April 16, 2025 • 29 mins
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/.
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Episode Transcript
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(00:10):
Welcome to The Water Troughwhere we can't make you drink,
but we will make you think.
My name is Ed Drozda to theSmall Business Doctor, and I'm
really excited you chose to joinme here as we discuss topics
that are important for smallbusiness 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 helpyou create the healthy business
that you've all.
Always wanted.
(01:02):
Welcome back to The Water Troughfolks, this is Ed Drozda the
Small business doctor.
I am joined today by MichaelSchank, who brings over 25 years
of experience in financialservices as a banking executive
management consultant, andtransformation expert.
He is the author of the bookDigital Transformation Success,
a comprehensive guide thatintroduces the process inventory
(01:22):
framework to drive digitaltransformation by aligning
organizational goals andresources.
The book provides actionablemethods and case studies to
enhance operational efficiency,enabling institutions of all
sorts to implement cutting edgetechnologies like AI and
automation.
It empowers leaders to achieveagility and excellence in the
(01:43):
digital era.
Michael, welcome.
Ed it's a pleasure to talk toyou.
Thanks for having me on.
Let's invite the elephant intothe room for a moment.
Michael and I had this sessionearlier this week, and I
neglected to hit the recordbutton.
So this is our second go.
(02:04):
And we like to think that whenwe do things more than once, we
do them better the second timearound.
We'll leave that to you folks todecide if it sounds okay, but
let's face it, you don't knowwhat happened the first time.
Only Michael and I do.
So welcome again, my friend.
How you doing?
I'm doing phenomenal and I'mconfident this will be a great a
better conversation than lasttime.
(02:26):
I considered that to be a tallorder because I thought we did a
really good job the first timearound, but hey, you know what?
We shall see where we go.
Right.
So let's focus right in on theconcept of efficiency because
you are looking to bringefficiency and productivity into
the business environment.
(02:46):
This is your coup de grace,right?
Yep.
So what in your estimation isthe root of efficiency
challenges?
Ultimately it's complexity andchaos.
So as organizations grow,sometimes it's not always
intentional that you just evolvein many areas as the business
(03:07):
dictates.
Particularly for smallbusinesses, in the life cycle of
a business, and you grow focusedon maximizing your revenue just
getting out into the market, butyou don't really think about
efficiency.
But as you continue to evolveand margin becomes much more
important you have to startthinking about am I efficient in
my people process, technology,vendors, et cetera.
(03:29):
But the larger an organizationgrows this chaos grows as well.
So people only know what theydo, and their peripheral
knowledge, decreases as goesout.
So nobody has that detailedunderstanding from a strategy
level down to the lowest leveldetail.
That's where alignment is key.
And that's what my frameworkdoes.
(03:50):
It's called process inventory.
It's a very simple concept.
You start with the top of theorganization and you interview
teams and people and ask them asimple thing.
What is it that you do?
You write that down and you keepwalking down the organizational
hierarchy until you captureevery process.
And when I do this, I go back upthe hierarchy again and have
(04:10):
people formally document thatthey approve that it's accurate
and complete, because they needto be able to trust this
information.
But why that's so key is nowhaving a semantic structure or a
common language for yourorganization allows you to align
all your operational data.
where are my systems?
Where are my people beinginvolved?
(04:30):
Where do I have risk andcompliance?
Where do my products align?
Really, you could go on forever,but that gets you one source of
all operational intelligence andthat's what gets you to
alignment.
So alignment is, and there's twoparts of it one is vertical
alignment.
That's where your CEO, yourC-suite leadership, all the
other leadership are directlyaligned to people on the ground
(04:52):
doing the work that everyone'smarching to the same tune.
They're all playing from thesame playbook and then
horizontal alignment so that allthe different teams within your
organization work together well.
So you're breaking down silos,you're arming people with
intimate knowledge of what otherteams do so that you could
collaborate effectively.
That's really what it is,mapping out your entire
(05:14):
organization so that everyone'son the same page.
You could look for waste ininefficiencies and you could
drive transformational change.
So that could be digital, thatcould be technology that could
be mergers and acquisitions,whatever it may be by being
armed with this precise processinformation, now you could
pinpoint what exactly has tochange and who has to do what to
(05:36):
make that change real.
Thank you for that explanation.
I really appreciate that.
Let me go back a little bithere.
I imagine that you are workingwith established businesses who
are doing this in retrospect, ifyou will.
Yep.
So do you see a place for thisprocess as a forward looking
(06:01):
thing?
Have you ever done that and whatdo you think about that?
Yeah, in fact I worked with anew 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 ofthings.
But they took this opportunityto lay out what processes do we
think we need to execute so thatthey could align their staff
(06:22):
their investment and resourcesinto it.
And it worked great.
So very small organization.
I think they were 10, 20 peoplesomewhere in that range and it
was all volunteers for the mostpart.
It, enabled them to be clear onwhat they're doing and avoiding
that whole fog of war chaos thathappens when you're starting
something new.
(06:44):
Most of us have developed abusiness plan before we go
forward.
I like to think of the businessplan as a foundational document
and also as a roadmap, orsometimes I refer to it as a
beacon.
This is what we're strivingtowards as in our vision and our
purpose.
But, many of us tend to create abusiness plan and we don't
(07:04):
actually abide by it.
We don't necessarily officiallyimplement it.
Yeah.
It seems that your processinventory framework takes into
account all the things that arelikely in a business plan.
Yes.
Right?
All the elements, but we don'thave the commitment.
If we were thoughtful aboutcreating that business plan in
(07:27):
the first place.
If we really recognized it forwhat it's worth, that it is a
roadmap, that it is a beaconguiding us towards a goal, then
you'd think we'd be committed,but we're not necessarily.
