What is business process optimization?
Business process optimization (BPO) happens when companies take a good look at their existing processes and improve them by ensuring a more efficient use of available resources.
The key here is the use of available resources. Optimizing your processes enables you to either get more value out of your existing costs (be it human resources or otherwise), or decrease costs while maintaining the same level of output. That looks like the definition of improving efficiency!
The process of BPO has 3 key elements:
- Streamlining your employee workflows,
- Promoting efficiency,
- Ensuring that each process is aligned with your company’s targets and strategy.
As a part of Business Process Management (BPM), BPO is about doing the right things AND doing things right. This often goes hand in hand with the concept of continuous improvement. Rarely, if ever, does a single fix put a company on the right path immediately. As realities change, it is important to keep your finger on the pulse and always seek improvements, striving for even better results.
In the business process maturity model, optimization is the last stage of the process. This is because for you to know how to improve your processes, first you need to have them up and running and have some experience with them, to allow time for unexpected shortcomings to come to the surface. When you have all the data about your existing processes, you can then look at how to make them better.
What are the benefits of BPO?
Making your business processes more efficient can bring about numerous benefits. To highlight a few, it can give you a competitive advantage in your market (both in terms of product and talent acquisition), provide a better service to your customer (improving brand loyalty), and improve your business’s bottom line (either by increasing output or minimizing costs).
If you take a closer look at what exactly can be improved by implementing BPO, you will find some interesting results:
- Market compliance – ensure your processes fit your market (as one size rarely fits all), whether that means adjusting your operations to local conditions or ensuring legal compliance in different countries;
- Streamlined operations – not only can this save your employees’ time (and decrease OT or improve their output), a straightforward and streamlined process is easier to learn for new joiners;
- Better resource management – using the tools available to their full potential gives you more bang for your buck, both by increasing output and by decreasing spending on other resources you’d otherwise have to purchase;
- Reduced risks/errors – removing human error from many processes saves time, money, and legal exposure. This is especially important in sensitive fields like finance, legal, or human resources (related to privacy);
- Consistency – consistent performance is at the core of an effective business. Having significant ups and downs can damage your reputation as well as make your shareholders unhappy during the downturn;
- Quality assured – 21st century customers are “picky”. Providing a subpar product almost always backfires, and your most loyal promoters can become your loudest haters;
- End-to-end visibility – insight into your processes makes management much easier and more efficient. No improvement can be made without good insight;
- Improvement of cashflow, better budget management, and even savings – smooth processes equal smooth revenue inflow and more predicable outflow, not to mention HR cost savings, fewer resources needed, and reduced inventory waste.
Why is business process optimization important?
We have looked at the benefits of process optimization. But what happens if you don’t do it?
Especially in complex, large organizations, the numbers of stakeholders involved in each process can be significant. Moreover, the relationships between processes and the people they impact are different for each organization depending on its structure, and are constantly evolving as market realities change, employees come and go, and strategies are altered.
BPO tailored to your company’s needs is crucial to ensure the best return on investment for your projects, – especially nowadays, when most markets have wafer-thin margins and fierce competition. Gaining that competitive advantage can be the difference between your company existing in 5 years or sliding into oblivion. If you don’t think this applies to you, look at what happened to Nokia, Blockbuster, and Konica Minolta.
Hiring a company that uses a one-size-fits-all approach to BPO to help you carry out these improvements out may not work – especially in the case of very specific and unique companies. It’s important to work with a partner who:
- understands your business well,
- treats you individually,
- will locate areas for process improvement accordingly,
- will propose a dedicated and proper optimization strategy.
For example, at Inwedo, we’ve helped our client in the ultra-fresh food business improve their order processing, making it easier for them to manage their orders and decrease losses from product expiration. Check out the case study of how we helped an ultra-fresh food company with their BPO.
Who needs business process optimization?
We bet that if you take a close look at the processes across your organization, you will find areas that would benefit from optimization in each department. If you are in charge of budgeting, manage revenues or cashflow, manage a team, utilize data from various sources, or your field requires accurate real-time data, there is a good chance you would benefit from BPO.
Are you not sure whether the above examples apply to you? If your job title is HR manager, CTO, director of a department or any other leadership role, logistics manager, supply chain manager, purchaser, omnichannel manager, or manufacturing leader, then you and your team have a lot to gain from BPO.
How do you know if it’s the right time for business process optimization?
There are a few indicators that you could benefit from business process optimization right now. Let’s look at the kinds of tasks you handle.
