Building a Future-Ready Business: Expert Talk with Michael Schank

Unlock the secrets to digital transformation with insights from @MichaelSchank, author of 'Digital Transformation Success.' Discover how aligning processes can drive efficiency and innovation in your business. Listen to our conversation on The Water Trough podcast! You can find ‘Digital Transformation Success’ on Amazon. Connect with Michael on LinkedIn or learn more at https://processinventory.com/. 

Transcript

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Welcome to The Water Trough where we can't make you drink, but we will make you think. My name is Ed Drozda to the Small Business Doctor, and I'm really excited you chose to join me here as we discuss topics that are important for small business folks just like you. If you're looking for ideas, inspiration, and possibility, you've come to the right place. Join us as we take steps to help you create the healthy business that you've all. Always wanted. Welcome back to The Water Trough folks, this is Ed Drozda the Small business doctor. I am joined today by Michael Schank, who brings over 25 years of experience in financial services as a banking executive management consultant, and transformation expert. He is the author of the book Digital Transformation Success, a comprehensive guide that introduces the process inventory framework to drive digital transformation by aligning organizational goals and resources. The book provides actionable methods and case studies to enhance operational efficiency, enabling institutions of all sorts to implement cutting edge technologies like AI and automation. It empowers leaders to achieve agility and excellence in the digital era. Michael, welcome. Ed it's a pleasure to talk to you. Thanks for having me on. Let's invite the elephant into the room for a moment. Michael and I had this session earlier this week, and I neglected to hit the record button. So this is our second go. And we like to think that when we do things more than once, we do them better the second time around. We'll leave that to you folks to decide if it sounds okay, but let's face it, you don't know what happened the first time. Only Michael and I do. So welcome again, my friend. How you doing? I'm doing phenomenal and I'm confident this will be a great a better conversation than last time. I considered that to be a tall order because I thought we did a really good job the first time around, but hey, you know what? We shall see where we go. Right. So let's focus right in on the concept of efficiency because you are looking to bring efficiency and productivity into the business environment. This is your coup de grace, right? Yep. So what in your estimation is the root of efficiency challenges? Ultimately it's complexity and chaos. So as organizations grow, sometimes it's not always intentional that you just evolve in many areas as the business dictates. Particularly for small businesses, in the life cycle of a business, and you grow focused on maximizing your revenue just getting out into the market, but you don't really think about efficiency. But as you continue to evolve and margin becomes much more important you have to start thinking about am I efficient in my people process, technology, vendors, et cetera. But the larger an organization grows this chaos grows as well. So people only know what they do, and their peripheral knowledge, decreases as goes out. So nobody has that detailed understanding from a strategy level down to the lowest level detail. That's where alignment is key. And that's what my framework does. It's called process inventory. It's a very simple concept. You start with the top of the organization and you interview teams and people and ask them a simple thing. What is it that you do? You write that down and you keep walking down the organizational hierarchy until you capture every process. And when I do this, I go back up the hierarchy again and have people formally document that they approve that it's accurate and complete, because they need to be able to trust this information. But why that's so key is now having a semantic structure or a common language for your organization allows you to align all your operational data. where are my systems? Where are my people being involved? Where do I have risk and compliance? Where do my products align? Really, you could go on forever, but that gets you one source of all operational intelligence and that's what gets you to alignment. So alignment is, and there's two parts of it one is vertical alignment. That's where your CEO, your C-suite leadership, all the other leadership are directly aligned to people on the ground doing the work that everyone's marching to the same tune. They're all playing from the same playbook and then horizontal alignment so that all the different teams within your organization work together well. So you're breaking down silos, you're arming people with intimate knowledge of what other teams do so that you could collaborate effectively. That's really what it is, mapping out your entire organization so that everyone's on the same page. You could look for waste in inefficiencies and you could drive transformational change. So that could be digital, that could be technology that could be mergers and acquisitions, whatever it may be by being armed with this precise process information, now you could pinpoint what exactly has to change and who has to do what to make that change real. Thank you for that explanation. I