Systems Engineering: The Missing Link In Business Excellence - Part 2

Retail Cries Out (or it should) for a Better Way

The Systems Engineering Body of Knowledge has started making the entire field more applicable to areas outside the technical engineering world, by taking into account human and social factors in systems consideration. The results so far have been unfairly criticized as complex, whereas the truth is that the complexity has finally be given clarity and some structure, enabling re-engineering and simplification.
Source: INCOSE SEBoK V1.5

If any industry needs to have Systems Engineering break into and transform the sector, it is retail and especially vertically integrated retail. Make no mistake about it: today's retailer - especially the vertically integrated one - operates in one of the most complex and demanding business environments possible.

Consider this: a product needs to be conceptualized, designed and manufactured - or otherwise sourced. This is enough for many companies. But then there are distribution channels that may need to feed hundreds of retail locations across the world, or direct to tens of millions of consumers via online channels -  a supply chain of incredible complexity and one very easy to get wrong, wiping out any chance of profit. On top of that, there is marketing and promotion, then all the standard support services of finance, human resources and IT. 
And the high turnover in retail makes things even tougher.

When I look at a retail business, I invariably see a very complex system - and I mean that even when a business is "simple". I smile (usually internally, but often it creeps out) when a business owner says that they want their business to be simple. Here's the's almost always possible to make a business simpler, but it is rarely possible to make a business of any size truly simple. The trick is effectively managing the complexity when you cannot simplify further.

But even if you do amazing things with this, the inevitable tensions, hiccups, mistakes arise that somehow tend to magnify and cascade small errors into something far greater. The creative flair of purchasing and buying, of advertising and marketing? Get those guys to work with the finance team who need to count every cent in what can be an brutally low margin business. Or Supply Chain, who need to move unpredictable quantities with little warning across oceans and have it arrived undamaged and on time. Or IT, who need to deal with people who have little concept of online sales even as it destroys their bricks and mortar business model and they struggle to come up with a solution.

There are of course, experts in all of these fields. It's not that challenging - or at least it shouldn't be - for the different aspects of a retail business to individually/internally be run in a fairly successful fashion.

But try making all of it function together seamlessly. Continually. Especially when Retail is an industry sector which tends to employ many individuals who are very "seat of the pants": they make fast decisions based on gut instincts, rather than hard data analysis. Rules are seen as guidelines and guidelines are not even considered. Of course, it's not like that everywhere, but the cultural bias that I have seen certainly leans a certain direction in many mid size and smaller retailers, as well as some of the larger ones.

It is Systems Engineering that can help create a map from the mess: even when you have Lean Six Sigma, Concurrent Engineering and every other best practice ready, its successful traction is at risk unless you optimally integrate all the tools in a very challenging environment, one that is going to enlist the aid of Mr Murphy at every possible - and even some impossible - opportunity to derail your plans.

At present, whilst there are Business Excellence frameworks, there is no real world guide as to how to implement and integrate global best practices into one seamless flow in a business. Systems Engineering comes closest...but it's nowhere near close enough yet.

The Need to Grow in New Directions

More work - a lot more work - needs to be done in Systems Engineering to turn it into a useful too for broader businesses. Whilst Systems Engineering has a large number of books written on the topic, they reflect the diversity of views and approaches discussed above: they are technically and technologically focused. I am in the process of transitioning certain parts of the knowledge that are useful in a more general business enviornment, but it's a slow process: you have a problem, you intuitively know it can be approximated into an engineering type challenge, you look for the Systems Engineering approach, then modify, apply, verify...and then you see how it can be optimized and systemized.

Simply put, Systems Engineering is going to have to undergo a huge metamorphosis and become as powerful in broader business improvement as it is in large scale engineering projects.

Systems Engineering has two main references of global significance that I find especially useful: one is the Systems Engineering Body of Knowledge and the other is the Systems Engineering Handbook: A Guide for System Life Cycle Processes and Activities. Both are products of INCOSE (International Council on Systems Engineering) and are perhaps the closest we have to what can be regarded as the standards of the field. There are furthermore thousands of specialist books on the area, most of which reflect a certain focus in physical engineering realm.

