Companies often know where they want to go when it comes to Strategy Development. Companies want to be more agile, quicker to react, and more effective. They want to deliver great customer experience, take advantage of new technologies to cut costs, improve quality and transparency, and build value.
Yet, while most companies are trying to get better, the results tend to fall short. One-off initiatives in separate units do not deliver big enterprise-wide impact. Improvement methods that were adopted almost invariably yield disappointing results.
Senior leaders have a crucial role to take in making things happen. Business Transformation cannot be a siloed effort. A Next-generation Operating Model is essential to break through organizational inertia and trigger step-change improvements.
Understanding the Next-gen Operating Model
Companies need to commit to a Next-gen Operating Model if they want to build value and provide compelling customer experiences at a lower cost.
- Integrated, Organization-wide Operational Improvement Program. This approach is focused on Customer Journeys and distinctive customer experience. The Integrated, Organization-wide Operational Improvement Program is a holistic approach towards how operations can contribute to delivering distinctive customer experience. It cuts across organizational siloes in both customer-facing and end-to-end processes. This approach is a preferred organizing principle. Having multiple independent initiatives within separate organizational groups can deliver incremental gains. However, the overall impact can be underwhelming.
- Holistic Customer Journey. This is an approach that makes use of multiple capabilities instead of individual capabilities to achieve greater impact.
The holistic Customer Journey is achieved when the 5 core capabilities are utilized.
Discovering the 5 Core Capabilities
There are 5 core capabilities essential in unlocking the most value in the shortest possible time. Two of the 5 capabilities are Digitization and Advanced Analytics.
Digitization is the process of using tools and technology to improve journeys. It has the capacity to transform customer-facing journeys by creating the potential for self-service. It has the power to reshape time-consuming transactional and manual tasks that are part of internal journeys more so when multiple systems are involved.
Another core capability worth knowing is Advanced Analytics. This is the autonomous processing of data using sophisticated tools to discover insights and make recommendations. It provides intelligence to improve decision making and enhance journeys when nonlinear thinking is required. This is very useful in claims triage, fraud management, and pricing.
There are 3 other core capabilities that are essentially important in these days of Digital Transformation. These are Intelligent Process Automation, Business Process Outsourcing, and Lean Process Design.
Intelligent Process Automation is an emerging set of new technologies that combine fundamental process redesign with process automation and machine learning. It can replace human effort in processes that involve aggregating data from multiple systems taking a piece of information from a written document and entering it as standardized data input.
Business Process Outsourcing works best for processes that are manual. It uses resources outside the main business to complete specific tasks or functions. Back-office processing of documents and correspondence is an example of BPO.
The Lean process Design is one capability that helps companies streamline processes, eliminate waste, and foster a culture of Continuous Improvement. It is considered a versatile methodology as it can be applied in multiple processes.
Organizations can use these capabilities to achieve the greatest impact. The maximum effect, however, can be achieved when specific implementation guiding principles are followed.
Interested in gaining more understanding of the Next-gen Operating Model within the context of Digital Transformation? You can learn more and download an editable PowerPoint about Digital Transformation: Next-gen Operating Model here on the Flevy documents marketplace.
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As the last decisive step in customer service, a warehouse ensures cost effective distribution. Latest technological innovation has turned warehousing into a competitive advantage. It offers untapped potential for improvement. However, warehousing is a hugely neglected part of global supply chains. There is inconsistency in picking, packing and shipping orders, storing receipts, and managing inventory and logistics operations.
These and the following roadblocks in the way of smooth warehousing operations and Lean Management exist in every traditional warehouse:
- Lack of focus on acquiring technology to facilitate in improving efficiency and quality.
- Inability to utilize a structured approach to ascertain the reasons for poor performance.
- Lack of a big picture viewpoint pertaining to processes, costs, or external supply chain partnerships.
- Absence of a continuous improvement culture to achieve warehouse operations excellence.
- Lack of communication, organization, and proper training of resources.
These shortcomings call for implementing Lean Warehousing methodology to unlock improvement opportunities and savings in operational, efficiency, and maintenance related costs. First initiated by Toyota, the Lean Warehousing approach has a deep emphasis on eliminating 3 basic limitations: waste, variability, and inflexibility. The Lean Warehousing methodology focuses on the following 3 improvement areas:
- Cost Reduction
- Customer Quality
- Service Levels
The Lean Warehousing methodology concentrates on increasing productivity and reducing operating costs. This is achieved by:
- Cutting undue walking and searching
- Preventing needless replenishment, reworks, waiting times, and double handling
- Upgrading demand and capacity planning and manpower allocation
A Lean Warehouse seeks to take the customer quality to the next level by avoiding:
- Order deviations
- Picking errors
- Damaged goods
Improving service levels is at the center of a Lean Warehousing methodology, which involves:
- Reducing lead times
- Enhancing on-shelf availability
Lean Warehousing Transformation
Lean Warehousing Transformation entails streamlining operations to identify waste, know how to increase service levels, implement standardization and innovative ideas, and learn to evaluate and manage performance. Such transformation becomes a reality in an experiential learning environment and by developing organizational capabilities in 3 critical areas:
- Operating System
- Management Infrastructure
- Mindset and Behaviors
The organizational capability to configure and optimize all company physical assets and resources to create value and minimize losses. The focus areas under operating systems include eradicating variability, encouraging flexibility, and promoting end-to-end design.
