Hidden Profits Blog

Are you frustrated because you have to wait until after the financial month end close to obtain any information about your company or departments operating results?  This happens in too many companies today!  In my last post, The Real Value of Information Technology, I reviewed the 4 critical areas to create value in Information Technology.  The first was real time information for better decision making.  

Jack Welch retired Chairman of General Electric said   ‘An organization’s ability to learn, and translate that learning into action rapidly, is the ultimate competitive advantage.’ 

So how can you as an executives learn fast and translate that learning into action rapidly? 

First, you need to have critical information at your fingertips in real-time.  So what is critical information commonly known as KPI’s (Key Performance Indicators).  Every company is different, however, KPI’s are generally financial or statistical values or percentages/ratios that indicate to you when critical operations are moving in the right direction. You know what your KPI’s are and once those are defined then we can define what is required provide them instaneously.  

Information Technology is critical to obtaining KPI’s on a real time basis. 

1.  Use technology to load data at it’s origin.  This can include mobile devices and/or internet to process sales in the field, receive products and inventory, load information from vendors, transfer data from manufacturing equipment or monitoring equipment, load agriculture data, etc. It can also include direct file transfer from customers, vendors and partners. This data is generally then loaded into an ERP system and optionally into a Business Intelligence system. 

2. ERP systems today process data from sub-modules (sales, manufacturing, purchasing, AP etc.) directly into the general ledger and/or job cost system on a real time basis.  An ERP system is a key component to process data and prepare/present information instantly. Processing data instantly is one of the key reasons to upgrade an old ERP system to a new system.

 3. A final puzzle piece in the technical stream to provide instantaneous information is the Business Intelligence system.  These systems provide functionality to dynamically process data into information and present it in numerical, graphical or text format into MS Office products and/or feed directly to mobile devices or web-based applications.  Data can be displayed in numerical or graphical formats and you can drill to detail transactions. Business Intelligence systems and mobile devices are the key components in transforming data into information immediately that enables you to learn, make decisions and act rapidly to make corrections.  As Jack Welch indicated this provides a distinct competitive advantage and the value of the technology used is invaluable!

For more information on how to define KPI’s and implement a fully integrated Business Intelligence system contact LJR Consulting Services at 818-709-6583 or info@ljrconsultingservices.com.

My friend Alex Auerbach who owns the PR firm, Alexander Auerbach & Co Public Relations, and is a member of the board of directors of a public company forwarded an article to me from Boardmember.com about Cyber Risk. and why corporate board members should be concerned about it.  The article addresses a couple of types of cyber crime and the general lack of attention paid to cyber crime by corporate boards and executive management.

The article discusses the 2 main areas of cyber crime

1. Theft of customer and employee information for the purpose of identity theft
2. Cyber corporate espionage for the purpose of obtaining competitive information and harming the firm’s revenue, profit and reputation

Both of these crimes are the result of individuals outside the organization hacking into the company’s computer systems to obtain the desired information.  As mentioned in the article the first type of cyber crime, theft of customer information, is generally a one-time problem in which the company is hacked and the data stolen, however it can happen multiple times.  The second type tends to be more ongoing in nature.

In addition, companies also need to guard against theft of data by internal employees,  The internal employees do not necessarily need to be IT employees.  With today’s sophisticated communications, offsite workforce and IT savvy employees it is more important than ever that additional precautions are taken to protect corporate data.

As the article mentions, the majority of executives and board members do not give much thought to cyber crime, although that is slowly changing.  Some of the reasons it is not on the radar for executives are:

1.  They assume the IT department will take care of it.

      While it is true that all good IT managers today address the basics, frequently that is not adequate and there are holes in security that are not obvious.  While a majority of software systems will encrypt data generally recognized as critical such as customer credit card numbers and employee SSN,  there may be data in systems that are critical to your company that are not generally considered critical in nature.  Also many in-house developed applications are not designed to encrypt data on the data bases.  Finally, if data is extracted from systems and stored in an employee’s spreadsheet or Access file it will not be encrypted and usually not even password protected. 