really appreciate that. Let me go back a little bit here. I imagine that you are working with established businesses who are doing this in retrospect, if you will. Yep. So do you see a place for this process as a forward looking thing? Have you ever done that and what do you think about that? Yeah, in fact I worked with a new nonprofit and they were just building their business case. They had to do some marketing, they had to do some operation stuff, they had to do a bunch of things. But they took this opportunity to lay out what processes do we think we need to execute so that they could align their staff their investment and resources into it. And it worked great. So very small organization. I think they were 10, 20 people somewhere in that range and it was all volunteers for the most part. It, enabled them to be clear on what they're doing and avoiding that whole fog of war chaos that happens when you're starting something new. Most of us have developed a business plan before we go forward. I like to think of the business plan as a foundational document and also as a roadmap, or sometimes I refer to it as a beacon. This is what we're striving towards as in our vision and our purpose. But, many of us tend to create a business plan and we don't actually abide by it. We don't necessarily officially implement it. Yeah. It seems that your process inventory framework takes into account all the things that are likely in a business plan. Yes. Right? All the elements, but we don't have the commitment. If we were thoughtful about creating that business plan in the first place. If we really recognized it for what it's worth, that it is a roadmap, that it is a beacon guiding us towards a goal, then you'd think we'd be committed, but we're not necessarily. When you encounter somebody in this space, who comes to you michael, you know, I started a business and we're six months in and things are kind of dodgy here. Does the concept of the business plan come into your conversation at this point? For sure. For new organizations it's important to think about all the things you need to do because if you don't, some of those things will come up and you'll have to react, kind of after the fact. To your point, even if you did it in your business plan, and I love that quote from Mike Tyson, everyone has a plan until they get punched in the mouth. I just bring that up as even if you did this, once you get going you're gonna learn more. You're gonna have to adjust as the demand for your products adjusts or you may come up with new financial reporting needs or whatever and it's important to keep this as a living document. You have to not only build it once in the business CL case and not look back at it for years, but maintain this information so that you could keep that systematic approach to how you run your business. You don't necessarily need a team, but you need to identify people that do certain things like go back out and refresh it. Talk to people in your organization to make sure that it's accurate and complete if you're aligning data to it, making sure that that's still accurate and that people are using this to operate the company. Michael, what happens if we do not pay attention to alignment and systems thinking. As we grow a business inefficiency grows. Quality challenges appear. if you're in a regulated business, then you could get in trouble with the regulators. A lot of,these things can bite you, but if you can be more clear on what you're doing, and a good analogy with this would be if you were taking a cross country trip to say California, and you didn't have a map, you'd have a hard time getting there. And that's essentially what this is. It's really just laying out what your organization is and where it's important too, in driving out West takes a strategy. There's a purpose for it. I have to think about fuel cost and all this other stuff and bathroom breaks, et cetera. But when an organization does a strategy, one of the key things that they do is they do an environment analysis. And that is internal analysis and external. Your internal is where we are strong and weak relative to expectations. So maybe our customer service isn't good or there's some gaps in our products and we have to address those things. And then there's external environment. We need to look at what are the opportunities and threats. That could be many things. That could be economic, that could be political, that could be legislative and regulatory. That could be your competitive landscape. What are my competitors doing, et cetera. But if an organization, especially the strategic leaders, have this map laid out now, they could start creating heat map of where they're strong and weak. And that is important because now they could be very specific around what has to change to get them to where they want to go. And now they could allocate their change dollars. And their investment to specifically what they need and put more objectivity into their funding process. Who is typically responsible for number one, for agreeing that a process inventory is needed. Number two, for actually facilitating it's initiation. Is it the C level executives or where exactly does it come from? A lot of it depends on the context of what they're trying to accomplish. Organizations where risk and regulatory is a big topic item, that would fall under the chief risk Officer. If it's efficiency it could be the chief operating officer. If it's more technology focused, it could be the CIO. And