"Two can win at this game." - How this return-driven tenet can lead to success for all business parties involved!
As someone in the business and consulting industry for 30+ years now, one of the things I find effective in managing my team is Return Driven Strategy (RDS). That’s why every Tuesday, we publish articles about this framework to help you effectively navigate an ever-changing work landscape as a business leader, manager, or worker. Today, let’s continue our topic about RDS’ Tenet 8: Map and Redesign Processes. Read on to know when and why you should redesign a business strategy or model for your firm.
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"Two can win at this game." - How this return-driven tenet can lead to success for all business parties involved! In a past “Return Driven Strategy” article, we talked about the eighth tenet of Return Driven Strategy (RDS), the TRUE reasons for each business process, and the “why-axis analysis.” There, we explained that management should ask “why” something occurs in a transaction between a business and a client or customer, and whatever the answer to that question is, ask “why” again and again. According to Professor Joel Litman and Dr. Mark L. Frigo, this is one of the effective exercises to identify the real reasons for every exchange. Most times, the reasons center on some basic human need, such as those in Abraham Maslow’s “Hierarchy of Needs” framework. Today, we’ll talk about another aspect of RDS’ Tenet 8. We’ll call this… The WHEN and WHY of redesigning processes! What first comes to your mind when you read or hear the term, “redesigning processes”—is it changing an entire process altogether or improving just one or some aspects of that process? Different people have different answers to that… and it’s okay! After all, different individuals have different reasoning. It’s just a matter of understanding what drives a particular redesigning.
In the book, “Driven,” Professor Litman and Dr. Frigo wrote that the higher tenets of RDS (Tenets 1, 2, and 3) should drive the management’s decision to redesign a particular process. It’s not simply asking, “how much can the process be improved?” but “why AND when should the process be improved?” Think about this: A firm could have the greatest process in the world for making buggy whips, but what good would it be if the need is not there? The company is just wasting its resources by making something that its target market doesn’t actually need and won’t buy. What’s more? Management should understand what the redesign’s potential impact would be on the cash flow returns of the business and the need fulfillment of its constituents. According to Professor Litman and Dr. Frigo, there are no inherently good, bad, lucky, or unlucky aspects of a process to redesign. The main focus is on the potential positive impact on achieving the higher tenets. Let’s take a look at these business examples… In the 1980s and 1990s, Coca-Cola took steps to focus on the highly valuable areas of the processes between production and final consumption.
The company held onto its most valuable processes, then divested or outsourced as much of everything else as possible. This was not an accident as the firm realized the non-value-adding areas of its operations, divesting itself of those aspects of its business. Dell is another example of a company that experienced the benefits of redesigning processes in a similar way. Over the years, Dell continued to outsource the manufacturing of its laptops and desktops to its partners. The computer company found that the value in its business stemmed not from the creation of the computers, but from allowing customers to customize their devices with a myriad of options. This was something in which no in-store sales could compete with during the early years of Dell’s business model. Many other computer manufacturers were afraid to anger their in-store selling partners, and so they were late to recreate the same strategy. Meanwhile, some managers say this about their suppliers: “The main focus of our suppliers is being profitable, but we want the cheapest prices possible. We’re at natural odds.” On the contrary, some suppliers also reflect that statement, saying: “The main focus of our business customers is profitability. The higher prices we charge them, the lower their returns, so all we can do is compromise.” These statements show poor communication between the parties involved and poor analysis or understanding of the business process or model. Definitely, the business and its partners or suppliers can come to an agreement where both of them would equally benefit from the outcome! In Coca-Cola and Dell’s cases, the firms believed that their partner manufacturers could make many parts of their offerings more cheaply. So, the companies made a smart move to give those manufacturers more of such operations. The result? Coca-Cola and Dell were able to focus on other areas in which they had gained competitive advantages in their business models! Two Can Win At This Game There are lots of examples of partnerships where both the supplying firm and the retailer have achieved high returns. The key is to make sure processes are redesigned appropriately, and each business focuses on its respective core strengths in producing a unique offering that fulfills an unmet need. When this is accomplished, there will be more than enough cash to split among the parties. Wouldn’t that be AMAZING? The business examples we featured today are good examples of effective mapping and redesigning of processes. They show how firms could innovate their offerings by focusing on the totality of the customer experience. … and when customers’ needs are met, achievement of the other higher tenets of RDS will also follow. Think about it: Through transactions with customers, businesses will be able to ethically maximize wealth for their firms and their suppliers or partners. Take note of these insights from RDS’ Tenet 8! Remember: Avoid blind planning and false senses of direction. A more total awareness of a business’ place in the community is necessary for management to take the necessary steps that will lead to success. If you’re looking to gain a better understanding of Return Driven Strategy and Career Driven Strategy, we highly recommend checking out “Driven” by Professor Litman and Dr. Frigo. Click here to get your copy and learn how this framework can help you in your business strategies and ultimately, in ethically maximizing wealth for your firm. Hope you’ve found this week’s insights interesting and helpful. One of the goals of businesses is to make money. Their provision of important services that fulfill unmet customer needs is rewarded with financial returns. Learn more about the importance of business ethics in next week’s article! |
