Stan Kirkwood – Business Designer

I spend time in several Business Process groups on LinkedIn and one of the terms I keep seeing is “Outside In”.  I keep seeing people using that phrase as if they just had an epiphany or that they just came over the ridge and have seen the promised land.  What I don’t understand, or what surprises me, is that it seems to be a new thing to experienced people.  “top down, outside in” is how everything should be designed.  How do you go about designing something where you have not established its purpose?  How do you design something if you don’t create specifications (performance requirements)?  Outside In is common sense and I don’t see why it is getting so much play.

So I responded to a discussion and wrote the following: 

‘Outside In’ is about Context.  Understanding Context is critical in every line of thought – not just BP design.

In order to understand the purpose of an activity you have to understand it in the context of the process in which it exists.  Processes are a collection of activities.  Evaluating an activity on its own has some merit but to fully understand the activity one must understand it within the context of the process in which it exists.

Seeing an activity on its own will not provide you with an understanding of how it fits into the whole.  Every activity has a cost associated with it and should also have a value associated with it (non-value added activity?).  The activity receives its performance requirements from the next level up – the process.

In order to understand the purpose of a process you have to understand it in the context of the system in which it exists.  Systems are a collection of processes (Senge – Fifth Discipline).  Every process has a cost associated with it and its corresponding value.  The process receives its performance requirements from the next level up – the system. 

 Every business has a number of systems which support it and to understand the performance requirements of those systems you have to view them in the context of the overall business.  The system receives its performance requirements from the next level up – the business. 

 And there is where some companies have stopped their thinking.  They view their systems, processes and activities only in the context of the business itself.  They are operating in a vacuum and use performance indicators focused within their four walls.

 However those businesses need to go the next level up – the competitive environment.  They need to add another layer of context.  The business operates within the context of the competitive environment.  If a business does not factor the competitive environment into their performance requirements it will be flying in the dark.  And the likelihood it is going to hit the mark (from the competitive environment’s perspective) is slim to none. 

Hence the need for Outside In design.  While one can look at performance from the ground up (activity to process to system to business) the requirements come in the opposite direction.  One needs to understand the competitive environment first.  One has to know what the outside (competitive environment) is requiring to know the minimum performance requirements for the business and then it cascades all the way down to activities and individual employees.

And the competitive environment is not defined solely by the expectations of the customer.

What happens if your company slightly exceeds customer expectations but there are competitors offering even more?  In that situation you will most likely lose market share.  Remember, your investors are not the only ones looking for a Return on Investment.  So are the customers.  Customers want to get the most for their money (the greatest return on their investment) and if your competitors are offering more than you then you need to adjust your performance requirements.  You need to be offering a compelling Value Proposition to the market and if you don’t understand what the customers want and what your competitors are offering then you will most likely fail.

Companies don’t get to decide what the performance requirements are for products and services.  Customers do.

That is one perspective on Outside In design.  Where does your understanding differ from mine?

I am not certain if it is a matter of being lazy or if it is nature’s way of not burdening us with too much detail but regardless of the reason people do not ‘think’ correctly about governments, religions, races or businesses.   Our thinking falls down when referring to any group or entity as if is one thing.

We often hear about how inefficient “the government” is in the US.  “The government can not run anything” or “the military and intelligence should not be used in the same sentence”.  What we are failing to realize is the government is not one thing  – it is many.  The military (while being protrayed as having some questionable purchasing practices) is composed of many brilliant people.  The military is many.

And when we speak about business we should remember that it is not just one thing.  I spent seven years in the role of CIO.  One of the challenges facing CIOs centers on the idea of aligning IT with ‘the business’.  And here is when I learned that ’the business’ does not exist.  The business is a collection of disparate groups, all sharing a common banner, but operating relatively independently of each other.  Each have their own metrics, own goals, objectives, and key performance indicators.   Each being led by a person wishing to have a World Class organization. 

Essentially each department is a business within a business.  I witnessed it first hand when I sat in on the assessment of the alignment of an IT department with the rest of the business.  The findings were not in favor of the IT department.  The consulting company determined that more than 80% of the IT projects did not support the key drivers for the business.  The consulting company therefore determined the IT department was not aligned with the business.  Just how wrong the consulting company was became apparent when it was discovered that every one of those projects originated outside of IT.  Those projects came from ‘the business’.

What you have is the situation where ‘the business is not aligned with the business’.  Actually there is no such thing as ‘the business’.  ‘The business’ was never designed as an entity but instead it evolved one decision at a time and just happens to look the way it looks.

This is the primary achilles heel for every business - business executives do not understand that the business they are leading actually has a design and  that design is as tangible as the design of their products or processes.  Nor do they understand that the design of a business has the greatest impact on the performance of ‘the business’.

Wouldn’t you like to see what your business design looks like?  Wouldn’t you like to be able to analyze the performance capabilities of your design and make any necessary changes to improve its performance? 

