Change management and cultural transformation is critical to increase the pace of teams and organizations to make deep-rooted changes required to align with the impact of digitalization and embrace it, including bringing on board more digital enablers.
A quote from Gandhi, “your beliefs become your thoughts, your thoughts become your words, your words become your actions, your actions become your habits, and your habits become your values, and your values become your destiny”. In short, if you don't have a good culture in your company, your company won’t have a good destiny.
It matters because it become the first principals you go back to when your employees conduct their daily responsibilities, focus on projects and make decisions, including hiring decisions. If you have a good strong culture and core values, you will know who you want to retain, and who do you not want to retain. Culture has to be a daily habit.
The results speak for themselves, the companies in the “Fortune 100 Best Companies To Work For” happen to achieve a return in market annualised growth of 11.08%, twice the return of the average return of companies in the S&P 500 and the Russell 3000 indices.
Good high trust company cultures are evident, particularly in meetings, team members do not focus on who’s right, they riff of each other, and generate solutions that are better for the company. They trust they can have a debate and disagree, and get to the right answer, hold people accountable to things they committed to, to achieve results.
They focus on company first, then department, then team and then themselves. Results is the major output of a company, and culture is the major input.
Creating a culture aligned to the pursuit of the company mission generates a passionate team environment, you can see it and feel it when you visit companies that have done this well. As the old story goes, two people are laying bricks, and they were asked “what are you doing”, and the first replies “I am building a wall”, the second replies “I am building a cathedral”. The more people we have that believe in the mission, and not just a job, will strengthen the company culture.
Currently, the average lifespan of a company in the S&P 500 is only 14 years. To stay relevant companies more than ever need to adapt to rapidly changing business environments, continuously improve and innovate. If the mindset of the company is to stick with what is does, it will not flourish for long. Change is a necessity, and the right leadership buy-in and cultural transformation is at the heart of that.
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Cultural Transformation is Hard
Cultural transformation is the hardest to do, and it is the greatest progress limiter.
To highlight the difficulty of cultural transformation, most change initiatives don't achieve their objectives or are deemed unsuccessful, resulting in wasted resources and diminished moral. Research shows that amongst the many factors that contribute to poor results are change fatigue, too many priorities to focus on, top down dictating with no true employee engagement, this in turn leads to passive aggressive behaviors down the lower levels.
Culture is critical to the success of a change management program. Most companies do the formal change management items well, such as training, changing the reward structure, decision managements systems, process flows, performance management systems, but are poor at culture change. Culture is “how things get done around here” it is how your people think, believe, act, feel. Companies need to get good at these cultural aspects, or they won't impact the change process in the way they want to.
Some simple first steps would be to focus on the cultural strengths the company already has, and to unleash the power of the informal leaders who are trusted, motivated and believe in the mission. Another key is create an environment where all communication from all leaders and all channels is coherent, so each person in your organization knows what they need to do to make it happen.
As two respondents put it:
“The messaging on continuous improvement needs to be consistent, so everyone is rowing in the same direction”.
“It is critical to having the entire team on the same journey to avoid challenges on the ways of working and the priorities”
Leaders also need to walk the talk and act the change in a visible way, from the CEO and their executive leadership team, to the middle managers, so the entire organization can see we are going to do things different. Role modelling is critical. It is also important that the front line staff are engaged and they are part of the change team, and their culture and change counsellors are at hand to give expert advice. this will lead the organization closer to the all important culture of sustainability where employees are continuously practicing the right way of solving problems.
It is important that people fully understand the company mission, strategy and targets, and it resonates with them and means something to them. this is the all important why, and Operational Excellence will help put the right systems and processes in place to reinforce the new set of behaviors.
However, the transformation journey is long and hard, and you are bound to get a dip in energy, but things that will create energy will be the story, the why that resonates with each individual and the quick wins. It is also important to make tough decisions on people if they don’t have the right capabilities or fail to change their mindset and behaviors.
The organization should focus on bringing in the right new skills, this report shows they need to rebalance their team with digital enablers who are ready, happy and know how to embrace new advanced digital technologies. They need to develop leaders and getting the best talent to rise to the top, so they can focus on what is critical to the business.
Lack of/Need for Leadership Understanding & Buy-In.
