Follow the Money

The Four Dimensions of Operational Excellence

Cutting costs helps the bottom line but weakens future performance.  Sustaining operational excellence in a down business cycle requires the better use of each of the four dimensions of operational excellence: people, process, technology, and time.  However, for many organizations these four dimensions are out of balance.  Creating a balance between them enables a more productive and stress-free work environment.

Traditional approaches to operational excellence tend to be one dimensional. For example, an organization with a primary focus on implementing technology solutions, may not sufficiently invest in people and processes.  Too much focus on technology may provide a cost effective service to customers, but one that is inflexible and difficult to adjust to changing market conditions.  However an office focused primarily on leveraging its people may provide its customers a highly satisfying experience, but that experience may be too costly to maintain.

Considering all four dimensions of operational excellence helps maintain equilibrium between existing people, process, technology, and time resources.  Each dimension offers a different perspective that can be used to manage each individual resource as well as the interactions between all four resources.

• People – role definitions, responsibility transfers, service level agreements
• Process – work instructions, decision points, value added steps
• Technology – role-based inputs & outputs, information milestones
• Time – flow, priorities, work-in-process, outcomes, change

Well defined responsibility transfers make it easier to identify value added and non-value added work steps; reducing costs. Succinct value added process steps describe exactly what information is needed when; reducing lead times.  Concise knowledge of role-based inputs and outputs better defines responsibility transfers; reducing rework.  Pro-actively managing change through result-based outcomes sustains operational excellence; reducing workplace stress.

A four dimensional approach to increasing operational excellence applies four unique perspectives to performance improvement.  Each perspective provides additional insights and management control points that are not available individually.  Applying all four perspectives to increase operational excellence, results in a balanced environment with better solutions, greater employee morale, higher productivity, lower costs, and more satisfied customers.

Making Meetings Count

Attending internal meetings is a non-value added activity.  Imagine providing your customers a line item bill for the services provided by your enterprise that included the time spent in internal meetings.  You may be surprised at the percent of the bill allocated to meetings.  But it’s unlikely you’d be surprised by how unwilling a customer would be to pay for all of those meetings.

By definition meetings are a waste.  As with any waste there are ways to reduce the waste and achieve a corresponding increase in value.  The first step in making meetings count is to establish the value of any meeting.  This step occurs even before the meeting agenda is developed.  Since every meeting has a cost, it should also have a corresponding value, otherwise why have it?

With this one step we may have already eliminated the need for at least one third of all meetings.  I’ve seen enterprises require an series of escalating signatures to approve capital expenditures for amounts that are insignificant compared to the cost of a 20 person one hour meeting.  Yet literally anyone in the organization could schedule that meeting with no second thoughts.  And in fact schedule hundreds of them a year.

When the value of a meeting is justified it is usually for the following reasons:

• Education
• Decision Making

It’s a short list.  Note that the majority of meetings held rarely accomplish either.

Education meetings are designed to increase the skills or capabilities of the participants.  This type of meeting is not the same as an information sharing meeting; which probably represents the greatest majority of meetings held.  Given the vast array of methods available to any enterprise these days, the meeting format is probably the most costly and provides the least value.  Either design the meeting to truly educate the participants or shift the content to an email, webinar, text message, blog, voice message, discussion tree, etc.

Decision making meetings are designed to increase the speed of the decision making process.  They are an alternative to having a serial review and approval process.  Instead all of the decision makers are in the room at the same time. The objective of this type of meeting is to make a yes or no decision; maybe is not an optional outcome of the meeting.  However, it is possible to establish a yes decision with conditions that must be later satisfied or the decision automatically reverts to no.

Value-Added Conference Calls

Transportation is one of the seven wastes identified in a LEAN office.  It is a waste because while you, or anything else, moves from one location to another it’s difficult to create customer value at the same time.  Telephone conference calling is one method for reducing transportation waste.  But when done poorly it can the value of a meeting beyond any transportation waste savings.

The most common method of conference calling is multiple people sitting in a room with some poor souls conferenced in via a speaker box.  This approach can be effective when the meeting objective is one-way communication.  Rarely should this be the objective of any meeting, but when it is, this approach works if there is a preset agenda and each speaker takes turn at their monolog. 

