Making Profits Using Process Based Management

11 January, 2013

Process Based Management

“Process-based management according to Wikipedia “is a management approach that governs the mindset and actions in an organization. The process is the basis on which decisions are made and actions are taken. It is oriented toward achieving a vision rather than targeting specific activities and tasks of individual functions.”
When you look at this definition of process based management, you would think that this approach is simply common sense. Why would some function or business process not be aligned with the rest of the operation? Well in many businesses, especially businesses in rapid growth mode, individual business processes can take on their own meaning and operate in a silo unaware of how their work may be affecting other departments.
Let’s look at an example of a hardware product design process that is done the traditional way and then through the process based management method.
In our example let us say we have a growing technology business and the internal product design team is assigned to develop a new computer based hardware product. The managed product design process includes bringing marketing people together with the design engineers to create a product specification that will include a targeted product cost. A product design that meets both the design functionality and product cost is to be considered as a victory in a product design process.
However, from a process based management approach that is focused on bringing the best customer value, there may be some hidden issues. The process based management approach makes a company look down from a 30,000 ft level and review the complete value driven system.
In this approach, all major stakeholders in the company play a role, albeit not an equal role, in the design of the product with the understanding that not everyone’s needs or requests will be met. The focus on the company mission or vision will be the deciding factor.
It must be mentioned here that while more people are involved in the process that an environment free from political gamesmanship that will delay action or create political environments must be maintained.
In our case we may discover that although the targeted product costs have been met, the installation costs are now higher than a previous model due to the hardware design. Inventory may be increased as the low cost design requires that the company stock different internal parts for each design variant. The product development team has met their individual objective and in doing so has created an inventory problem to the manufacturing team.
The overall company costs to deliver customer value has increased therefore in a process based management approach we have not met the company objective.
With our product design example and using the process based management approach, we find that a slight increase in product costs means one hardware variant needs to be inventoried so we eliminate the extra inventory and associated carrying costs. With input from sales and service we find that if we make software changes via the internet to add or delete features without sending a service rep we can keep service costs down and create higher gross margins for upgrades.  
The process based management approach brings a balance to the business by bringing all stakeholders together to deliver the best customer value. People do not work in functional silos as they come together with other areas of the business and see how their activities interrelate in meeting the goals of the organization.  They become aware that they are not operating alone and their actions have an impact on other departments and processes.
True success in the creation of a new product using the process based management approach is measured not by the results of one department or process. True success is achieved by a team process that creates lower company costs, an increased company profit while delivering incredible customer value. Here is our youtube channel

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