2.  They feel there is not much risk because no one would be interested in their data.

Cyber criminals are getting more and more sophisticated and as larger companies secure their systems and data better, smaller mid-market companies become easier targets,  Also all companies have competitors and in today’s marketplace many are becoming more willing to pay for competitive intelligence.  This is the biggest risk from internal employees because they have a greater understanding of what data is important.

3.  They are unaware of the growing magnitude of the risk and potential cost of loss

Cyber criminals have become more sophisticated and the rewards have become greater thus increasing the likelihood that any  company can be a victim.  With new laws regarding notification of breaches in customer and employee data, the administrative costs of a cyber crime are high.  However, even at the high cost of reporting the potential for loss from corporate espionage is even greater.  What would the cost to your company be if key product secrets or strategies were made known to competitors or to the public? 

So as executives and board members begin to put cyber crime on their radar, what can be done about it?  Just like any other type of crime cyber crime cannot be completely prevented, however, there are several steps that can be taken to reduce your chances of being the victim of cyber crime and increase your cyber security. 

1. Identify the most critical corporate data and focus on securing that data. For example whatever is unique about your business, provides a competitive advantage or represents a large R&D investment should be protected in systems. 
2. Perform an independent security assessment annually to identify risk levels.  Many companies feel they are adequately protected yet have lapses in security.  An independent audit by a cyber security firm can identify those lapses.  Secure the breaches that represent the biggest potential threat.
3. Purchase insurance to protect the company and limit liability for any breach.  Majority of insurance companies today provide policies to protect against cyber crime.  This is just as important today as standard property and casualty insurance. 
4. Perform background searches on all employees with access to critical data. 
5. Include IT executive representation on board of directors.  The inclusion of a CIO/CTO as either a member or advisor to the board will bring understanding of cyber security options to that body. 

Boardroom.com article ‘Is Your Company Prepared for Cyber Risk?’

Alexander Auerbach & Company

Most CEO’s and CFO’s of companies of all sizes would say that IT expenses are too high and they are not convinced that they receive value for what they spend.  CIO’s today spend a significant amount of time focusing on reducing costs and explaining the value of IT projects to the business.  While it is always a good idea to find ways to get the same value at a reduced cost and IT has alot of room to reduce costs, just cost cutting is not the optimum way to support the business.  In fact frequently a focus strictly on cost cutting will result long term lost value of IT.

The reality is that new technologies and IT business solutions have come together in the last few years to really provide the long term promise of enabling IT to increase revenue, reduce costs and increase productivity in businesses.  This situation has resulted in the new focus of aligning IT with business goals.  In a recent blog post I discussed the reasons to create an IT Strategy and that is certainly the beginning of ensuring that IT is aligned with the business strategy.

http://www.hiddenprofitsblog.com/what-is-an-it-an-it-strategy-or-it-roadmap-and-why-do-i-need-one

The IT strategy is the first step. The next step after the IT Strategy is to define the projects, create budgets, obtain approvals and architect the solutions so all the pieces fit together to fulfill the strategy.  This is generally where the strategy and alignment falls apart.

So how to ensure the strategy and plan come to fruition and bring the expected value to the business?  First, I recommend the company  create a board of executive management that includes the CIO, to define project priorities and requirements for project business cases and review project progress. 

Second is to manage all of IT – ongoing maintenance, new projects and infrastructure as a unit so the executive board can see how all the projects fit together.  The IT department basically has 2 tracks – investment in new systems and functions and projects to sustain existing systems.  Create separate budgets for existing system maintenance and new investment.  Group the new projects into major programs that work together as a group. Then bring the two together to define the entire IT budget.  The consolidated portfolio should include an overall picture of how each project fits into the company strategy and what existing systems and costs will be phased out as each new project is brought online. 

This approach enables all of management to see the global picture of IT initiatives and expenditures and for CIOs to manage expectations.

M&A transactions were in the news this week with the article in the McKinsey Quarterly entitled ‘Understanding the Strategic Value of IT in M&A’.  I of course was thrilled to see this article as the authors Hugo Sarrazin and Andy West echoed the key issues I have discussed in earlier posts. 

