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MANAGING BOOKS

Four principles of operational excellence Add to ...

Redefining Operational Excellence

By Andrew Miller

(Amacom, 246 pages, $33.50)

When we ponder improving operations at our firm, we often think of Six Sigma or Lean initiatives. Those eliminate waste, fix problems, and heighten standardized processes.

But Toronto-based consultant Andrew Miller says operational excellence transcends such limited approaches. After all, companies we consider operationally superior, such as Dell, Amazon, Apple, and Wal-Mart, are known for more than their quality management systems or maximizing standardization, which are at the heart of something like Six Sigma.

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“They are operationally excellent because they go well beyond these activities. These companies engage their customers, they constantly innovate, they continuously improve how they operate, and they move at optimal speed,” he writes in Redefining Operational Excellence.

We wouldn’t have the iPod through the Six Sigma improvement process for manufacturing. It didn’t spawn Dell’s approach of allowing customers to customize computers on the Internet or Disney’s customer-first culture. Lean may eliminate waste but it doesn’t help to create value. “Lean is an effective way to increase productivity for repeatable tasks but it doesn’t help develop new ideas or strategies,” he observes.

He therefore asks us to think more broadly when we consider operational excellence: It’s the constant pursuit of improved performance and profitability in all areas of your organization. It has four core components:

1. Attract and retain top talent Employees are a key ingredient for success but many organizations are weak at attracting and retaining the right people.

2. Innovate and collaborate Innovation, whether incremental or revolutionary, is the engine that keeps your organization moving forward. At the heart of innovation is collaboration, which he says seems to be a lost art, even though it separates the market leaders from those chasing them.

“How often do you meet with key suppliers to align strategies and look for mutually beneficial opportunities? When was the last time you met face-to-face with key customers? That is where all the action happens, yet many organizations ignore these opportunities,” he writes.

3. Align strategies and tactics Strategy is what you will do, while tactics are how. And they must be aligned, connected to appropriate metrics for success. You must bring everyone together to focus on the same common goal, which is never easy.

4. Acquire and keep the customers you want You need to engage with your customers, providing an emotional bond and unique experiences. Consider activities like customer panels, sneak previews of new products, or inviting consumers to exclusive events. Make sure you ask for and act upon referrals – he estimates that only one in 100 firms are asking for, following up on, and measuring the business they receive from referrals by existing customers.

Beyond that, he feels it’s important to address a concept that few organizations consider: Optimizing speed. That means knowing when to speed things up and when to slow things down to achieve optimal results. “Every organization knows the importance of speed, but most focus only on moving faster. My clients focus on moving at an optimal speed so that they can achieve better performance and profitability,” he said.

He asks them:

How fast are you going now?

How fast could you go – what is your potential top speed?

What would happen if you were to achieve that top speed?

What are the key indicators that you should use to determine when to slow down and when to speed up?

What plan do you need to put in place to maintain an optimal speed?

Those aren’t normal questions around the boardroom table. We are hardwired to go faster. But he points to Research In Motion’s fumbled, premature introduction of its BlackBerry PlayBook in 2011 and Toyota’s 2008 rush to become the world’s largest auto maker, which was followed by serious quality issues, as examples of how speed can backfire. “It may sound counterintuitive, but sometimes slowing down how we operate will increase profitability,” he said.

Similarly, he notes that slowing down the hiring process allows you to ensure the right fit for positions in your organization. He suggests different hiring processes for different roles – some that require specific skills may be elaborate and slow, while for folks handling repetitive tasks you can encourage applications continually and choose more quickly. When people come on board, however, don’t be slow; move quickly to create an emotional bond, to cement their relationship with the organization.

When you develop some operational mastery, create backstops – initiatives that keep pushing you forward. Hold an innovation competition, seeking ideas from customers, suppliers and other business partners. Have a third-party interviewer find out why your key customers and suppliers like working with you and what can be improved. Review key departments and look for gaps in procedures or communications.

The book is clear and practical, with sensible foundational principles and lots of tips on how to implement his ideas. It will open your eyes to the broader parameters of operational excellence, and offer a challenge and support for heading in that direction.

POSTSCRIPT

Business commentator and corporate adviser Kirk Dando shows how to avoid the 12 critical mistakes that derail growth-hungry companies in Predictive Leadership (Palgrave, 221 pages, $31).

Alan Trefler, CEO of Pegasystems, a software provider, explains how to revolutionize customer engagement through continuous digital innovation in Build for Change (John Wiley, 175 pages, $30).

The Millionaire Master Plan (Business Plus, 275 pages, $30) by Roger James Hamilton, founder of the Entrepreneurs Institute, offers a guidebook for entrepreneurs to improve their financial standing.

Harvey Schachter is a Battersea, Ont.-based writer specializing in management issues. He writes Monday Morning Manager and management book reviews for the print edition of Report on Business and an online work-life column Balance. E-mail Harvey Schachter

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