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Attack of the low-growth zombies

Adrian Cook, Nilesh Chandra, Iain Windle

Business Performance Management Magazine

6 December 2010

The Great Recession hasn't dimmed companies' commitment to customer satisfaction. But they must learn to leverage customer value to transform processes and power growth -- or risk joining the ranks of the Living Dead.

In his 2009 book "The Zombie Economy" (published by PA Consulting Group), Mark Thomas comments that "unless the entire business has been re-invented since September 2008, it will no longer be well positioned for the world of 2010-14". The challenge for practitioners of business performance management is to ensure that the things we're doing and measuring in our businesses are not zombie-like relics of a past that should be dead and buried, but sources of insight that will help the organisation to prepare for the challenges of the future.

Over the last year we've been asking some of our clients about their top business objectives, their priorities for business transformation, and the outcomes that they're achieving. We used a framework of best practices related to Lean and continuous improvement as the basis for this conversation because at the heart of Lean is the principle of orienting the business from the perspective of customer value. As a working hypothesis for successful transformation -- genuinely putting the customer first -- this seemed a good starting point, and certainly an idea to which we would subscribe.

Here's what we found:

1. Cost reduction is still the Number One objective.

We started by asking clients about their current strategic objectives. Not surprisingly, cost reduction was at the top of their list of objectives, with 90 percent of respondents indicating its importance, and over two-thirds indicating that it was their top (or equal top) concern. Improving customer satisfaction and improving quality were also important goals, but not because our respondents see growth as an objective yet; on the contrary, only 43 percent indicated that revenue growth was an objective, with only one small IT company indicating that it was their top objective.

If businesses are looking to improve quality and customer satisfaction, this appears to be more about hanging on to what they have than improving their competitive or market position -- a typical desire to do "more with less". Improving competitive position was the lowest ranked of any of the objectives. This all suggests a fairly low level of optimism about the near future at least.

2. Transformational practices are far from radical.

When we asked our participants to reflect on how their organisations could do better, a very strong thread, running through all the responses, emerged. These organisations are making relatively little use of customer value as an input to the process of setting business goals and measuring process outcomes. Respondents reported that:

  • Talking to customers is not a highly rated component in the process of setting business goals.

  • Employees are generally not assessed against their contribution to customer satisfaction (although many respondents told us that this was one of their current strategic objectives).

  • There's no clear link between process outputs and business goals. And the lowest score of all was returned for the question "Are production and/or process flows tuned to customer demand?"

In our experience, high-performing companies develop a culture that combines process execution excellence with empowerment of staff to change processes in a controlled way. Our discussions suggest that although cost control is important, there's general concern that processes are neither documented, modeled and managed, nor staff engaged and empowered to improve them. If this is a fair assessment, then some businesses are not addressing the current changeable environment in a systematic way and are not using all the staff resources available to them.

3. Customer service targets are not being met.

Our final questions focused on outcomes. We discovered that the only area where outcomes clearly match aspirations is compliance with regulatory and legislative requirements. Surely this is a low benchmark, since it's a basic requirement for some of the highly regulated businesses, such as utilities and healthcare organizations, that formed part of our panel.

Most concerning was the strongly negative response to the question, "Are customer service targets met?" We also noted strongly negative responses to several other process-related questions: Are processes designed to a standard? Are they free of bottlenecks? Are they agile and adaptable? How effective are reward and recognition structures? We believe that poor processes are contributing to companies' lack of success in meeting customer targets.

What should businesses do?

Respondents' top two goals -- reducing costs and improving customer satisfaction --are not surprising; they're entirely reasonable objectives in the current economy. However, the level of concern we heard over the shortcomings of companies' efforts to create flexible processes and deliver continuous improvement reveals that many organizations are daunted by -- and in some cases failing to meet -- the challenge of creating scalable, customer-centric operations. This was reinforced by the variance between ambition and outcomes; Fewer than 10 percent of our respondents reported that their performance was exceeding their goals.

We are certainly living in "interesting" economic times, and businesses face the strategic imperative to change, or join the ranks of the Living Dead. That means designing and executing processes that focus on providing customers with value, while resolutely shedding non-value-added steps. It also means listening closely to what customers are saying about what they need.

That may be a lot harder than salami-slicing costs. But it's what winning businesses are doing now.

Adrian Cook is one of PA Consulting Group's leaders in the design and implementation of new business architecture, and works with senior stakeholders to transform operations. He is based in Washington, DC.

Nilesh Chandra specialises in IT strategy, business case development and technology-related business transformation. He is based in PA's Boston office.

Iain Windle specialises in service-based process improvement, and particularly in the application of lean principles and techniques. He is based in PA's Washington, DC office.

Visit PA's pages on the Zombie Economy and Economic decline of the West

To visit PA's pages on operational performance, please click here.

PA Consulting Group in the United States

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Andrew Hooke

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George Botsakos

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Wil Schoenmakers

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Ritu Sharma

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Ron Norman

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