When you encounter somebody inthis space, who comes to you
michael, you know, I started abusiness and we're six months in
(07:48):
and things are kind of dodgyhere.
Does the concept of the businessplan come into your conversation
at this point?
For sure.
For new organizations it'simportant to think about all the
things you need to do because ifyou don't, some of those things
will come up and you'll have toreact, kind of after the fact.
To your point, even if you didit in your business plan, and I
(08:08):
love that quote from Mike Tyson,everyone has a plan until they
get punched in the mouth.
I just bring that up as even ifyou did this, once you get going
you're gonna learn more.
You're gonna have to adjust asthe demand for your products
adjusts or you may come up withnew financial reporting needs or
whatever and it's important tokeep this as a living document.
You have to not only build itonce in the business CL case and
(08:31):
not look back at it for years,but maintain this information so
that you could keep thatsystematic approach to how you
run your business.
You don't necessarily need ateam, but you need to identify
people that do certain thingslike go back out and refresh it.
Talk to people in yourorganization to make sure that
it's accurate and complete ifyou're aligning data to it,
(08:52):
making sure that that's stillaccurate and that people are
using this to operate thecompany.
Michael, what happens if we donot pay attention to alignment
and systems thinking.
As we grow a businessinefficiency grows.
Quality challenges appear.
if you're in a regulatedbusiness, then you could get in
(09:13):
trouble with the regulators.
A lot of,these things can biteyou, but if you can be more
clear on what you're doing, anda good analogy with this would
be if you were taking a crosscountry trip to say California,
and you didn't have a map, you'dhave a hard time getting there.
And that's essentially what thisis.
It's really just laying out whatyour organization is and where
(09:34):
it's important too, in drivingout West takes a strategy.
There's a purpose for it.
I have to think about fuel costand all this other stuff and
bathroom breaks, et cetera.
But when an organization does astrategy, one of the key things
that they do is they do anenvironment analysis.
And that is internal analysisand external.
Your internal is where we arestrong and weak relative to
(09:55):
expectations.
So maybe our customer serviceisn't good or there's some gaps
in our products and we have toaddress those things.
And then there's externalenvironment.
We need to look at what are theopportunities and threats.
That could be many things.
That could be economic, thatcould be political, that could
be legislative and regulatory.
That could be your competitivelandscape.
(10:15):
What are my competitors doing,et cetera.
But if an organization,especially the strategic
leaders, have this map laid outnow, they could start creating
heat map of where they're strongand weak.
And that is important becausenow they could be very specific
around what has to change to getthem to where they want to go.
And now they could allocatetheir change dollars.
(10:38):
And their investment tospecifically what they need and
put more objectivity into theirfunding process.
Who is typically responsible fornumber one, for agreeing that a
process inventory is needed.
Number two, for actuallyfacilitating it's initiation.
Is it the C level executives orwhere exactly does it come from?
(10:59):
A lot of it depends on thecontext of what they're trying
to accomplish.
Organizations where risk andregulatory is a big topic item,
that would fall under the chiefrisk Officer.
If it's efficiency it could bethe chief operating officer.
If it's more technology focused,it could be the CIO.
And that's where organizationsreally need to think through
what their strategy is and whythey're adopting a concept like
(11:20):
this.
But doing something like thisneeds that champion at the
executive level and thenbuilding a team or an effort at
the lower level to execute onit.
That's where you'll need astrong leader who gets this
concept.
Somebody who could run yourprocess, center of excellence,
for instance that gets the needfor quality and standards and
(11:41):
doing the right thing, so thisis accurate and then guiding the
organization to use it.
A lot of what I do is creatingthis map of the organization,
but if you don't use it to runyour business, then it's just
another piece of data in somerepository.
So you've gotta use it forthings like strategy, as I
mentioned.
Use it for your changemanagement process for driving
(12:02):
out waste and inefficiencies,using it for risk management,
using it for your ITarchitecture, design, whatever
your organization's faced with,and that is most pressing for
you, is aligning this frameworkto enable that.
I heard you mention actually acouple times here, it's a top
down and a bottom up kind ofsituation.
(12:24):
Naturally a champion at theexecutive level be necessary.
Someone has to initiate theprocess.
The idea of building the processinventory does necessitate input
from folks on the shop floor.
Is that correct?
Oh yeah, yeah.
Okay.
So tell me more about that.
(12:46):
In my experience there isawkward communication between
those in the senior mostpositions and those who are, as
I like to say, doing the work.
Yes.
But if you want this thing towork for them, that is something
that has to be assured, andthat's what I'm hearing and
makes perfect sense.
(13:07):
What do you do?
How can you inspire theseexecutives to acknowledge the
need to have that shop floorfeedback?
It's a brilliant questionbecause like that game of
telephone I was mentioningbefore, I think leaders really
only know in detail, what theirteams one level or two levels
(13:31):
down do.
And then they really lose a lotof the understanding as you go
deeper and they will sometimesget the story that's curated for
them, which may not be the truestory of what's going on.
So that's why you have to drawthese direct linkages and give
this information to seniorleaders so that if there's a
problem in one particular areaof your business, they're not
(13:53):
relying on just the storybecause it'll be crafted for
them, but getting down to thedetails, rolling up your
sleeves, understanding what'sactually happening in the
process, what's the gap andaddressing it.
And I think we're seeing a lotof leaders specifically in the
tech industry that do that, thatare really good about you know,
I'm not just gonna rely on thelayers of my management
organization.
(14:13):
I'm gonna roll up my sleeves,I'm gonna get into the details,
and we're gonna address this asa team.
But you can't do that if youdon't have an understanding of
what's happening.
Absolutely.
Leadership is not somethingmeant to be done in a vacuum,
nor is leadership meant to besomething that is comprised of
dictums and mandates.
