The key challenge facing Operational Excellence programs remains squarely around changing & improving company culture, with over 53.1% citing it as their top critical challenge.
This makes sense as cultural transformation, changing mindset and behaviours, is the hardest thing to do, and consequently it is the greatest progress limiter. Click here to read the full Survey Report 2018/19.
To highlight the difficulty of cultural transformation, many 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 and poor employee engagement; which in turn leads to passive aggressive behaviors down the chain.
Culture is critical to the success of a change management program. Culture is shared values and “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 are likely to negatively impact the change.
Cultural transformation is critical to increase the pace of teams and organizations in order to make deep-rooted process changes required to gain advantage of digitization, automation and advanced technologies. Results are the major output of a company, and culture is the major input.
The results speak for themselves, the companies in the “Fortune 100 Best Companies To Work For” happen to achieve a double-digit return in market annualised growth of 11.08%, twice the average return of companies in the S&P 500 and the Russell 3000 indices.This is why culture matters.
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 changing business environments, and continuously improve and innovate.
23.18% of respondents cited leadership buy-in and understanding as their top critical challenge. Leadership buy-in and understanding is a must to achieve a successful change management and cultural transformation program. Conversely its absence is considered a major cause for failure in operational excellence programs. Having a strong Global Leader at the corporate-level who is banging the drum for the VP and Directors in the business and functional units, ensuring executive leadership see the value of Operational Excellence as an investment with substantial reward, will ensure the right resources and budgets are put in place to deliver the necessary sustainable results.
Furthermore, the messaging on continuous improvement needs to be consistent, so everyone is rowing in the same direction. Leaders need to walk the talk and act the change in a visible way.
Sustaining Operational Excellence improvements came in at 2nd as the biggest challenge for a quarter of all respondents; with most environments having a tendency to move on to the next challenge once they feel they have implemented an improvement without any plan to sustain it, thinking once implemented it will not fail, or they fail to incorporate new advanced technologies to support it, which leaves them redundant. Leaders need to hold their departments accountable on the new process designs to ensure they sustain, and dedicated coaches need to ensure improvements and process reengineering remain a constant focus.
Driving an end-to-end Business Transformation program came in 3rd as the biggest challenge for 30.7% of respondents, which if you take a moment to think about it makes complete sense. If process re-engineering is not end- to-end, it will always be sub-optimal. Disparate continuous improvement efforts do not provide meaningful impact. It is key to bring together all relevant functions across the organization and maximise collaboration, and design systems to achieve flow between the relevant departments across the functional value stream.
The 4th biggest challenge for respondents was the willingness to embrace new technologies, a challenge for 28.5% of respondents.
Part of the solution is for organizations to evaluate current employees for digital knowledge. Companies must build a new inflow of digital talent in the organization that have a flexible, rapid decision making, agile mindset. They need to rebalance their team with digital enablers who are ready, happy and know how to embrace new advanced digital technologies. Digital talent must be obtained to fill the roles of quality professionals. The type of talent now required in operational excellence are software designers, agile scrum masters, agility coaches, full-stack architects, robotic process automation specialists, and machine-learning engineers.
I have touched on the importance of culture, leadership, a sustainable end-to-end transformation, and technology, but what is this all for. This report confirms, that we are in the age of Customer Delight, which should not surprise. Businesses need to ensure all their policies and procedures are focused on customer Delight, and their whole organization including their traditional sales and marketing departments are designed to focus on delight. Before your product had to be 10 times better than the competition, now it is your customer experience that has to be 10 times lighter than the competition.
As one respondent put it “Thanks to companies such as Amazon and Apple, they now expect every organization to deliver products and services swiftly, with a seamless user experience”
Operational excellence professionals need to focus on designing a low-friction customer experience, where there are minimal handoffs between people and departments. Customer delight, generates the power of word of mouth, in particular with the amplification of social media, and is where the biggest ROI is generated today. A new breed of technologies deeply rooted in knowing who your customers are and how they behave is already here, and need to be part of any process re- engineering and business transformation.
Operational excellence needs to involve Design thinking to understand customer needs and then design the “idea process” embracing new advanced technologies.
It is also important to understand the new trends and competitive landscape, as 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. Adapting to new trends is critical.
The outlook is promising, a clear majority, nearly 60% of respondents have cited that Operational Excellence methodologies are growing in popularity. This supports the demand for process re-engineering and business transformation, adapting to new advanced technologies and the demands of the customer for a friction-free customer experience.
The report concludes that changing and improving the company culture is the single most important factor for success. In simple terms, it is the people who do the work through the processes, that are enabled by technology. It is only people that can make the different processes and parts work well together. processes will be simpler and technologies will get more advanced. Changing process and technology is the easier of the three to do, as they are more predictable, functional and controllable.
However, we all know that people's mindset and behavior is the most important factor in business transformation and process re-engineering initiatives, and this is difficult to manage. Arguably, it is the executives biggest challenge, and as this report suggests it is where they need to focus their time, but yet they don’t, they focus on processes and tools because it is easier. Instead, we need to double our efforts and invest and focus energy on people, as only they can tell us where to fix, simplify, and streamline the processes. Consequently, change management and cultural transformation will remain the single biggest issue facing operational excellence leaders.
A successful change management program with cultural transformation at its heart, will in turn drive a more sustainable and enterprise-wide operational excellence program, which will in turn drive a willingness to embrace new technologies and digital enablers. However, without leadership understanding and buy-in you can never achieve a successful change management and cultural transformation program. Leadership understanding and buy-in has to come first.
This report presents the new paradigm of operational excellence and the challenges that go along with it, where operational excellence leaders have to rethink their operations end to end, incorporating the numerous transformation drivers such as rising customer expectations, expanding markets, and digitalization activities along the whole value chain.
Operational excellence needs to be viewed as a critical strategic weapon by the corporate-level executive leadership teams. It needs this level of buy-in and understanding for any organization to truly strive for and deliver end-to-end business transformation and sustainable adoption in normal business activities.
I hope this report will support you and provide you with the necessary data to help you and your leadership team get fully behind an enterprise-wide operational excellence program. Download the full Report.
Want to learn more? Download the full Report.
About the Author
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.