Operational Excellence – the mantra that came into fashion in the early nineties of the previous century and one that is still fanatically preached across the globe. This is the world of Lean, Six Sigma, 5s, TQM. It assumes businesses thrive by being operationally perfect.
Paradoxically, many of the process superstars that grew to dominate their markets through Operational Excellence have fallen prey to its stillborn twin: Systemic Inertia. In a quest to raise profitability and short term reward, companies everywhere have been over-optimizing their business processes and ignoring an ancient planning truth: plan 80% with rigor and cunning, then leave 20% flexible for the Unpredictable. Scary stuff, because it requires reserving expensive resources that may end up not being used at all. Even worse, it may be abused in the most anti-operational horror known to process designers: improvisation.
Leadership teams grew blind to the fact the world around them is by nature unpredictable. They created a monster that leaves their business inflexible, unresponsive and in trouble. And the trouble accelerates, not just because of today’s ever changing economic reality, but for two systemic reasons as well.
- Blinkered systems. Masters of efficiency will be unaware they are in trouble until their relentlessly churning systems jam and it’s way too late to correct course. Dell was the unrivalled master of assembling and delivering desktop computers to customized customer specification. But when the market interest abruptly shifted to laptops, Dell did not notice until stock started piling up in places it never had before. Had Dell been a little less ‘perfect’ on desktops and spent more resources on chasing (and failing) less profitable non-desktop market opportunities, it may have caught the laptop and subsequent tablet waves in time. Similarly, the planet’s most efficient manufacturing machine, Toyota, drove itself into unimaginable losses like a run-away train before it could tame the beast and adapt to the changed market dynamics.
- Operator attitude. The expertise required for Operational Excellence and the attitude required to successfully improvise are mutually exclusive. Businesses that accumulate pools of great process operators will naturally evolve into horrendous improvisers. And the more skewed resource pool, the more likely the one type will drive the other out of the organization as they tend to disagree on almost everything. So the better a business is equipped to accelerate profitability by Operational Excellence, the worse it will be at innovating and keeping an eye open for the next big opportunity. Just imagine what meetings are like in a room full of process operators once the systems have jammed. An operational mind-set tends to look for even further rigor in planning and stricter process controls, rather than questioning the output and the process itself.
Is there then no hope for Operational Excellence? Of course there is, and you can even dress up the solutions as old-school Operational Excellence so none of the accountants will notice.
Here’s what you do:
- Fail faster. Accelerating failure and dealing with regular small losses saves you from the life-threatening systemic bleeders. Do many small launches rather than few big ones. Ensure your production lines derail, jam or raise flags much faster when demand changes (even when it goes up). Operational Excellence systematically pushes business life into sameness, whilst it’s the ability to notice, react to and create differences that help tap new opportunities.
- Entrepreneurial attitude and incentives. In the micro-cosmos of Operational Excellence, the processes become more important than the output, which is reflected in employees’ KPI’s across all levels and disciplines. Marketing Managers are rewarded for concepts’ performance in market research rather than on shelf. Manufacturing Managers receive applause for improving asset efficiency, but not for smart use of the resulting idle time when they optimize capacity beyond market demand. Customer Service teams are increasingly good at providing their customers help in ways prescribed in the helpdesk operation manuals, but hopeless when confronted with a non-scripted problem.
Increasing flexibility, being less operationally excellent will appear like a short term dip in process efficiency. But finding a balance between planning and improvising is the only way to protect oneself long term from the Systemic Inertia that Operational Excellence naturally leads to.
image credit: universalstudiosentertainment.com
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Costas Papaikonomou is Founding Partner of Happen, a global innovation agency based in London, Amsterdam, Toronto, New York, and Sydney.