It's important to remember that  speaker boxes pick up the sound of rustling paper much more readily than voices.  Plan for everyone to be absolutely still, muting remote locations, and moving each speaker as close to the speaker box as possible.

Perhaps the best solution is to eliminate any "informational" meetings. These tend to be non-value added in their own right.  We live in the information age with many more effective ways of delivering content than scheduling a live meeting.

An alternative to using a speaker box is the conference call bridge.  Many  telecommunication providers offer the capability for all conference call participants to call into a single phone number, each from individual phones. 

It’s important that all participants call in from a separate number; even if they are located in the same office.  There is a phenomenon in how humans communicate that makes us unable to focus on dialog occurring on a phone at the same time as dialog occurring in a room with multiple people. 

Humans are unable to rapidly leap back and forth from: 1) using the visual cues associated with face-to-face dialog, and 2) using the verbal cues associated with a pure phone conversation.  The result is poor or missed communications on one side or the other.

A meeting where everyone is a unique participant on a conference call bridge enables clear and focused two-way communication.  The sound quality is better, it’s more difficult to be distracted by the local environment, and everyone can participate equally in the dialog as they would in any person-to-person meeting.

Strategic Execution: An Oxymoron?

What makes strategic execution an oxymoron?  The Heisenberg Uncertainty Principle states that: “The more precisely the position is determined, the less precisely the momentum is known in this instant, and vice versa.”  In other words we can measure how fast something is going, or measure the direction it is going, but not both at the same time. 

In 1927 Werner Heisenberg applied this statement to subatomic particles.  However the same seems true for most businesses.  If operations are optimized for execution (speed), then the business drifts from its intended strategy. However if operations are controlled to conform to a strategic purpose (direction), then business execution suffers. It is as if efficiency is the enemy of effectiveness; and the two can never be found in the same place at the same time.

Strategy and execution are two different worlds.  Strategy tends to be the domain of big picture outward thinking. What are market trends, where is the competition going, what are the next enablers for customer value creation? Whereas execution tends to be the domain of tactical inward thinking. How can each individual in each functional department be made more productive?

A paradigm shift is in management thinking is needed to treat execution with the same big picture system-wide thinking that is used in strategy development.  Organizations must stop treating organizational structures, business processes, and enabling technology as foundation infrastructures or raw materials and begin to leverage them as strategic weapons.

As strategic direction changes, each and every asset and activity of the organization should be reviewed for how it contributes towards executing the strategy.  Not just how to make them more cost efficient, but more effective overall at delivering the desired strategic value. Designing strategy directly into the operational fabric of an organization enables management to then focus full speed ahead on execution. Execution with strategy already built in removes the need to simultaneously manage and measure speed and direction; overcoming the limitations of Heisenberg’s Uncertainty Principle.

The Power of Diversity

Medical science recognizes the importance of diversity to the health of all living things.  Reduce the amount of diversity by any one of a number of factors and over time organisms become weaker in their ability to face new threats.

The same is true for social organisms, whether with friends or business.  Yet many social organizations appear to ignore this fact.  We as individuals seem to purposely look for situations where we are among those whom are most like us.  The exact opposite of what nature tells us we should be doing.

Much of the conflict I see in U.S. based business is caused by people with different backgrounds, experiences, and personalities.  Any surprise here?  Yet somehow this is viewed as negative.  Rather than embracing diversity of backgrounds, skills, or opinions as the secret to success it is, U.S. businesses seem to strive to eliminate it. 

A new year a new beginning.  Make it a New Years resolution to personally thank all of the people whom have at one time or another last year gave you grief, or otherwise represented a diverse view.  Then encourage them to join you in fostering diversity as the means for maintaining a strong and vibrant business community.

Who is the Customer?

How do you know a customer when you see one? We all hear: listen to your customers; customer service is everyone’s job; and without customers there is no business. These sayings are often repeated, and often believed - but who is this customer?

Customer is defined by most dictionaries as someone who purchases a product or service. Therefore the easiest way to identify a customer is if they give you money in return for a product/service. But what if a parent gives a merchant money for a product that a child uses? Aren’t they are both customers in this case? The parent is a direct customer of the merchant and the child is an indirect customer.