The organizational capability to strengthen formal structures, processes, and systems necessary to manage the operating system to achieve business goals. The focus areas under Management Infrastructure are performance management, organizational design, capability building, and functional support process.
Mindset and Behaviors
The organizational capability to manage the way people think, feel, and act in the workplace individually as well as collectively. The target areas to focus on here include a compelling purpose, collaborative execution, up-to-date skills, drive to improve, and committed leadership.
Model Warehouse Implementation
Lean Warehousing Transformation necessitates developing a “Model Warehouse,” which presents facilities for supply chain people to practically experience state-of-the-art warehouse operations in a modern warehouse and shop-floor environment. The Model Warehouse incorporates newest technology and systems, and offers real-life conditions for building capabilities—i.e., optimization of storage, pick and pack, and dispatch processes. Newest technologies—e.g., Smart Glasses and HoloLenses—available at the facility help improve the performance of pickers significantly and execute multi-order picking efficiently.
Such a setting allows people to observe and analyze the performance of an exemplary warehouse and implement this knowledge at their own premises. Leading organizations organize a week-long rigorous knowledge sharing workshop—in an experiential learning environment of a Model Warehouse—for their people to have a hands-on experience to learn Lean Warehousing, actual picking, packing, root cause analysis, and performance management. The participants of the Model Warehouse Knowledge Sharing Workshop are excellent candidates for “change agents” to implement Lean Transformation.
Interested in learning more about Lean Warehousing, Model Warehouse Implementation, and Lean Warehousing Transformation? You can download an editable PowerPoint on Lean Warehousing Transformation here on the Flevy documents marketplace.
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Organizations need to persistently improve the way they do business to stay ahead of the curve. New ideas trigger organizational improvement and build the foundation of a Learning Organization.
Scholars have defined a Learning Organization in many different ways. Some suggest it as an organization skilled at creating, acquiring, and transferring knowledge, and at modifying its behavior to reflect new knowledge and insights. Marlene Fiol and Marjorie A. Lyles describe organizational learning as “the process of improving actions through better knowledge and understanding.” Barbara Levitt and James G. March define organizations as “Learning Organizations when they encode inferences from history into routines that guide behavior. Chris Argyris categorizes organizational learning as “a process of detecting and correcting error.” According to Peter Senge, “a Learning Organization is a group of people working together collectively to enhance their capacities to create results they care about.”
Being a Learning Organization offers several advantages. A perpetual influx of insights and new experience keeps the organization dynamic and ready for transformation; assists in better management of investments, improves efficiency; and helps in developing cost leadership and differentiation strategies. Learning Organizations tend to be more innovative by encouraging people to learn, develop, and by generating a more innovative environment. Shared learning builds the corporate image of the organization and increases the pace of change within the organization. Learning Organizations provide their people the ability to think insightfully about complex problems, take coordinated action, improve decision making, and instill a sense of community in them.
Despite efforts to improve continuously and creating new knowledge, organizations cannot simply become Learning Organizations. They employ various approaches but what they actually need is to become proficient in translating new knowledge into new ways of doing things, and actively managing the learning process so that it gets ingrained into the organizational culture.
Becoming a Learning Organization necessitates mastering 5 key activities. These 5 activities form the building blocks of a Learning Organization and should be integrated into the organizational core to transform your company into a Learning Organization.
- Systematic Problem Solving
- Learning from Experience
- Learning from Others
- Knowledge Transfer
Applying these practices to some degree or in isolated cases isn’t enough. To ensure continued success, these practices should be complemented by distinct mindsets, support systems, and processes.
Let’s now discuss the first 3 building blocks in detail.
1. Systematic Problem Solving
Systematic problem solving is based on scientific methods for diagnosing problems, e.g., the Plan, Do, Check, Act (PDCA) cycle or “hypothesis-generating, hypothesis-testing.” The technique employs fact-based management, relying on concrete data instead of assumptions for making decisions and utilizes statistical tools—such as Pareto charts, histograms, correlation, and cause and effect diagrams—to consolidate data and draw conclusions.
For a real Learning Organization, people need to become more disciplined, pay more attention to detail, assess underlying causes, and analyze data before reaching decisions.
Experimentation involves systematic exploration and testing of new knowledge. Experimentation has 2 fundamental configurations; both forms transfer knowledge and yield new insights, capabilities, tools, techniques, and processes:
- Ongoing programs
- Demonstration Projects
Ongoing programs entails a chain of small experiments aimed at yielding incremental gains in knowledge. These programs maintain a steady flow of new ideas by sending workforce on sabbaticals at different places to learn new work practices and tools from industry and academia, and applying that knowledge to their daily routines. Such programs foster risk taking and a feeling of “benefits of experimentation far outweigh the costs.”
