Monday, November 13, 2006

The Criticality of Operational Excellence

The line between business and IT continues to blur as new technologies provide increasing support for business users to design, modify and even implement some critical systems. Business operations and technology are deeply interdependent, and an alignment of IT with organizational goals has become the new Holy Grail of business performance enablement.

Business culture has traditionally undervalued operations as an unglamorous necessity. The allure of dealmaking and the excitement of new technology deployment have all but trumped operations as a strategic imperative. Worse, while “continuous process improvement” has been overused to the point of now being a cliché, it’s remarkable how few companies actually practice it.

The design of the organization, as well as workflow optimization, technology selection, key performance indicators, policy development and hiring, training and compensation practices sit squarely in the domain of operations, creating the context in which technology deployments take place (i.e., the domain of the CIO) and real organizational value is built and maintained (i.e., the domain of the CFO). The commoditization of so many products and services has created a new mandate for operational excellence – low cost operations that drive pricing flexibility requires some real attention to internal cost reduction. “In this environment,” writes process improvement guru Michael Hammer, “the only way to grow is to take market share from competitors by running rings around them: by operating at lower costs that can be turned into lower prices and by providing extraordinary levels of quality and service. In other words, the game must now be played on the field of operations.”[1]

You best believe tomorrow's leaders will be those with exemplary operations. Traversing the path to excellence means constant attention to key performance indicators, ever-raising the bar and leaving competitors in the dust.
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[1] Hammer, M. (2004, April). Deep change: How operational Innovation can transform your company. Harvard Business Review.

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