Visible Process Organization (VPO)
The past decade has seen a great deal of M & A activity in many industries. The new, large companies appear to fulfill many of the success factors postulated in the mid-1990s—for example, global presence, comprehensive product and brand portfolios, and especially critical mass. Despite, the conglomerates created through these mergers and acquisitions are often less profitable than smaller niche players. What is going on?
One reason is that niche players have simple decision-making structures and usually know their customers well. Large companies, on the other hand, have complex hierarchies and have to meet a wide range of customer needs using intricate internal and external production networks.
In response, many large companies have taken steps to improve their synergy potential. In the pharmaceutical industry, for instance, a number of firms have used M & As to replenish their product pipelines and boost competitiveness. Through the use of platform and shared-part strategies, the auto industry has succeeded in standardizing those parts that are invisible to end customers, across product lines, and even across brands. These measures allow product development times to be significantly reduced and model variety to be increased.
Thus, determined efforts are being made to tackle technical complexity by means of standardization. However, reduced technical complexity leads directly to an increase in management complexity: in a company with several divisions already using shared parts, it becomes difficult to coordinate market demand with the production resources installed at the company's own plants and at suppliers. This coordination has to take place not only among the functions for a given division (procurement, production, and sales / marketing), but also among all the divisions within a single function. Unless this is done successfully, one cannot ensure, for instance, that the procurement departments of all the functions involved are able to forward useful demand information to a shared supplier.
Managers regularly complain that coordinating market demand with production resources within the group works poorly in practice. As a rule, planning processes are sequentially structured, and seek to produce a precise and sustainable plan for departmental silos for the coming planning period (typically from two to six months). The sub-plans created by the departments and divisions involved are only aggregated once during the entire planning period. If events occur during the period that run counter to plan, the corporate culture often causes them to be ignored until it is too late.
Having to admit that a plan needs to be changed is seen as a personal failure by many. As a result, departments often stick to their plan, despite obvious deficiencies, until the problems become so overwhelming that the entire plan has to be scrapped. By then, however, the decision backlog has become so long that no single department is able to effect a solution. The outcome is that a problematic package is escalated to group top man¬age¬ment. Due to a lack of detailed knowledge, however, the group's top management may also be unable to find a decision beneficial to the business as a whole.
Visible process organization (VPO) is an innovative model that can turn the black box of “operations” into an efficient and effective organization whose processes are transparent and whose decisions can be taken in real time. Consequently, the company is able to respond quickly and effectively to changes in customer demand, in the supplier market, or in the competitive environment as a whole. Visible process organizations are closely modeled on the Mission Control Center of NASA. After a detailed study of the Johnson Space Center in Houston, a team of AT Kearney consultants identified the following success factors for NASA process management:
Permanent deployment of decision makers in one place: From lift-off in Cape Canaveral all the way to landing, space missions are managed by the Mission Control Center. The Mission Control Center itself is manned with one representative for each of the critical disciplines, for example, Propulsion, Navigation, Systems, Payload, and Communications. Each Mission Controller in turn is just the “tip of an iceberg,” and is backed up by support teams of up to 1,000 staff.
Dynamic re-planning process: NASA process management is designed to continuously monitor complex data streams for unforeseen events. If such events occur, they are immediately evaluated by the Mission Control team in terms of import and urgency. Adjustments are made to the plan as necessary . As NASA puts it: "We are not in the planning business—we are in the re-planning business."
Rule-based decisions: Clear, pragmatic decision-making rules are in place for handling the most critical situations. These rules ensure that when time is of the essence, the Mission Control Center focuses on solutions rather than engaging in abstract discussions.
Delegation of decision-making powers to the Mission Control team: NASA ’s top management delegates full decision-making competence for a mission to the Control Center. Any subsequent intervention is conducted in accordance with the decision-making rules.
Based on A.T. Kearney`s experience, the following are critical success factors for the introduction of VPO:
Focus and commitment by top management
Careful selection of the VPO team
Concomitant change management
The introduction of VPO invariably engenders resistance within a company: VPO can be misunderstood as a centralistic approach; particular departments may shun the transparency associated with VPO; employees may refuse to move their office or to work in the open-office atmosphere of a VPO room . As opposition at any of these levels can cause a VPO project to founder it is crucial to obtain total commitment from the group's top management even before the project begins. Unity among the group's top management will keep the project's launch on course even during critical phases .
The group's top management needs to be aware that it is setting a milestone for the entire industry by opting for VPO. As a member of a major automotive group's management put it, "VPO will be the defining organizational structure for the group during the next 10 years. It will assist us in translating the benefits of our platform and shared-parts strategy into corporate success. "
The selection of the VPO team is of key importance. Besides their professional expertise, ideal candidates are highly regarded within their regular work spheres and have strong team-working skills. In particular, the selection of initial team members should be made under the supervision of experienced HR experts. Appointment to the team should be seen as both a unique distinction within the company and a positive career move.
Change management for the introduction of VPO should be supported by specialists with experience in both the organization and operation of mission control centers in space travel or similar fields. This will ensure that the VPO team can continually refer to the relevant benchmarks when defining modes of operation . In fact, AT Kearney sometimes enlists the services of NASA experts in its VPO projects.