Leveraging Operational Discipline to Drive Value Creation

Regardless of what business or industry your client is in, operational excellence aims to optimize the fundamental processes of their company by identifying and eliminating failure points and transforming functional methods to increase productivity. Bringing operational discipline to the organization is a critical step towards value creation and exit.

As a set of methods and practices aimed at improving company performance for the benefit of stakeholders (customers, workers, suppliers, partners, and shareholders), operational excellence takes a pragmatic approach that focuses on customer needs and staff involvement in finding solutions and optimizing processes. With the implementation of an operational excellence strategy, your clients will be able to adjust their practices over time, overcome any dysfunctions encountered along the way, and build the ability to improve key performance indicators systematically.

Related: Underpinnings of Value Creation. 

Understanding an Organization’s Health

The first step in any operational excellence initiative is understanding the changes that must occur and the resources–available or not–necessary to execute that plan. This step, which sets the course, is essential to initiate any operational excellence initiative properly. Before committing to a change process, it is crucial to take stock and determine priorities.

One of the risks of failure associated with all projects is initiating actions too quickly without considering the organization’s level of maturity, management’s ability to understand its dysfunctions, and their willingness to create changes. Questions like the following can help you diagnose your client company’s problems early:

• What difficulties does your business have?
• Does your organizational model no longer suit the needs of the business?
• Do you want to improve your team’s skills?
• Is customer satisfaction lacking?
• Are you losing quality, responsiveness, transparency?

This first diagnostic and framing phase is essential to the success of your client’s operational excellence program. It lets you lay a solid foundation for action by taking stock of existing resources, defining desired outcomes, building processes to achieve those outcomes, and identifying milestones that indicate progress toward those outcomes. Start cultivating stakeholder buy-in from the beginning. In this phase:

Articulate your mission via these activities:

• Discuss the goals with key stakeholders and the detailed success criteria
• Conduct field observations and precise measurements of existing processes
• Complete interviews and discussions with teams and local managers to ensure commitment
• Document findings and establish a regular review of effort status
• Develop an action plan to guide efforts toward the desired outcomes.

Diagnose the following elements:

• Piloting and management: who’s in charge, who does what, when do they do it, and can they solve problems?
• Resources: what resources are available, what resources must be acquired, how will those resources be deployed, who will manage deployment?
• Productivity: what is being achieved or produced, how quickly, and how efficiently?
• The progress of activities: where are the bottlenecks impeding the flow of information and work progress, where are there redundancies or gaps, and how can processes be streamlined?
• The level of maturity: what processes already function well and efficiently and which personnel already operate at high levels?

When diagnosis concludes, you will have a good idea of how you can help your client achieve earnings growth:

• The project objectives (results, deadlines, cost, etc.) and their scope
• Means of change management
• Elements that create value
• Macro-planning with the main stages, key dates, and milestones identified
• Necessary resources (human, material, financial)
• Project governance and organization
• Means of communication set up within the framework of the project
• Risks and associated contingency plans
• The metrics used to measure progress and the achievement of the objectives

Empowering Decision-Making

The farther away the decision is from the process, the less efficient it is. Therefore, the next step is to support and assist your executive teams. Here’s how:

• Specify what defines value for the company
• Identify value streams: value-added tasks and those without added value in the same process are identified and schematized by value stream mapping to reduce waste and improve performance.
• Map the workflow and ensure the process is fluid.
• Identify performance measures and indicators to reveal problems and adjust to correct them.
• Pull flows: synchronize orders
• Strive for perfection.

During deployment of the operational improvement plan, you must make employees and management aware of the concept of value creation and its impact. Lead problem-solving sessions in a collaborative environment and a culture of continuous improvement that includes everyone. Also, don’t forget to train the company’s leaders, so they provide support for change. The greater the sense of ownership for change that emanates from all stakeholders, the better the

Measuring Your Progress

Generally speaking, operations people are very KPI-driven individuals. The operations of a business are one of the few places where output is highly measurable and illuminates a clear path to value creation. Here are a few of the many areas you can focus on achieving operational gains and measuring your progress:

• Improved data exchange with suitable technologies
• Reduction in overhead costs
• Availability and further training of specialists
• Securing the availability of energy and limiting costs
• Improved transport infrastructure
• Expanded sales markets
• Responsive process confirmation: a signal appears as soon as the process does not go according to the “target.”
• Transparency and visualization of current and target states
• Structured approaches to resolving problems in processes in a target-oriented manner
• Improved returns processing as a contribution to service quality
• Sustainable recycling
• Reducing stock, transport time, lead time, waiting periods, and errors
• Productivity improvements
• Standardizing processes to accommodate standard exceptions improves flow to increase process reliability (Achieve this by establishing physical proximity, reducing throughput times, and eliminating buffers between the individual process steps and interfaces.)
• Value creation, especially in retail. (Studies show that companies in the food retail sector that manufacture the food items they sell are more successful than their peers. Backward-integrated companies can react flexibly and faster to customer requests and better control their products).

Ensuring Operational Improvements Stick

It’s more important to get it done than to get it started. Your project can only become a success when all the players in your company understand and adhere to the individual and collective changes required for transformation. Lack of agreement on what needs to be done can doom any project to failure.

Adoption is key. Thoughtful planning, quality control, and an operations manual are necessary steps to ensure the success of your project. To measure employees’ acceptance, consider the following questions:

• Are your teams resisting the changes?
• Are you wondering how to get your team to participate?
• Have you implemented tools to ease the transformation process, but no one is using them?
• Does your team reject new methods or object to the transfer of skills?

Too often, we forget that a project, whatever its size and scope, imposes adjustments or modifications in employees’ practices, work organization, and the development of their skills. Naturally, these changes are uncomfortable and sometimes provoke strong resistance. Sometimes this mechanical resistance can quickly lead to mutiny. Therefore, anticipate opposition to change and identify motives for acceptance. The facilitation for approval expedites project deployment, and the transfer of skills and guarantees project success. One of the strongest tools available is to cultivate stakeholder buy-in from the very beginning.

As value creation consultants, our duty is to limit the upheavals generated by the client’s transformation and facilitate employees’ acceptance of the necessary changes. Our primary roles are:

• To help make change a real opportunity for progress for the business
• To guarantee business continuity during and after the transformation
• To control the costs and delays associated with change management.

You must also help your clients:

• Identify obstacles to project implementation
• Determine and budget the means necessary to overcome resistance
• Define the skills to be developed
• Develop a communication plan to support the change and create cohesion around the project.

Operational Excellence = Enhanced Value.

Ultimately, an organization with high operational discipline signals to an external buyer that the likelihood of the organization replicating past results in the future (after it’s bought) is relatively high. As value creation consultants, it is incumbent upon us to give our clients the assessment, the vision, the skills, and the resources to achieve operational excellence if we’re going to enable them to transition on their terms successfully.