We at P5G are privileged to have countless interactions with enterprise executives every year, focused on their successes and challenges in driving operational excellence (OpEx) in their business.
In many cases these interactions result in a dialogue on what I like to call their “investment thesis,” or their organization’s overall philosophy and approach toward investing in OpEx.
A common response to our questions on investing in OpEx goes something like this...
“We’re a results-focused organization. We don’t make any investment, in OpEx or otherwise, unless we can clearly see the link between those investment dollars and the bottom line of the business.”
And at one level, this is almost impossible to dispute. OpEx isn’t a social experiment or an academic exercise. Quite the opposite: it’s a vehicle for improving the results of the business, so any investments made to implement OpEx should ultimately drive better performance. The problem is, many organizations aren’t diligent enough in linking their OpEx efforts to the bottom line.
However, we’ve found that the “results only” approach can be highly problematic if taken to an extreme, because it can cause your organization to undercut the value of your OpEx program. One way this could happen would be through insufficient investment or, alternatively, by delivering a series of “false positives” through investments that generate near-term results but are ultimately unsustainable.
In our experience, there are generally two areas where organizations either under invest or mis-invest in OpEx, ultimately resulting in a total paralysis of the entire OpEx program:
1. Operational Excellence Capability
Organizations often struggle to quantify the benefits from their investments in an OpEx implementation. This is especially difficult when having to compete against other, more technically-oriented investments, such as new equipment or process automation, that appear on the surface to provide greater line of sight to ROI.
Therefore, the path of least resistance is to invest in building (or buying) capability in a core set of experts (e.g., LEAN practitioners, Six Sigma belts, etc.) to drive the improvement agenda, because the level of investment is lower and it’s relatively easy to justify that investment through project-based value capture.
However, what’s often missed in the above analysis is that it’s impossible to engage the entire workforce in driving the improvement agenda of the enterprise if only a small fraction of the workforce is truly capable of doing so.
In other words, while it may be hard to quantify specifically how capability building drives bottom line results, the primary cost of not making these investments is that the organization is never able to generate a competitive advantage through operations. So if the goal is to achieve operational excellence, then organizations must invest in broad-based capability building.
2. Operational Excellence Technology and Tools
Technology and tools is another area where organizations routinely under invest or mis-invest when it comes to OpEx. Any organization that’s serious about rigorously managing an enterprise improvement agenda needs to have the right tool set.
Imagine for a moment an enterprise with 3 business units and 10 operating locations per business, that uses the balanced scorecard to define corporate strategy. Those 4 corporate level objectives aligned to the four categories in the balanced scorecard – financial, customer, internal, and workforce – would translate to dozens of sub-objectives:
- 4 for each of the 3 business units
- 4 for each corporate function
- 4 for each location of the 30 locations
In addition, there would be hundreds of discrete improvement initiatives to drive those objectives, and thousands of individual action items to drive those projects.
The key is to manage the implementation of standard business processes and functional best practices. Whether for compliance purposes or to improve organizational predictability, this introduces a series of assessment and action planning activities into the mix.
The point is that all of this business improvement activity is both tremendously important and highly interdependent, which necessitates that it be comprehensively managed. Yet most organizations still lack specific and sufficient tool sets for OpEx, instead choosing highly flexible but ultimately unreliable and administratively burdensome tools like Excel, Access, and SharePoint.
In some cases, a lack of awareness as to what tools are available is the reason for this decision. However, sometimes organizations avoid the platform solution because they believe they can “make due” with existing embedded tools.
In our experience this mindset is similar to the axiom, “penny wise but pound foolish” because the repercussions associated with poor management of the enterprise strategy and resulting improvement agenda are staggering:
- According to a study by the Palladium Group, 85-90% of organizations fail to execute their strategies
- That same study found that 73% of organizations with no formal strategy execution process achieve less than superior performance
- According to the Project Management Institute, only 38% of projects on average are completed on time and on budget
- Towers Watson found that 60% of the workforce in the average company is not highly engaged… the #2 driver of employee engagement is understanding of business goals & objectives
What the above data strongly indicates is how vital it is for enterprises to take OpEx management seriously. In order to achieve the results you're looking for, you'll need to invest in the capability of your workforce to do so. But with large, omni-channel or distributed enterprises, broad-based investments at scale are extremely challenging to accomplish quickly. The only way to replicate and automate your improvement is through a highly specialized tool set, designed specifically for the planning, execution, and reporting you need to excel at scale.
Want to learn more about how to get the most ROI from your continuous improvement? Be sure to check out our guide.