Their opening statement states what I have experienced with several clients, ‘Many mergers don’t live up to expectations, because they stumble on the integration of technology and operations.  But a well planned strategy for IT integration can help mergers succeed’.  Sarrazin and West stated that in their work with post merger management ,they have found that 50 to 60% of the initiatives intended to capture synergies are strongly related to IT, but most IT issues are not fully addressed during due diligence or the early states of postmerger planning.  Simply stated, the more thorough the IT Due Diligence during the evaluation phase the greater the chance to realize expected synergies and cost reductions.

Sarrazin and West highlighted the 3 major tasks that acquiring companies perform that enable them to reap the greatest benefits from the merger.  These are:

1.  The acquiring firm  must get their own IT house in the best possible shape before initiating any deals.  I call this ‘Know Yourself First’.  The authors provide several suggestions on what should be done to get the IT house in order.  What is required to get the acquiring firms IT house in order is dependent on the company, the current status of the IT systems and infrastructure, and the types of acquisitions that are planned.  I strongly suggest an complete IT assessment and development of an IT roadmap based on managements strategic plans.  

2.  As companies begin merger talks, executive management must include IT in the due diligence process to evaluate the target company’s technology, to determine how it complements their own IT strategy and operations.  In my opinion this is an absolutely critical step that should be performed by IT professionals experienced in M&A issues.  This can be internal IT professionals or an external team that specializes in IT due diligence.

3. Prior to completion of the deal the postmerger integration must be carefully planned, including the systems and processes that will be merged, and the IT resources required. 

I will discuss each of these tasks in detail in subsequent posts on this topic.

Per the article, when these tasks are done, the acquirer can rapidly integrate the target company’s platform into a carefully considered architecture, enabling data from the acquired company to be migrated in less than 6 months.  I would also add that more importantly it enables synergies such as

• Merger of customers and cross selling of products/services,
• Realization of staff reductions
• Rapid penetration of new markets
• Rapid consolidation of products/services
• Rapid consolidation of vendors and potential favorable pricing due to increased volume

Serrazin and West also stressed the importance of the role of the CIO as a strategic partner in identifying acquisition targets and that the earlier the CIO is involved the more value can be added.  This requires the CIO to be not just technology focused but also business focused.  They also discuss the importance of evaluating the IT talent in both companies and determining who will be retained and implementing strategies to ensure continuity during the transition, maintenance of crucial talent within the organization.  In order for this to be accomplished, IT must be involved early in the merger discussions and due diligence phase.

Their summary states ‘As organizations depend increasingly on the information systems that coordinate transactions, manage operations and aid the pursuit of new market opportunities, the role fo technology in mergers becomes more critical.  Companies with a keen understanding of IT’s essential role in M&A can gain an edge in completing successful mergers.’  I concur wholeheartedly.  I would also add that it is important for executive management to understand the strategic role of IT in successfully meeting all the business goals including cost reduction, productivity improvements, market share growth, customer satisfaction, revenue growth.  In the 21st century, Information Technology is the heart of every successful company.  

Here is the link to the McKinsey Quarterly article.  www.mckinseyquarterly.com/Corporate_Finance/M_A/Understanding_the_strategic_value_of_IT_in_MA_2709

Here is the link to my previous post about IT Due Diligence

www.hiddenprofitsblog.com/it-due-diligence-what-and-why

On this special Thanksgiving holiday weekend, I want to thank all my readers.  Thanks for sharing your thoughts contributing to the conversation.  I look forward to continued interaction with you.  Thank you for forwarding the posts that you feel are helpful to others.  If you have not yet joined the conversation feel free to comment and provide your insight.  I look forward to hearing from you!

Sincerely

Lynda Roth

Outsourcing is seen as one of the best and quickest ways to reduce cost.  The popular thought is that you outsource non-core business functions to companies and locations that can do it cheaper than your team can if it is kept in-house.  While I agree that outsourcing is an option to be evaluated, it is not necessarily the panacea that has been suggested.

First, what is meant by outsourcing?

