Why Continuous Improvement Is Not Enough

Why Continuous Improvement Is Not Enough

CAUTION: This post is not a criticism of Lean, TPS, OpEx, and other CI initiatives, but a call to action for a higher order of strategic improvement – One that evolves a systematic architecture of leadership, sustaining infrastructure, digital technology integration, and behavioral/cultural development to new, superior levels of enterprise-wide excellence and global success.

Introduction

The world of improvement is evolving before our very eyes. The opportunities are larger than ever before. The purpose of this post is to encourage all organizations to evolve their thinking to a bolder, enterprise-wide, digital technology-enabled, and culturally connected approach to strategic improvement that builds upon previous Kaizen, Lean, TPS, OpEx, and other CI experiences. More of the same old school tool approaches or continuing to mimic another organization’s initiatives is not enough to harvest these new opportunities.

Current State Assessment

For most organizations, the magnitude and rate of improvement from their Lean efforts has reached a maturity and decline point. Many Lean, TPS, and other CI initiatives have declined and in fact, disappeared in many organizations as they have traded in their formal continuous improvement initiatives for more instant gratification activities. Before you stop reading, there is plenty of benchmarking data out there to validate this current state. What happened?

First of all, the current state of CI initiatives is a testimonial of leadership and their organization’s failure to implement, sustain, and achieve the entitled benefits of a fully engaged and culturally internalized CI operating environment. Despite the best of intentions, it’s not Lean, TPS, or OpEx’s fault. By the way, this situation is either a temporary bump in the road or a catastrophic disaster – Your choice, that’s what the continuous in continuous improvement means. The need for improvement is not going away and in fact, the urgency is higher than ever before. But what else is going on that has much larger implications on CI?

“First of all, the current state of CI initiatives is a testimonial of leadership and their organization’s failure to implement, sustain, and achieve the entitled benefits of a fully engaged and culturally internalized CI operating environment.”

What else has changed? The World and its requirements for improvement have changed dramatically. The scope of improvement has morphed from the factory floor to the enterprise and extended enterprise. The required velocity of improvement is ahead of most organization’s capabilities and rate of improvement. Improvement has become more technology and human dependent, requiring more creative thinking and advanced predictive and preventive approaches to improvement. So what happens when organizations apply the same thinking, same process, same people, and same beliefs to these shifting paradigms? The answer is being felt by the majority of organizations involved in CI initiatives. Value declines, commitment and interest declines, and CI falls off the radar – Again!

It’s not the end of the world if your Lean initiative has stalled out, declining, or is struggling to deliver true value to the organization . . . As long as you recognize and acknowledge this condition and the need to do something different to achieve different greater results. Easier said than done – Change can be difficult, even for the change experts.

TPS success or Lean failure are temporary oxymoron terms in the grander philosophy and correct practice of continuous improvement. The “process” of how we improve needs to improve to keep pace with changing business requirements and cultural development needs. Make sense? We definitely see this change in our consulting practice where clients are requiring higher and more immediate breakthrough improvements at a lower total cost. We have always continued to evolve our professional service offerings with client and market needs and hence, our service delivery model of strategic improvement is very different than it was 10 or 20 years ago.

Future Focus: Organizations can never achieve and sustain permanent breakthroughs in operating performance without consciously and deliberately driving and nurturing the right cultural values and behavioral patterns of excellence.

  • You can’t change culture with tools. History demonstrates the birth-death cycles of dozens of previous CI efforts. The typical executive mandated, top down, tools-focused, train-the-masses, measure compliance, report funny savings approaches to CI have not stuck because they eventually add questionable value. Tools-based improvements backslide when the attention and impetus is removed, plain and simple. More important, change leaders and practitioners have come up short on the human behavioral and cultural development aspects of change.
  • You can’t change culture by token commitments, edicts, and random behaviors all over the map. Culture is a continuously moving and churning outcome based on the combined behaviors, choices, and actions of organizations. You must focus on the means of adaptive leadership, strategy, a formal planning and execution architecture, technology and digitization, talent development, and real time closed-loop performance.
  • It takes a permanent, adaptive, systematic business systems approach to behaving, thinking and working. A higher order, daily business system approach to strategic improvement is the superglue that adapts, synchronizes, and holds the means of cultural transformation together. The name is insignificant, it’s the totally integrated business systems approach that matters.

