Does optimisation actually improve your bottom line?
Most companies want to streamline their work processes. But does it actually pay off in a busy company? We went and asked the expert for you. [Updated]
You have probably heard or said it before. “We need to optimise our processes. Do things smarter and become more efficient.”
Maybe you have experienced employees who do not always welcome new initiatives. Or maybe you yourself have endured having unnecessary procedures imposed on you.
When revenue recognition, approval of time registrations and budget follow-ups fill the workday, it can be overwhelming to dedicate time to making everything work smarter.
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In the end, you may have a sneaking suspicion your efforts do not even improve the bottom line.
As we had the same suspicion, we asked one of Europe’s leading process maturity experts:
Is it actually worth the effort to optimise our internal processes?
Expert in process optimisation
We meet the expert Jørn Johansen in Whitebox’s office north of Copenhagen. Usually, deer pass by just outside the windows, and an exceptional quietness rests over the office building.
Jørn is a partner and ”the scientist” in the consultancy Whitebox. They evaluate companies’ ability to do product development and project delivery and advise managers in development projects.
We quickly discover he doesn't throw lofty words around when we meet him. But with a kind and accommodating look and a researcher’s reservations towards imprecise claims, he proceeds straight to the core of the question.
Status quo is often 40% rework
”Yes, it does”, is the short answer from the expert.
”When we talk about optimising processes, we talk about maturity within the company. And maturity brings a lot of advantages. Amongst other things, we see that in the less mature companies, around 40% of all work is rework”, he explains.
Also read: 7 essential processes professional services businesses elevate with PSA software.
With experience that stems from more than 300 evaluation projects, Jørn Johansen has seen how immature or lacking internal processes can hold companies back.
"If you improve from level 1 to level 2 on the maturity scale, you go from 40% rework to 20%. And the curve continues as you become better. It frees up hands for people who would otherwise be doing rework. They can then do something more valuable.”
Fortune 500 does it…
The maturity scale is part of an internationally recognised maturity model that places companies on five distinct maturity levels. If you are at the lowest level, the internal processes are not followed (if any exist), and you can forget about being able to predict anything within your business.
On level 5, all processes are optimised, and you constantly work on optimising and learning more.
In the Nordic countries, the average is around 1.5 and 1.75, Jørn Johansen estimates.
While mature companies on level 5 delivered 89.6 % of all projects on time, immature level 1 companies only finished within the deadline 65% of the time.SPI Research's Professional Services Maturity Benchmark
”60% of Fortune 500 companies use this maturity model to improve. So you can ask yourself whether or not it is working”, the researcher asks rhetorically with a wry smile.
”Maturity is about how well you are coming through on your projects. You are measured against best practices from the world’s very best companies.”
Less rework is just one advantage of optimising your company's processes.
Also read: Explainer: What does it mean to be a mature company?
Both a requirement and competitive advantage
Today, we see industries where companies demand a certified maturity level of 3 or higher from their suppliers in order to do business with them. E.g. the defence industry requires high standards from their suppliers.
Moreover, the most mature companies win their bids 58% more often than the average company. You can read this in SPI Research's latest edition of the Professional Services Maturity Benchmark.
This does not surprise Jørn Johansen.
”Naturally you would rather do business with a stable and predictable company, where you are confident they can deliver. And this is why these companies win more offers”, he explains.
Mature companies are trending in China
Halfway through the interview, Jørn's partner and CEO in Whitebox, Per Hartlev, enters the room. Through 30 years, he has worked as a manager on all levels within project development. Lastly, as CEO of the Danish company DELTA.
“Did you talk about the China trend yet?” he interrupts.
Also read: How maturity leads to 63% higher profits in top companies.
”In China, 60% of all maturity analyses are performed because companies cannot attract new employees if they do not perform at level 3 - at minimum. Employees do not want to work in mishmash company.”
Nordic competition for talent
When we asked if this trend could be transferred to Scandinavia, Jørn Johansen hesitated a bit.
”Generally, attracting employees in companies delivering and completing projects is difficult. You can look at the entire building sector, which hungers for people being able to manage projects.”
In Scandinavia, most companies fight to find talented employees. Sweden is especially under pressure and experiencing a big shortage of qualified staff within industries like construction and IT.
”This also means that you become pickier as a future employee. If you could, wouldn’t you then rather join the best company than be working in a sandbox?” Jørn Johansen asks.
Courage and the will to change
During the length of our conversation, more disadvantages of immature processes are considered. Low productivity, no opportunity to re-use from previous projects and poor estimates on projects.
But if process optimisation is only advantageous, why doesn't everyone do it?
“For many companies, there simply is not time, as they spent too much time extinguishing fires”, Jørn Johansen says.
In the Scandinavian market, the high demand for qualified staff means that the employees work beyond maximum capacity to keep up.
”If you are under pressure, it requires courage and the will to venture into the project. But you need to make a decision that this is what you choose to do. It requires management to get involved and see the optimisations as an investment and a project.
But as the level is generally low, you really gain advantages when moving ahead of your competitors”, Jørn Johansen ends.
Get vital key figures from SPI Research's benchmark
SPI Research has investigated how consultancies can increase profit through maturity.
The benchmark has 244 pages, but if you do not have time to read it all, we have summarised the most important insights and key figures from the report in an executive summary.
About Jørn Johansen and Whitebox
Jørn Johansen has worked with product development and maturity assessments for more than 40 years and is considered the industry's grand old man. He has managed several research projects about product development, how companies improve and outsourcing of development projects.
He has furthermore developed the ImproveAbility™ method, which is the standard with process improvement, and he took the initiative to the global norm creating SPI Manifesto.
He is part of the team behind the consultancy Whitebox, which holds more than 100 years of experience with product development and has carried out more than 400 business evaluations. Together, they work to help companies get better at exploiting their growth potential.