I was reminded of this great quote from the master of the Toyota Production System today:
“Costs do not exist to be calculated.
Costs exist to be reduced.”
– Taiichi Ohno
As a Chartered Accountant, I am well trained to understand cost – especially with respect to Activity Based Costing. Understanding the cost of every element of the process is clearly important.
However, it is all too easy to then assume that these activities are actually necessary.
In my work, I have helped many teams discover that amongst the 300 steps in their back-office processes, as few as just 3 actually add value.
When you examine the end-to-end process from the customers’ perspective with a real sense of “What is the purpose of the system?”, you soon discover that many of the the activities are there to:
- prop-up the failure of not doing things right-first-time
- mask the organisation’s failure to organise themselves around the demands of the customer
- respond to multiple customer “chasing” contacts as they as wait for service.
By redesigning around the customer demand, with a real understanding of where value is added, many of the activities can be reduced or eliminated. And this saves money. I regularly see systems and processes where costs can be reduced by around 20%.
It sounds easy – and to some degree, it is.
Why doesn’t everyone see it? – because not everyone looks. It requires someone to see both the big-picture and the detail – at the same time.