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Published:July 19th, 2013 14:25 EST
How To Bulk Up Your Process Advantage

How To Bulk Up Your Process Advantage

By Kaihan Krippendorff

I reconnected with Pegasystems` (PEGA) CEO Alan Trefler recently. Since my first interview with him in 2010, the enterprise software company`s stock price has grown (granted erratically) by about 50% and its revenue has expanded to $460M from $335M.

PEGA`s growth points to an opportunity I find companies forget too often and an opportunity to those of us willing to see things differently. This opportunity has popped up repeatedly in the last two weeks. We worked with a leading consumer packaged goods company who came up with an idea to launch a new business in an emerging market space. They could figure out the product and branding ... there is certainly enough expertise in those spaces ... but even the greatest product and branding would be worth naught if they didn`t also rethink how they invoice their retailing partners. We met with an executive at large pharma company, and when we explored their biggest barriers to innovation, she immediately said, "How can we cut down the time it takes to launch a new partnership from months to weeks?"

Great ideas move only as fast as your processes.

Wait. Don`t put this blog aside yet. I know "process" is perhaps the last topic you want to think about. We want innovation to mean beauty and simple designs and community and creativity. Process seems to mean the opposite. But perhaps that is precisely why there are such exciting opportunities to be found by rethinking the "how" of your new "what."

Consider the Overseas Chinese Banking Corporation (OCBC), based in Singapore, which came from being well below the industry average in customer satisfaction (as measured by their Net Promoter Score) to being the clear #1 in a recent Bain study.

OCBC didn`t depend on new banking products or a marketing campaign. Instead they rethought some of their processes. The bank uses PEGA software on top of its back-office program that allows it to experiment more rapidly than their competition. If someone calls, the bank representative can engage the customer using a shared screen and offer various products. This software learns from the history of other clients and suggests that the representative offer specific products and even permutations of products. The system is continually experimenting and learning, with each interaction, to make the experience better. It may figure out (this is just my hypothetical example) that working mothers care more about online banking so they can bank after the kids go to bed.

Other banks, by contrast, code in a set of rules that do not learn, do not adapt.

This means that with every new interaction, the OCBC system gets better, stretching out its advantage over its peers.

Imagine you meet two friends for coffee every week. One learns and adapts. By the third week you are past the basics and talking about childhoods and passions. The other adapts only slowly so that by the third week you are still telling them your name and whether you like coffee in your milk or not.

Now multiply this advantage by hundreds of customers a day, thousands of interactions a week, and you can quickly see which friend will become more popular.

When I tended bar during college, I learned the lesson quickly. Know you regulars` drink preferences, remember their names, pick up your last conversation, and your tips grow.

The problem most large companies have is that they confuse what Trefler calls "memory" with "muscle." Your enterprise systems (SAP, Oracle, etc.) are great repositories of memory. But unless you have really optimized a process, you want it to strengthen and improve. You want to build muscle. This is what PEGA`s technology allows you to do, build muscle on top of your memory.

Process is one of eight dimensions on which you should look for innovation. The others are product, positioning, people, physical experience, pricing, promotion and placement (or channels). Are you building muscle across all of these? I`m working on a set of exercises for each of these "P"s to help us bulk up. I`ll it send out next week. 

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