Does optimisation really increase your bottom line?

You have probably heard or said it before. “We need to optimise our processes. Do things smarter and become more efficient.”

Maybe you have experienced employees who do not always welcome new initiatives. Or maybe you have endured having unnecessary procedures imposed on you.

When revenue recognition, approval of time registrations and budget follow-ups fill the workday, it can be overwhelming to dedicate time to making everything work smarter.

Ultimately, you may have a sneaking suspicion your efforts do not even improve the bottom line.

As we had the same suspicion, we asked one of Europe’s leading process maturity experts:

Is it worth the effort to optimise our internal processes?

Expert in process optimisation

We meet the expert Jørn Johansen in Whitebox’s office north of Copenhagen. Usually, deer pass by just outside the windows, and the office building is exceptionally quiet.

Jørn is a partner and ”the scientist” in the consultancy Whitebox. They evaluate companies’ ability to develop products and deliver projects and advise managers on development projects.

When we meet him, we quickly discover he doesn't use lofty words. But with a kind and accommodating look and a researcher’s reservations about imprecise claims, he proceeds straight to the core of the question.

Status quo is often 40% rework

”Yes, it does”, is the short answer from the expert.

”When we talk about optimising processes, we talk about maturity within the company. And maturity brings a lot of advantages. Amongst other things, we see that in the less mature companies, around 40% of all work is rework”, he explains.

Also read seven essential processes professional services businesses elevate with PSA software.

With experience that stems from more than 300 evaluation projects, Jørn Johansen has seen how immature or lacking internal processes can hold companies back.

"If you improve from level 1 to level 2 on the maturity scale, you go from 40% rework to 20%. And the curve continues as you become better. It frees up hands for people who would otherwise be doing rework. They can then do something more valuable.”

Fortune 500 does it…

The maturity scale is part of an internationally recognised maturity model that places companies on five distinct maturity levels. If you are at the lowest level, the internal processes are not followed (if any exist), and you can forget about being able to predict anything within your business.

On level 5, all processes are optimised, and you constantly work on optimising and learning more.

In the Nordic countries, the average is around 1.5 and 1.75, Jørn Johansen estimates.

”60% of Fortune 500 companies use this maturity model to improve. So you can ask yourself whether or not it is working”, the researcher asks rhetorically with a wry smile.

”Maturity is about how well you are coming through on your projects. You are measured against best practices from the world’s best companies.”

Less rework is just one advantage of optimising your company's processes.

Also read: Explainer: What does it mean to be a mature company?

Both a requirement and competitive advantage

Today, we see industries where companies demand a certified maturity level of 3 or higher from their suppliers to do business with them. For example, the defence industry requires high standards from its suppliers.

Moreover, the most mature companies win their bids 58% more often than the average company. You can read this in SPI Research's latest Professional Services Maturity Benchmark edition.

This does not surprise Jørn Johansen.

”Naturally, you would instead do business with a stable and predictable company where you are confident they can deliver. And this is why these companies win more offers”, he explains.

Mature companies are trending in China

Halfway through the interview, Jørn's partner and CEO in Whitebox, Per Hartlev, enters the room. For 30 years, he has worked as a manager on all levels within project development and, lastly, as CEO of the Danish company DELTA.

“Have you talked about the China trend yet?” he interrupted.

”In China, 60% of all maturity analyses are performed because companies cannot attract new employees if they do not perform at level 3 - at minimum. Employees do not want to work in mishmash company.”

Nordic competition for talent

When we asked if this trend could be transferred to Scandinavia, Jørn Johansen hesitated a bit.

”Generally, attracting employees to companies that deliver and complete projects is difficult. You can look at the entire building sector, which hungers for people who can manage projects.”

In Scandinavia, most companies fight to find talented employees. Sweden is especially under pressure and experiencing a significant shortage of qualified staff within industries like construction and IT.

”This also means that you become pickier as a future employee. If you could, wouldn’t you instead join the best company than work in a sandbox?” Jørn Johansen asks.

Courage and the will to change

During the length of our conversation, we discussed more disadvantages of immature processes: low productivity, no opportunity to reuse from previous projects, and poor estimates on projects.

But if process optimisation is only advantageous, why doesn't everyone do it?

“For many companies, there simply is not time, as they spent too much time extinguishing fires”, Jørn Johansen says.

In the Scandinavian market, the high demand for qualified staff means that the employees work beyond maximum capacity to keep up.

”If you are under pressure, it requires courage and the will to venture into the project. But it would be best if you decided that this is what you choose to do. It requires management to get involved and see the optimisations as an investment and a project.

But as the level is generally low, you gain advantages when moving ahead of your competitors”, Jørn Johansen ends.

Get vital key figures from SPI Research's benchmark

SPI Research has investigated how consultancies can increase profit through maturity.

The benchmark is 244 pages long, but if you do not have time to read it all, we have summarised the most important insights and key figures from the report in an executive summary.

About Jørn Johansen and Whitebox

Jørn Johansen has worked with product development and maturity assessments for over 40 years and is the industry's grand old man. He has managed several research projects about product development, how companies improve and outsourcing of development projects.

He has furthermore developed the ImproveAbility™ method, which is the standard for process improvement, and he took the initiative to create the global norm, the SPI Manifesto.

He is part of the team behind the consultancy Whitebox, which has more than 100 years of experience with product development and has carried out more than 400 business evaluations. Together, they work to help companies better exploit their growth potential.