Many think it means using a company that is not in the US to perform a back office or non-core corporate function.  While a lot of outsourcing is done offshore, that is not the only definition of outsourcing.  You can outsource the function to a company in the US. The broad definition of outsourcing is to hire another company to perform internal corporate functions. The term for outsourcing to a company outside of the US is termed Offshoring.

 Next, how much of the function is to be outsourced? 

Outsourcing is generally when an entire department/function like Accounts Payable, Accounts Receivable or Information Technology is transferred to another company,  However, outsourcing can be done on selected functions within a larger functional department.  Some examples of partial outsourcing are:

• Instead of completely outsourcing all IT functions, you can outsource selected development to development firms, or outsource infrastructure maintainence to an infrastructure firm, or outsource data base administration. 
• In Accounts Payable you can outsource just the payment process to a bank 
• In Accounts Receivable you can outsource payment receipt to a bank and customer collections to a collection firm.

I have worked with numerous clients in which outsourcing looked like a possible alternative, however, upon assessing the company several key items came to light.

1. In the majority of cases a large part of the reason the cost of back office business functions was high was due to extremely inefficient and ineffective business processes. This was the result of numerous manual functions sometimes in spite of adequate computer business systems and sometimes because of inadequate computer business systems.
2. Another major  reason was multiple business systems resulting from corporate acquisitions that were not consolidated onto one system and standard business process
3. Organization and people are also one of the reasons why companies struggle with many operations that they consider outsourcing,

By addressing these issues, many companies can be competitive with outsourcing options.  By not outsourcing you also don’t have to worry about the disadvantages and loss of control that comes with outsourcing. Finally, if there is still a decision to outsource, it can be done in a more effective manner and thus better ensure success.

If you are interested in having an assessment of your systems and processes contact me at 818-709-6583 or info@ljrconsultingservices.com

There are always a certain amount of corporations that have found themselves in a situation of negative profitability and/or declining sales.  If these cases are prolonged they are in need of a fundamental business change and infusion of cash in order to survive – A Corporate Turnaround.  In the last couple of years the number of companies in this situation has increased significantly.  The common approaches to address these situations are:

1. Assemble a finance team get a cash infusion from a bank, finance company or investor
2. Assemble a team to arrange the sale of all or part of the company
3. Cut expenditures and employees across the board in the company
4. Bring in a consultant to address the revenue side of the business
5. Re-organize under bankruptcy protection

While I agree that some or all of these approaches may be necessary in any given situation, I believe that except for the cases in which the company is liquidated, Information Technology also plays a vital role.  I have been working with several clients in the last couple of years that find themselves in the situation where revenue is down, cash flow is down, cash is hard to find and the company is in serious trouble.  In one situation the client had already attempted to sell the company 3 times and was unable to come to terms with a buyer.  In another, they had already brought in management consultants to address the issues and increase sales.  In another the company was still in good position but the owner knew there were big bumps in the road and wanted to address them before they became serious.  In all cases the biggest hindrance to management was the lack of information, financial, sales and production about what was happening in the business so that productive decisions could be made.

Why was there such a lack of basic information?  In all cases the root of the problem consisted of the following:

• Computer systems which were not integrated – each company utilized a minimum of 2 major systems in the business and sometimes more
• Significant manual processes that prevented timely and accurate information from being processed in the computer systems
• Inadequate and untimely reporting regarding financial and operational results
• Lack of an adequate system to track sales performance

Because of the above Information Technology problems, the companies were unable to answer the following basic business questions:

• How much are sales down over previous years and in what product lines, customers or geographic areas?
• What sales do we have in the pipeline and what are the expected future revenues?
• Where are sales coming from in terms of products, customers and geographic regions?
• What is the productivity of operational staff and how can we increase the productivity?
• Where are the greatest expenses and what are the best cuts to make?
• What is the projected cash flow for the next month, quarter and year?
• What is the status of AR and collections, if collections are down why?

Now I know what most people would say – hire a staff of accountants to come in and generate those reports.  Ok let’s say we do that.  First, these types of reports are not static.  Management needs these reports on a daily or weekly basis.  How many accountants and how much time will be required to compile this information on an ongoing basis?  In most cases it would be unrealistic.  So what can Information Technology do?