Successful organizations are responding to the speed of change required to remain competitive with a more holistic, higher order daily business systems approach to Lean and continuous improvement.

Again, how are they responding? With greater focus on leadership, strategy alignment, sustainable infrastructure, digital technology integration, talent management, and cultural development . . . And much less focus on the methodologies and tools themselves.

Learn From the Past

In Western organizations for example, the Toyota Production System (TPS) is the current popular methodology of choice. Consultants and practitioners take TPS as Gospel and forget that once upon a time Toyota adapted in their own way, the basic body of knowledge of industrial and systems engineering principles, methodologies, leadership, and cultural development efforts into what is now known as TPS. They also injected creativity by adapting and integrating military and supermarket-type practices into their operating model. They didn’t mimic or copy GE, GM, ITT, IBM, and other large corporations at the time. Fast forward 70 years. They observed, learned, adapted, evolved, and perfected their knowledge into a single continuous improvement mandate, the Toyota Way. Just the opposite of most Western organizations, who have cycled through about 50 different fad, rebranded, alphabet soup improvement programs in the same time period.

On No, Not More Ohno

Taiichi Ohno is considered to be the father of TPS. Ohno advanced the basic principles of industrial engineering into a superior, culturally internalized sociotechnical operating system of CI. His principles work well, and it should have become the operating standard in every organization. But it has not worked as well for Western organizations for a number of explainable causes. Generally a major reason is the oversimplification and underestimation of Toyota’s long term efforts to achieve greatness. Ohno’s teachings are precious – However, as long as TPS is introduced and practiced in this manner it is a severely self-limiting CI initiative. Today his teachings are seventy years old, and Toyota and many other organizations have advanced far beyond these basics of good manufacturing practices, particularly with the integration of process innovation and emerging technologies. Those who have achieved the most success with CI are not mimickers and followers of TPS, but innovative CI organizations that learned and adapted TPS and many other data points in their own way. Things change after 70 years . . . And in today’s fierce global economy, every 2-3 years.

A continuation of a lite, mimic the tools strategy is limiting the potential of Lean in many organizations. So many people in organizations are running around with solutions and don’t have any idea about what problems they are trying to solve. Recognize the seriousness and risks of continuing on with this long term, Lean-lite mimicking trend to improvement. For decades continuous improvement has been exported and interpreted by Western organizations as an oversimplified piecemeal venue of individual tools, principles and the associated acronyms, jargonese, and manual storyboards. Six Sigma has followed a similar rainmaker dance and sing course: Walk people through the standard DMAIC methodology and statistical tools, give them the belt, sprinkle the instant experts across the organization to work on projects – any projects. It’s all about the visible activity and funny money savings, and not enough attention to alignment and real validated operating results. These approaches to improvement are extinct in our digital global economy gone wild. In retrospect, this is a fragmented, sub-optimization strategy of improvement. The journey has not been a holistic, enterprise-wide and culturally grounded and permanently internalized strategy like Toyota. It is not the fault of the improvement methodologies; executives and their organizations have continuously allowed themselves to fall into a kind of continuous improvement pit. Much of this has been driven by short term financial performance, where longer term efforts such as continuous improvement are always the first casualty.

A Bolder Approach is Needed

It is not the most popular statement, but many organizations and lean practitioners are stuck in their own same old comfort zones today. They trade off the broader philosophy, thinking and creativity and instead mimic all the right standard tools, principles, and jargon so they appear to fit into the insider’s Lean Manufacturing/TPS club.

Lean and continuous improvement is a lot more than memorizing and reciting what a particular symbol means in value stream mapping theory, or constructing gargantuan and non-actionable wallpaper maps of the company’s operations. And everyone knows that preaching about or mandating excellence doesn’t work. Continuous improvement has always been about riding against, and changing the direction of the herd. I’ve observed many consultants, experts, and practitioners become comfortable with their limited and more repetitive mechanical tools-based approaches to continuous improvement, and have become part of a new Lean/TPS herd. When this happens, it’s like any other herd. People are comfortable, emotionally attached, and settled in with their current practices and are not open to opposing or different viewpoints. It becomes a bit like Fake News. Continuous improvement is never steady state, it’s continuous – A continuous challenging of operating processes and practices, and continuous learning and development based on new and evolving improvement requirements and opportunities. Our intent with a reference model approach is to shift people away from the copy and mimic mode of improvement, and provide extensive details about architecture guidance and best practices of successful higher order daily XYZ Business Systems based on years of benchmarking and implementation experiences.

