Commercial Processes In Industrial Companies
A few, well-designed commercial processes are absolutely critical to both the day-to-day smooth running of complex, multinational companies and to the long-term sustainability of their competitive position.
What Commercial Processes Are
A “commercial process” is essentially the sequence of steps that is followed in executing a particular activity.
An example is the “order fulfillment process”: this starts when a customer places an order and runs right through to the point where delivery has been completed and an invoice raised. The process sets out who-does-what-when, so that everything happens efficiently and professionally.
Most processes relate to basic, routine activities, and are not written down; theyevolve over time and are simply ‘the way things are done’. However every company has a few critical processes that are fundamental to the smooth running of the business and its basic market positioning, and usually these should be formally written down, communicated to all employees that are involved in the activity, and monitored to ensure they are working smoothly.
These core commercial processes usually involve several individuals, each responsible for sequential (and parallel) tasks. These people can be in different departments, reporting to different managers and even in different countries. The importance of their involvement in the process relative to their individual jobs can vary dramatically. The larger and more complex an organisation becomes, the more important formalizing its core processes becomes.
Sometimes ‘disconnects’ occur in commercial processes and these can cause operational problems – things not being done on time, things not be adequately communicated, things being duplicated, etc.
The problems are symptoms: they happen as a result of the disconnects. But the root cause is usually not easily apparent. Unfortunately, when there are problems within an organisation, people tend to blame other people, and departments blame other departments. Disconnects in core processes then not only cause inefficiencies and problems, they also can promote internal arguments and bad feeling.
It is therefore always necessary to establish exactly what is going wrong (what the real causes of the [problems are), and in particular to “separate the people from the process”. Only then can appropriate adjustments be made to the process.
A major change (e.g. organisational restructuring or the integration of an acquired business) can disrupt established commercial processes more significantly. Here it is usually clear(er) what the issues are, but a rapid re-design, which is acceptable to all parties, has to be developed and installed to enable the activity to be once again completed efficiently and to the desired standard.
Processes can be viewed as defining ‘best practice’ – they map out the best way of carrying out a particular activity (for the individual company – what is “best” for one company will not be for another). Good process design ensures that tasks are:
(a) performed in the most logical sequence
(b) eliminated if they do not add any value
(c) performed by the right people (e.g. so highly paid people do not undertake lower-grade tasks)
and also that:
(d) the whole activity progresses at the optimum speed
(e) the right data is recorded in the right place at the right time
(f) there are no ‘disconnects’ (i.e. so nothing gets lost)
(g) there are appropriate metrics, giving management increased insight and control
Why Are Formal Processes So Important?
From above, it is self-evident that well-designed processes are essential for the day-to-day smooth running of core activities in a business, e.g. without a robust order fulfillment process, there will be occasions when orders are not met on time and customers are let down – and possibly they will not even be forewarned that their delivery will not be made.
By extension then, core processes become strategically critical: e.g. if delivery to customers is unreliable, they will take their business elsewhere. Moreover, if the company develops a reputation for poor order fulfilment, this will have an extremely detrimental effect on long-term sustainability of the whole business.
In short, formal processes coordinate key activities across complex organisations and ensure they are executed efficiently and consistently.
Which processes should be formalised?
The core commercial processes should be apparent from the company’s strategy: e.g. if the strategy is positioned as having leading-edge technologies, the NPD process is likely to be critical (as in many specialty chemical companies); if top-quality applications support is a cornerstone of a company’s market positioning, then a customer service process is essential.
Fundamentally then, all companies of significant size should have a formal process supporting each of the key elements of its strategy.
Typical Processes in Industrial and Business-to-Business Companies
In industrial and B-2-B companies the most important commercial processes typical include:
How Many Formal Processes Should A Company Have?
There are no rules on how many formal processes there should be within a particular organisation, nor on how detailed and prescriptive they should be. This depends on various factors, e.g. the size and complexity of the business, and the general culture of the company (some companies have fairly simple guidelines for just the few most important activities, and leave much to the discretion of their employees, whilst others leave nothing to chance and have very detailed and mandatory processes covering many internal activities – and staff have very little latitude).