that's where organizations really need to think through what their strategy is and why they're adopting a concept like this. But doing something like this needs that champion at the executive level and then building a team or an effort at the lower level to execute on it. That's where you'll need a strong leader who gets this concept. Somebody who could run your process, center of excellence, for instance that gets the need for quality and standards and doing the right thing, so this is accurate and then guiding the organization to use it. A lot of what I do is creating this map of the organization, but if you don't use it to run your business, then it's just another piece of data in some repository. So you've gotta use it for things like strategy, as I mentioned. Use it for your change management process for driving out waste and inefficiencies, using it for risk management, using it for your IT architecture, design, whatever your organization's faced with, and that is most pressing for you, is aligning this framework to enable that. I heard you mention actually a couple times here, it's a top down and a bottom up kind of situation. Naturally a champion at the executive level be necessary. Someone has to initiate the process. The idea of building the process inventory does necessitate input from folks on the shop floor. Is that correct? Oh yeah, yeah. Okay. So tell me more about that. In my experience there is awkward communication between those in the senior most positions and those who are, as I like to say, doing the work. Yes. But if you want this thing to work for them, that is something that has to be assured, and that's what I'm hearing and makes perfect sense. What do you do? How can you inspire these executives to acknowledge the need to have that shop floor feedback? It's a brilliant question because like that game of telephone I was mentioning before, I think leaders really only know in detail, what their teams one level or two levels down do. And then they really lose a lot of the understanding as you go deeper and they will sometimes get the story that's curated for them, which may not be the true story of what's going on. So that's why you have to draw these direct linkages and give this information to senior leaders so that if there's a problem in one particular area of your business, they're not relying on just the story because it'll be crafted for them, but getting down to the details, rolling up your sleeves, understanding what's actually happening in the process, what's the gap and addressing it. And I think we're seeing a lot of leaders specifically in the tech industry that do that, that are really good about you know, I'm not just gonna rely on the layers of my management organization. I'm gonna roll up my sleeves, I'm gonna get into the details, and we're gonna address this as a team. But you can't do that if you don't have an understanding of what's happening. Absolutely. Leadership is not something meant to be done in a vacuum, nor is leadership meant to be something that is comprised of dictums and mandates. The whole idea of what you're proposing here is to take the processes within an organization and use those as benchmarks that tell us where we are or are not efficient, therefore giving us the information to improve or to expound upon the things that we're doing well. But leadership has to have an openness sometimes which is lacking. Leadership often relies upon the information provided and doesn't hold people accountable for the information that's being provided. Yes. We have, I think, as leaders, a responsibility to be able to verify that information that's provided to us is in fact legitimate information. When you are creating this process inventory do you have elements in there that support that notion? You're trying to transcend the silos and you're trying to bring the information together in a cogent fashion. But is there an actual deliberate intention and is there an actual deliberate product here that helps to feed the executives information that is going to help the organization. Yeah, there's a couple topics there. One is as an organization sets goals, and it could be sales goals, it could be cost goals or whatever it may be, because this is a kind of a linked taxonomy structure, they could set those goals at the top and then cascade'em down to the organization for what it means for specific areas of the business or even down to a process level as appropriate. Another key aspect of it is when I construct the process inventory and I identify process areas or processes, I put a named person on that so that I'm clarifying accountability. And then there's another topic which I think is really important, which is democratized innovation. So as opposed to innovation coming strictly top down or from a centralized innovation or r and d group, that it's really tapping into the knowledge and expertise of everyone in your organization. But you can't really do that if you don't have clear accountability. It's that whole phrase of, if everybody owns something, nobody owns it. So you put a name on it. But then leadership needs to also drive the culture, which states that look, it's okay to test new ideas, it's encouraged and we understand that not everything is gonna work out, but through this culture of innovation, we're gonna find some really good things in our processes, our products, or any other aspect of our business. But then you need to enable those people on the ground with information. So they