11 Steps to Increased Profits through Process Improvement and Re-Engineering

Business process efficiency has never been more crucial than it is now. The COVID-19 pandemic has dramatically accelerated the transition to digital while putting many companies on the brink of survival. Response to the pandemic has prompted businesses to re-evaluate their operating models and re-engineer internal processes to generate better profit and loss (P&L) statement results.

“Due to inefficient business processes, most companies lose up to 30 percent of their profits each year. What can be done to make a company work more efficiently? Expand the ‘bottleneck’,” states Volodymyr Semenyshyn, Executive Vice President, EMEA and Global Financial Services at SoftServe, “As Goldratt's theory of Constraints says: find the weakest point. It is not necessary to optimize everything at once, not something at random, but the process that can have the greatest impact on your business flow.”

Changes in business are continuous and happening at an enormous speed. The fundamental purpose of business process re-engineering is to help organizations change their infrastructure to win the competition and succeed in today’s business environment.

When clients are considering platforms and SAAS implementations, such as Salesforce, they are mostly looking to solve three main challenges:

1. Building efficient business processes that will outperform the competition and are easy to scale within an organization.
2. Choosing and implementing the best and ready-to-use IT platform or building a solution that covers key business needs for automation and digitalization.
3. Ensuring the fast and safe integration of a new platform or solution with already existing enterprise architecture.

The first challenge stated above is fundamental and requires a holistic approach — considering the organization's marketing strategy, planned innovations, business scaling opportunities, and shareholders' plans and ambitions. Let's discuss the potential first steps required to start your business process improvement journey.

Key Steps to Business Processes Improvement

1.Investigate

Investigate your company's current P&L statement to understand key cost groups, customer segments, and channels that drive most sales. Such trend visibility helps to identify the pain points and areas for improvement. For example, the production or advertising cost is growing faster than sales.

2. Analyze

Analyze which processes are lagging and are your biggest pain points. Next, pay attention to the processes directly involved in receiving the money to the company's accounts (which you can't outsource, even theoretically). For most companies, these are sales and marketing, procurement, production, and services delivery.

3. Assume

Evaluate the company's profit and loss account to make assumptions. For example, how much would it increase your bottom line if you could theoretically improve one process? Financial modeling and business case preparation can help prioritize potential improvements.

4. Prioritize

Prioritize the scope of potential project improvements and choose the ones that provide maximum theoretical increase/decrease for your P&L. The management team can also consider how fast the improvement can be delivered and which resources will be needed. Most likely, top #1 will be sales and marketing processes, #2 purchases, and #3 group of processes for hiring and managing employee performance (for companies that have a high share of payroll in their cost structure). That's why most modern digital automation platforms start with CRM systems, helping businesses build an effective automated sales funnel.

5. Postpone

At the same time, identify processes that will not have a visible effect on P&L. Usually, these are development and research, document flow, administrative processes, often legal/compliance, and support infrastructure. Finally, postpone and de-prioritize processes that are important for strategy implementation but which have a weak potential for profit growth.

6. Describe AS-IS

Once the top three to five priority processes are identified, the management team must decide how to describe and visualize them AS-IS. The most flexible, time-efficient, and inexpensive modern approach is using Businesses Process Management (BPM) technologies, BPMN notations, and special programs for describing and modeling processes (most of these are free in their basic version). This process usually involves a senior leader and a business analyst (or other functional BPO specialists). If your staff has limited experience working with BPMN notations—pay attention to less complex tools such as the RACI matrix and the SIPOC approach.

7. Estimate

After you've described each top priority process AS-IS, you need to roughly estimate how much each stage/step will cost you. This will help you evaluate options for restructuring the process while removing some elements/stages based on the estimated numbers. This way, you can roughly calculate process costs and effectiveness and see if there is a potential for process re-engineering and cost reduction.

9. Use Proper Frameworks

The lean approach is perfect for systematic process optimization and waste reduction. Consider design thinking and service design approaches if you need to rebuild service processes or significantly increase client focus. Or use common sense and approach each stage with the WHY question—to determine the importance of each action and understand if there are ways to do it more efficiently.

10. Launch TO BE

Once the first version (iteration) of the updated processes (TO BE version) is set, the management team can formalize a new version of processes execution and monitor whether the new operating procedure is followed. This includes analyzing the improvement in income indicators or a decrease in expenses.

11. Next Wave and Automation

Now it's time to look at lower-level priority processes and start evaluating the automation potential for the company's processes and sub-processes based on a specific product solution or platform. We recommend not diving into automation without understanding the current state of processes. As business process management professionals say, "You can automate chaos, but it will remain an automated chaos."

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Some leaders may be intimidated by the scale and complexity of the task. Nevertheless, the above-described algorithm can help you focus on what's important to start the automation and digitalization journey with minimal effort while achieving meaningful and faster results. Any process improvement journey is difficult, so start exercising in advance and add business processes improvement skills to your management DNA.

SoftServe has helped hundreds of clients identify and prioritize the highest value changes to business processes through experienced, methodology-driven analysts and consultants. We excel at facilitating challenging discussions across the client stakeholders and ensuring alignment in focus, needs, and priorities.

Let's Talk about how SoftServe can bring clarity to your vision and planning, and accelerate your journey to more efficient, automated, and optimized processes.