Outsourcing in the 21st century

During a recent business trip to India on a consulting engagement, I came across a news item in the local newspaper in Pune, India that is worth a mention for the benefit of my readers. In the September 26, 2011 issue of the Times of India (Pune edition), Kenneth Coleman, member of a special advisory group on US-India trade policy and a key figure in US President Barrack Obama's IT think tank was quoted “If Indian players can solve critical problems in the processes of their customers there is no question of 'lower cost' logic coming into play, because it is value that will drive businesses in the next 20 years."

Coleman added that markets such as China, the Philippines, Poland and Russia are coming ahead fast and will challenge India's cost advantage.

Coleman went on to say that many US companies have significant cash reserves and are looking at opportunities to pick up businesses that can help them grow. "Average to weak companies which thus far thrived on venture capital will no longer be relevant and only those with a strong growth promise will attract international strategic investors," Coleman underlined.

Outsourcing service providers should take a cue from Coleman’s remarks. Solving their customer’s business problems throwing human capital will no longer be acceptable. Solving critical problems in the processes is the value-add that customers are seeking and I may say willing to pay. BPO service providers should help transform their customer's processes and position their customers for the growth that will inevitably come. Outsourcing companies need to move their focus from transaction processing to process improvement to process transformation.

You may also read my earlier blog on a related subject “Predictions for 2011 in Shared Services & Outsourcing”.

Laws of Life

It's been a while since I last posted on my blog site. But I am back and expect to continue blogging for a long time. I received these Laws of Life from a friend of mine and I thought it might be a good way to re-engage myself with my readers with some humor. As you read these eighteen Laws of Life, I am sure you will relate to them as I certainly did. So here you go:

1. Law of Mechanical Repair - After your hands become coated with grease, your nose will begin to itch and you'll have to pee.
2. Law of Gravity - Any tool, nut, bolt, screw, when dropped, will roll to the least accessible corner.
3. Law of Probability - The probability of being watched is directly proportional to the stupidity of your act.
4. Law of Random Numbers - If you dial a wrong number, you never get a busy signal and someone always answers.
5. Variation Law - If you change lines (or traffic lanes), the one you were in will always move faster than the one you are in now (works every time).
6. Law of the Bath - When the body is fully immersed in water, the telephone rings.
7. Law of Close Encounters - The probability of meeting someone you know increases dramatically when you are with someone you don't want to be seen with.
8. Law of the Result - When you try to prove to someone that a machine won't work, it will.
9. Law of Bio-mechanics - The severity of the itch is inversely proportional to the ability to reach.
10. Law of the Theater & Hockey Arena - At any event, the people whose seats are furthest from the aisle, always arrive last. They are the ones who will leave their seats several times to go for food, beer, or the toilet and who leave early before the end of the performance or the game is over. The folks in the aisle seats come early, never move once, have long gangly legs or big bellies and stay to the bitter end of the performance. The aisle people also are very surly folk.
11. The Coffee Law - As soon as you sit down to a cup of hot coffee, your boss will ask you to do something, which will last until the coffee is cold.
12. Murphy's Law of Lockers - If there are only 2 people in a locker room, they will have adjacent lockers.
13. Law of Physical Surfaces - The chances of an open-faced jelly sandwich landing face down on a floor, are directly correlated to the newness and cost of the carpet or rug.
14. Law of Logical Argument - Anything is possible if you don't know what you are talking about.
15. Brown's Law of Physical Appearance - If the clothes fit, they're ugly.
16. Oliver's Law of Public Speaking - A closed mouth gathers no feet.
17. Wilson's Law of Commercial Marketing Strategy - As soon as you find a product that you really like, they will stop making it.
18. Doctors' Law - If you don't feel well, make an appointment to go to the doctor, by the time you get there you'll feel better. But don't make an appointment, and you'll stay sick.

Do you have your Laws of Life to share? If so, please leave them behind in the Comments section.

Root Cause Analysis

We have thus far reviewed the following modules in the process improvement or continuous improvement journey:

• Process improvement road map – Introduction
• Establishing objectives & strategy
• Identify process value stream
• How to select processes for PI assessment (a.k.a Assess Process Impact & Maturity)
• Collecting process health data (a.k.a QCPC assessment)

We are now ready to analyze the data we have collected and conduct a comprehensive root cause analysis. Keep in my mind that our objective is to improve the current process and as such collecting the health of the current process (QCPC data) and doing a root cause analysis forms the foundation of continuous improvement (CI).

The idea behind root cause analysis is that each problem or turnback is to be treated as a golden nugget, offering an opportunity to get better. Using QCPC data, root case analysis tells a story about how and why a problem occurs. It offers the “CI doctor” an opportunity to dig deep down in the process and prescribe the correct medicine for the cure.

In order to do a comprehensive root cause analysis, the process improvement participants must have an open mind, be alert and be persistent and tenacious in their approach. Also, the process improvement participants must dig deep down and not limit the assessment to the surface. Often, the real root cause is hidden somewhere else in the process or the process value chain and not visible on surface. Finally, before a solution is identified, the root cause must be confirmed with the customer and all stakeholders.

