Is it time for a Chief Process Officer?

Just the words, all strung together "chief" "process" "officer" sound so, I don't know... Orwellian. Don't they?

OK, there's a fundamental shift that's occurring. "Process" is the new focus of companies. But before we tackle the question of "how do we become more process-aware?" let's ask ourselves "why are we doing this, now?"

The initial movement of automation, in which we're only at the tail end of the first major phase, was to make processes we did in the old world more scalable. Faster. We can simply do more of them than we could without technology. We can build more cars on a production line with fewer people. We can process more invoices than we used to, with fewer people.

At the same time, we also have more direct, and faster, access to the information that we use to run our business. Or should I say, the information we use to run our old businesses.

The very nature of business - how business is done - is changing as a result of the automation of the past four decades. A business used to make things or provide services (in the form of human bodies). Most businesses were vertically integrated in that they owned some end to end process... you received an order, you did your thing. And so on, down the line.

But that's not our model any longer.

Businesses and governments are beginning to ingest the internet (although it's not near being digested!). There are two fundamental results of this: first, your supply chain is no longer about "making." It is more about "integrating." Integrating with the people who actually make what you used to make. Integrating with the companies who supply you material or products, using JIT methods. Integrating with your logistics partners.

Your supply chain is less about physical goods and more about integration of process, information and logistics than ever before.

The second major result of the internet ingestation is that your distribution is scaling on a planetary basis, well beyond previous geographies. And because of that, your direct sales channel is now reducing as a percentage of sales, not increasing. Channel partners - like supply chain partners - are becoming more reliant on your information, process and logistics than ever before. You are integrating with your distribution channels more than ever.

These factors combine to mean that the complexity of running your business is way up, even as the old costs of doing what you do are going way down. It's less costly - on a direct basis - to build something in China and ship it here than it is to build it here. But guess what, it's a lot more complicated. And if you don't get a grip on these new complications, you will eat up in costs and in bad service everything you wanted to save!

Process, then, is the word we use today to describe "getting a handle on the complexity, putting programs in place to reduce the complexity, and scaling our ability to consume the supply chain and deliver to the channel in as easy a way as possible." The companies that are able to do this - scale the integration and complexity - will win.

And this, then, is how business has changed... the winners are those with the best mechanisms for getting product and selling product, globally, in a very complex but low direct cost world.

Because of this, "process" becomes the business. A business is no longer defined by its goods and services as much as it is defined by its capabilities. Is Wal-Mart in the, um, what business is Wal-Mart in? What do you call a business that provides retail hard goods, medical services and banking? In the end, the products don't define Wal-Mart as much as their capabilities define them.

Business models of the future will be about "core competencies" - across traditional product areas - and less defined by specific products.

Big pharma is undergoing a sea change right now. Moving from blockbuster drugs to niche markets is a very different business, and once they get there, and due to competitive pressures, there's no doubt the R&D capabilities will be exploited outside the areas we would define as normal pharma... but they will have capabilities in terms of relationships, testing methodologies, access to governments, that will allow them to move into other areas not related by old methods of correlation... but very related when you consider the underlying processes or capabilities.

So now, back to the original question: Is it time for the CPO? Absolutely. The only other person who is capable of leading such a shift (or who should be tasked with leading such a shift) is the CEO. So if the CEO isn't ready to take this on, then some, one person should be designated as the person to move the company's capabilities into the limelight.

Now, as to what responsibilities and power that person should be given... you'll have to wait for another article. Today's CPO's - or their precursors - are given little of either and, therefore, are destined for failure. This is a bigger job than that of the CIO, in the same way that a CEO's job is bigger than a CIO. Capabilities ARE the business. CPO's are responsible for creating a culture where they are discovered, documented, implemented and improved.

Then, possibly, the CPO goes away. No doubt, in many cases, to the CEO's job...

technorati tags: BPM, Business Process

Comments

[Hyoungiel Park]

CEO's concerns are oftenly the business performance, the financial result (or overall customer satisfaction), not something related to operational thing. In most company, CEO don't have enough room for thinking about operational efficiency except in exceptional situation where the efficiency affects critically the business performance. I think the most managers whose title begins with "Chief" concern about almost the same thing, the performance, I mean the result. Without that, CxOs could be kicked out from the company.

"The world gets changes and the really important thing now is the process, thus the time is full for introducing CPO." is not enough to persude the stakeholders in a company. We need to point out the tangible, intuite, practical reason to prevail upon the people.

So many hypes on bpm around us, to avoid hearing that our approach is a sort of hype, we may need to explain the exact roles and their effectiveness in quantitave way before saying it necessity.

[Daniel]

Great article.
The question is how to lead to organization to the undestanting that a CPO is needed?
Forget a moment about a CPO. How does someone lead an organization to understanding that it needs a corporate group responsible for initiating, leading, designing, imporving, business processes?

Where, if at all is that happeining these days?