Cost-saving value is not found in process automation.
It’s found in process understanding.
Some years ago, a client asked me to find some automation opportunities within their organization. During my analysis, I interviewed a woman who had been hired in the late 1980’s to manually collect data and report her findings to satisfy a regulatory requirement. Years later, she was still performing this work admirably during the early 2010’s.
But guess what?
I discovered that her finely crafted report was not being used or reviewed by anyone. In further investigation, I found that the regulation requiring the information had been rescinded in the early 90’s!
She told me she was retiring that year after a wonderful twenty-five years of employment with the bank. I’m pleased (and relieved) my client never told this dedicated woman that her life’s work had no value to the bank. Yet, I’m also concerned that the client incurred untold costs by not understanding the processes occurring within the bank.
Value Stream Mapping: A Powerful Tool to Eliminate Waste
Consider the process described above as “waste” that should have ended twenty years earlier.
Automation would have been an even bigger failure and wasteful.
Understanding your processes is far more valuable than automation.
My favorite go-to tool for process understanding and cost efficiencies is Value Stream Mapping (VSM).
Value Stream Mapping (VSM) is a powerful tool for identifying and eliminating waste in any process, especially in banking. VSM helps to visualize the flow of value from the customer’s perspective, and to identify the sources of inefficiency, variation, and delay that reduce customer satisfaction and profitability.
VSM can be applied to any banking process such as, loan origination, account opening, customer service and compliance.
By mapping the current state and designing the future state, VSM can help to:
- streamline the process and reduce cycle time
- improve quality and increase value for both the customer and the bank
By analyzing the current state and designing the future state, value stream mapping can help improve efficiency, quality, and customer satisfaction.
The benefits of value stream mapping are many, including:
- providing a holistic view of the process and revealing hidden sources of waste and inefficiency.
- helping to align the process with customer needs and expectations, and reducing overproduction, inventory, and wait times.
- fostering collaboration and communication among stakeholders, and facilitating problem-solving and continuous improvement.
- supporting strategic planning and decision-making and helping to prioritize improvement actions based on value and impact.
How Value Stream Mapping Can Detect Problems
In a previous blog post, I described two common types of processes found in banks: Self Organizing Systems (SOS) processes and Highly Optimized Tolerance (HOT) processes.
- Self-Organizing Systems (SOS) processes are designed for complex systems. For example, commercial loans are complex with negotiated syndications, unique collateral, heightened risks, and profits. This is a SOS process, requiring human interactions.
- Highly Optimized Tolerance (HOT) processes are designed for complicated systems. For example, consumer loans are complicated but repetitive, so we “productize” the process of consumer loans within a set of choice parameters, making it a HOT process with very little human interaction.
Here’s a great example of how Value Stream Mapping can detect problems:
A bank client asked me to review a perplexing situation concerning their newly automated loan origination system. They were experiencing an unexpected customer loss during onboarding – close to a 25% loss.
My advice? Go back and do the value stream mapping of the manual process. The client initially resisted this advice but eventually agreed.
Here’s a word of caution: Never automate a process without performing a value stream mapping. The VSM results discovered loan officer intervention in the manual process. People had devised a workaround to make a broken manual process work for customers. The automation process missed these vital steps. Once discovered, we easily fixed the automated system, solving the problem.
I often use VSM to find ways of automating SOS processes, but as described above, it’s just as important to VSM HOT processes too. The value is in understanding your process.
Additions or Replacements to VSM: Know the Alternatives
There are some alternatives that can complement or replace VSM, depending on the context and goals of the improvement project.
Some of these alternatives are:
Process mapping: A simpler and more generic way of documenting the steps, inputs, outputs, and resources of a process. You can use process mapping to identify waste, variation, and complexity in any type of process, not just those that involve physical products or services.
SIPOC: An acronym for Suppliers, Inputs, Process, Outputs and Customers. SIPOC provides a high-level overview of a process, helping define its scope, boundaries, and stakeholders, and allowing alignment of customer expectations and requirements with the capabilities and constraints of the process.
Value stream design: A more proactive and creative approach to designing or redesigning a process based on the principles of lean thinking which involves identifying the value proposition, customer segments, value streams, and key performance indicators of a process. It then eliminates or minimizes any activities that do not add value to the customer or the organization.
Value network analysis: A holistic and systemic way of understanding and improving the relationships and interactions among the entities that create and deliver value in a complex system. It involves mapping the nodes (actors), links (flows), and outcomes (value) of a network, and then optimizing the network structure, governance, and dynamics to enhance its performance and resilience.
Because no bank can afford to ignore their technological infrastructure, especially not in today’s climate. Helping banks of all sizes to improve their technology is my life’s work.
Contact me today to see how I can assist your organization.