In Search of Operational Excellence

This blog post is long overdue. I actually drafted this post already about a year ago, but due to several reasons did not post it before now. Last year was extremely challenging for me, and I reduced my workload by stopping updating this blog. Let's see if I can bring it alive again.

About a year ago I found this article about Five Hallmarks of Operational Excellence by Accenture. Here's my summary of it.

Accenture research on past economic downturns has found that high-performance businesses put a premium on operational excellence and pull ahead of their competition at the end of an economic recession. Here are the five factors that influence the creation of positive, long-term impacts in both good times and in bad.

“Sometimes you need that external threat to make those tougher decisions you knew you had to make anyway, and also to convince others that it is time for change” said one COO

Companies that come out ahead of their competitors share these five essential characteristics
1 Identified competitive essence – the "dominant vector"
2 Establishing the right structure
3 Execution - the path from strategy to action
4 Balancing structure and execution
5 Choosing the right journey

1. Naming the company's dominant vector
The mechanism by which organization best creates economic profit. It is a longterm characteristic—something that should change only when the company’s underlying values change. It can be summarized simply and clearly; it’s a statement that everyone in the organization can hold on to.

Accenture article mentions Kennedy and Nasa here, but let me quote Garr Reaynolds, whose blog, Presentation Zen, has been one of my biggest sources of inspiration for my blog.

(a) “Our mission is to become the international leader in the space industry through maximum team-centered innovation and strategically targeted aerospace initiatives.”
                      Or…
(b) “…put a man on the moon and return him safely by the end of the decade.”

In his post Garr continues "The first message sounds similar to CEO-speak of today and is barely comprehensible, let alone memorable. The second message — which is actually from a 1961 speech by JFK — motivated a nation toward a specific goal that changed the world.")

2. Establishing the right structure
Aligning people, process, technology, and organization structure, the operating model is designed and developed based on external and internal priorities. It relies on strategic decisions about customers, products and routes to market, and serves to deliver the capabilities that match the dominant vector.

Needless to say that my choice of picture of a Leatherman multitool has the right structure.

3. Execution – the path from strategy to action
Excellence in execution revolves around drivers of simplification, standardization and the elimination of waste.
- Clear understanding of what customers are willing to pay for.
- Push for asset productivity.
- Stress process excellence, emphasizing continuous improvement techniques and process discipline.
- Build enduring capabilities and ensure that best practices are proliferated across the enterprise.
- Ensure the close alignment of business strategy, goals, metrics, and initiatives through performance management.

This list by Accenture reminds me of Lean principles and management system such as Really Simple Balanced Scorecard.

4. Balancing structure and execution
Structure and execution must not be considered independent of one another. Execution and robust processes to drive steady gains in product quality and productivity. Structure that supports agility and the resource flexibility to be able to respond easily to new market opportunities. Business leaders have to know how structure affects execution, and how superior execution enables a leaner structure.

This in turn was best summarized in the book and articles by John Spence, another person whose ideas have influenced my blog greatly.

5. Choosing the right journey
Three alternative journeys
- Continuous improvement that focuses on building excellence in execution
- Targeted interventions that span structure and execution in a key functional area
- Transformational initiatives that are top-down and largely structural in emphasis

Accenture concludes the article by saying "The tools, techniques and expertise are available to help make operational excellence an everyday reality—and a long-term differentiator. What’s needed now is the management intent."

They also note the following challenge. "The challenge is that powerful change factors such as these regularly outstrip organization’s abilities to respond; they are not operated and governed with the focus and rigor needed to deal with the current complexities."

Operational excellence is simple as that, but achieving it is not easy.

How to change when change is hard

What do you do when most of us know we have a problem, but are not convinced enough to change anything? Or when the problem is huge and it's too easy to wait for somebody to appear with a huge solution? The answer is not providing more information about the problem to convince you about the need of change. It is to appeal to your emotions and give you examples of small solutions to motivate you to start the change.

Chip and Dan Heath give a good framework for this in their new book Switch: How to Change Things When Change Is Hard. I have copied their framework below. But first take a look on how Jamie Oliver is motivating you by appealing to your emotions and giving you examples of small solutions to fight the huge obesity problem.



The Switch framework with my comments about Jamie Oliver's project:
Download the framework here.

HOW TO MAKE A SWITCH

For things to change, somebody somewhere has to start acting differently. Maybe it’s you, maybe it’s your team. Picture that person (or people).

Each has an emotional Elephant side and a rational Rider side. You’ve got to reach both. And you’ve also got to clear the way for them to succeed. In short, you must do three things:

DIRECT the Rider

• FOLLOW THE BRIGHT SPOTS. Investigate what's working and clone it. (Home made food)
• SCRIPT THE CRITICAL MOVES. Don't think big picture, think in terms of specific behaviors. (Cooking lessons on main street, small extra budget for schools to use better incredients, weggie class for children to know the difference between potato and tomato!)
• POINT TO THE DESTINATION. Change is easier when you know where you're going and why it’s worth it. (No need in this case)

MOTIVATE the Elephant

• FIND THE FEELING. Knowing something isn't enough to cause change. Make people feel something. (Notice how Jamie is not talking about you, but your children!)
• SHRINK THE CHANGE. Break down the change until it no longer spooks the Elephant. (Milk)
• GROW YOUR PEOPLE. Cultivate a sense of identity and instill the growth mindset. (Our parents ate real home food, our grandparents ate real home food, but our generation is no longer giving that example to our children. Cooking lessons on homestreet together with your neighbors.)