First, there are numerous Business Intelligence (BI) systems available today that can be used to gather data from multiple systems and create reports, trend analysis, dashboards for management to have meaningful information as soon as data is entered into the systems.  This is especially important when analyzing sales and production data.  The majority of these systems can access Excel spreadsheets and any ODBC data base.  So even if there is no CRM (Customer Relationship Management) system and sales information is in spreadsheets, important management reports may be obtained from them.  Then the next question is ‘Aren’t BI systems expensive and difficult to implement?’  Traditionally that has been the case but today there are several systems that are very inexpensive and they will build a dynamic data store from the raw data.  These may not be a long term solution but can be implemented rather quickly to start providing management with critical information.

Second, in some situations the BI data can be used to create interfaces between systems that are not integrated. One of the biggest issues I see is operational systems that are not integrated with an accounting system.  Some of the BI systems can be used to capture the operational transactions and generate Excel spreadsheets of the journal entries that can then be integrated to the accounting system.

Third, I.T. is no longer just an internal data gathering operation that is used to create financial statements and tax returns.  Technology and automation are used to follow up on sales leads and prospects, survey customers, create new sales channels, provide customer and vendor self-service, provide for entry of data at the source, streamline operations and improve many other business functions.  By effectively utilizing information technology and business process automation, many time consuming and inaccurate business processes can be streamlined and made more accurate.  Much of this technology is relatively inexpensive.  For example, there are many services offered by banks, financial institutions and vendors that are free or very low cost to implement.  Many systems especially CRM (Customer Relationship Management) and prospect follow-up systems are available as a service at a low monthly cost. 

By implementing timely management reporting, integrating systems and automating business processes many companies can find solutions to their business problems, provide better information to investors and lenders and even improve the chances for an acceptable sale of the business.  Times are challenging and information technology is not a silver bullet but it is an arrow that should be in every executive’s quiver. 

For information and an evaluation of your Information Technology contact me at info@ljrconsultingservices.com or 818-709-6583

The position of a CIO has traditionally been thought of as only for larger companies.  Indeed when the position first became popular in the 90’s only companies with fairly significant data centers and IT staffs hired a CIO.  In recent years more companies with revenues of less than $1 billion have been hiring CIOs.  However, in many of those situations the position becomes more of a title given to the person at the company that is responsible for IT, regardless of what their actual function.  In many cases the CFO also carries the title of CIO. 

A CIO is no longer just a title to be given as a reward or just to give to another executive as a place holder.  As information technology (IT) has become ubiquitous and ever more important within companies of all sizes, the role of the CIO has become more critical and includes more expanded functionality.  The following are 5 key functions a CIO should perform in all organizations.

1. CIO should be responsible for both the technical components of information technology and business process.  As a company grows the systems it should use include more and more functionality and the company should use more of that functionality to improve the productivity in the company.  Unfortunately, what generally happens is that the company invests in technology that has the capability to significantly improve productivity and controls.  Or the company does not purchase the technology available to them because they do not understand the benefits of the available functionality.  The result is that as the company grows of the ratio of expense to revenue increases and the company becomes less profitable as a percentage of revenue that translates into net income.  A good CIO should understand the technology, the business and lean business processes.  The CIO becomes the key person that guides the company to utilize information technology to the fullest extent and implementing lean business practices to maximize profitability.

2. IT is no longer just about processing accounting transactions and providing management reports.  It is also no longer just about building and maintaining an internal data center at a single location.  IT encompasses customer interface, product/service delivery, marketing and sales and ultimately can be the key to an important competitive advantage or major cost savings.  A savvy CIO who is involved at the C-level executive ranks can help guide the company through technology decisions, educate management and employees regarding different technology options. 

3. CIO should be part of strategic planning process.  Often executive management plans are hampered and information systems are purchased in a crisis mode because no one with a technology background has been involved in the strategic planning process.  I have worked with companies that are struggling with growth because they do not have the systems and processes needed to remain competitive and profitable as they grow.  Having an experienced CIO involved with executive management at that strategic level will not only improve the chances that the company’s information systems and processes will be able to support their growth; they may also be able to provide solutions to competitive pressures.  In addition, if a company is struggling and needs to reduce cost, an experienced CIO will be able to identify opportunities where information systems coupled with revised business process will enable staff reductions.

