ICG

The management system describes the structure of the organization and steers communication and operations. The development of a management system has a direct link to clarifying value creation for the customer. A management system cannot be copied from one company to another: each organization must create its own management system based on the culture prevailing in the organization.

A face-to-face communication is the most efficient way to connect with another person: meeting with another person allows you to understand and sense his/her perspectives and experience. The steps for good interaction can be put in the following order: understand first and then become understood. Within family, friends, or a small organization, this is possible unlike in a large organization – there is simply not enough time. That is why we have to rely on other means of communication, i.e. build a management / leadership system, the task of which is to create the conditions for success.

The organization creates its own management system

A management system can mean, among other things, the organizational structure and the goals set within it. In practice, any management of an entity can be called a system. In this context, we could talk about quality systems, operating systems and ERP systems. Similarly, we could talk about, for example, quality management, innovation management, strategic management and agile development and just management.

The task of the management system is to create the conditions for success

The management literature is full of excellent descriptions of management issues and concepts. However, each organization creates its own system with lessons from other organizations’ approaches which can be applied (e.g., Lean, Six Sigma, or Agile Management). The source of an organization’s success is competence: if competence is lacking, no system or guide will help.

Understanding value is important for leadership

Often in an organization, the conversation revolves inwardly around sale and cost or the features of products and services, rather than all activities, including marketing and sales, that should generate value for the customer.

Surprisingly, few organizations know what creates value for the customer in their operations. As long as there is no understanding of value creation for the customer, it cannot be managed in an effective systematic way either. In the long run, the only chance to succeed is to create value for the customer.

Describing business as a process helps to understand value creation

The easiest way to understand value creation is to describe (business) activities as processes. The work begins with describing the customer’s process. If the organization does not understand the customer’s process and what creates value for the customer’s process, the development of the organization’s own business process is almost hopeless and the investigation focuses on of one’s own, self-created internal problems such as people getting exhausted by overloading, not delivering information in proper time or not forwarding the information to those people, who need it, building own stockpiles of material or work to  ensure, that they are available when needed.

Value is created in the customer’s process only when the customer uses the organization’s products and services or otherwise benefits from the organization’s operations. Only buying without using a product or service does not create value.

All significant results in an organization are the results of collaboration

Almost all large companies are organized by functions such as sales, customer service, production and product development. A functional structure facilitates the setting of financial goals (e.g. revenue and cost), but often makes it difficult to collaborate across the organization.

Problems with the functional structure of an organization often emerge as information flow breaks: for example, sales sell something that cannot be delivered, or product development develops a product with manufacturing costs exceeding the value experienced by the customer. In this case, in the worst case, competitors will take the market. The only sustainable competitive advantage is the ability to improve, learn and innovate faster than competitors. So, a particular leadership challenge is: how do you lead to improve customer value creation?

Processes are a way to organize collaboration and value creation

At Innotiimi-ICG, we see organizational (business) processes as a means to organize effective and smooth collaboration to create value for the customer. Processes bring a new role to managers called the process owner. The task of the process owner is to improve and develop the process from customer to customer, sometimes end-to-end (note the difference in wording).

Most organizations describe processes to develop information systems or in the case of developing of operations and services. Less frequently, we see genuine descriptions of business processes with which we organize smooth, effective collaboration and value creation of (business) operations. Realizing and modeling this is at the core of process management or process thinking – and perhaps the easiest path to sustainable excellence.

In their day-to-day work, leaders face increasingly complex challenges related to, among other things, digitalization, competition, internationalization, e-services and renewal. In this series of articles, we look at different perspectives on leadership.

Read the first part of the blog series on the role of goal-oriented interaction in decision making and the third part on agile change management.

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