Sourcing Breakthrough Productivity by Looking End-to-EndTM
Phase 1 – ReThink
Many companies look for productivity at the commercialization end of the value creation funnel. Continuous improvement programs such as lean and six sigma provide sophisticated and effective approaches with tools that can generate significant cost savings. However, over time many companies see costs continue to outpace incremental improvements and the productivity well dry up. End-to-End (E2E)TM is a methodology for creating a pipeline of breakthrough productivity opportunities at the innovation end of the Value Creation Funnel and moving them to commercialization where they can have significant – up to twice the current productivity pace – economic impact.
The job of business is to create value: value for customers and economic value for the business. All value creating opportunities progress through three phases of the value creation funnel. Companies can suffer from two biases: innovator’s bias where they are too focused on their cool ideas but fail to effectively commercialize; and producer’s bias where they are too focused on commercialization and the idea pipeline runs dry. The best businesses balance their focus on both ends of the funnel.
Most businesses are very adept at optimizing each function in the value chain. However, optimizing each part does not optimize the whole and in fact often leads to sub-optimization. The E2E methodology is designed to inspect and challenge the business model through three lenses: the Competitiveness lens; the Value Added lens; and the Orthodoxy lens. After becoming well grounded in the strategic, financial and competitive situation, the Value Chain is interrogated using each of the three lenses.
Assessment is comprised of several qualitative and quantitative methods that produce a variety of deliverables. A Competitive Advantage scan is developed that provides a consensus view of where in the value chain the business has competitive advantage and/or where there may be opportunity to create competitive advantage.
The Value Added lens challenges every significant factor in the value chain that adds cost by asking 4 questions. Since 60% of most activity within a value chain is classified as non-value added, a list of several opportunity domains is generated.
The third lens, the Orthodoxy lens, uncovers existing orthodoxies within the business that have become part of the business model but don’t contribute to creating value and in many cases trap or destroy value. Again, the results identify new opportunity domains.
The final steps in the first phase – reThink – are to finish ideation, classify savings into different buckets (variable cost, fixed cost, cash flow, etc.), validate the concepts, and then approve, stage and resource them with senior management. Opportunities then move into the second phase – reDesign – where they are “platformed”, modeled or prototyped, chunked/de-risked and business propositions are completed.
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