4.  Information Technology today is much more complex and specialized than ever before. Also, new technology is coming on the market faster than ever. Traditionally, mid-market companies rely on vendors or non-technology executive’s previous experience to keep them informed on what enhancements they need.  This is dangerous for 2 reasons – 1.  vendors are primarily interested in making sure that their clients purchase products/services that fit in their experience. 2. Vendors are not involved in planning so are often unaware of all the factors that should impact a decision.

5.  CIO should be involved in M&A transactions.  Many companies grow by acquisition and as the economy recovers M&A activity will increase.  The CIO needs to ensure that the parent company has the infrastructure and systems to support the acquisitions, perform due diligence on the acquisition targets and plan the transition of systems, infrastructure and processes.  I have worked with several businesses that have grown by acquisition without addressing these areas and after a few years they have a major issue to address.  They are supporting multiple systems and infrastructures, the companies cannot work together, customers are confused and they have not realized the expected ROI. 

Hiring an experienced CIO is expensive and many mid-market companies do not have a need for a full time CIO.  In these situations I recommend using an experienced CIO on a part-time consulting basis and/or adding an experienced CIO to the Board of Directors.  Also, many CIOs are primarily experienced in managing the IT environment and have limited business knowledge.  Utilizing an experienced CIO as a coach/mentor to the corporate CIO or on the Board will provide the needed support for the company CIO. 

Links to additional articles.

Role of CIO in M&A

New Role of CIO

Role of Strategic CIO

Contact LJR Consulting Services for experienced CIOs 818-227-5025 or info@ljrconsultingservices.com

I have spoken with several prospects in the last couple of weeks all of whom are wrestling with how to select an ERP system. 

I am encouraged that they are wrestling with it and contemplating getting professional support.  Selecting and implementing an ERP system is one of the most important and expensive decisions a company will make. Unfortunately, in many cases, over 70%, the projects will fail.  Why such a high rate of failure for such an important business undertaking?  In my over 30 years of experience implementing systems, the 2 biggest reasons for failure are:

1. Selecting the wrong system
2. Selecting the wrong VAR or implementation partner 

Of course, there are many other reasons for the failure rate but these are the most common. 

So the next question is – if a company does an evaluation how is that they so often pick wrong?

The primary reasons are the following:

1. Select a system based on the prior experience of an executive with a system at another company.  That may or may not be a good test of what will work in the current company.  There are several factors that impact whether a system that works well in company A will do the same for Company B.  What works for one does not necessarily work for another.
2. Buy into advertising, popular theory or executive pressure that the company must have the biggest name in the business to be a ‘real’ system.  When ERP systems first started to be developed, it was true that the larger company systems had better functionality.  That is not true today. 
3. Delegate the selection only to the IT department
4. Do not document requirements at all or document requirements based on how the company currently functions not how it will function in the future.  This is a very limiting view and results in selection of systems that will not support a growing company.
5. Select the system with the best demo instead of based on how the system functionality best supports the company’s requirements.
6. Do not use the services of a professional ERP consultant or use a systems integrator that benefits from the selection of a particular system.

The optimum methodology to use to select an ERP or any system is the following:

1. Create a selection team comprised of employees from all key departments and information technology.
2. Define and document system requirements based on the future processes of the company.  Use best business process practices as a guide. Also, use new technological features to redefine processes.  For example, systems today have executive dashboards and real time information access so traditional reports are not needed as much. Also evaluate how wireless and smartphone technology can be used to replace existing manual processes.
3. Determine the technology platform you expect to support.  For example what data base and operating system can your company best support.  Will you use SaaS, outsource the application hosting or host the system in-house.
4. Research systems that support your industry and compare them to your documented requirements and preferred technology platform.  Select the best 3 or 4 applications for demonstrations.
5. Work with the selected vendors to script the demonstration so they will address your key requirements. 
6. After each vendor demonstration, score the vendor based on how well the system performed and how comfortable the team was with the user interface.
7. Obtain cost estimates for total cost of ownership – purchase price, implementation. and ongoing maintenance costs.
8. Make the selection based on the best balanced system.