Management at the leadership level plays a very critical role in root cause analysis. They must not give lip service or solve the problem through a shot gun approach. Management must display the proper attitude by adhering to a defined and disciplined approach to problem solving. They must provide the appropriate level of support and resources and ensure that a solution is only implemented once the root cause has been properly identified and confirmed with the customer.

Following are the key steps in doing a root cause analysis:

• Identify and define the breakdown in process
• Utilize the underlying data collected in the QCPC phase of CI
• Brainstorm causes of breakdown
• Ask “Why? Why? Why?” multiple times
• Apply DIVE Technique: Define the problem; Investigate the problem; Verify the root cause; Ensure a mistake proof solution is achieved and implemented
• Confirm root cause with the customer

The following are a few different tools and techniques available to analyze the root cause:

Generating ideas through brainstorming and the use of 5 Whys

Brainstorming – helps to generate and collect ideas and helps facilitate the involvement of various stakeholders

5 Why’s - The following practical example demonstrates the basic process:

My car will not start. (Problem)

Why? - The battery is dead. (first why)
Why? - The alternator is not functioning. (second why)
Why? - The alternator belt has broken. (third why)
Why? - The alternator belt was well beyond its useful service life and has never been replaced (fourth why)
Why? - I have not been maintaining my car according to the recommended service schedule. (fifth why, a root cause)
Why? - Replacement parts are not available because of the extreme age of my vehicle. (sixth why, optional footnote)

I will start maintaining my car according to the recommended service schedule. (Solution)

Finding patterns and relationships through the use of a cause and effect diagram such as a fish-bone diagram.

Such a diagram helps analyze causes across different dimensions (typically equipment, process, people, materials, environment and management as shown in the picture below) and understand their effect (problem) on the process.


Several other techniques are also available such as storyboarding, grouping ideas through the use of nominal group techniques, prioritizing action through the use of histograms and pareto charts, etc. However, no matter what technique you use, the goal is to use the data collected in the QCPC phase of CI and breakdown the process problem down to its root cause and not limit the solution only to the symptom.

The next blog will be devoted to process flow assessment, also known as value stream mapping.

For questions or comments or help in implementing, please contact me via email.

Collect Process Health Data

For those joining the PI discussion, we have thus far covered the following PI modules:

• Process improvement road map– Introduction
• Establishing objectives & strategy
• Identify process value stream
• How to select processes for PI assessment (a.k.a Assess Process Impact & Maturity)

We are now ready to get into the nuts and bolts of PI assessment.

Known as QCPC (Quality Clinic Process Chart) assessment, this aspect of the PI journey involves collecting and recording process deviations for the area under review. The area under review is the one that was identified and explained in the previous phase of the PI journey, “Assess Process Impact & Maturity”.

Just as a doctor orders the necessary tests to diagnose an ailment, in this module of PI, the “PI doctor” also collects and charts significant data by conducting the necessary process deficiency tests.

A QCPC clinical activity is similar to a medical clinical diagnostic activity. PI process technicians collect business process deviation data to help identify potential business process problems. After collecting the data, they chart the process deviations to look for trends and patterns. These PI technicians do not jump to conclusions and immediately treat the problem, unless the issue is so severe that a short term solution is necessary. Additional tests may have to be conducted and charted and eventually the process technicians perform a root cause analysis to correctly identify the mistake proofing solution.

QCPC assessment is the foundation and heart of any process improvement activity and allows organizations to pinpoint what specifically is wrong in the process.

So how do you conduct a QCPC clinical activity?

The first step is to know the existence of a problem. This is generally identified through a formal Impact-Maturity exercise or knowing the existence of a problem day-to-day. This initiates the need for QCPC clinical process.

The second step is to collect, document, summarize and chart the process deviations in a manner and form that will be understood by all. The proper and meaningful charting of the data is very critical as it will help identify patterns and trends. Collected data should be shared with the process stakeholders as “golden nuggets” for process improvement.

The third step in the QCPC activity is data and trend analysis leading to a formal root cause assessment. This involves a deep and rigorous root cause analysis (RCA) of the process deviations so that meaningful solutions can be identified. We will devote a separate module on RCA.

The fourth and final step involves determining process improvement projects based on the process clinical activity.

The benefits of a QCPC activity are many; however, some of the major benefits are summarized below:

• Employee involvement
• Building employee / management trust and confidence
• Creating a positive work environment
• Making the lives of the associates involved in the day-to-day activity more meaningful and less stressful
• Encouraging problem solving
• Addressing customer issues in an unbiased and an unemotional manner
• Prioritizing corrective actions to the areas that have the highest impact to business objectives
  
• Setting aggressive process improvement goals

Like any major initiative, the QCPC or PI activity requires management support, commitment and leadership to a “Quality First” culture. When process deviations are captured and shared, it requires management leadership of not “shooting the messenger”. All process deviations must be treated as golden nuggets and associates should be rewarded for bringing forward this information. This helps raise the morale and associates will get excited in making improvements. However, this type of inclusive culture must start at the top, with top managers making themselves part of and active members of the QCPC clinical activity.