SHAPE the Path

• TWEAK THE ENVIRONMENT. When the situation changes, the behavior changes. So change the situation. (Start with the school lunch. Moving to the same direction Pepsi announced this week they will cut sugary drinks from schools globally. See also how NYC Health authorities appeal to your emotions on their three month old ad about fat and soda drinks.)
• BUILD HABITS. When behavior is habitual, it's “free”—it doesn't tax the Rider. Look for ways to encourage habits. (Jamie Oliver calls for supermarkets to give more info about healthy food, the habit needs to start on what kind of food you buy.)
• RALLY THE HERD. Behavior is contagious. Help it spread. (The main street cooking class, and school lunch again. My peers are changing, I'd better follow their example.)

The book. uses tens of examples like this and is a nice read. One of the examples is the opposite problem of obesity - malnutrition in Vietnam -but the solution is exactly the same: cooking lessons in villages for how to make healthier food from simple incredients, and how to have healthier eating habbits.

What made the book even more interesting was that I had just finished reading two books about motivation and the emotional right brain side of us by Dan Pink - his new book Drive: The Surprising Truth About What Motivates Us and the classic A Whole New Mind: Why Right-Brainers Will Rule the Future.

Dan and Chip Heath's earier book Made to Stick: Why Some Ideas Survive and Others Die was one of the books that made me look at communication from a different point of view two years ago.

Earlier I always tried to convince the Rider with more facts (because the facts convinced me), but I had trouble motivating the Elephant - now I try to do both.

Time to Look Back and to Look Forward

Another year is coming to its end, and it's time look back at what we have achieved. It's also time to set objectives and plan actions for next year.

How was your year? Did you meet your objectives? Did you stay focused? Did you manage to keep your work and life balanced?

How about next year? How are your objectives? Are they focused? Will you be able to keep yourself and your relationships healthy?

I received the seasons greetings below from Gemba Consulting. It is spot on.

I wish you all happy holidays and a successful new year!

Samuli

How many things are on your agenda for 2010? Whether you are the CEO of a major company or the leader of your own life this is a question we all must ask ourselves as we prepare to meet the coming year. When teaching the TPS approach to strategic planning and deployment known as hoshin kanri there are several critical conversations we must have.

The first and most important is to limit the annual objectives to only the vital few, three to five at most. This is incredibly difficult for most to do since we all want and need to do so much. Yet to be as effective as possible we must focus most of management team's effort on the vital few breakthrough objectives.

What happens to everything else we need or want to do? We must deselect these other initiatives, integrate or turn them into enablers for the breakthrough objectives, or handle them through daily management. The capability of senior leaders to delegate to junior leaders much of the daily management and problem solving that occupies them can be a breakthrough objective in itself.

I wish all of you improved health, success and well being in 2010!

Jon Miller
CEO
Gemba Consulting

How to Keep Talented People

On the comments of my previous post my regular commentator Daddy asked: "have you ever thought of becoming a professional consultant by yourself?" That is a tough question to answer publicly, as Daddy is commenting anonymously, and the only thing I know for sure is that he is from Finland (and could even be my boss or his colleague).

Here is my honest answer.

Yes I have thought of becoming a consultant. Several times a year, every time I work with good consultants. But I have too many reasons for not to take the risk. The company I work for meets several criteria that are important for me, and for any business.

Opportunities for professional development

Some weeks ago The Wall Street Journal published an article called How to Keep Your Best Executives. I am not an executive, and if I am talented or not, is for other people to judge.

Reading the article made me realize that I do not have a satisfaction gap on the opportunities for my professional development. The most important opportunities are summarized on the picture in the right, for details see the article.

I am given increased responsibilities and challenging tasks to develop diverse competencies. I am allowed and encouraged to accumulate marketable skills, to expand my professional network, and to build my professional reputation. Partly through my blog, which is no secret.

Matching values

My values match the company values. We are among the companies having received recognition from UN for outstanding Communications on Progress regarding Corporate Social Responsibility reporting.

We are included in the Cleantech Index which is comprised of 78 publicly listed companies that are global leaders in cleantech across a broad range of industry sectors.

Business fundamentals

We have a solid foundation for Achieving Business Excellence with (1) high-quality products and services, (2) solid financials, and (3) reacting to change.

Management fundamentals

We pay attention to important management fundamentals of (1) vivid vision, (2) best people, (3) robust communication, (4) sense of urgency, (5) disciplined execution, and (6) extreme customer focus. For more on these, see my earlier post about the book Awesomely Simple where these criteria come from. Or check how I rephrased the list as advice I gave my management team when I gave them the book.

Continuous improvement

Nobody's perfect, and we are working on to improve some of the above. I am able to influence many of them. From inside.

Yes I have thought of becoming a consultant, but why would I?

Instead, would you be interested to join us?