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Preparing Corporations for the Future

Published
  • September 01 1998, 1:00am EDT

As companies move from the Industrial to the Information Age, the role of information and knowledge becomes increasingly more important. But technology alone is not a silver bullet. A company's people must use technology in the correct ways. The company's culture must support the innovation and harmonious change brought about by the integration of technology and the deluge of information into the everyday lives of the employees, business partners and customers. To achieve this, companies must become "cybercorps" to reflect the characteristics and personality that they need to be successful in the future.

A Value-Stream Approach

A value-stream approach breaks down the functional walls that have grown up within a company over time and have inhibited change, innovation and responsiveness. Value- stream driven solutions take an overall view of a company and deliver to its customers--external or internal--a result that satisfies their needs.

To explain further, a value stream is an end-to-end collection of activities that create a result for a customer. The value stream has a clear goal: to satisfy, or better, to delight the customer. Thinking of corporate activities in terms of value streams is the key to designing the most effective cybercorp operations. An example of a value stream is the set of activities that result in materials being supplied to a company's manufacturing operations: the customer is the manufacturing function.

When we map a corporation as a collection of value streams, for each value we can ask: How can it be optimized? How should it use cyberspace? Should it be totally reinvented? What value streams are strategically important? And, particularly interesting, what value streams should be virtual?

In most corporations, value streams have been unnamed and unmanaged because the corporation has been structured around vertical functions that evolve their own power structures. Value streams in these traditional organizations fragment work activities across traditional departments or functional areas and, hence, are slow and clumsy in operation. Today's technology allows us to synthesize work rather than fragment it. Small teams of employees can often be established to tackle the entire end-to-end value stream in an integrated, alert fashion. The team can move fast and delight the customer.

Achieving Results There are numerous examples of value-stream teams achieving tenfold improvements over traditional hierarchical structures. For example, some telephone companies have reduced response time to customer requests for circuits from 10 months to one or two days. Some manufacturers have dramatically shrunk the time it takes to design a new product and get it to market. Harley-Davidson reduced the time to manufacture motorbike frames from 72 days to two. More importantly, some corporations have rebuilt a strategic capability so that they do it far better than their competition. Wal-Mart reinvented its distribution and logistics capacities to get goods on its supermarket shelves more cheaply than other stores.

Many corporations have old mainframe systems, often called "stovepipe systems" because of their narrow, vertical set of functions. The crude technology of an earlier era led to crude forms of organizational structure. The cybercorp needs value streams with instant responsiveness and information systems designed to make the value stream as effective as possible. It is essential for executives to understand value streams and how they are being reinvented.

Value streams simplify a corporation's infrastructure. A reason why the drive for simplification is so important is that cyberspace encourages new relationships among trading partners that are inherently complex. We need to spend our efforts on valuable complexity and eliminate activities that do not add value.

Most old corporations have structures designed for a world before cyberspace and value streams. Most employees are cogs in obsolete machines. Some are not even cogs; they are grit in a mechanism that itself should not exist. Clunky multi-department work holdovers of the old world should be replaced by value-stream teams designed to be tight, simple and intensely focused on how to delight the customer.

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