need to know how the organization works, what resources they use, how it connects up and downstream, across teams, et cetera. So if you set that culture, give'em the information, drive the accountability, then,you could really change the culture where people want to make improvements in their day-to-day lives. That will cascade up through to the greater good at the organization. My next question for you is how this process inventory can drive value in a business. But I want to stop for a moment and look at what you said about culture. As a business coach, I guess you can imagine that for me, culture is a big deal because I think culture is the glue, the underlying fabric, of a business. That's my feeling. Okay? And it doesn't matter if you're the CEO or you're the janitor. Culture is a large and encompassing thing. When I talk about value I always looked at culture. So can you expand upon that and other aspects of how this process drives value? Yeah, so in my book I talked about Herzberg's Two Factor Theory and I thought it was fascinating'cause I resonates in my experience of when I ran teams. But the whole theory is that people are motivated by positive and negative factors. So negative factors are things like your pay, your title. There's a few other things, but when I say negative is it doesn't motivate people, but it's a demotivator if minimum expectations are not met. But what people are truly motivated by are things like accomplishment and recognition. And I think at the end of the day, they want to go home and know that they did a good days. work and that they contributed. Obviously you have to meet the negative factors, but if you could build a culture where people really have that feeling of pride when they go home after a good day's work, then you'll motivate them to continue to contribute all that they can. So does this process facilitate that? It does by the accountability and ownership. If you know that you own something, this process, you own this technology, you own whatever it may be, and you arm them with information about how the broader environment works and then you let them loose on making things better within their own world, then I think you're arming them towards that, motivation theory and getting them to do hard work. So what I'm hearing is that this process, you know, I'm sure it drives value in a variety of other ways as well but it appears that it drives value in so far as employee engagement and commitment which is in my estimation, a critical, a fundamental element. Yeah. That's right. And you were gonna ask about growth how it benefits the business and I just wanted to mention that I've talked a lot about efficiency, but I think there's a growth angle of this as well, especially when organizations provide products and services ultimately to their customers. And if you could understand the intersection between how you support those products and processes, because there's a lot of overlap. There's a many to manary relationship. Some processes will cover multiple products and services and whatnot, but if you could understand that and then identify what products and services are in demand have a lot of growth potential, then you could invest more resources and time into building those up and making sure that those are running efficiently and delivering what customers are looking for. Alright, so let's take a look here at AI. We can't ignore AI. It's here, it's expanding, it's evolving. How can we leverage AI in the process environment that we're talking about today? A key to AI is having good data. And most organizations have data everywhere about how they run, but it's all in siloed pockets of the organization, and it doesn't have any consistent indexing structure. So, you could call one process make a payment, another team calls it transfer funds. So how's AI gonna decipher that? Those two teams are actually talking about the same process. So that's where the common language is important. Where I think we're going with this is, and I saw Deloitte put out a state of the AI survey and they asked, where do you want AI to go? And a plurality of the respondent said, I wanna drive AI deeper into my processes and to me, you can't do that unless you know what your processes are. So you've gotta name them, et cetera. Where I think this is going is there's this concept called digital twin. And digital twin is a virtual replica of your real world environment. It's grown in the manufacturing environment because it's physically tangible. I could easily create a model of my manufacturing floor. Station one does this, station two does this. Station three does this. But if I have that model in an AI engine, now I could take IOT data, anything about my operating metrics, like how are my costs relative to my value, where do I have customer issues and what's the root cause of that issue, et cetera. Really, the sky's the limit in terms of what it could do from a predictive analytics simulation. There's a lot of benefits for it, but where I haven't seen it crack the nut is an information based businesses. So my background's in financial services and banking, there is no physical tangibility to a bank because anybody could be anywhere in any part of the country, any building, et cetera. Right. But the concept still applies And that's where process inventory could help, because now it is the foundation for creating that model by identifying all processes, collecting all data, aligning it to that. Now you could feed information