Digital initiatives should exploit innovation opportunities available in encapsulated processes

Until the early 2000s, I observed dozens of IT projects simply substituting tech for physical or manual processes. I decided to bring process innovation skills into my group at my previous employer Cognizant. We found that process innovation opportunities abound, and we started exploiting the opportunities.

That was then. What about now? As I showed in an earlier article, the horizon in today’s digital initiatives is much broader. It’s not about an isolated piece of tech, but multiple larger processes. While translating strategic objectives into a strategic architecture, the team innovates the whole (multiple larger processes). Unfortunately, while rightly focusing first efforts on the whole, teams forget the processes present in each individual tech.

So, then and now, processes are often simply transformed into tech. This is called substitution, where the organization merely uses tech as an alternative or replacement for pretty much the same function they already performed through physical or manual work. Tech substitution is common but it is not the right thing to do.

What are encapsulated processes?

I call the processes present in each tech “encapsulated processes.” Encapsulated processes are present in internal tech such as an inventory control system and in external tech such as a supplier bidding system accessed by bidders. Encapsulated processes are also present in consumer tech; a typical cab service mobile app, for example, encapsulates these processes: rides, offers and payments.

Role in strategy translation

Using digital technology, a cab service company created a new business model to provide on-demand cab service. The company became hugely successful due to innovation at the highest level: business model. However, the company’s mobile app had a problem with payments – one of the encapsulated processes. Credit card users must pay the fare for the earlier trip before booking a new one. Often, the notification came just as the customer was about to book a cab. By the time payment was made, pricing may have changed or nearby cabs may have been hired by other customers. This not only wastes time, but may also create stress or even cause serious problems to the customer depending on the purpose of the customer’s ride. It’s reasonable to imagine that many customers switched to a competitor.

If “provide superior service” and “retain customers” were among the company’s strategic objectives, the company failed on both. Strategy wouldn’t translate to outcomes.

In strategy translation, designing the whole is a “higher” level step – both chronologically and in terms of the value it can deliver. This is also when the team discovers the digital technologies that would contribute to strategic outcomes. At this time, the team has a high-level idea of what processes and process activities the tech might encapsulate. Later when the team has the Requirements list, they look for opportunities to improve the processes and activities – purposefully to contribute to strategic objectives.

Key how-to tasks

Start with strategic objectives, as it is always the case with every step in strategy translation. This keeps the team focused on what matters most to the organization. Focusing on the organization means focusing on the four factors: assets, process performance, customer value and financial performance.

Be clear about what processes should be encapsulated in the tech.

Design the encapsulated processes. In digital initiatives, whether it is innovation of the whole (multiple large process) or innovation of encapsulated processes, there’s one big difference is: leveraging the tech’s power and the tech’s connections to other tech and devices. And this is tough. Otherwise, process innovation is more or less the same as in conventional process design discipline. For example, the team would ask questions such as these: Could we streamline by straightening and shortening the path of flow? Could we do more efficiently what customer or vendor normally does? Could the customer or vendor do some of the work? Could we eliminate some work? Could we eliminate hand-offs, approvals and anything else that doesn’t add value?

End note

It’s important to stop squandering strategic opportunities that encapsulated processes present. The digital team’s process innovation capabilities should be used to improve encapsulated processes as well.