The whole idea of what you'reproposing here is to take the
(14:36):
processes within an organizationand use those as benchmarks that
tell us where we are or are notefficient, therefore giving us
the information to improve or toexpound upon the things that
we're doing well.
But leadership has to have anopenness sometimes which is
(14:56):
lacking.
Leadership often relies upon theinformation provided and doesn't
hold people accountable for theinformation that's being
provided.
Yes.
We have, I think, as leaders, aresponsibility to be able to
verify that information that'sprovided to us is in fact
(15:18):
legitimate information.
When you are creating thisprocess inventory do you have
elements in there that supportthat notion?
You're trying to transcend thesilos and you're trying to bring
the information together in acogent fashion.
But is there an actualdeliberate intention and is
(15:41):
there an actual deliberateproduct here that helps to feed
the executives information thatis going to help the
organization.
Yeah, there's a couple topicsthere.
One is as an organization setsgoals, and it could be sales
goals, it could be cost goals orwhatever it may be, because this
(16:01):
is a kind of a linked taxonomystructure, they could set those
goals at the top and thencascade'em down to the
organization for what it meansfor specific areas of the
business or even down to aprocess level as appropriate.
Another key aspect of it is whenI construct the process
inventory and I identify processareas or processes, I put a
(16:21):
named person on that so that I'mclarifying accountability.
And then there's another topicwhich I think is really
important, which is democratizedinnovation.
So as opposed to innovationcoming strictly top down or from
a centralized innovation or rand d group, that it's really
tapping into the knowledge andexpertise of everyone in your
(16:42):
organization.
But you can't really do that ifyou don't have clear
accountability.
It's that whole phrase of, ifeverybody owns something, nobody
owns it.
So you put a name on it.
But then leadership needs toalso drive the culture, which
states that look, it's okay totest new ideas, it's encouraged
and we understand that noteverything is gonna work out,
(17:02):
but through this culture ofinnovation, we're gonna find
some really good things in ourprocesses, our products, or any
other aspect of our business.
But then you need to enablethose people on the ground with
information.
So they need to know how theorganization works, what
resources they use, how itconnects up and downstream,
(17:24):
across teams, et cetera.
So if you set that culture, give'em the information, drive the
accountability, then,you couldreally change the culture where
people want to make improvementsin their day-to-day lives.
That will cascade up through tothe greater good at the
organization.
My next question for you is howthis process inventory can drive
(17:46):
value in a business.
But I want to stop for a momentand look at what you said about
culture.
As a business coach, I guess youcan imagine that for me, culture
is a big deal because I thinkculture is the glue, the
underlying fabric, of abusiness.
That's my feeling.
Okay?
And it doesn't matter if you'rethe CEO or you're the janitor.
(18:07):
Culture is a large andencompassing thing.
When I talk about value I alwayslooked at culture.
So can you expand upon that andother aspects of how this
process drives value?
Yeah, so in my book I talkedabout Herzberg's Two Factor
Theory and I thought it wasfascinating'cause I resonates in
(18:27):
my experience of when I ranteams.
But the whole theory is thatpeople are motivated by positive
and negative factors.
So negative factors are thingslike your pay, your title.
There's a few other things, butwhen I say negative is it
doesn't motivate people, butit's a demotivator if minimum
(18:47):
expectations are not met.
But what people are trulymotivated by are things like
accomplishment and recognition.
And I think at the end of theday, they want to go home and
know that they did a good days.
work and that they contributed.
Obviously you have to meet thenegative factors, but if you
could build a culture wherepeople really have that feeling
(19:09):
of pride when they go home aftera good day's work, then you'll
motivate them to continue tocontribute all that they can.
So does this process facilitatethat?
It does by the accountabilityand ownership.
If you know that you ownsomething, this process, you own
this technology, you ownwhatever it may be, and you arm
(19:30):
them with information about howthe broader environment works
and then you let them loose onmaking things better within
their own world, then I thinkyou're arming them towards that,
motivation theory and gettingthem to do hard work.
So what I'm hearing is that thisprocess, you know, I'm sure it
drives value in a variety ofother ways as well but it
(19:53):
appears that it drives value inso far as employee engagement
and commitment which is in myestimation, a critical, a
fundamental element.
Yeah.
That's right.
And you were gonna ask aboutgrowth how it benefits the
business and I just wanted tomention that I've talked a lot
about efficiency, but I thinkthere's a growth angle of this
as well, especially whenorganizations provide products
(20:16):
and services ultimately to theircustomers.
And if you could understand theintersection between how you
support those products andprocesses, because there's a lot
of overlap.
There's a many to manaryrelationship.
Some processes will covermultiple products and services
and whatnot, but if you couldunderstand that and then
identify what products andservices are in demand have a
(20:37):
lot of growth potential, thenyou could invest more resources
and time into building those upand making sure that those are
running efficiently anddelivering what customers are
looking for.
Alright, so let's take a lookhere at AI.
We can't ignore AI.
It's here, it's expanding, it'sevolving.
(20:59):
How can we leverage AI in theprocess environment that we're
talking about today?
A key to AI is having good data.
And most organizations have dataeverywhere about how they run,
but it's all in siloed pocketsof the organization, and it
doesn't have any consistentindexing structure.
(21:19):
So, you could call one processmake a payment, another team
calls it transfer funds.
So how's AI gonna decipher that?
Those two teams are actuallytalking about the same process.
So that's where the commonlanguage is important.
Where I think we're going withthis is, and I saw Deloitte put
out a state of the AI survey andthey asked, where do you want AI
(21:39):
to go?
And a plurality of therespondent said, I wanna drive
AI deeper into my processes andto me, you can't do that unless
you know what your processesare.
So you've gotta name them, etcetera.
