In the last blog we looked at the basis of all planning and the areas that are under management control. In this blog we will take a closer look at organisational business processes that should provide the foundation of all plans.
Focus on Business Processes
Rethinking the planning process starts out by undertanding the organisation’s business processes. Every organisation has them through which goods and/or services are produced for its intended customers. How well these are performed within the prevailing economic environment will determine the level of success it will achieve.
Each industry has a different set of processes. For example, a manufacturer buys raw materials and through a series of processes will transform them into a finished product. Each process ‘adds value’ to the raw materials so that at the end of each sub-process the original materials are now worth more than what they were at the start.
For a service organisation such as a software vendor, value is added in the form of knowledge, functions and presentation capabilities, which transforms a computer into a more valuable piece of equipment. For example, a relatively low-cost PC with the right software is able to control a production facility that previously would either have been impossible or required a team of expensive staff to operate.
With a ‘not-for-profit’ organisation or government department, the business process concept is just as valid. The main difference is that the focus will be on the delivery of a service that may be quantified in measures other than monetary. But that service is still delivered through a range of ‘value-add’ business processes.
Core and Support Processes
Business processes for any organisation can be grouped into core processes and support activities, where:
Core processes are those that directly relate to the delivery of products/services to the intended customer. This includes how products or services are sourced, developed, manufactured, marketed, sold, delivered and supported. It is these activities where typically most organisational value is generated.
Support activities are those that enable the organisation to operate legally and in an effective manner. This includes how suppliers and employees are paid, monies collected from customers, the way the organisation is financed, and how it meets its legal and statutory responsibilities.
Both core processes and support activities are typically implemented (or managed when outsourced) by operational department(s) that have specific responsibility for carrying them out.
Sometimes the boundary between a core process and a support activity is not always clear. For instance, meeting satisfactory minimum standards of health and safety fosters compliance with the law (support) but also ensures orderly an orderly production process and maintains commercial reputation. The key point to understand is that an organisation needs both.
‘Core’ processes tend to be similar within an industry, while ‘support’ activities are often common to all organisations. Below is an example of the high-level activities for a manufacturer:
Sample activities through which an organisation creates and supports value
In this example, there are 5 core processes, many of which can be expressed as a chain of linked activities. The revenue process is responsible for the way products or services are promoted, sales enquiries are handled, and the tasks that lead to a sales order. The product development process is where the organisation ensures it has a pipeline of new products it can sell, which in our example includes tasks for conducting market and product research, through to designing and conducting product trials. The production process is concerned with how raw materials are turned into products and delivered to customers, while the Customer Service process determines how the organisation interacts with clients once they have received the products or service.
Supporting these core processes are a number of support activities that include how the organisation ensures regulatory compliance, how it generates funds to operate, the IT infrastructure required, and so on. Each support activity has a number of tasks (not shown in the graphic) that may or may not form a chain, however each provides a vital service that enables the core processes to operate effectively.
Not all activities or tasks have to be fulfilled by the organisation. For example, some aspects of production could be outsourced to another company, as could Helpline and IT support functions. Competitive advantage is gained when these processes are either performed more effectively and / or help to generate a higher level of value for customers.
The role of planning is to ensure these processes are conducted in an efficient and effective way. In the next blog we will look at a way in which this can be modelled. For those of you who can’t wait, you can download our new white paper that covers all the blogs in this series.
If you Can not wait for the next parts, you can download the white paper: ” Rethinking the Planning Process”