Following up from his article in the March issue of LMJ, Roddy Martin, senior vice president, global supply chain at Competitive Capabilities International, proposes a four-layer management system model and explains why alignment between these four layers is so critical.
As continuous improvement and supply chain performance improvement practitioners, we know that aligning business operating strategy and business performance improvements, and building end-to-end supply chain capabilities to achieve competitive advantage are merging to achieve one goal: to sustainably and profitably grow while weathering the dynamics of market change.
In reality, however, “disconnects” and “project based approaches” in these initiatives highlight cross functional gaps that stand in the way of collaboratively building an end-to-end business with demand-driven process capabilities.
“Disconnects” are characterised in the following leadership questions:
- What is the challenge involved in translating and aligning the business operating strategy into end-to-end business processes and SC design, and in achieving sustainable performance improvement capabilities by aligning with continuous improvement?
- What factors are in the way of aligning and synchronizing IT with business and supply chain transformation?
- How is leading and managing the transformational change embedded into every maturity stage of the transformation journey?
- Is there a model that helps us understand the different management systems operating in the business so we can reduce complexity and institute a governance model with a change leadership process to ensure sustainable and effective progress on the journey?
These fundamental executive level questions must be understood and answered if the business performance improvement outcome of endto- end supply chain transformation is to be sustainable in delivering measurable and improved business results.
The most fundamental issue, and the one that embeds much of the complexity, is the understanding of the four layers of management system that run the business.
In the following section, I propose a 4 Layer model that leading executives have found useful in understanding and managing this issue.
THE 4 LAYERS
Three of the layers are more heavily vested in technology and data management and one is business process capability based. These layers evolved bottom up as they were largely developed functionally and were reinforced by the development and deployment of information technology.
These bottom layers grew by necessity as the business realised the need to operate holistically as an integrated end-to-end set of demand driven processes but needed to start at a low level control of integrated data and event management .
From the lowest (Layer 1 – real time) event, data, and activity management these layers evolved from:
- Layer 1 Systems of Control (real time data; for example process control) to…
- Layer 2 Systems of Record (transaction and data processing applications like ERP) to…
- Layer 3 Systems of Process (work flow management systems like integrated quality, governance, and compliance, sales and operations planning).
Unfortunately, investments into these bottom three layers of management systems were dominated by technologyoriented requirements that were indicative of the low levels of data and information integration. Investments were not made into Layer 4 Systems of Venture and Sufficiency because the business “didn’t know what it didn’t know” as a Layer 4 that represented business actually operates as a set of operation and management processes comprised of people, process, and technology.
While layers 1-2-3 are important in the data and transaction efficiency and effectiveness of the business, they do not holistically represent the way the business actually operates effectively with people, process and technology. The bottom three layers also generally do not reflect or align to the stage of the businesses performance improvement and operating process maturity (Stages 1-5) as I described in the article appeared in the previous issue of LMJ.
With the best intentions, the IT organisation designs and deploys systems for best in class end-to-end value network capabilities. The business typically still at a stage 2-3 of maturity in its process operating capabilities (project-based improvement) cannot operate as a Stage 5 value network process-based operating system and, to make the investment usable in its current Stage, the business customises the Stage 5 value network based design to fit the current Stage 2 of business operating capabilities.
This vicious cycle of continually adapting and fitting Stage 1-3 systems to the business as it evolves becomes a major source of business disruption and a hurdle to integrative performance improvement initiatives.
Furthermore, today’s global businesses operate across many cultures, business product lines, and geographies – the reality is that there are many different stages of process capability maturity and not just one! Again, the business must continually adapt and re-implement its layer 1-3 Systems to fit different stages of maturity across the business.
The net impact is that customisation, the lack of business standards, and the continual adaptation and redeployment of technology and information management systems combined with the lack of a decoupling layer from the way the business actually operates represent serious constraints to learning, sharing best practices, process development, and sustainable continuous improvement across the business.
WHY IS THIS SITUATION A PROBLEM?
An operational excellence executive from a leading global life sciences company stated the issue very succinctly when she attended an IT systems design and blue printing meeting to deploy a major vendor’s application.
She noted that the IT-based “blue printing” and systems design in layers 1-3 did not represent the way the business actually works but was being done that way because the IT system required it. Secondly, one simple transaction or workflow process in layers 2-3 designs could involve five to nine different departments in the business to be successfully executed. This was not reflected in the systems design.
This means that businesses are encapsulating IT, data management, and process automation into layers 1-3 but not taking account of the real people, process, and stage of organisational and process maturity implications in layer 4 (the way the business actually operates). This means that many technology investments are not necessarily leading to organisational and process effectiveness across the business as a whole. This approach is also not developing integrative improvement capabilities and end-to-end value network process capabilities as found in the requirements the business has in layer 4.
After billions of dollars of IT investments in Layers 1-3, the business is still not at a proficient level of process capabilities that enable it to operate as a demand-driven value network across people, process and technology components in a way that performance improvements are sustainable and the business is agile to change.
WHAT’S THE CONCLUSION?
The strategic alignment and integration of continuous improvement, change management, strategic planning, enterprise architecture planning, enterprise data warehousing and advanced process analytics are a leadership, top down business responsibility. These investments will not achieve the same objectives cost effectively if they are allowed to evolve bottom-up.
The first conclusion is that responsibility lies firmly in the hands of the business executive leadership team and must include IT.
Secondly, the business and IT must collaboratively discover, plan, build and deploy a flexible information management and analytics layer between layers 3 and 4 that allows decoupling of technology from the way the business operates in processes without disconnecting the two critical pieces! The flexible analytics and performance management layer and information model must support different levels of maturity and be able to grow to support different levels of process and operating maturity found across the business.
These flexible model based capabilities already exist with vendors like EveryAngle, Aegis Analytics, Rockwell Incuity, Kinaxis, SoftwareAG, and Vecco.
The key principle in the second conclusion is that companies must institute this reference layer for information and process performance management to support the way the business actually operates and be agile and adaptable to support new questions that the business is asking as the level of process maturity evolves.
Investment in this layer must have the outcome that the business does need to continuously change, redesign, and redeploy technology applications at layers 1-3 to support evolving business capability maturity in layer 4.
It is a leadership and strategic planning responsibility to synchronise change management across layers 1-3 to align it with the business operating system in layer 4.
The combination of the decoupling information layer and the leader’s top-down alignment strategy (between the business operating system and IT investment) in Layers 1-3 means that prioritised technology, work flow initiatives, and IT architectural planning must be driven top-down by the process maturity of the business and governed by its performance improvement needs.
For example, a business can only leverage applications like network planning and master data management when they are aligned and synchronised with its process capabilities and integrative improvement priorities at that point of maturity in the evolution of the demand-driven business operating strategy.