Where I think this is going isthere's this concept called
digital twin.
And digital twin is a virtualreplica of your real world
environment.
(21:59):
It's grown in the manufacturingenvironment because it's
physically tangible.
I could easily create a model ofmy manufacturing floor.
Station one does this, stationtwo does this.
Station three does this.
But if I have that model in anAI engine, now I could take IOT
data, anything about myoperating metrics, like how are
my costs relative to my value,where do I have customer issues
(22:22):
and what's the root cause ofthat issue, et cetera.
Really, the sky's the limit interms of what it could do from a
predictive analytics simulation.
There's a lot of benefits forit, but where I haven't seen it
crack the nut is an informationbased businesses.
So my background's in financialservices and banking, there is
no physical tangibility to abank because anybody could be
(22:43):
anywhere in any part of thecountry, any building, et
cetera.
Right.
But the concept still appliesAnd that's where process
inventory could help, becausenow it is the foundation for
creating that model byidentifying all processes,
collecting all data, aligning itto that.
Now you could feed informationlike what's your customer
complaints or your defect data,your issue data, your
(23:03):
transaction performance data, etcetera, et cetera.
And now you could have real timeinsights into how your business
is performing and where you needto make changes if there's
issues that come up.
But take it even one stepfurther.
The new hot topic now is AIagents where AI is not just
analyzing your business butactually doing things for you.
(23:24):
I think where this is going is Icould speak something in my
phone, for instance in a promptand say, hey, I want to add this
functionality to this system,and you can describe it.
But the AI agent now can haveone agent in a multi-agent
environment could go into yourprocess inventory, operating
intelligence repository and say,okay, they're asking for this.
(23:44):
Give me the landscape ofprocesses.
Let me understand the impacts.
And it could zero in on whatexactly has to change.
It could hand it off to anotheragent that goes into your source
code repository, identifies whatcode needs to be created,
creates the code that needs tohappen, then puts it into your
CICD pipeline, generates thecode, compiles it, deploys it,
(24:06):
does your automated testing,does all your documentation,
your requirements, yourprocedures, everything that you
need, and then the next morningand I'm testing the new code.
In a normal situation, maybethree months, maybe longer, and
you're making it almostinstantaneous because these AI
agents are doing the work foryou.
Now there's a ton of differentscenarios where this could apply
(24:27):
I could do automated risk andregulatory assessments.
I could create project plans fortransformation programs.
Really the sky's the limit indoing something like that.
But it doesn't work if you don'thave a detailed model of what
your organization does.
So what you're saying is at somepoint, if we have a sufficiently
detailed organizational, mapthat it could kind of take over
(24:52):
for us in a sense.
But we have to have that, Imean, okay.
So it is kind of scary to me.
It is like, well, I guess youdon't need me anymore.
But, that doesn't necessarilymean you don't need me anymore.
There still has to be someoversight.
A I can't be sufficient tooversee you're shaking your head
it can, okay, nevermind.
No, no, no, no you can't get ridof humans.
(25:15):
We all know that AI is prone tohallucinations and making things
up, so you still need people tocheck things and make sure that
it's all right but it willdisplace some people.
I'm not the only one sayingthat, it will displace people.
Tthat's why it's important tohave people that are building
and maintaining this model ofyour organization because that
will be the engine that givesyou the competitive advantage
(25:38):
relative to what yourcompetitors are doing and help
you create better products andoperate with greater margin, et
cetera.
Right.
Given the nature of AI and itsevolution, what will you be
doing with this processinventory?
How will you be insertingyourself into this evolution?
(26:01):
What do you see as your role andyour process environment here in
that future?
Great question.
So, I see myself as first andforemost an evangelist for this
topic.
I didn't get to cover mybackground, but I spent most of
my career in consulting, workingwith large banks and insurance
companies, wealth managementmm-hmm, on their transformation
(26:22):
topic.
Defining strategy, designingtheir IT architecture, doing
risk and compliance, runninglarge transformation programs.
Through that I saw patterns offailure and challenges, and it
was going back to that chaos andconfusion, these environments
are so complex.
So first I want to be anevangelist telling the story
that this is the art of thepossible if you have the right
(26:44):
strategy.
I also do consulting withcompanies that want to adopt
this approach, that want tocreate strategies and stand up a
process capability; and then I'malso, partnering with a lot of
technology organizations to seeif we could make some of these
concepts real.
Well, it sounds like you'reprepared to adapt, and that's a
good thing as we all should be.
(27:06):
Right?
With AI it is scary, but thegenie's out of the bottle.
There's nothing we could doexcept for adapt and make the
most use for our own businesseswith it.
I totally hear you there.
So Michael, we're at the end ofour time together and I'd like
to ask you before we sign off,if you have anything further
(27:27):
you'd like to leave us with.
Yeah.
so and Ed, again it was mypleasure.
Thanks for the time and in thesecond discussion, a couple
plugs.
If you guys are interested in mybook, digital Transformation
Success is on Amazon.
I detail out this wholeframework, how do you construct
it?
How do you leverage it forvalue?
How do you stand up a processcenter of excellence?
I put a lot of details in there.
(27:48):
Connect with me on LinkedIn.
I post a lot about these topics.
Michael Shank is very easy tofind and then if you're
interested in my services, go toprocess inventory.com and I
detail out what I do there.
I will also put this informationinto the edited script at the
end.
So that will be available topeople there Well Michael, I
(28:09):
want to thank you also for thissecond round.
And I will say that maybe'causeof my memory being what it is,
it sounded like it was as goodas the first But seriously,
thank you very much.
I really appreciate you beinghere.
Folks it is my privilege tothank Michael Schank as our
guest today.
This is Ed Drozda the smallbusiness doctor, and from The
(28:30):
Water Trough, I want to wish youa healthy business.
