Muscle memory is the enemy of innovation. When it comes to transformations, process optimization is often under-valued by auto and equipment finance organizations as they implement a modern core or move their data and applications to the cloud. Adam Little and I think that’s a mistake. You must let go of old habits and challenge your ways of working before you can truly transform.
It’s tempting to “lift and shift” processes to a new platform. But before you embark on your big transformation, make sure you look at each component. The little things can drive a big economic impact. That’s why we advise businesses to hit pause, and to evaluate which processes are worth optimizing or automating first. To truly optimize, you must question everything. In some cases, it may make sense to bring the existing process into your new environment as is. In others, processes could come from out-of-the-box functionality—or even be left behind.
This evaluation phase is much like the prep work you should do before painting the spare room. Filling holes and masking the trim takes an inordinate amount of time and it’s not glamorous work. However, if you do it right, the painting itself goes significantly faster and the end result will be clean lines and a flawless finish.
Similarly, if you move your operations to a new platform, but don’t take the time to adequately evaluate the process landscape, you will dedicate precious time to non-value-add activities, and yet inefficiencies will still exist in your new operations—and these are often harder to optimize post-transformation. Once your operation is up and running, you will need to break existing workflows in order to optimize them.
Benefits of optimizing upfront
Some of the more subtle benefits to pre-transformation optimization include:
- Reduce costs, not just for operations in the long term but also for the transformation itself.
- Mitigate risk. Project delays are often caused by course corrections mid-flight. Doing the prep work will help avoid cost overruns associated with stopping to retool processes.
- Position the business for future transformation. The auto and equipment finance spaces are rapidly changing. Properly optimizing and documenting your processes will put you in a better position to move with the market.
- Boost business agility to make it easier to respond to changes in the market or events like the COVID-19 pandemic.
Before you start your transformation, ask yourself and your organization these questions:
The processes themselves
Consider if there’s a better way of doing it. Don’t let inertia stop you from updating inefficient processes.
Often when auto and equipment lenders and lessors embark on a journey to standardize their processes, they make the mistake of letting standardization be a goal unto itself. However, it is important to consider whether there really is value in standardizing across every geography—perhaps there are important reasons why processes are done differently, such as to comply with regional regulations or laws.
Always ask: why are we standardizing? Sometimes a process doesn’t need to be standardized. For example, consider whether you need a lien on a piece of equipment like a printer or copier. Is the item valuable enough to make the cost of filing a lien worthwhile?
In some cases, you could use a tool out-of-the-box to get close enough or you could choose to configure an off-the-shelf product. Or perhaps you need to build a custom solution.
It might help to reframe the problem and think about the process in a new way. For example, an equipment financier was struggling to choose between using a pre-integrated platform solution for collections or its own highly configured existing application. The conversation started as “which one is more powerful,” but ultimately ended with “our business doesn’t support the volumes needed to justify an integration.”
Consider whether digitizing this process could save on costs. Think in terms of faster, more efficient processing, fewer printed pages, less travel time and the expense of attending in-person meetings. Perhaps a series of microservices would be more cost efficient.
Estimate the volume of transactions that would be affected. For a few transactions, the ROI might be low. If this process is something you do only once or twice a year, changing it might not give you a significant return. If you do optimize this process, think about whether it will make a significant difference in terms of time or cost.
Effects on accuracy
Consider whether robotic process automation (RPA) would reduce errors and free up human employees for more meaningful or higher-value work. But again, remember that simply automating everything will not lead to a meaningful transformation.
Is the process something you need to manage in-house? Is it a core competency or could you have a vendor manage it for you so you can take advantage of their economies of scale? Is your attention better spent elsewhere?
For example, if your competitive advantage lies in the front office with your customer-facing processes, could you invest in optimizing those while using a vendor to support your back-office functions through business process outsourcing services?
Ultimately, our two key takeaways are these:
- Don’t forget process optimization. It doesn’t always get the headlines in the way that robotics, sustainability, artificial intelligence or other modern technologies do. But process optimization is a critical part of your transformation effort.
- Be thoughtful in your approach. There’s no need to optimize or digitize every process. Choose only those that make sense.
As you would before any transformation, define a strategy and develop a roadmap for process optimization that meets the needs of your business. Decide which processes score “a passing grade” and which ones are worth perfecting. Then you can move on to giving your project a catchy name and funding a transformation that will make a lasting impact on the business.
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