Practical examples of business process optimization
First of all, processes that are executed frequently (e.g. several times a day): in these cases, even a small tweak can bring significant benefits. For example, if you target a process that takes 30 minutes each time and is executed 5 times a day on average, and optimize it to save 5 minutes each time, that means you will be able to fit in one more session every day! Multiply that by the number of employees who are working in this specific field, and you’ll see the impact. A good example would be improving your customer service process by developing easily sharable FAQ pages for your help desk staff to share with customers, instead of personally answering each simple query repeatedly.
The second kind of processes are those that occur infrequently but are very time-consuming and resource-intensive. The scale and frequency varies, from huge tasks once a year (e.g. auditing of financial reports) to irregular events that depend on the situations arising in the company (e.g. travel cost reimbursement applications). By digitizing the processes, you make the workflows much clearer and faster, and allow for real-time feedback. This can be as simple as replacing a paper-based process with a simple digital form.
Finally, there are situations in which a certain process needs to be completed before the next steps can start. You can see how crucial it is to make sure the task is completed as quickly as possible. If ignored, unoptimized “blocker” processes can apply the brakes on significant projects. A good example would be the process of integration with a third-party payment provider in order to outsource financial operations in foreign countries when expanding to new markets. If carried out in-house, however, these can be very costly and involve a lot of manual work, making them subject to human error.
Another way to look at whether it’s time for your company to invest in BPO is by looking at what’s happening right now.
Examples of events that are good triggers for business process optimization:
- you want to build a new product from scratch,
- you’re not sure how to approach your digital project,
- your team lacks product development skills,
- you want to improve an existing application,
- you’d like to integrate multiple sources of data,
- you aim to reduce manual labor for your employees.
How to implement business process optimization in 5 steps – BPO strategy
Like any improvement initiative, BPO implementation starts with identifying the issue. This might be conscious and deliberate (when you sit down and look at your business with the aim of making your operations more efficient, and you identify the key areas in need of improvement) or a complete accident – you may simply come across a process that isn’t running how it should.
You may also realize there is an issue with efficiency as part of a brand new activity that your company hasn’t ever engaged in before – entering a new market, releasing a new product line, or working with a new partner.
The next stage is to rework the process using existing resources. Before jumping into making huge organizational changes and splashing big bucks on investments in new tools, see what can be improved (and what can’t) with what you already have at hand. This could mean removing unnecessary steps from an approval process or organizing a better way to communicate between departments, for example.
However, you will also identify what kinds of improvements are needed that you simply do not have the resources to carry out, and what kinds of tools can help you achieve them. For example, if you want to go paperless and fully remote with some of your bureaucratic processes (like reimbursement applications) to enable your remote office salesforce to work more efficiently, you may need a dedicated system.
After that, you need to think about what exactly you wish to achieve through the optimizations, and how you will measure that success. When setting goals for your business process optimization, remember to make the goals SMART – Specific, Measurable, Achievable, Realistic, and Time-bound.
We recommend that you start with implementing changes using existing resources and measuring the results. If such optimization doesn’t meet your expectations, it might be time to invest in a system that can support you in achieving your improvement goals.
The tools that can help you are often digital, and can help automate some of the processes to remove manual work and increase the speed. Some examples could be relatively simple, such as automatically adjusting the approval paths for reimbursement applications depending on the selected reimbursement item and amount, or more complex, like using a sophisticated algorithm to help you identify high-potential CVs (recruitment automation software) or scanning documents to be audited for sensitive parts that will require a more careful look by human auditors.
The final stage is continuous monitoring of the process. Especially if you set ambitious optimization goals, ongoing tweaks to the process may be required: that could mean adding new features to the system, identifying areas that could be improved even more, etc. Keep your finger on the pulse to make sure you are running the specific process at its full capacity and efficiency.
5 methodologies you can use for business process optimization
1. Agile
Agile methodology is becoming very popular among software development teams, but marketing departments are also applying some of the principles to their operations. As opposed to the waterfall method, which is based on setting up a production process once and running it the same way for years to come, agile methodology applies continuous tweaks and improvements.
The one thing that is constant in agile teams is change. That brings about a great many benefits, but the most notable one is reaction speed – this can give you a competitive advantage over your competitors, making sure that you’re the first on the playing field (and if you’ve read 22 Immutable Laws of Marketing, you will know it’s of utmost importance to be the pioneer).
Agile teams plan for the long term, but act in the short term. The term “sprint” is often used, which refers to completing one part of a project quickly to meet a milestone, evaluate the results, and tweak if necessary.
2. Mapping
Mapping is a method of creating and analyzing maps (surprise!) of the stages of a process and how they relate to the whole business process. With this method, you can identify bottlenecks or opportunities for making big impacts with small changes. Mapping helps you understand how different stages of a process influence each other. Perhaps you may notice that slightly optimizing a task at an early stage of the process can significantly affect the efficiency of further steps.