Welcome to The Water Troughwhere we can't make you drink,
but we will make you think.
My name is Ed Drozda to theSmall Business Doctor, and I'm
really excited you chose to joinme here as we discuss topics
that are important for smallbusiness 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 helpyou create the healthy business
that you've all.
Always wanted.
(01:02):
Welcome back to The Water Troughfolks, this is Ed Drozda the
Small business doctor.
I am joined today by MichaelSchank, who brings over 25 years
of experience in financialservices as a banking executive
management consultant, andtransformation expert.
He is the author of the bookDigital Transformation Success,
a comprehensive guide thatintroduces the process inventory
(01:22):
framework to drive digitaltransformation by aligning
organizational goals andresources.
The book provides actionablemethods and case studies to
enhance operational efficiency,enabling institutions of all
sorts to implement cutting edgetechnologies like AI and
automation.
It empowers leaders to achieveagility and excellence in the
(01:43):
digital era.
Michael, welcome.
Ed it's a pleasure to talk toyou.
Thanks for having me on.
Let's invite the elephant intothe room for a moment.
Michael and I had this sessionearlier this week, and I
neglected to hit the recordbutton.
So this is our second go.
(02:04):
And we like to think that whenwe do things more than once, we
do them better the second timearound.
We'll leave that to you folks todecide if it sounds okay, but
let's face it, you don't knowwhat happened the first time.
Only Michael and I do.
So welcome again, my friend.
How you doing?
I'm doing phenomenal and I'mconfident this will be a great a
better conversation than lasttime.
(02:26):
I considered that to be a tallorder because I thought we did a
really good job the first timearound, but hey, you know what?
We shall see where we go.
Right.
So let's focus right in on theconcept of efficiency because
you are looking to bringefficiency and productivity into
the business environment.
(02:46):
This is your coup de grace,right?
Yep.
So what in your estimation isthe root of efficiency
challenges?
Ultimately it's complexity andchaos.
So as organizations grow,sometimes it's not always
intentional that you just evolvein many areas as the business
(03:07):
dictates.
Particularly for smallbusinesses, in the life cycle of
a business, and you grow focusedon maximizing your revenue just
getting out into the market, butyou don't really think about
efficiency.
But as you continue to evolveand margin becomes much more
important you have to startthinking about am I efficient in
my people process, technology,vendors, et cetera.
(03:29):
But the larger an organizationgrows this chaos grows as well.
So people only know what theydo, and their peripheral
knowledge, decreases as goesout.
So nobody has that detailedunderstanding from a strategy
level down to the lowest leveldetail.
That's where alignment is key.
And that's what my frameworkdoes.
(03:50):
It's called process inventory.
It's a very simple concept.
You start with the top of theorganization and you interview
teams and people and ask them asimple thing.
What is it that you do?
You write that down and you keepwalking down the organizational
hierarchy until you captureevery process.
And when I do this, I go back upthe hierarchy again and have
(04:10):
people formally document thatthey approve that it's accurate
and complete, because they needto be able to trust this
information.
But why that's so key is nowhaving a semantic structure or a
common language for yourorganization allows you to align
all your operational data.
where are my systems?
Where are my people beinginvolved?
(04:30):
Where do I have risk andcompliance?
Where do my products align?
Really, you could go on forever,but that gets you one source of
all operational intelligence andthat's what gets you to
alignment.
So alignment is, and there's twoparts of it one is vertical
alignment.
That's where your CEO, yourC-suite leadership, all the
other leadership are directlyaligned to people on the ground
(04:52):
doing the work that everyone'smarching to the same tune.
They're all playing from thesame playbook and then
horizontal alignment so that allthe different teams within your
organization work together well.
So you're breaking down silos,you're arming people with
intimate knowledge of what otherteams do so that you could
collaborate effectively.
That's really what it is,mapping out your entire
(05:14):
organization so that everyone'son the same page.
You could look for waste ininefficiencies and you could
drive transformational change.
So that could be digital, thatcould be technology that could
be mergers and acquisitions,whatever it may be by being
armed with this precise processinformation, now you could
pinpoint what exactly has tochange and who has to do what to
(05:36):
make that change real.
Thank you for that explanation.
I really appreciate that.
Let me go back a little bithere.
I imagine that you are workingwith established businesses who
are doing this in retrospect, ifyou will.
Yep.
So do you see a place for thisprocess as a forward looking
(06:01):
thing?
Have you ever done that and whatdo you think about that?
Yeah, in fact I worked with anew 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 ofthings.
But they took this opportunityto lay out what processes do we
think we need to execute so thatthey could align their staff
(06:22):
their investment and resourcesinto it.
And it worked great.
So very small organization.
I think they were 10, 20 peoplesomewhere in that range and it
was all volunteers for the mostpart.
It, enabled them to be clear onwhat they're doing and avoiding
that whole fog of war chaos thathappens when you're starting
something new.
(06:44):
Most of us have developed abusiness plan before we go
forward.
I like to think of the businessplan as a foundational document
and also as a roadmap, orsometimes I refer to it as a
beacon.
This is what we're strivingtowards as in our vision and our
purpose.
But, many of us tend to create abusiness plan and we don't
(07:04):
actually abide by it.
We don't necessarily officiallyimplement it.
Yeah.
It seems that your processinventory framework takes into
account all the things that arelikely in a business plan.
Yes.
Right?
All the elements, but we don'thave the commitment.
If we were thoughtful aboutcreating that business plan in
(07:27):
the first place.
If we really recognized it forwhat it's worth, that it is a
roadmap, that it is a beaconguiding us towards a goal, then
you'd think we'd be committed,but we're not necessarily.