Leadership understanding and buy-in is a constant challenge, and continues to be the number one cause for failure in operational excellence project and programs. Presenting strong ROI from Operational Excellence and process re- engineer programs aligned with key strategic objectives, will go a long way, as well as a strong Global Leader at corporate- level who is banging the drum for the business units.
Leadership buy-in is a must to shift the culture significantly, which then drives engagement. Leadership buy-in is critical to ensure Operational Excellence programs have the budget, resourcing and dedicated people available to work on the initiatives.
Importantly, the executive leader must be a dedicated Operational Excellence professional, but surprisingly many organization struggle with this, as one respondent mentioned “We have people in our organization leading out transformation without real knowledge of Lean...they can’t do it. and our senior leaders are very hesitant to incorporate a Lean expert into senior ranks”.
If dedicated operational excellence professional are struggling with leadership buy-in, they need to be clear about which leader to approach, why it would be worth their time, what actions they want them to take, and how they are going to put forward a strong business case to sell this to them.
No Operational Excellence journey can happen without leadership understanding or buy-in. The leaders must be the role models for the rest of the business.
The problem is leaders are overloaded and time-poor, so hence it is absolutely vital to have a full-time dedicated leader at executive corporate level who can control and direct the overall Operational Excellence program. They will ensure the board see the value, the results, and ensure the right resources and budgets are put in place.
It is not just leadership at the corporate level, operational excellence personnel at the business unit level need buy-in from the business unit GM's before there is any sense in trying to implement any improvements or cultural changes.
A key problem is a number of non-dedicated Operational Excellence leaders have little awareness and understanding of OE methodologies and where / how to deploy them. as a respondent pointed out “Leaders know they need it, but don't understand what "it" is and how to execute "it" they need to be educated to a basic standard, a beginners Lean workshop or Green Belt training will shed a lot of light on the value of these methodologies”. The key is they must recognize the value of OpEx as a long term investment with substantial reward, otherwise they will not maintain the commitment. They must "walk the talk" as leaders, otherwise cultural buy-in will not occur.
Leaders need to make a committed investment in Operational Excellence with a consistent strategy. Without this they are likely to change course, which would prove very disruptive to any OpEx programs and efforts.
As a respondent put it “Without the pull from the senior leadership, the rest of management will say their too busy to support and will not allocate the resources or budget to work on OpEx."
Execution & Sustaining Operational Excellence Projects
The key issue why sustaining continuous improvements is difficult is most people and cultural environments have a tendency to move on to the next challenge once the feel they have implemented an improvement and shown it off to the team. There is a thought process that once implemented it will not fail, and so why put in any effort into sustaining it. Also, there is a tendency for operational excellence projects down the line to be watered down and decreased to just a to do list, losing the major impacts of the original project.
Hence, it is crucial for the improvement implemented, and the serious investment that has been made in the skilled workforce, company culture, and strategic planning that they do not fail to stick because of the lack of focus and methodologies for developing, executing, and sustaining operational excellence programs and projects. A focus on sustaining could be revolutionary for many businesses. Importantly, improvements need to embrace new advanced technologies, otherwise they will be redundant very quickly, and hence fail to sustain.
Leaders also need to support the change in the systems they sit over, if they are not providing the resources or holding their departments accountable on the new process designs, that will never sustain.
Need for end-to-end Business Transformation
Business transformation is a "game changing" action by rethinking one or more business processes to redefine the businesses for survival and success. Business transformation at its core is business process re-engineering, and it is in response to significant industry changes resulting from, for example digital transformation, new advance technologies, regulatory changes and the global economic environment, as just a few drivers.
End to End Business Transformation is the biggest challenge. If process re-engineering is not end-to-end it will always be sub-optimal and it cannot be grown to its full possibility and sustained if the new process are not part of normal business. The reason end to end business transformation is important is because disparate continuous improvement efforts do not provide meaningful impact, but if achieved it will maximize performance across all business units and regions.
An important factor is having a global leader of operational excellence creating standardization in areas such as hiring standards across all business units, and across all aspects of the program, ensuring all business units are focusing on the significant areas aligned with overall strategy; ensuring that managers are not just focussed on short term "cost saving" silo projects, but instead focussing on driving value stream transformation to improve flow end-to-end. This requires a thorough enterprise-wide understanding of the value chain impacts, critical paths and value streams.
