• Micha Veen

How does Operational Innovation introduce the "radical" changes that operational excellenc


When organisations are implementing operational excellence or transformation programs, it mostly exists of the following type of transformations:

  • Technology transformations through an ERP system to standardise, harmonise, simplify and optimise:

  • Application landscape, reducing the number of desperate systems, interfaces, data storage locations, etc.

  • Introduce industry-standard processes; some will say best-practice processes, which are often a combination of existing processes from similar organisations in “your” industry.

  • Creation of a single user-interface with controlled access, roles and activities, supported by system driven hand-over processes.

  • Shared Services, Centres of Excellence (CoE) or Business Process Outsourcing (BPO) to reduce inefficiencies in their back-office environment, e.g.:

  • Shared Service Centre for transactional activities, e.g. human resources administrative tasks, customer service and/ or call centre, transactional finance, procurement admin, etc.

  • Centre of Excellence (CoE) for the high-skilled processes, e.g. procurement sourcing, treasury, tax & legal, statutory accounting, etc.

  • Business Process Outsourcing (BPO) where businesses are too small, the task is to country or industry specific, or a decision has been made to have an external “centre”, e.g.; payroll, statutory accounting, logistics, manufacturing, etc due to a shortage of skills in the organisation.

  • Operational Excellence to reduce inefficiencies in their operations, supply chain, packing, warehousing, logistics to become more cost conscious and quality orientated in their operational environment.

However, on many occasions these traditional business and technology transformations don’t fully deliver the benefits that were expected during the “investment decisions”. Industry experts have identified the following main reasons that lead to failure of these transformations:

  • The vision doesn’t align with the transformational principles, assumptions and constraints that were identified at the start of the transformation initiative. Accurate translation of a vision into operational and technology goals is crucial to the success of a transformational program, shared service or operational excellence initiative,

  • Buy-in is focussed on senior management and not from the employees. Having buy-in from senior management is important, but having buy-in from your employees is critical to the success of a transformational change. As he employees are executing the new transformed business environment, it’s critical to have their buy-in. As the initiatives are mostly top-down, there is often a feeling from the employees that they don’t have relevant input to the decisions that have been made by the top. I have seen many transformations, where the employees follow their “old” processes, reports, ways-of-working, as they feel the “old” processes were better. This creates a non-engaged workforce as part of the transformational effort, which negatively affects your transformational goals.

  • Decisions are made based on high-level expectations, but it’s the transformational details that will either see success or failure of the transformation. It’s key that early in the transformation program, shared services initiative or operational excellence program, a strong and much-needed dose of realism and expectation management is set with the true costs and impact that the transformation will have across the organisation. I have seen that this realism, expectation management and impact is defined and introduced during or at the end of the transformation, leading to disappointments, finger-pointing, etc.

  • There is an expected start and end-date of a transformation. Transforming an organisation is not a periodic process. It’s imperative for organisations to continuously “transform”, improve and adapt, therefore a transformation will never be fully completed.

  • Transformations, Shared Services, BPO and Operational Excellence initiatives focus on optimisation of existing processes, behaviours, applications, etc. instead of revisiting and radically changing the processes, behaviours, applications, etc. to deliver the desired results.

Unfortunately, the current business landscape, rapid technology developments, global competitiveness, requires a more radical approach to deliver expected double-digit growth targets, cost savings and customer effectiveness. It has been shown that many of these business and technology transformations create unnecessary complexity and business challenges, e.g.:

  • Technology transformations often create standardised, systematic processes, which affects the unique selling proposition (USP) of the organisation. Instead of being “unique”, organisations transition towards the industry standards, reducing their uniqueness.

  • Shared Services, CoE and BPO require additional hand-offs, formalisation of roles and responsibilities, workflows, metrics, etc. across different business units, locations and processes to ensure higher effectiveness and reduced costs. Although, these organisational models assist in cost reductions, it should be noted that the recent introduction of robotics, artificial intelligence software, machine learning, etc. is leading to a reduced need to centralise, outsource or create hybrid centres to execute these tasks.

  • Operational Excellence focuses optimisation of existing processes, ways-of-working, applications, resulting in the improvement of broken processes, technology and business practices, instead of innovative solutions to deliver a fit-for-purpose end-results.

So, why should organisations invest in Operational Innovation?

Operational innovation has some key differences in comparison to the technology and business transformations:

  1. Operational innovation focuses on the desired results: Instead of optimisation of existing processes, applications, behaviours, organisational models, etc., operational innovation focuses on delivering the desired result more effectively. Instead of dissecting current processes, applications, ways-of-working, etc. operational innovation uses a bottom-up iterative approach through a minimal viable solution to radically change the tasks and activities to achieve the desired result.

  2. Operational innovation is a continuous innovative solution development process: Technology and business transformations have often a scope, a budget, a start and an end date. Operational innovation is a continuous process, questioning the status quo, to introduce radical improvements to deliver a better outcome. This means that organisations that have started to embed operational innovation at the heart of their business, allow their employees to spend a percentage of their day, week or month on innovative solution development. This doesn’t only create optimal innovative solutions that meet the needs of the organisation and its customers, but also creates a higher employee engagement.

  3. Operational Innovation creates a measurable adaptive learning organisation: To ensure effective, measureable innovative solution development, leading organisations have embedded innovative metrics and progress measurements in the organisational performance management process, KPI’s and board reports to deliver their organisational targets. Only by measuring the effectiveness of operational innovation and driving accountability across the organisation, an innovative culture will be developed that “lives and breaths” operational innovation, leading to innovation across the end-to-end value chain.

Transitioning from business and technology transformation environment to operational innovation requires commitment, adaption and a mindset change across the entire organisation, but implementing operational innovation in some of the industry-leading organisations has delivered:

  • Higher and measurable transformational success rates,

  • Better alignment between organisational goals and innovative solution delivery,

  • Higher employee engagement and performance culture,

  • Ability for continuous solution adaption,

  • Reduced implementation risks,

  • Lower investment costs, resulting in higher ROI’s

Operational innovation introduces “radical” changes, but how radical are these changes, if your transformation and operational excellence efforts continuously miss their targets and don’t deliver the desired results?

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