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Increasing Competitive Advantage by Standardizing Critical Business-Processes across the Enterprise

Published in the Houston Business Journal in January, 2004.

Connie M. Spiess, Vice President, Supply Chain Integrated Solutions, Worldwide Operations, Hewlett-Packard.
Ravi Kathuria, President, Cohegic Corporation



Business complexity plagues a large corporation's ability to execute its strategy and operations and prevents it from responding nimbly to changing market conditions. A significant contributor to complexity is each business-unit's custom and disjointed processes and IT systems. Standardizing processes and IT systems across business-units simplifies operations. Simpler operations result in increased cost-efficiency, shorter operational-cycle times and increased market-place agility which all lead to increased competitive advantage.

Standardization involves making difficult changes in the corporation. Not having the freedom to customize processes and IT systems may inconvenience a business-unit's operations. Which may lead to open opposition, quite discontent or even hidden noncompliance. Standardization can fail if business-units do not appreciate how the actions of customizing processes and IT systems within their business-units can create complexities and incompatibilities at the enterprise-level.

Before embarking on standardization across business units, it is important to answer two questions. Is there synergy among the business-units in at least one or more of the following areas - markets, customers, suppliers and internal competencies (knowledge, processes, systems and employees)? Is the exploitation of synergy across business-units critical to the overall competitiveness of the corporation? If the answer is not strongly affirmative, the justification for standardization may not be strong enough.

Standardization can only succeed when executive management vigorously champions the synergy among business-unit strategies and operations, and sells the synergy as a critical part of the corporation's overall competitive advantage. Executive management must follow-through to ensure business-units intrinsically buy-into the benefits of enterprise-level-optimization versus business-unit-optimization.

Revenues and cost-management are always the top and immediate priorities for a corporation, especially in current economic times. Business-units may be inclined to achieve cost-efficiencies through localized initiatives that do not leverage enterprise-level synergies. Executive management must make it clear that the cost-efficiency achieved through corporate-level standardization is far more important than the cost-savings achieved through business-unit-level initiatives.

Standardizing a corporation's processes requires careful planning and an iterative and incremental implementation instead of a "big bang approach". An iterative approach reduces risk of failure and allows the organization to see immediate benefits and subjects it to a series of smaller changes. The standardization process starts by identifying a set of "critical core processes" that are fundamental to the corporation's strategic and operational performance. The goal is not standardize every process, just those that are critical to the enterprise-level competitive advantage. This set of critical core processes replaces the myriad of business processes that exist within the business-units. Every business unit implements the standardized version of the core processes and related IT systems, and thereby replaces its existing custom processes and IT systems.

Simplifying by standardizing across business-units produces significant benefits. Standard processes and IT systems need to be developed only once and can be deployed many times over resulting in lower total-costs and higher quality processes and systems. Common processes and systems result in lower training costs, increased mobility of workforce among the business-units and reduction in cycle-time associated with activities that involve multiple business-units. The biggest benefit is agility - having all business-units on the same page and a lot fewer processes/systems allows the enterprise to adapt more quickly to changing business conditions. Standardizing critical core processes results in increased cost-efficiency, shorter operational-cycle times and increased market-place agility which all lead to increased competitive advantage.