If you took the time to have your business designed – then your business would actually exist.  Without the design your business is really just a bunch of departments acting mostly independently.  Good luck with that.

I do find some interesting discussions on LinkedIn.  I tend to spend my time with Business Process people since they have a slightly better concept about how something invisible (process and/or business) can have a design.

Here is my 2 cents when addressing the idea of how some business thinking is fundamentally flawed (which I agree in principle).

I know I sound like a one note singer but I am willing to live with that. I want to comment on the idea of “Fundamentally flawed thinking for the 21st century..”

It is all about Context! It is my contention that the relevance of any design is determined by the environment in which it exists. Think about that sentence and apply it to any design. Apply it to processes, to products and to businesses.

Businesses are created within the existing environment and survive because its design is compatable with the environment. But as we know time changes things. The expectations of the customer change (outside in design), the offerings of the competition changes and materials and technology change. What was a leading design becomes obsolete at an ever quickening pace.

Important tenets that affect business performance (according to me):
1) Businesses, just like products and processes, have designs that can be documented.
2) No product, process or business can outperform its design
3) Design dictates performance
4) The best any product, process or business can do is to reach the maximum performance capabilities of its design.
5) The best any strategy can do is to help the business reach its maximum performance capabilities of its design.
6) Strategies do not change the design of a business.
7) Four step process to business (or process) performance: Design, Implement, Execute and Manage. Carpe DIEM
Businesses are much more than processes. Don’t get lost in processes. You must have the Context for processes just like you must have the Context for products and the other facets of the business.

The most important responsibility of any executive is for the design of the business and for executives to not understand that is the biggest flaw in thinking today!

That concept fits the idea of Outside In design better than most people realize. One can only create a relevant business design by understanding the context in which it exists (the outside). I can go on and on about this but will stop here.

One LinkedIn discussion centered on truths.  Here was my offering.

It seems to me the issue is not around set theory and the axiomatic approach. Board members (representing those holding the equity of the company ) and customers (representing those deciding to spend their disposible cash with your company) don’t care.

Executives are at the center of the fulcrum. One the one side are the equity holders wanting a better return on their investment and on the other side are the customers who want the greatest value for the money they are spending. And the business leaders are trying to navigate through the existing environment and give each what they desire.

Here are a few ‘truths’ those executives should be paying attention to:
- Products, processes and businesses have designs that can be documented.
- Products, processes and businesses can not outperform their design.
- Changing strategies has no effect on the design of a business.
- Strategies are executed, designs are implemented.
- Strategies can only be executed if the design can accommodate them.
- Strategies need to be embedded in the design of a business.
- Design, not strategy, is the key to change.

Getting to KPIs. Their use is in determining when a design needs to be updated. Since designs gain their relevance from the existing environment KPIs need to be sensitive to what is changing.

Here is a response I penned this morning in one of the LinkedIn process groups.  The person who initiated the discussion was asking the question “Why are Americans lagging in trying new things in relation to processes?  Even the two approaches of Lean and Six Sigma are not being adhered to as strictly as in the UK and on the continent.”  

My response to that question is:
You have hit directly at the core of a problem I keep running into.  I have been trying to connect conceptually and intellectually with both business leaders as well as academics around the idea of business design. Every principle you can think of in relation to process design is equally true for business design.

Here are some examples:

• A poor process design can never result in great process performance.
• The key to process performance is in the design, not the strategies.
• You can not execute process strategies unless the process design can accommodate those strategies.
• Processes have a design, just like products.
• Performance requirements for processes should not be arbitrary but instead based upon requirements of the market place and stakeholders.
• Before making adjustments to a process you should always document the process to reduce the likelihood of unintended consequences.
• When documenting a process what one is actually doing is documenting the design of the process.
• Process management consists of four steps (DIEM): Design (according to performance requirements); Implement (the design according to specs); Execute (the design according to specs); and Manage (keep track of KPIs to know whether design is meeting requirements of two sources: customers and shareholders).  Go back to first step when design either does not meet performance requirements or performance requirements change.
• Now reread every bullet in the preceding paragraph and substitute business for process. And every sentence is equally true. Only now you are operating at a higher level, one where processes are just one piece of the puzzle.

Why am I having trouble getting across the importance of business design to executives and academics? I think for two reasons: 1) they have trouble with critical thinking. They have been taught what to think and not how to think. They filter everything through what they have been taught and can not see other possibilities. This is reinforced by consulting companies who keep selling them the same processes (strategic planning for one) that continue not to work (which I can explain why rather easily). And 2) they have too much invested in the way they currently think to allow something new to come in. I have been especially disappointed in people I know and respect and have even studied under in their inability to consider what I have to say. They have been teaching the same ideas for years and have all of their case studies lined up for students to review, analyze and report. But the universities and colleges are supposed to be the heart of new ideas and creativity and what I am finding is a stone wall just as thick as those of the business world.

