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  • Writer's pictureMicha Veen

Operational Excellence? What problem(s) are you trying to solve….

As I have been working across finance & accounting, supply chain/ operations, human resources, sales & marketing and technology in various large multinationals and national Australian organisations, I have continuously seen strategic objectives that capture the need to deliver Operational Excellence. For many of these organisations this means, among others:

  • Automation of existing processes,

  • Centralisation of the organisational model, incl. establishment of Global Business Services, Sharer Services or Business Process Outsourcing,

  • Introducing an ERP system to integrate end-to-end business processes,

  • Introducing Lean, Six Sigma and other continuous improvements methodologies

Wikipedia highlights that Operational Excellence is an element of organisational leadership that stresses the application of a variety of principles, systems, and tools toward the sustainable improvement of key performance metrics.

However, how do you deliver Operational Excellence if your key performance metrics are continuously evolving and the measurements are not static? E.g. what if your finance key performance metric is measuring the number of AP invoices processed per FTE, and you’re transitioning to automatic RCTI/ self-billing? Then this metric becomes fully redundant. Or you measure packing efficiency throughput on a production line for 5 products, but by changing the packing specifications – based on customer requirements –, these 5 products become 2 products. Does this mean that you have met your packing efficiency metrics and have become “best in class”?

The issue is that key performance metrics in today’s business landscape are not static, and are often becoming irrelevant or require complete replacement or changes. What best-in-class is today, might not be tomorrow, next week or next month, and most likely will not be best-in-class next year!

What problem(s) are you trying to solve?

Organisations that introduce Operational Excellence are often focussed to achieve the following benefits:

  • Sustainable cost reductions of existing operations or through off-shore/ outsourced operating models (reducing the labour costs),

  • Use automated process models to deliver straight-through-processing and reduce rework,

  • Introduce standardised systems, applications and technologies to increase end-to-end visibility, efficiency, etc.

  • Increase focus on standard reporting tools and data models to create a single version of the “truth”

The main challenge with introducing Operational Excellence is that these initiatives, often, don’t deliver a competitive advantage to your business or your customer, as most organisations are using the same Operational Excellence metrics to measure themselves with other similar organisations.

Today’s successful businesses are known to deliver continuous value to their customer. This can be an internal customer, which will ultimately deliver value to your external customer, and your customer’s customer. This means that businesses should continuously “raise the bar” and deliver innovative, competitive “value” that supports your continuous changing customer demands.

When you realise that you should focus on addressing your customer’s ever changing demands, you realise that Operational Excellence is not effective enough to meet these demands. This is why in the last few years, organisations have shifted their strategic focus and transited to Operational Innovation to deliver end-to-end innovative, competitive processes, behaviours, products and services to their customer’s customer.

Through Operational Innovation, I have been able to introduced some innovative behaviours, processes and ways-of-working, including:

  • Reducing the product variations, increase single product for multiple Asian markets to meet customer demand and channel strategies,

  • Introduce end-to-end product cost allocation on the individual products to provide insight in product profitability, reducing and focussing on products that customers actually “want” and buy,

  • Introducing vendor managed inventory initiatives to deliver the products and services that your customer’s customer is purchasing,

  • Introducing first-time-right process behaviours, reducing back-end systems and rework across finance & accounting, delivering a 75% reduction in the month-end close time-line,

  • And many more...

The problem that you should be trying to solve is; how can you deliver continuous value to your customer or customer’s customer through an optimal innovative operational environment. Only, if your organisation focuses on this aspect, you’re solving your problems…

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