Competence Center for Family Businesses

The Center of Family Businesses is headed by Prof. Dr. Claus Gerberich

Controlling processes in a digital world

Prof. Dr. Claus Gerberich SGBS St. Gallen

Prof. Dr. Claus W. Gerberich
Studied mechanical engineering and business administration in Karlsruhe, Mannheim and MIT Cambridge/Boston; professor at the universities of Worms and Lucerne; supervisory board member and investor in medium-sized international companies; managing partner of Maschinenfabrik Gerberich GmbH & Cie; managing director of Schöller Mövenpick GmbH, board member of ADIDAS AG, COO Battelle Europa, board member of STAFF/Zumtobel Leuchten GmbH.

New opportunities through digitalization

Digital technologies offer enormous opportunities. Their use can lead to the development of completely new business models, the acquisition of new customers or the binding of existing customers more closely to the company. Digital technologies make it possible to work more efficiently and to network processes – for example through networked machines that intelligently control the production process and thereby release performance potential. The use of digital technologies not only changes the processes, but also the working environment of employees. It is therefore important that management not only deals with technical issues, but also prepares employees for change. The transfer of specialist knowledge and new skills as well as involvement in the change process are essential to making digitalization a business success.

Process goals

Processes should be designed in such a way that they help to achieve the goals that the company has set for itself. Process performance must be measurable. This always involves these three target categories, which must be seen in the overall context:

• Quality: Processes must deliver a result and the quality of the result must meet the requirements of the next process step. Quality is seen from the customer’s perspective.
• Time: Processes and the actions carried out must run or be carried out within the planned time. Lead times must be shortened and wasted time must be avoided.
• Costs: The effort required to carry out the individual process steps must not exceed the planned budget or must be minimal according to the rules of economic efficiency.

From functional perspective to process organization

The previous functional thinking promotes interfaces and partial optimisation thinking. The process-oriented organisation focuses on the customer and ensures that all processes are geared towards the customer. The core processes of the company begin and end with the customer. They create value for the customer and value for the company. The classic four core processes are

• The innovation process – the creation of new innovative goods and services.
• The sales and marketing process – the successful marketing of services to target groups.
• The order processing process – the implementation of the customer order into deliverable products and services.
• The customer service process – accompanying and supporting the customer when using the products.

Example: Rational AG is the world market leader for cooking appliances and one of the most successful German companies. Rational AG belongs to the category of hidden champions. The company is consistently oriented towards processes. Customer thinking is constantly present. The support processes have the task of equipping the core processes with the necessary resources, data and tools that are required to carry out the core processes correctly in terms of time, cost and quality. These include the procurement process, the HR process, IT and logistics. The management processes are the bracket around the core and support processes and ensure their integration, coordination and goal orientation. These include the planning processes, the decision-making processes, the implementation processes and the control processes. This is the only way to achieve uniform, integrated process management.
“RATIONAL is practically organized along the lines of a customer order. The company-wide, consistent process organization is characterized by holistic, natural, manageable and self-contained tasks. Superfluous interfaces and traditional departments have been completely eliminated. The employees at RATIONAL know their goals and tasks exactly and thus their contribution to the company’s success. As an entrepreneur in the company, you personally assume overall responsibility for your sub-process and make the necessary decisions yourself. The RATIONAL process organization is thus moving away from the extremely division of labor and thus management-heavy work organization. The overall view is retained. At the same time, we make the best possible use of the knowledge and training levels of our employees. The location in Germany is an advantage.” (Source: rational-online.com)

Managing processes differently: demanding customers, new competitors

The first step is to create your process map with the core processes, support processes and management processes and bring customer thinking into the entire company through service level agreements.” The current crisis shows that the flexibility and speed of response in dealing with unforeseen changes must be improved in our companies. We must change the way in which processes are controlled. The VUCA world is setting new standards – agility is key, rigidity is deadly.
Digitalization is also changing customers. They are becoming well-informed and networked partners in the market. Today they demand customized solutions and individual products at the price of standard goods. They expect fast delivery and excellent service. They know that digital technologies make this possible today. This means that the value chains have to be redesigned. New competitors with completely new business models (platform economy) are pushing their way into the classic chains from the manufacturer via the retail trade to the end customer and reaping growth and profits. This is challenging established business models and creating new business models that generate high and impressive value and revenue growth. In the famous Fortune 500 list, six platform companies are among the top ten most valuable companies in the world, whereas five years ago there were none.

