It's time to update the concept of operational excellence by focusing on accelerating growth and maximizing profitability.
Operational excellence is dying. It’s a slow death, where each day a little piece of it falls away. You can’t watch it happen, but it’s happening. It’s happening because to most, operational excellence is still a term from the 1980s. We haven’t moved on, and if we have, we’ve come up with some definition or concept that is so complicated we can’t really determine what it means.
Operational excellence is dying because we aren’t taking the time to revive it. And it needs reviving. So here’s how I would revive it.
I would start with ensuring that operational excellence focuses on accelerating growth and maximizing profitability. Downsizing and cost cutting and standardizing and eliminating waste are so passe. Use better words like growth and innovation and retention and alignment. Operational excellence is so much more than cost control and efficiency.
I use operational excellence to accelerate top-line growth and maximize profitability with my clients. Here are four ways I do so.
1. Find your ideal future state and your ONE priority.
Many organizations have never taken the time out to identify their ideal future state. It starts with one, simple question, “Where would we like to be 12 months from now?” Everything that comes next depends on the answer to that question. One of my clients said that customers stopped calling them and their ideal future state is to have customers calling them again wanting their business. Another client told me that they wanted to sell their existing products into new industries. Yet another said they wanted to reverse the decline in their customer base. Those are all ideal future states. What’s yours?
Once you have identified your ideal future state, you need to determine your ONE priority. Your ONE priority is the fastest and most effective way to achieve your ideal future state. For the client that wanted the phone to start ringing again, we cultivate their current clients into ambassadors and evangelists. For the client that wanted to move into new industries, we retrained front line people to have better conversations with potential customers. For the client that wanted to reverse the decline in customers, we developed strategies that focused on attracting only their ideal customers.
That’s how easy it can be. What is your ideal future state and what is the fastest way to achieve it?
2. Practice operational transparency.
Operational transparency is a phrase I coined to help companies reduce failure work while empowering customers at the same time. Sound implausible? FedEx and UPS did it. What was the most frequent question FedEx and UPS customers would call and ask? “Where’s my package?” FedEx and UPS knew where the packages were because as soon as a customer called, the service representative would look it up and tell them where the package was located. FedEx and UPS then decided to create a website for customers and give them a tracking number. That way, the customer could check the status of their package at any time. No more calls asking, “Where’s my package?” At the same time, they were empowering the customer to take control of the process. It not only reduced failure work for FedEx and UPS, it also gave the customer the information he or she needed and created more loyalty for the brand.
What initiatives can you implement that will reduce your failure work and empower your customers?
3. Improve the quality of your ideas.
The reason you may find it hard to implement and execute on many of your ideas is that they are not as good as you think they are. If the ideas were better, they would be easier to implement. The issue more organizations have is that they have no criteria to determine whether or not an idea is a good one. They think because there is consensus, or it can make money, or because the CEO came up with it, it is a good idea. Those same organizations then lament the fact that they were unable to implement the idea successfully.
The most important criteria to use when determining whether or not an idea is a good one, is alignment. Does it align with the ideal future state? If not, then it is a bad idea. If it takes you in a different direction, then it will be hard to implement and even harder to sustain.
Once you have passed the alignment hurdle, you need to consider these other factors:
- Impact – What is the impact of the idea (financial, reputational, retention)?
- Capability – Do you have the right people to implement it?
- Feasibility – Is it possible?
Once you have compared the idea against those four criteria (alignment, impact, capability, and feasibility) you can state that it is a good idea.
4. Build a strong farm system.
Every sports team focuses on building a strong farm system. That means not only developing your current top performers, but also identifying those high potentials and developing them. What would happen if two of your best people left? Do you have others to replace them? Are they any good? Most organizations do a decent job of developing their top people. That is easy because those people stand out. What is not so easy is finding a diamond in the rough or other employees with potential. That takes work. That takes discipline. And most importantly, that takes managers who know that a big part of their job is developing their people and preparing them for what’s next.
In most sports, there are three ways to bring in new players – via trade, free agency, or through the draft. You only have two options – free agency (hiring away from other companies) and the draft (hiring and developing your own people). Free agents often command more money and more attention, so which option would be best for your organization?
That’s right, the draft. That will help you develop your people and unlock your hidden leaders and build a strong farm system.
Accelerating growth through operational excellence requires you do four things well:
- You find the fastest way to achieve your ideal future state.
- You reduce failure work while at the same time empowering customers.
- You improve the quality of your ideas and maximize their impact.
- You develop your people and unlock your hidden leaders.
Give yourself a score from 1-5 on each of those four statements.
Be honest, how did you do? If you are like most of the companies I work with, you did well in a couple of areas and not as well in others. Start with those areas in which you didn’t score well and consider them the areas of focus for 2016 to help you move closer to your ideal future state.
Andrew Miller is a leading expert in operational excellence and helps companies like 3M, Becton Dickinson and Siemens accelerate growth, maximize profitability, and boost performance. He is the author of Redefining Operational Excellence, and speaks to industry and corporate audiences across North America on how to accelerate growth and boost performance through operational excellence. He can be reached at email@example.com