Demonstration projects are one of a kind, large-scale initiatives that include holistic system-wide transformation targeted at a single site. These projects are executed with a goal of developing new organizational capabilities using a “clean slate” approach.
Self-managing, multi-departmental teams; high level of employee autonomy; considerable “learning by doing;” course corrections; implicit policy guidelines, precedents, and decision rules are the key characteristics of demonstration projects.
3. Learning from Experience
Learning Organizations gain valuable knowledge from their past experiences, by doing an exhaustive and systematic appraisal of past successes and failures. However, not too many managers pay attention to past experiences or reflect on those, eventually losing valuable insights. To inculcate a culture of learning, lessons learned should be recorded and made readily accessible to all employees.
A handful of companies have laid out processes for their managers to contemplate on their past actions and incorporate those in their learning. At the core of this approach lies the belief that distinguishes productive failure from unproductive success. Productive failure delivers knowledge and understanding whereas unproductive success goes unnoticed where nobody knows what went well and why. Learning from experience approach isn’t that expensive—case studies and project reviews can be compiled with little cost.
Interested in learning more about the building blocks of a Learning Organization? You can download an editable PowerPoint on Learning Organization: 5 Building Blocks here on the Flevy documents marketplace.
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Over the last decade, companies have made greater strides in retooling their innovation engines. Leaner and faster, products are developed from concept and delivered to customers in record time. But even a Ferrari does not know where to drive.
There are plenty of opportunities to enhance execution. Yet, inspiration and insights are increasingly getting to be a challenge for innovation executives. Innovation executives know that a new approach is needed. To boost performance to the next level, executives need to simultaneously loosen and tighten approaches to innovation management. We must start looking outward and opening ourselves to customers, collaborators, and our own creative side. At the same time, we need to tighten it through continuous improvement by attempting to embed an innovation culture to the organization.
Intelligent Innovation is considered a comprehensive approach that can support the next phase of Innovation Performance Improvement. The practice of Intelligent Innovation must complement the strengths of the current control regime to achieve innovative excellence.
Why Intelligent Innovation
Innovation Performance Improvement has been driven by initiatives that are highly analytical, inward-looking, and focused largely on retooling the innovation engine. There are 3 Stages of Performance Improvement. First is Management Control where innovation was treated like any other process and controlled with traditional management techniques. The second is Cost Control where innovation is redesigned to minimize cost. And the third is Profit Control where innovation was managed as projects with each project needing to be profitable in its own right.
Each successive stage built on the previous one. These stages are called “control regimes.” While these have built a critical foundation for future progress, they cannot deliver the desired results on their own.
To boost performance to the next level, Intelligent Innovation must be put in place. Intelligent Innovation completes the 4 Stages of Innovation Performance Improvement.
Intelligent Innovation and its 4 Dimensions
Intelligent Innovation cuts across 4 critical dimensions. It complements the strengths of the current control regime with excellence in 4 dimensions.
1st Dimension: Customer Insight
Customer Insight is considered the most important performance improvement level. It improves customer understanding with regards the evolving needs and critical priorities of customers. It can also increase customer participation in the innovation process.
Understanding what the customers want is important to drive ideation and execution.
According to Henry Ford, “If I’d only listened to customers, I’d have developed faster horses.”
By listening to customers, the more we learn what our customers need or want. And by knowing what our customers want, our organization will be in a better position to uncover tacit priorities that will fuel the most attractive development and innovative options.
2nd Dimension: Global Network
Global Network allows intelligent innovators to leverage dispersed knowledge across the globe. Each site or external partner is integrated into a seamlessly managed innovation network.
By having a Global Innovation Network, our organization will have the impetus to grow faster than its market.
3rd Dimension: Future Foresight
A well-tuned future trends capability can be a powerful strategic and competitive weapon in today’s global environment. It can identify tomorrow’s market opportunities and risks to drive innovation. Detailed and imaginative, this envisions the future competitive environment which better prepares our organization how to approach it.
4th Dimension: Innovation Organization
A critical element of success is the way organizations foster an innovation culture. An Innovation Organization carries within its DNA the intelligent innovation principles – senior management commitment to innovation, knowledge sharing, cross-functional teaming, freedom to pursue ideas, and innovation-friendly incentives. These are all embedded in the organization.
Intelligent innovators must work hard to unlock the innovation potential within the organization and use the tools available to direct organizations to take advantage of market opportunities. With a clear destination in mind, an innovative organization can accelerate its potential to gaining the winning edge when it comes to innovation, customer excellence, and profit.
Interested in gaining more understanding of the Dimensions of Intelligent Innovation? You can learn more and download an editable PowerPoint about Dimensions of Intelligent Innovation here on the Flevy documents marketplace.
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