Process excellence includes keeping your competitors guessing and your board aware.

How does our perception of process excellence play out in an aggressive market place? Is process excellence a barrier to competitiveness? Well, I believe it can be, if the mindset is not prepared for change. Here is why.

In turning our business around, we recognised the need to increase sales; developing $140m new prospects in 6 months and converting this into a 70% increase in first year revenue; a team effort combining the best disciplines of engineering design, manufacturing and service.

Our bids were close to perfect, including the right level of resource and materials. We worked closely with suppliers. We built and installed reliable equipment. We evaluated risk and included appropriate mitigation. Contractually, we offered tight, but fair terms, with appropriate warrantees.

A winning combination, you might think? Our engineering excellence played well with established customers. Our competitors knew our strengths. Our owners wanted positive cash flow. Lower cost new entrants challenged pricing. How did we all respond?

Our excellent processes ensured that the original bid was profitable, commercially complete in every detail and would pass the scrutiny of the customer’s buyers and our board’s technical experts.

Our competitors took a different perspective of the project life-cycle. They submitted a lower initial price and were happy to run with negative cash flow for longer. Either through guile or incompetence, they might under-quote on engineering time or forget to include some items. They knew that by the time their work was incorporated into our customer’s large infrastructure project there would be many changes to the successful bid. They also knew that the initial project would be awarded to the lowest bidder and the changes in the years ahead would not be put out to re-tender.

Our competitors gambled on making money from the variations that would be requested later in the cycle. How were we aware of this behaviour? Large bids are opened publically by the awarding organisation. From the numbers read out, we got a quick sense of where competitors’ offers varied from our own. They worked on the presumption that they could correct any mistakes and add back profit via some of the many requested project variations. They knew that changes post project award were commonplace. Our owners, from a service and financial background, did not understand this.

We were sometimes outraged that our competitors acted with lower quality. They were prepared to manage risk and relationships later to ensure profit across the whole life-cycle of the project.

So, my advice to those who pride themselves on process excellence is this. Ensure that your processes are reviewed regularly against the needs of ALL those who benefit. Be aware that your unique selling points can be exploited. Keep your competitors guessing and your Board aware of what you are doing.

Feel free to push back on my observations and have a great week.

Michael

Can process excellence be a barrier to competitiveness?

Last week, I suggested that we should all re-invest in Management. This thought was triggered by reading Dr Julian Birkinshaw's "Reinventing Management"; probably the best business book I read in 2010. It challenges our pre-occupation with Leadership.

My challenge to you, at the beginning of 2011, is not simple:

1. How much of our management process is designed to satisfy or exceed the expectations of ONLY our current customers and shareholders? Are our processes sufficiently flexible to consider ALL those who influence profitable outcomes - competitors, staff, suppliers, regulators and local communities, for example?

2. How can we ethically and legally take on international competition and be successful? Are all the cards now stacked against us - a high cost base, necessary regulation, a shift in international economic power and stringent financial conditions? Are we learning from experience or just bemoaning our bad luck? As an example, what can the English speaking world take from the recent World Cup bid failures from Australia, England and the USA?

3. What do we need to do differently in the leadership and management of our businesses, to succeed in an environment that we no longer control, but only influence?

I would welcome your thoughts on these challenges.

These days, as a Regional VP for Pyramid ODI, I facilitate leadership development and run OD projects for clients, but as the Managing Director of a satellite communications and systems integration company, I experienced the equal importance of effective management and leadership in practice.

Next time, I will share a real-life experience from my MD days, to explain why I believe passionately that management and leadership need to be in balance to generate sustained profit, particularly as we face tougher competitive challenges and decisions in 2011.

Best wishes to you, your business colleagues and families for a successful year ahead.

Michael

Three things

Best wishes for a profitable year, ahead of budget, with positive people and greater cash flow.

Here are three things we could all do more of, to successfully improve our business performance:

- Understand the needs and motivation of those who rely on us. Listen rather than transmit;

- Re-invest time in management process; improve on detail to surprise those benefiting from more consistent outcomes;

- Trigger innovation by encouraging open working relationships.

Here are three things we could all try to stop doing this year:

- Relying on personality and power to entice others to do our will;

- Mistreating suppliers and resources for short-term or political benefit;

- Wasting or ignoring the knowledge and energy of people around us.

And one more tip. Read a good book!

Until next time,

Michael