I also recommend that if your employees do not have experience in systems selection, you should use the services of an objective, vendor agnostic consultant to guide the organization through the evaluation and selection process.

If you would like to learn about our methodology and/or get support during your ERP selection and implementation contact Lynda Roth at 818-709-6583 or info@ljrconsultingservices.com

I am reading a new book by John C. Maxwell entitled ‘How Successful People Think’.  An intriguing title.  If you are not familiar with John C. Maxwell he is a very dynamic speaker, and an expert on Leadership.

 Available on Amazon tinyurl.com/25pp34c  

One of the chapters in the book is about Creative Thinking.  Maxwell quotes Annette Moser-Wellman the author of ‘The Five Faces of Genius’ who states ‘The most valuable resource you bring to your work and your firm is your creativity’.  Maxwell states ‘Creative thought isn’t necessarily original thinking. Most often creative thinking is a composite of other thoughts discovered along the way.’

When I read the chapter, I thought about how so many companies either do not take on projects like lean process design that require new thought or engage in those projects and don’t see any benefit. There is much written about why projects fail and what is required to be successful and in all of those numerous articles I have not seen ‘Creative Thought’ as one of the requirements for success or lack of creative thought as one of the reasons for failure.  However, after reading and thinking about the chapter, I believe it just might be the key ingredient for success.

Maxwell listed the following as characteristics of creative thinkers.

• Value Ideas – this is a requirement for a lean project and you need many ideas for improvement
• Explore Options – also key so the team can explore multiple ways to perform the process
• Embrace Ambiguity – certainly when a team is initially evaluating how to ‘lean’ a process there is much ambiguity on exactly how things will be done, what technology might be available to lean the process and how it would all be implemented.
• Celebrate the Offbeat – in order to get to a truly different process that saves time and cost, the team must think out of the box and brainstorm.  Some of the ideas will seem way crazy but may have merit.
• Connect the Unconnected – so often in evaluating how to make a process more efficient the team needs to consider process steps that are not normally connect to the process being evaluated.  For ex. When a company looks at Accounts Payable, what really needs to be addressed is the entire Procure to Pay process which may address areas not normally connected in the company.
• Don’t Fear Failure – a team must try multiple options and ask many questions before finding a satisfactory revised process.  Some of the options may not work, also the new process will probably be improved again at a later time. Don’t be afraid to try and revise.

Maxwell’s list on How to Discover Creative Thinking is a primer for companies who want the get the most from employees and provide an environment in which employees feel valued and motivated to improve the business.

Remove Creativity Killers – in most companies today creativity is dead and buried.  The most important role for executive management is to remove creativity killers and create an environment that encourages creativity.

Think Creatively by Asking the Right Questions – This is a key skill to teach employees who are team members on a lean project.  The right questions are those that stretch the mind beyond the obvious.  Too many lean projects fall short because team members only ask the obvious questions. 

Develop a Creative Environment – having an area where the lean teams meet and have tools just for the lean process that enable them to explore ideas, put them on paper and move components around is very conducive to creative thought.

Spend time with other creative people – not only do you need creative thinkers from your team, the project will greatly benefit from outside team members.  These may be consultants, representatives from customers and vendors, representatives from key advisors like banker and accountant. These people bring a totally different perspective and insight on what other companies do to a lean project and business process re-design.

Get Out of Your Box – to me that means not only thinking outside the box but looking at how other more efficient companies perform the same processes, technology that might be available to enable a change that could not happen without the technology.  For example, a company in which employees are not near a computer in the course of their job, may resist performing functions that require entering or manipulating data on a computer.  However, with smartphone, iPads and the internet, applications can be created in which access to a workstation or laptop is not requried to use the technology.  You can also apply generally accepted processes from one area of the company or industry to another process.

So bring Creative Thinking to your Lean Projects. 

If you would like to spend time with other creative people – Call LJR Consulting Services for a free consultation  818-227-5025