When you encounter somebody inthis space, who comes to you
michael, you know, I started abusiness and we're six months in
(07:48):
and things are kind of dodgyhere.
Does the concept of the businessplan come into your conversation
at this point?
For sure.
For new organizations it'simportant to think about all the
things you need to do because ifyou don't, some of those things
will come up and you'll have toreact, kind of after the fact.
To your point, even if you didit in your business plan, and I
(08:08):
love that quote from Mike Tyson,everyone has a plan until they
get punched in the mouth.
I just bring that up as even ifyou did this, once you get going
you're gonna learn more.
You're gonna have to adjust asthe demand for your products
adjusts or you may come up withnew financial reporting needs or
whatever and it's important tokeep this as a living document.
You have to not only build itonce in the business CL case and
(08:31):
not look back at it for years,but maintain this information so
that you could keep thatsystematic approach to how you
run your business.
You don't necessarily need ateam, but you need to identify
people that do certain thingslike go back out and refresh it.
Talk to people in yourorganization to make sure that
it's accurate and complete ifyou're aligning data to it,
(08:52):
making sure that that's stillaccurate and that people are
using this to operate thecompany.
Michael, what happens if we donot pay attention to alignment
and systems thinking.
As we grow a businessinefficiency grows.
Quality challenges appear.
if you're in a regulatedbusiness, then you could get in
(09:13):
trouble with the regulators.
A lot of,these things can biteyou, but if you can be more
clear on what you're doing, anda good analogy with this would
be if you were taking a crosscountry trip to say California,
and you didn't have a map, you'dhave a hard time getting there.
And that's essentially what thisis.
It's really just laying out whatyour organization is and where
(09:34):
it's important too, in drivingout West takes a strategy.
There's a purpose for it.
I have to think about fuel costand all this other stuff and
bathroom breaks, et cetera.
But when an organization does astrategy, one of the key things
that they do is they do anenvironment analysis.
And that is internal analysisand external.
Your internal is where we arestrong and weak relative to
(09:55):
expectations.
So maybe our customer serviceisn't good or there's some gaps
in our products and we have toaddress those things.
And then there's externalenvironment.
We need to look at what are theopportunities and threats.
That could be many things.
That could be economic, thatcould be political, that could
be legislative and regulatory.
That could be your competitivelandscape.
(10:15):
What are my competitors doing,et cetera.
But if an organization,especially the strategic
leaders, have this map laid outnow, they could start creating
heat map of where they're strongand weak.
And that is important becausenow they could be very specific
around what has to change to getthem to where they want to go.
And now they could allocatetheir change dollars.
(10:38):
And their investment tospecifically what they need and
put more objectivity into theirfunding process.
Who is typically responsible fornumber one, for agreeing that a
process inventory is needed.
Number two, for actuallyfacilitating it's initiation.
Is it the C level executives orwhere exactly does it come from?
(10:59):
A lot of it depends on thecontext of what they're trying
to accomplish.
Organizations where risk andregulatory is a big topic item,
that would fall under the chiefrisk Officer.
If it's efficiency it could bethe chief operating officer.
If it's more technology focused,it could be the CIO.
And that's where organizationsreally need to think through
what their strategy is and whythey're adopting a concept like
(11:20):
this.
But doing something like thisneeds that champion at the
executive level and thenbuilding a team or an effort at
the lower level to execute onit.
That's where you'll need astrong leader who gets this
concept.
Somebody who could run yourprocess, center of excellence,
for instance that gets the needfor quality and standards and
(11:41):
doing the right thing, so thisis accurate and then guiding the
organization to use it.
A lot of what I do is creatingthis map of the organization,
but if you don't use it to runyour business, then it's just
another piece of data in somerepository.
So you've gotta use it forthings like strategy, as I
mentioned.
Use it for your changemanagement process for driving
(12:02):
out waste and inefficiencies,using it for risk management,
using it for your ITarchitecture, design, whatever
your organization's faced with,and that is most pressing for
you, is aligning this frameworkto enable that.
I heard you mention actually acouple times here, it's a top
down and a bottom up kind ofsituation.
(12:24):
Naturally a champion at theexecutive level be necessary.
Someone has to initiate theprocess.
The idea of building the processinventory does necessitate input
from folks on the shop floor.
Is that correct?
Oh yeah, yeah.
Okay.
So tell me more about that.
(12:46):
In my experience there isawkward communication between
those in the senior mostpositions and those who are, as
I like to say, doing the work.
Yes.
But if you want this thing towork for them, that is something
that has to be assured, andthat's what I'm hearing and
makes perfect sense.
(13:07):
What do you do?
How can you inspire theseexecutives to acknowledge the
need to have that shop floorfeedback?
It's a brilliant questionbecause like that game of
telephone I was mentioningbefore, I think leaders really
only know in detail, what theirteams one level or two levels
(13:31):
down do.
And then they really lose a lotof the understanding as you go
deeper and they will sometimesget the story that's curated for
them, which may not be the truestory of what's going on.
So that's why you have to drawthese direct linkages and give
this information to seniorleaders so that if there's a
problem in one particular areaof your business, they're not
(13:53):
relying on just the storybecause it'll be crafted for
them, but getting down to thedetails, rolling up your
sleeves, understanding what'sactually happening in the
process, what's the gap andaddressing it.
And I think we're seeing a lotof leaders specifically in the
tech industry that do that, thatare really good about you know,
I'm not just gonna rely on thelayers of my management
organization.
(14:13):
I'm gonna roll up my sleeves,I'm gonna get into the details,
and we're gonna address this asa team.
But you can't do that if youdon't have an understanding of
what's happening.
Absolutely.
Leadership is not somethingmeant to be done in a vacuum,
nor is leadership meant to besomething that is comprised of
dictums and mandates.