The next blog will be devoted to analyzing turnbacks or process deviations and conducting a formal root cause assessment.

Predictions for 2011 in Shared Services & Outsourcing

With the uncertainties of 2010 and the Great Recession almost behind us, corporations and service providers will need to start looking at and driving deep process improvements in their back office functions. By the very nature and as the name implies, back office process improvement took a back seat in the overall scheme of things. With limited budgets and resources, corporations deployed their scarce resources and talent to “front office” type of activities such as increasing top line growth or driving quick wins in cost reduction through labor cost arbitrage or dealing with cash management to remain afloat. In other words, corporations "hunkered down" to survive.

However, it’s now time to start focusing on the back office non-core functions that was perhaps neglected in the past either due to circumstances or by design. By only focusing on labor cost arbitrage, corporations will only be able to take their cost reduction initiatives up to a certain point. Also, corporations generally deployed their expensive internal or external resources to those functions that either gave them the maximum return on investment or helped grow their core functions. And again back office took a back seat.

So here are my predictions / recommendations:

• Corporations who have not yet thought of shared services, should start actively pursuing, planning and quickly implementing a strong shared services function in one or more back office areas. And those who have already implemented a shared services model, should start driving continuous improvement (CI) or process improvements (PI) using common sense PI principles and tools from their CI/PI tool kit.

• Corporations who have outsourced their shared services functions to low cost external service providers need to start leveraging the labor cost arbitrage. They need to start utilizing strong domain expertise of the service providers to make quantum improvements in their business processes by driving out waste and inefficiency. While the domain expertise does not come cheap, it certainly is a lot cheaper than the domain expertise that corporations can acquire in their developed markets. This will give corporations a double benefit; low cost transactional arbitrage with a lower cost transformational advantage as well.

• For external service providers, here’s your opportunity of increasing your top line. Focus on CI/PI and help corporations make quantum improvements in their back office processes rather than simply throwing low cost resources to push transactions out of the door. You will not only help companies become better and more efficient; you will in turn help increase your top line as well.

2010 was the Year of The Tiger. 2011 is the Year of the Rabbit. Let’s take the roar of the tiger and the speed of the rabbit to drive quantum process improvements!!

Happy New Year!!

Managing the Outsourcing Relationship

Managing the outsourcing relationship is a journey. It's a journey where miracles do not happen overnight. For a successful outsourcing relationship, it requires hard work, dedication and a little bit of the Irish luck. For a two-part presentation, Managing the Outsourcing Relationship, based on a real life case study, please view the presentation on Slide Share.

Puns for Educated Minds

I get a lot of frivolous spam email; however, this one, even though it has nothing to do with outsourcing or shared services, is quite entertaining. Read on ....

1. The fattest knight at King Arthur's round table was Sir Cumference. He acquired his size from eating too much pi.

2. I thought I saw an eye doctor on an Alaskan island, but it turned out to be an optical Aleutian

3. She was only a whiskey maker, but he loved her still.

4. A rubber band pistol was confiscated from algebra class, because it was a weapon of math disruption.

5. No matter how much you push the envelope, it'll still be stationery.

6. A dog gave birth to puppies near the road and was cited for littering.

7. A grenade thrown into a kitchen in France would result in Linoleum Blownapart.

8. Two silk worms had a race. ;They ended up in a tie.

9. A hole has been found in the nudist camp wall. The police are looking into it.

10. Time flies like an arrow. Fruit flies like a banana.

11. Atheism is a non-prophet organization.

12. Two hats were hanging on a hat rack in the hallway.

-One hat said to the other, 'You stay here; I'll go on a head.'

13. I wondered why the baseball kept getting bigger. Then it hit me.

14. A sign on the lawn at a drug rehab center said, 'Keep off the Grass.'

15. The midget fortune-teller who escaped from prison was a small medium at large.

16. The soldier who survived mustard gas and pepper spray is now a seasoned veteran.

17. A backward poet writes inverse.

18. In a democracy it's your vote that counts. In feudalism it's your count that votes.

19. When cannibals ate a missionary, they got a taste of religion.

20. If you jumped off the bridge in Paris, you'd be in Seine .

21. A vulture boards an airplane, carrying two dead raccoons. The stewardess looks at him and says, 'I'm sorry, sir, only one carrion allowed per passenger.'

22. Two fish swim into a concrete wall. One turns to the other and says 'Dam!'

23. Two Eskimos sitting in a kayak were chilly, so they lit a fire in the craft. Unsurprisingly it sank, proving once again that you can't have your kayak and heat it too.

24. Two hydrogen atoms meet. One says, 'I've lost my electron.' The other says 'Are you sure?' The first replies, 'Yes, I'm positive.'

25. Did you hear about the Buddhist who refused Novocain during a root canal? His goal: transcend dental med ication.

26. There was the person who sent ten puns to friends, with the hope that at least one of the puns would make them laugh. No pun in ten did.