like what's your customer complaints or your defect data, your issue data, your transaction performance data, et cetera, et cetera. And now you could have real time insights into how your business is performing and where you need to make changes if there's issues that come up. But take it even one step further. The new hot topic now is AI agents where AI is not just analyzing your business but actually doing things for you. I think where this is going is I could speak something in my phone, for instance in a prompt and say, hey, I want to add this functionality to this system, and you can describe it. But the AI agent now can have one agent in a multi-agent environment could go into your process inventory, operating intelligence repository and say, okay, they're asking for this. Give me the landscape of processes. Let me understand the impacts. And it could zero in on what exactly has to change. It could hand it off to another agent that goes into your source code repository, identifies what code needs to be created, creates the code that needs to happen, then puts it into your CICD pipeline, generates the code, compiles it, deploys it, does your automated testing, does all your documentation, your requirements, your procedures, everything that you need, and then the next morning and I'm testing the new code. In a normal situation, maybe three months, maybe longer, and you're making it almost instantaneous because these AI agents are doing the work for you. Now there's a ton of different scenarios where this could apply I could do automated risk and regulatory assessments. I could create project plans for transformation programs. Really the sky's the limit in doing something like that. But it doesn't work if you don't have a detailed model of what your organization does. So what you're saying is at some point, if we have a sufficiently detailed organizational, map that it could kind of take over for us in a sense. But we have to have that, I mean, okay. So it is kind of scary to me. It is like, well, I guess you don't need me anymore. But, that doesn't necessarily mean you don't need me anymore. There still has to be some oversight. A I can't be sufficient to oversee you're shaking your head it can, okay, nevermind. No, no, no, no you can't get rid of humans. We all know that AI is prone to hallucinations and making things up, so you still need people to check things and make sure that it's all right but it will displace some people. I'm not the only one saying that, it will displace people. Tthat's why it's important to have people that are building and maintaining this model of your organization because that will be the engine that gives you the competitive advantage relative to what your competitors are doing and help you create better products and operate with greater margin, et cetera. Right. Given the nature of AI and its evolution, what will you be doing with this process inventory? How will you be inserting yourself into this evolution? What do you see as your role and your process environment here in that future? Great question. So, I see myself as first and foremost an evangelist for this topic. I didn't get to cover my background, but I spent most of my career in consulting, working with large banks and insurance companies, wealth management mm-hmm, on their transformation topic. Defining strategy, designing their IT architecture, doing risk and compliance, running large transformation programs. Through that I saw patterns of failure and challenges, and it was going back to that chaos and confusion, these environments are so complex. So first I want to be an evangelist telling the story that this is the art of the possible if you have the right strategy. I also do consulting with companies that want to adopt this approach, that want to create strategies and stand up a process capability; and then I'm also, partnering with a lot of technology organizations to see if we could make some of these concepts real. Well, it sounds like you're prepared to adapt, and that's a good thing as we all should be. Right? With AI it is scary, but the genie's out of the bottle. There's nothing we could do except for adapt and make the most use for our own businesses with it. I totally hear you there. So Michael, we're at the end of our time together and I'd like to ask you before we sign off, if you have anything further you'd like to leave us with. Yeah. so and Ed, again it was my pleasure. Thanks for the time and in the second discussion, a couple plugs. If you guys are interested in my book, digital Transformation Success is on Amazon. I detail out this whole framework, how do you construct it? How do you leverage it for value? How do you stand up a process center of excellence? I put a lot of details in there. Connect with me on LinkedIn. I post a lot about these topics. Michael Shank is very easy to find and then if you're interested in my services, go to process inventory.com and I detail out what I do there. I will also put this information into the edited script at the end. So that will be available to people there Well Michael, I want to thank you also for this second round. And I will say that maybe'cause of my memory being what it is, it sounded like it was as good as the first But seriously, thank you very much. I really appreciate you being here. Folks it is my privilege to thank Michael Schank as our guest today. This is Ed Drozda the small business doctor, and from The Water Trough, I want to wish you a healthy business.