The whole idea of what you'reproposing here is to take the
(14:36):
processes within an organizationand use those as benchmarks that
tell us where we are or are notefficient, therefore giving us
the information to improve or toexpound upon the things that
we're doing well.
But leadership has to have anopenness sometimes which is
(14:56):
lacking.
Leadership often relies upon theinformation provided and doesn't
hold people accountable for theinformation that's being
provided.
Yes.
We have, I think, as leaders, aresponsibility to be able to
verify that information that'sprovided to us is in fact
(15:18):
legitimate information.
When you are creating thisprocess inventory do you have
elements in there that supportthat notion?
You're trying to transcend thesilos and you're trying to bring
the information together in acogent fashion.
But is there an actualdeliberate intention and is
(15:41):
there an actual deliberateproduct here that helps to feed
the executives information thatis going to help the
organization.
Yeah, there's a couple topicsthere.
One is as an organization setsgoals, and it could be sales
goals, it could be cost goals orwhatever it may be, because this
(16:01):
is a kind of a linked taxonomystructure, they could set those
goals at the top and thencascade'em down to the
organization for what it meansfor specific areas of the
business or even down to aprocess level as appropriate.
Another key aspect of it is whenI construct the process
inventory and I identify processareas or processes, I put a
(16:21):
named person on that so that I'mclarifying accountability.
And then there's another topicwhich I think is really
important, which is democratizedinnovation.
So as opposed to innovationcoming strictly top down or from
a centralized innovation or rand d group, that it's really
tapping into the knowledge andexpertise of everyone in your
(16:42):
organization.
But you can't really do that ifyou don't have clear
accountability.
It's that whole phrase of, ifeverybody owns something, nobody
owns it.
So you put a name on it.
But then leadership needs toalso drive the culture, which
states that look, it's okay totest new ideas, it's encouraged
and we understand that noteverything is gonna work out,
(17:02):
but through this culture ofinnovation, we're gonna find
some really good things in ourprocesses, our products, or any
other aspect of our business.
But then you need to enablethose people on the ground with
information.
So they need to know how theorganization works, what
resources they use, how itconnects up and downstream,
(17:24):
across teams, et cetera.
So if you set that culture, give'em the information, drive the
accountability, then,you couldreally change the culture where
people want to make improvementsin their day-to-day lives.
That will cascade up through tothe greater good at the
organization.
My next question for you is howthis process inventory can drive
(17:46):
value in a business.
But I want to stop for a momentand look at what you said about
culture.
As a business coach, I guess youcan imagine that for me, culture
is a big deal because I thinkculture is the glue, the
underlying fabric, of abusiness.
That's my feeling.
Okay?
And it doesn't matter if you'rethe CEO or you're the janitor.
(18:07):
Culture is a large andencompassing thing.
When I talk about value I alwayslooked at culture.
So can you expand upon that andother aspects of how this
process drives value?
Yeah, so in my book I talkedabout Herzberg's Two Factor
Theory and I thought it wasfascinating'cause I resonates in
(18:27):
my experience of when I ranteams.
But the whole theory is thatpeople are motivated by positive
and negative factors.
So negative factors are thingslike your pay, your title.
There's a few other things, butwhen I say negative is it
doesn't motivate people, butit's a demotivator if minimum
(18:47):
expectations are not met.
But what people are trulymotivated by are things like
accomplishment and recognition.
And I think at the end of theday, they want to go home and
know that they did a good days.
work and that they contributed.
Obviously you have to meet thenegative factors, but if you
could build a culture wherepeople really have that feeling
(19:09):
of pride when they go home aftera good day's work, then you'll
motivate them to continue tocontribute all that they can.
So does this process facilitatethat?
It does by the accountabilityand ownership.
If you know that you ownsomething, this process, you own
this technology, you ownwhatever it may be, and you arm
(19:30):
them with information about howthe broader environment works
and then you let them loose onmaking things better within
their own world, then I thinkyou're arming them towards that,
motivation theory and gettingthem to do hard work.
So what I'm hearing is that thisprocess, you know, I'm sure it
drives value in a variety ofother ways as well but it
(19:53):
appears that it drives value inso far as employee engagement
and commitment which is in myestimation, a critical, a
fundamental element.
Yeah.
That's right.
And you were gonna ask aboutgrowth how it benefits the
business and I just wanted tomention that I've talked a lot
about efficiency, but I thinkthere's a growth angle of this
as well, especially whenorganizations provide products
(20:16):
and services ultimately to theircustomers.
And if you could understand theintersection between how you
support those products andprocesses, because there's a lot
of overlap.
There's a many to manaryrelationship.
Some processes will covermultiple products and services
and whatnot, but if you couldunderstand that and then
identify what products andservices are in demand have a
(20:37):
lot of growth potential, thenyou could invest more resources
and time into building those upand making sure that those are
running efficiently anddelivering what customers are
looking for.
Alright, so let's take a lookhere at AI.
We can't ignore AI.
It's here, it's expanding, it'sevolving.
(20:59):
How can we leverage AI in theprocess environment that we're
talking about today?
A key to AI is having good data.
And most organizations have dataeverywhere about how they run,
but it's all in siloed pocketsof the organization, and it
doesn't have any consistentindexing structure.
(21:19):
So, you could call one processmake a payment, another team
calls it transfer funds.
So how's AI gonna decipher that?
Those two teams are actuallytalking about the same process.
So that's where the commonlanguage is important.
Where I think we're going withthis is, and I saw Deloitte put
out a state of the AI survey andthey asked, where do you want AI
(21:39):
to go?
And a plurality of therespondent said, I wanna drive
AI deeper into my processes andto me, you can't do that unless
you know what your processesare.
So you've gotta name them, etcetera.
Where I think this is going isthere's this concept called
digital twin.