So the dictionaries are not fully accurate in their definitions. To better address the parent/child example, the customer definition should be expanded to: A customer is someone who accepts a product or service provided by the efforts of others, under mutually beneficial conditions.

In the example above, the merchant, parent, and child all established mutually beneficial conditions; with the parent accepting the product from the merchant, and the child accepting it from the parent. Under the expanded definition, the parent and child are customers of the merchant, and the child is a customer of the parent.

Consider a supply chain that consists of multiple companies. Using the new definition, each link in the chain is a customer to all the prior suppliers. Suppliers that understand the needs of their customers, their customers’ customers, and their customer’s customers’ customers, etc., will be able to provide increased benefits and greater value to each level of customer.

Now consider a single company. Supply chains exist within companies as well - since each individual in a company that accepts a product or service from another, under mutually beneficial conditions, is a customer.

This definition treats a lot of people as customers. Excellent customer service generates the same benefits from them as from any customer. Companies managing their internal supply chains as their external ones: reduce costs, increase throughput, lower cycle times, and improve overall quality.

Why IT Projects Fail

Studies show that over 70% of all Information Technology projects fail. Who is the perpetrator of these crimes? A little detective work identifies three possible suspects: technology, people, and processes. Which one is the culprit?

It’s extremely rare for a computer to make a mistake. Given the same inputs and state, a computer always generates the same outputs. So the fault doesn’t seem to lie in the hardware. Software is not as reliable as hardware. The definition of a trivial software program is one that has no bugs. This said it is usually not the software that causes projects to fail. Software is a flexible medium and easy to change. If a bug is severe enough it can usually be trapped and killed, or a workaround discovered.

People make as many or more mistakes as software. But people have been around long before computers. Before computers most projects seem to complete successfully. It turns out people are pretty flexible too; they are good at adapting to any situation. Given a problem, a group of people can almost always come up with a creative way to solve it.

That leaves process as our last remaining suspect. Process is pretty hard to put the finger on. Usually process is invisible, inflexible, unstructured, and undocumented. Process is such a shifty character it must be the villain. As it turns out process usually is the cause of most project failures because: 1) complex processes interact with each other in complex ways, 2) when performing analysis, design, development, and implementation, rarely is the impact of process considered, 3) an error in process is nearly impossible to detect, and 4) processes are difficult to change.

To reduce the odds of failure, IT projects should do two things. 1) Accurately document both the current-state and proposed future-state business processes impacted by the project, and 2) Implement change management with all of the rigor of project managment, enabling process transformation to keep up with the technical transformation.

Lean and Mean?

There are times when people think "lean" should also be called "mean." It is easier to use the savings from lean to cut staff, than it is to look for new and innovative ways to add greater customer value for the same labor cost.

This is one of the reasons for advocating the simultaneous adoption of both agile and lean methods. Agile provides a continuous lifecycle between strategy, delivery, and results. Results then form the basis for new strategies and new delivery capabilities, driving new results, etc. Agile, used as a continuous process, helps to discover new strategic investments for the savings resulting from going lean. Investments that payoff in increased revenues and profits - as opposed to just a bottom line impact of cutting staff.

Why Agile and Lean?

Lean methods allow service-based operations to 1) increase throughput, 2) be more deterministic, 3) reduce cycle times, and 4) adopt a culture of continuous change. Service businesses that have used lean have seen 30% increases in throughput for the same amount of labor, 40% improvement in quality, and 70% reductions in response times.

These are great results in themselves, but are only part of the story. As a result some of the barriers reducing an organization's agility are removed. They are more flexible and accepting of the change necessary to be agile. There is less work in the pipeline so changes can be more easily made. And management has the visibility within operations to understand which levers to pull when change is necessary, and to better understand in advance the impact of those lever changes.

With the barriers removed, becoming agile is about taking a system-wide view of the direct relationships between strategy, delivery, and results. And establishing a continuous lifecycle where each is updated in turn.

A company that is both Agile and Lean consistently delivers better quality products and services at less cost that more accurately meet the changing needs of their customers.