Age of Digital Disruption and 'Keeping up' with New Technologies
Operational Excellence as a function has reached its saturation peak and is now it is the age of Design thinking & Digital Disruption. Operational Excellence needs to involve Design thinking to understand customer needs and then design the “idea process” embracing new advanced technologies.
Organizations need to evaluate current employees for digital knowledge that could be deployed in operational excellence projects. However, companies will need to face the new reality that they need to source the lion’s share of new capabilities externally. Companies must build a new inflow of digital talent in the organization, that also has a flexible, rapid decision making, agile mind-set.
World-class digital talent is scarce, which is a major obstacle to implementing their digital transformation.
Digital talent must be obtained to fill the roles of quality professionals, operators, and process engineers, whose skill set is being changed by disruptive technologies. The type of talent now required in operational excellence is software designers, agile scrum masters and agility coaches, full-stack architects, and machine-learning engineers.
So why is digitalization so important? Well in short digitized process shortens the time it takes from contextual insight to action. It speeds the delivery of a unique customer experience or response to inputs from the IoT, for example. In essence it involves using a highly intelligent process to respond in an optimal way to the unique context presented by business moments.
As respondents to this survey cited
“the landscape is changing very fast, and keeping up with new technologies and implementing them effectively and efficiently is key to capturing the benefits of external process innovation”
“the demands of operations changing are fast and operational excellence professionals must understanding how their organization can gain a benefit from aI/machine learning/automation/ Big Data, and Iot which evolves daily, and learn how to integrate new technologies to meet these demands.”
But a word of caution from another respondent “However, new technologies should be carefully selected for the right maturity with detailed testing and validation. The new millennial culture of young "technology oriented" leadership found at all levels with a tendency to bring the "newest" or the "latest" technology without careful selection or validation can be contrary and cause time consuming corrections. The operational excellence dedicated professionals need to be involved in new tech implementation as new technologies are being introduced so rapidly that we must have a methodology for integrating it correctly”.
Maintaining Key Priorities Consistently
Competing priorities is a constant challenge for busy executives. Organizations need a organization wide structure of dedicated Operational Excellence professionals and coaches to ensure improvements and process reengineering remain a constant focus.
The below respondent responses highlights this issue.
“Many have had training in the tools, but choose to stop doing them after some time has passed. Difficulties in tying it to day to day priorities and work. Often still firefighting. Need to have dedicated Lean Coaches etc in each department.”
“Reconciling competing priorities and agendas remains a top priority. trying to execute OpEx initiatives without explicitly aligning well intentioned stakeholders with competing agendas makes things difficult”.
“Key priorities in a world of constant change and moving focus, keeping focused on basic operational needs needs extra work”.
“Client support is 1, prospects are 2, improvement and systems are down the list”.
“We constantly shift our focus from one "flavour of the month" to the next!”.
Adapting to Business Trends
There is no point in having the best end to end operational excellence processes if they are the wrong processes and systems for the new business landscape. Continuous improvement programs and project portfolios must align to the changing strategic direction of the business.
Below are some great insights from respondents.
“Continuous improvement and OpEx will usually optimize the present, but disruptive trends will put the initiatives quickly into reverse gear”.
“Adapting to business trends: The Software team is very slow to respond to innovation which has a ripple effect on the operations at all levels”.
“Adapting to Business Trends is the most crucial, as it’s the key driver for getting the Operational Excellence well-done”.
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About the Author
Founder and CEO, BTOES
Vijay has founded, built and sold two successful market-leading businesses. The first in London, UK in the office equipment distribution sector, which he launched in 1991 and sold to Ingram Micro in 1999, after which he took a year off and traveled around India with his wife. The second headquartered out of Chicago, IL, in the large-scale commercial B2B conference sector, which was launched in 2001 and sold in 2012.
In 2012 he retired to spend time with family and focus on meditation.
In 2015 he was looking for the next challenge and founded and is currently CEO of the Business Transformation & Operational Excellence World Summit & Industry Awards (BTOES), which has become the largest senior-level cross-industry event within the sector, BTOES.com, and BTOESInsights.com a professional online content platform for senior-level executives involved in continuous improvement, which has grown to over 188,000 subscribers.
He is also an angel investor, mentor, and board advisor.
Vijay lives in Stanmore, Middlesex, UK, with his wife Reshma, son Armaan, and labrador Archie.
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