And I see some of that same resistance in several of the process groups.

Throughout my college years I traveled all around the United States – for free.  My home base was California, Pennsylvania the site of a small state-supported college.  During those years I spent a summer in Alaska; went to California three times; Florida twice; New England once and enjoyed the Mardi Gras.  I spent one summer traveling back and forth from Hamtramck, Michigan to Rillton, Pennsylvania every weekend to see my girlfriend.

My mode of transportation was my thumb.  I simply stuck it out where the driver of every car passing by could see it and waited for some kindred soul to stop and offer me a ride.  When I first experimented with hitch hiking I was very tentative about putting my thumb out.  I did not want to seem too aggressive nor did I want to impose myself upon the drivers.  So in my meekness I barely held my thumb away from my body and I never looked directly at the driver.  End result was   people were confused about what I was doing on the side of the road.  They thought I was waiting for a friend to pick me up or that I was loitering with nothing to do. 

After hours of disappointment I had the epiphany that I needed to put my thumb out where everyone could see it.  I needed them to know that I was asking for a ride and then let them decide if they wished to offer it or not. 

My thumb went out, I looked directly at drivers (not defiantly) and suddenly my success rate dramatically increased.  One of my trips from Pennsylvania to Lancaster, California took only three rides and 52 hours.  As one friend said:  “It takes longer to drive it than that”.  That trip held many interesting stories (accidentally setting a car on fire; being offered a large knife by someone who had been stabbed; being in a car chase around Albuquerque NM, and riding through the Mojave desert in the back of a pick up truck being driven by two cowboys).

Well here it is nearly 40 years later and I am ‘sticking my thumb’ back out and looking for opportunities.  Only now I am not looking for a car ride but instead I want speaking engagements.  My blog, my company’s website and my webinars on business design are all ways to make the public aware of ideas around the concept of business design.  And while writing can be effective I prefer to directly speak with people about it.  I want to speak with as many people as I can about the impact design has on the performance of their businesses or agencies.  They need to know that 80% of the time the performance issues facing their business are design-related.  Executives need to be reminded that the design of the business is their responsibility and they have to be shown how they can escape the business life/death cycle (Strategy Cycle).

If anyone reading this blog can point me to a speaking engagement I will be very grateful.  Business design is the key to change, not strategy, and I welcome the opportunity to speak about it.

If the ideas you read on this blog are of interest to you, let me know.  I would welcome your input.  You can email me at skirkwood@gmail.com or through the contact page on my business website at www.businessdesignconcepts.com. 

I look forward to hearing from you.

Happy New Year

Just wanted to extend a Merry Christmas and Happy New Year to all reading this blog.  Fortunately we had children and in-laws with us during the holidays and it was wonderful.

This should be an interesting year – globally.  We can see from the US bail outs how interdependent our companies and countries are so we may rise and fall together.  I am not particularly optimistic (short-term) because of the adversion to facing our problems head on.  We create artificial solutions which only buy us some time – in hopes that somehow things change enough to avert a complete melt down.  None of us want severe economic times but we will most likely have to experience more pain than we have thus far.  Bite the bullet and lets get on with recovery.

I have essentially made a career out of being able to dig down and uncover the root cause of problems.  For many years I served at the request of the CFO of a large consumer goods corporation.  He would crunch the numbers, do some analysis and then say “Go down to the plant at Dayton, Tennessee and see what is happening in the warehouse – invoices are arriving to dealers before the product does.”  And off I would go, dig through all the issues, discover the real source of the problem and develop solutions on how to fix the problem.  The CFO would pick from the choices I had offered up and then I would lead the charge to make changes.  It was a great deal of fun.

But there were two itches that could not be scratched in the role that I had.  One, often times the solutions I developed were only partially implemented.  I would create what I felt was a great design but reservations of local management would prevent them from fully implementing my solution.  And though improvements were gained, they often fell short of what they could have been.  I wanted to have control of an organization where I could design, implement and then execute. 

The other itch was wanting to participate in the setting of direction for the corporation.  One of my inherent strengths is the ability to think strategically.  I wanted to be in the Board Room when direction was being set and strategies were being developed. 

In order to gain access to that august group I had to take on the role of an executive so when I was offered the CIO position I took it.  I believed I would now have control over an entire department and could mold it in the image I felt would best serve the corporation.  And I would participate in strategy sessions. 

Indeed I did get to shape the IT department but there were constraints placed on me by the CEO.  This is to be expected.  This one form of governance for the IT department.   

And I became disenchanted with strategic planning.  If every company goes through a planning process then why do so many companies underperform?  What is it about the planning process that is not working? 

Turns out it has to do with design.  A strategy can only be executed if a design can accommodate it.  Executives fail to realize that their business has a design and therefore ignore it or think that changing strategies has an effect on business design.  It does not.  To improve the performance of a business you have to go beyond strategy!  You must look to the business design for success.