Networked processes

Digitization uses digital technologies to create the basis for networking processes. This is the only way to ensure that all processes are aligned with the common goals. The networking matrix shows the intensity of the networking of the processes in actual and target. Only through consistent networking can the goal be achieved. Networked processes require networked thinking and action. A high level of balanced networking is the key to success. Actively control the networking.

Data as a raw material

Data is the raw material from which the (task-related) information is made that is used to make decisions in the company. Only with the help of suitable data can a company determine whether it is currently deviating from the target state or make reliable forecasts about possible opportunities or risks. The increasing networking and complexity of work processes, which also spreads spatially across different locations and time zones, requires a change in the way processes are controlled. The flexibility and speed of response in dealing with unforeseen changes must be improved. The necessary data basis and the efficient processing of this information require a considered digitalization of company processes. This also requires many employees to actively change their usual working methods. Flexible teams and forms of work are becoming the norm.
This need for digitalization is further exacerbated when employees are forced to work together virtually – as in the current situation. Task planning, problem solving, decision-making processes and management tasks must now succeed with limited communication options. A prerequisite for efficient collaboration between virtual teams is the quick and easy availability of reliable data. They form the basis for objective, solution-oriented discussions and strengthen mutual trust.

Improve reaction speed

Many companies can increase their performance and reaction speed if they put more energy into collecting meaningful data. This is not just about the question of which data adds value, but also about how often this data is updated. As a rule of thumb, the more complex and interconnected the company’s processes are, the more often the data should be updated. If digitalization is inadequate, the effort required to collect data is very high and is often a reason why companies do not adhere to this rule of thumb and forego valuable information. RTL (Real Time Leadership) is required – real-time decisions require real-time data.
However, digitalization and the associated availability of data alone are not enough. The data must also be used and interpreted consistently. There are often cultural hurdles here that managers and employees must overcome before digitalization can reach its potential. More data creates more transparency, which is not welcomed by everyone in every situation. In addition to the technological challenges of digitalization, the human and cultural challenges must not be overlooked. Cultural change must take place in parallel.

Digitalisation does not replace decision-making processes

The existence of digital processes and meaningful data can only support decisions in complex processes, but not replace them. Individual data is always only part of the decision basis and should not automatically anticipate decisions. The selection of the data to be recorded must be based on requirements in order to avoid inefficient mountains of data. Before determining the required data, clear goals or target states must therefore be described, based on which the data can later be evaluated.

For companies, this often means that they have to move away from process-oriented management (“Is what should be done being done?”) and towards more result-oriented management (“Have we achieved what we want to achieve?”). The OKR method supports this result-oriented approach. In many cases today, it is no longer enough to rely on the correct execution of defined processes. Instead, iterative target states must be planned and, when they are achieved, checked based on data. This changes the nature of the decision-making processes. Without digitization, this approach is usually associated with a great deal of effort, but in digitized companies it can be implemented efficiently.

Conclusion for the new process organization

• Transparency of processes
• Up-to-dateness of data, if possible available in real time
• Networking of processes creates complexity and dynamics
• RTL (Real Time Leadership) – decisions are made in real time
• Decision-making processes need to be redesigned
• Establish process responsibility and measure process performance
• Result orientation according to OKR philosophy must be ensured
• Integration is the dominant factor
• Flexibility becomes a success factor