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Brilliant Leadership is useless without Operational Excellence

by @reagan No Comments

The Harvard Business Review  (Sept-October 2017) has been sitting underneath the coffee table in the lounge for far too long and it was only when looking for some inspiration, that I noticed the article on “Why do we undervalue competent management?”. The article is based on a key research project, World Management Survey, that looked at the use of key management practices across 12,000 different firms.

The research pulls into question the typical MBA / Strategist view that you can not compete on the simple basis of good management because management processes can easily be copied. It challenges the idea that “Operational excellence is table stakes in the competitive marketplace”.

Fact – The research showed that there is very little evidence that best-in-class processes can be imitated or copied.

This will not be a surprise to many of the lean guru’s out there either as I think we all know how hard it can be to get the combination right to grow operational excellence.

How many companies have actually managed to copy Toyota successfully? How many companies really get to a level that they can claim to be even close to excellent?

And more importantly, how many of us know what operational excellence looks like and  have had the chance to experience it? I have no evidence to back this up but from experience, I would say that many of us believe we have helped companies move towards it, but that very few of you (if we are completely honest) have really had the opportunity to experience it or work within it for an extended period of time.

Core Managerial Practices

The research focused on 18 specific aspects under 4 broad dimensions shared below.

  • Operations Management

    Use of Lean techniques
    Reasons for adopting lean processes

  • Performance Monitoring

    Process Documentation
    Use of Key Performance Indicators
    KPI Reviews
    Discussion of results
    Consequences for missing targets

  • Target Setting

    Choice of targets
    Connection to strategy, extent to which targets cascade down to individual workers
    Time Horizon
    Level of challenge
    Clarity of goals and measurements

  • Talent Management

    Talent mindset at the highest levels
    Stretch goals
    Management of low performance
    Talent development
    Employee value proposition
    Talent Retention

What really struck me around these core managerial practices is that Lean covers almost every item. Process documentation are the SOP’s. When you are thinking KPI’s, KPI reviews, discussion of results etc – think “team hunddles” with performance boards across the organisation. These performance boards need targets which in turn should link via Hoshin Kanri (policy deployment) to the overall strategic aims.

“Our research shows that simple managerial competence is more important—and less imitable—than Porter argued.” – HBR Article

The research shows that:

1 – There is strong correlation between operational excellence and measures of strategic success

2 – Differences in process quality persist over time

3 – There is little evidence that best-in-class processes can be imitated

Personally, I am 100% convinced that in the current market place we should be continually driving “innovation” within all firms. The marketplace is changing faster than most organisations can currently manage. But we must also have 100% focus on driving operational excellence across our businesses if we want to deliver the vision and the strategic goals we have set out.

What this means is that we must combine efforts in innovation and operational excellence with equal focus.  Designing great products that customers want but also designing great processes, great teams, great operating models into these new products from Day 1. We can not afford to have “Muda” (waste) within our processes.

One of the latest books to try to address this is The Lean Strategy by Daniel Jones, Jacques Chaize, Michael Balle, and Orest Fiume. This book focuses on how its the creation of the learning environment combined with customer focus which drives the “lean” culture and performance. Its well worth reading.

But there is a massive challenge ahead. New products come and go, disruptive technologies challenge the status quo and an alarming level of short term focus to do things quickly damage not only what products we offer but how we operate them from the inside.

Being able to operate at the highest level, gives companies an operational competitive advantage. But this operational foundation also ensures that the essential building blocks are solid – which in turns allows rapid learning and rapid change.

By not investing in operational excellence – the same way as we invest in R&D – the best innovations and new product designs will deliver sub optimal customer experiences. With a high risk of poor quality and an increased cost base, the new product does not quite meet the demands or expectations we all had. They fall short of their potential. And finally, without the operational foundations, we will be slow to respond to customer feedback and market changes.

To lead, to be at the forefront of our sector and our market, we need great value creating products for our customers but also value generating processes to deliver it.

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  1. […] Secondly, while MBA’s have been teaching for years that operational excellence is not enough, HBR research on opertaional excellence recently showed that best-in-class processes are both demanding and challenging to copy or imitate. […]

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