I have always been a big believer in COTS (Commercial Off The Shelf) solutions, whether it be for building a new type of portable surveillance drone or implementing new processes in a business. Whatever advantages there may be in tailoring a clean sheet design as a solution for a number of challenges, in the vast majority of cases the performance advantages of this are more than nullified by development costs, schedule risk and - especially - ongoing support costs. There is definitely scope for innovation at times, but in truth, if there is a single template, it is best to use it - Prince2 being a great example. The INCOSE documents are a superb base to get the core of systems engineering understood...and an excellent base to develop the methodology into a broader area.

You have at its core arguably the most powerful toolset to design the perfect system, one that interplays the design and physical movement of goods, the exchange of information, the key business rules and processes that underpin it all.

So, what have I discovered so far?

Systems Engineering in Business: 7 Principles from (often all too painful!) Experience

After an ocean of books have been read and the knowledge in them applied to over 90 projects / programmes over almost 2 decades in member, lead and consultancy capacities, Systems Engineering has given me a focus and an approach that is ideal for acting as a framework for action - a very comprehensive one.

But let's just cut it down to the basics: If I had 99 seconds (I talk pretty quickly!) to explain to someone why Systems Engineering was a Good Thing, what would I say? If I had to choose the 7 most important Principles I owe to SE to apply to the broader business world - which, of course, I am doing now - this is what they would be:
  1. Systems engineering sees businesses as a collection of systems: these include interpersonal, environmental, technological, intellectual, procedural, structural and physical (with relevant crossovers). These relate to each other at Supersystem, System, and Subsystem levels.
  2. Systems engineering requires the considered use of multiple best practices across all system disciplines in an integrated manner. It doesn't replace other best practices: instead it coordinates and optimizes them.
  3. Systems engineering considers how the relationship within and between subsystems reliably delivers the supersystem outputs in the most efficient manner possible, satisfying the needs of all stakeholders.
  4. Touchpoints between systems should be optimized centrally; touchpoints within sub-systems can usually be optimized internally...but the supersystem must always prevail.
  5. Complexity should be reduced but then optimally managed: simplification can still result in incredibly complex systems that any further simplification would have negative effects on.
  6. Systems must be engineered to be as optimal as possible for the present but with disciplined, transparent flexibility for an unpredictable future.
  7. Supersystems are inherently unstable and / or of limited long term viability and must be constantly managed and re-engineered when circumstances demand.
These principles are the product of many late nights, overly long meetings trying to resolve problems which should have never occurred, and finally a bit of throwing out a few supposedly proven rules. There has been much written about delegation, empowerment and and complexity over the years, and there are many aspects that are true about currently accepted conventional wisdom in the area. But there are many exceptions to the rule, perhaps so many that the 'rule' has to be rewritten.

Systems engineering rules are many, but I have found that the nature of much of my work has meant that a lot more research has to be done about Systems Engineering tools and techniques to be a fully fledged toolset in the broader business world. Rather than simply learning of a directly relevant toolset and applying it (as you can easily do with Lean Six Sigma), Systems Engineering has an indirectly relevant toolset which needs to be modified for and then applied to the business environment. I have found the end result more than worth it, but it doesn't change the magnitude of the workload.

The Next Steps...

So here is the challenge that lies before us: take a brilliant theory that has been expanded, applied and to a fair degree formalized in the complex engineering field and transpose it into the more expansive and varied environment of a "typical" business that involves a lot more diversity with fluid, non-technical areas that have to mash together with harder sciences.

It's an arduous process (well that's how I'm finding it), but one that has long been needed: Business Excellence now comprises many different methodologies in the various specialist areas that are key parts of most enterprises, however there remains (and perhaps has been amplified) a gap for an overall ability to reduce and effectively manage this complexity of ideal knowledge, most especially in vertically integrated businesses. Systems Engineering may have originally started purely in the technical aspect of engineering, but the focus on managing system complexity has applications far beyond creating a next generation weapons system.

Systems Engineering is the next frontier in management science, and ironically one that has been with us all along. It's time to start making the most of it.