Value Creation

There are many measures we can use to determine a process’s value. Cost and time are quantitative (are they really? – I will discuss this in my next blog) measures frequently used. Quality can certainly be a quantitative (production defects, returns, rework) measure but with knowledge worker products traditional production measures don’t have the same meaning; for example, what are the quality measures for the New Savings Account process?

Then there is customer value. In world where competition has narrowed competitive differentiation customer satisfaction has become an important part of how we measure customer value.

I was presenting at a ‘meet the author’ executive dinner in London in 2009 and something was said at that dinner that has stuck with me ever since. The dinner was held at the Rhodes 24 restaurant in the City of London’s Tower 42 building and was attended by a group of senior and executive professionals from both the commercial and government sectors. We were talking about the potential benefits of BPM in respect to work and cost reduction as well as customer value creation. I have to admit, I was a bit taken back by what I heard.
One of the attendees at the executive dinner was a senior process improvement person at a large bank. She commented that her bank had taken on the initiative to assess all of their processes against the landmark of customer value creation. In doing so, they had discovered that 90% of the work being done by the bank does not create customer value. From this, they have embarked on a strategic initiative to change the corporate mindset to one that fundamentally challenged work in the company at every level, with the express purpose to eliminate as much work as possible that does not pass the test of customer value creation.

The implications of such a statement are staggering. If this bank is right, then there is the potential to reduce the work and cost of delivering their goods and services to their customers by as much as 90%. Perhaps the often cited but generally discounted studies by McKinsey (and others) that indicate 70% to 90% of the work people do is non-value add is not only true, but the next real frontier for process improvement.

Play the scenario out… How would your business change if you were able to offer your goods or services to your customers for 10% of your current price – with increased customer satisfaction? What if your competition does that instead of you, how would that change your business?

Value creation indeed…

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