During the last six to nine months, many senior executives have wanted to visit with me about the subject of operational excellence. All of them know they need it and many wonder what it actually means and how to improve it.
Whenever this subject surfaces, I think back to Tom Peter’s definition of operational excellence which defines it as a workplace philosophy where problem solving, teamwork and leadership result in on-going improvements or continuous improvements in the organization.
Many executives focus on this subject now because they want their operations to be more efficient or effective. Strategically this idea is translating into a high degree of centralization and standardization within large companies.
Not too long ago, I was asked by a CEO to sit down with each of his direct reports and to ask them the following question: What is operational excellence? And how can we get better at it?
Later, I presented a summary of all of these one to one meetings to the senior team. What we discovered as a group is that everyone was all over the map about what it meant and how to get better at it. There was no common ground.
After listening to the entire summary and the in-depth dialogue on the subject, the CEO spoke. “First, I don’t think we can get better at this until we all hold a common definition of the term, operational excellence. But more important, I don’t think we can improve operations without having a high degree of customer intimacy. For operations to get better, we need to know our customers’ needs better. It is not efficiency for efficiency’s sake. It is efficiency and effective at the operational level so we can better serve the customer. To take the customer out of the equation is not going to make us better. It could actually make us misaligned with what they currently need and what they might need in the future.”
It was a “blinding flash of the obvious”, using an old Tom Peters phrase, for all of us in the room. Customer intimacy, in its most basic terms, means having the capacity to offer highly tailored or personalized products and services to meet customer needs which yield long-term loyalty, organic growth and increased profits. Furthermore, when culture, strategy and operational excellence are all connected to customer intimacy then the organization can be successful both strategically and operationally.
So what can a leader do to connect all four of these concepts together?
First, they should read and discuss the following article with their team: “The Hard Truth About Innovative Cultures” by Gary P. Pisano. January-February 2019 issue of the Harvard Business Review. Once they have done this, they can have a tolerance for failure but no tolerance what so ever for incompetence
As all of us know and the above article supports, some days things do not go as planned, and good ideas don’t work. Think Apple’s MobileMe, Google Glass, and the Amazon Fire Phone. The best organizations tolerate failure but do not tolerate incompetence. They recruit the best, and they train them. Then, they set high performance standards for their people, creating a culture that simultaneously values learning from failure and outstanding performance.
A good start is for senior leadership to articulate clearly the difference between productive and unproductive failures. For example, productive failures yield valuable information relative to cost. From these, we celebrate the learning, not failure. When we do the above, we build a culture of competence. This only happens when there are clearly articulated standards of performance.
Second, leaders need to have a willingness to experiment within highly disciplined and defined parameters. The minute you embrace experimentation, you must be comfortable with uncertainty and ambiguity. They come with the territory. Organizations that experiment, select those experiments based on their potential learning value. As always, there is data and there are feelings. Still, the best leaders know that there are decisions to be made, too.
This week, schedule time to read the above article. Then, on your own define what operational excellence means to you and what customer intimacy means to you. Once you have done this, then define, in your own words, what the difference is between a productive and an unproductive failure. This level of work is hard and very important. It will help you and later your team be very prepared for the future.
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