Take help desk operations, for example. By tweaking the ways in which your customers can get the information they need in the beginning, and setting up a chatbot which provides answers to the simplest queries, you will free up the time of your help desk staff so they can focus on the really challenging requests. This will decrease the waiting time for customers who truly need help. Then you can take it one step further – create a method of recording the solutions that the help desk comes up with, and integrate those into the chat bot for further time savings.
3. Kanban
First developed in Japan in the 1940s, the Kanban methodology is based on a dedicated board with 3 fields: “To do”, “In progress”, and “Done”. Project members add their tasks to the board and move them to the appropriate stages as they progress. This can be as easy as setting up a whiteboard and providing markers, or installing a cork board divided into 3 parts and having your team members add their tasks on sticky notes (to make them easy to move). You can also develop a more sophisticated software tool to track activities using the Kanban method.
Kanban allows all the team members to have insight into the progress of their project and adjust their action plan accordingly. This also gives quick, clear insight for managers.
In some specific cases, this method proves very important. Take an ultra-fresh food company, for example: using Kanban, they would be able to ensure that their inventory is properly used and stock optimized to reduce waste and improve the bottom line – all while delivering a more efficient, delay-free service to their customers.
4. Kaizen
Some organizations are riddled with inefficiencies, and trying to improve everything at the same time may lead to quite the opposite effect. Kaizen methodology (as applied to business process optimization) promotes the concept of implementing incremental changes as opposed to drastic, big ones all at once.
Kaizen is really a way of thinking: the idea of constant, continuous improvement of the production process. This methodology is based on 4 pillars:
- Improving the ergonomic qualities of the workspace
- Reduction of costs
- Involvement of team members in the process of increasing efficiency
- Implementation of improvements suggested by the frontline staff and operational workforce, as opposed to full top-down management of improvement initiatives.
After all, who knows the full picture of specific processes and what they are lacking better than the people who are actually implementing them?
5. 5S
The 5S business process optimization method has a single goal: to implement working standards throughout the organization to increase production efficiency. In this methodology, each team member ensures that the workplace is well organized, and the tools and equipment are used strategically to ensure economical and ergonomic production.
Employees working on similar levels should follow the same (or very similar) rules, which can help set up working standards at your company. 5S only works if your entire workforce follows these rules. If you manage to achieve that, you will definitely notice a measurable positive impact on your bottom line.
What are some examples of optimization?
While virtually any process in your company could potentially be made more efficient, here are some examples of the most common optimizations:
- Eliminating redundancies and errors
- Streamlining workflows
- Improving communications
- Forecasting changes (internal and external)
- Automating processes
What are some challenges or pitfalls of business process optimization?
While every process could potentially be improved, some inefficiencies are nearly unavoidable. If one day you hear of a company that has managed to not overload their managers, removed politics and personal conflicts within or between teams, completely solved the free rider issue, and managed to have each department take on each project they’re tasked with without ever claiming that it is “outside our scope of responsibility”, and that company delivers a competitive, high-quality product or service, no doubt they will eventually be the most successful company in the world.
But realistically, especially in larger corporations, some efficiencies will occur, and no process tweak will entirely remove them.
However, there are areas that you may struggle with where Inwedo as a tech partner could help. For example, there are situations when every single stakeholder must be involved during a project kickoff (especially the end users), but companies avoid doing this, as it is costly and requires a lot of effort. However, by not ensuring an all-hands-on-deck kickoff, you will burn through even more of the budget at the later stages of the process, and some of the actions you commit to will not achieve the ultimate project goals. Not to mention delays in the project and the multitude of additional approvals if some key decision-makers were skipped over during kickoff.
Working with a partner who has vast experience in business process optimization for companies of various sizes and specializations can be a great way to help identify all the stakeholders and involve them from day one.
Who should be responsible for business process optimization?
It is best to identify a change leader who will be responsible for the BPO project. Often companies assign the task to a business process lead or manager with enough experience, skills, and resources available to involve both managers and frontline staff in the optimization process.
Such a leader will typically be well respected and trusted in your organization. It is crucial to empower such a person to approach people on all levels of the company structure in order to gain insights and data related to the processes that they are involved in.
On one hand, this person will be the key decision-maker when it comes to changes. On the other hand, this leader must be capable of basing their judgement on the real needs of the team and must involve the employees in decision-making and designing new solutions. In effect, this means that some of the responsibility for the success of the process optimization is passed on to the employees, and this promotes a feedback culture.