And digital twin is a virtualreplica of your real world
environment.
(21:59):
It's grown in the manufacturingenvironment because it's
physically tangible.
I could easily create a model ofmy manufacturing floor.
Station one does this, stationtwo does this.
Station three does this.
But if I have that model in anAI engine, now I could take IOT
data, anything about myoperating metrics, like how are
my costs relative to my value,where do I have customer issues
(22:22):
and what's the root cause ofthat issue, et cetera.
Really, the sky's the limit interms of what it could do from a
predictive analytics simulation.
There's a lot of benefits forit, but where I haven't seen it
crack the nut is an informationbased businesses.
So my background's in financialservices and banking, there is
no physical tangibility to abank because anybody could be
(22:43):
anywhere in any part of thecountry, any building, et
cetera.
Right.
But the concept still appliesAnd that's where process
inventory could help, becausenow it is the foundation for
creating that model byidentifying all processes,
collecting all data, aligning itto that.
Now you could feed informationlike what's your customer
complaints or your defect data,your issue data, your
(23:03):
transaction performance data, etcetera, et cetera.
And now you could have real timeinsights into how your business
is performing and where you needto make changes if there's
issues that come up.
But take it even one stepfurther.
The new hot topic now is AIagents where AI is not just
analyzing your business butactually doing things for you.
(23:24):
I think where this is going is Icould speak something in my
phone, for instance in a promptand say, hey, I want to add this
functionality to this system,and you can describe it.
But the AI agent now can haveone agent in a multi-agent
environment could go into yourprocess inventory, operating
intelligence repository and say,okay, they're asking for this.
(23:44):
Give me the landscape ofprocesses.
Let me understand the impacts.
And it could zero in on whatexactly has to change.
It could hand it off to anotheragent that goes into your source
code repository, identifies whatcode needs to be created,
creates the code that needs tohappen, then puts it into your
CICD pipeline, generates thecode, compiles it, deploys it,
(24:06):
does your automated testing,does all your documentation,
your requirements, yourprocedures, everything that you
need, and then the next morningand I'm testing the new code.
In a normal situation, maybethree months, maybe longer, and
you're making it almostinstantaneous because these AI
agents are doing the work foryou.
Now there's a ton of differentscenarios where this could apply
(24:27):
I could do automated risk andregulatory assessments.
I could create project plans fortransformation programs.
Really the sky's the limit indoing something like that.
But it doesn't work if you don'thave a detailed model of what
your organization does.
So what you're saying is at somepoint, if we have a sufficiently
detailed organizational, mapthat it could kind of take over
(24:52):
for us in a sense.
But we have to have that, Imean, okay.
So it is kind of scary to me.
It is like, well, I guess youdon't need me anymore.
But, that doesn't necessarilymean you don't need me anymore.
There still has to be someoversight.
A I can't be sufficient tooversee you're shaking your head
it can, okay, nevermind.
No, no, no, no you can't get ridof humans.
(25:15):
We all know that AI is prone tohallucinations and making things
up, so you still need people tocheck things and make sure that
it's all right but it willdisplace some people.
I'm not the only one sayingthat, it will displace people.
Tthat's why it's important tohave people that are building
and maintaining this model ofyour organization because that
will be the engine that givesyou the competitive advantage
(25:38):
relative to what yourcompetitors are doing and help
you create better products andoperate with greater margin, et
cetera.
Right.
Given the nature of AI and itsevolution, what will you be
doing with this processinventory?
How will you be insertingyourself into this evolution?
(26:01):
What do you see as your role andyour process environment here in
that future?
Great question.
So, I see myself as first andforemost an evangelist for this
topic.
I didn't get to cover mybackground, but I spent most of
my career in consulting, workingwith large banks and insurance
companies, wealth managementmm-hmm, on their transformation
(26:22):
topic.
Defining strategy, designingtheir IT architecture, doing
risk and compliance, runninglarge transformation programs.
Through that I saw patterns offailure and challenges, and it
was going back to that chaos andconfusion, these environments
are so complex.
So first I want to be anevangelist telling the story
that this is the art of thepossible if you have the right
(26:44):
strategy.
I also do consulting withcompanies that want to adopt
this approach, that want tocreate strategies and stand up a
process capability; and then I'malso, partnering with a lot of
technology organizations to seeif we could make some of these
concepts real.
Well, it sounds like you'reprepared to adapt, and that's a
good thing as we all should be.
(27:06):
Right?
With AI it is scary, but thegenie's out of the bottle.
There's nothing we could doexcept for adapt and make the
most use for our own businesseswith it.
I totally hear you there.
So Michael, we're at the end ofour time together and I'd like
to ask you before we sign off,if you have anything further
(27:27):
you'd like to leave us with.
Yeah.
so and Ed, again it was mypleasure.
Thanks for the time and in thesecond discussion, a couple
plugs.
If you guys are interested in mybook, digital Transformation
Success is on Amazon.
I detail out this wholeframework, how do you construct
it?
How do you leverage it forvalue?
How do you stand up a processcenter of excellence?
I put a lot of details in there.
(27:48):
Connect with me on LinkedIn.
I post a lot about these topics.
Michael Shank is very easy tofind and then if you're
interested in my services, go toprocess inventory.com and I
detail out what I do there.
I will also put this informationinto the edited script at the
end.
So that will be available topeople there Well Michael, I
(28:09):
want to thank you also for thissecond round.
And I will say that maybe'causeof my memory being what it is,
it sounded like it was as goodas the first But seriously,
thank you very much.
I really appreciate you beinghere.
Folks it is my privilege tothank Michael Schank as our
guest today.
This is Ed Drozda the smallbusiness doctor, and from The
(28:30):
Water Trough, I want to wish youa healthy business.
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