Many of the hard core TPS club members are the most difficult to change mindsets to a higher order of Lean because they have settled into their comfort zone as a Lean/TPS Tools Tradesperson or No Brainer Trainer. It’s a normal physiological behavior for people to return to what they know well.

You just can’t allow this to happen as a Change Master.   Many of the hard core TPS club members are the most difficult to change mindsets to a higher order of Lean because their comfort zone is a Lean Tools Tradesperson or No Brainer Trainer. Many consultants are no longer adding value because they are preaching the same old stories in the same Field of Dreams mode (i.e., If you follow the recipe and go through the motions enough, the results will come). Everyone talks a good game about leadership, culture change, or sustaining the gains, but they always seem to gravitate back to the tools and techniques. They are cruising along with the same traditional tools-based approaches, debating about Kaizen vs. Lean vs. TPS vs. Six Sigma, and do not accept the recognition of the need for a higher order, totally integrated and systematic model of strategic improvement. They justify their position by touting the need to master the basic principles, while the actual daily interpretations and practices of these supposed basic principles in organizations are severely flawed and totally misaligned. They keep on the track of focusing on the wrong things, taking the wrong actions, and getting the wrong results. Not knowing or understanding the needto improve how they improve, they take the normal physiological path back to doing what they know well. There is no tangible operating results coming out of their efforts, and management commitment fades away. So too does the effectiveness of the Lean efforts. Lean and CI practitioners are like any other organizational position – One year of CI experience ten or fifteen times over makes people stale and less motivated to think creatively and change routines.
Finally, it is impossible to mimic transformation leadership and culture. TPS and Shingo are great references, but well intended interpretations of these topics cannot be reduced down to a standard recipe. The human emotion and cultural development side of improvement is the most important, and most complex challenge especially over the long term. Taiichi Ohono always talked about Toyota’s success by trial and error, “in their own way.”  Executives and their organizations must discover this secret sauce for “their own” organizations and “in their own way.”  They must define it, create it, and continuously nurture it to a higher level of performance.

It is impossible to mimic transformation leadership and culture. Executives must discover this secret sauce for “their own” organizations, and “in their own way.” 

Enterprise-wide culture change requires much more than mimicking a few Kata practices packaged on pocket cards from observations in a Toyota factory. All of these efforts have goodness, but they are not good enough to achieve the broader global strategic breakthroughs required in most organizations. Let’s look the reality of human nature in the face:  Many Lean consultants and practitioners have become complacent and are not able to see the new and emerging forest through the trees. Insanity – More of the same check-the-box recipe thinking does not produce different results. Enough of the traditional Lean thinking leads to protective coloration of a changing reality. Today Lean is a perceived commodity: Everybody is already doing it in some form or fashion with varying results. Consultants and practitioners who continue to preach the standard mantra, follow the recipes of others, and merely go through the motions are rapidly becoming extinct. It’s time to evolve beyond the Toyota Way and Toyota Kata and discover your new model of strategic improvement in your own way.

Evolutionary Lean

Again, let’s be clear and up front – We are not criticizing or discounting TPS, we are pointing out its “as-practiced” maturity or end-of-life status in the majority of organizations, and that a higher order of strategic improvement (which incorporates TPS and all other improvement methodologies focused across the entire enterprise) is needed to keep pace with the increasing speed of global change.

We are not claiming that Lean is better than Six Sigma or vice versa. We are not interested in debates about Lean vs. TPS vs. OpEx or Toyota KATA. We are not promoting some fandangle “What’s Next after Lean” solution. We are sending an urgent message about the need to improve how we improve. This is not a replacement for Lean but a major enhancement to Lean, building upon previous experiences and successes. Recognize that the Lean philosophy is not a static, steady-state value proposition of improvement, and it is not limited to manufacturing. The World is changing, the notion of process is shifting to a higher human and technology content. The future requires a more holistic, integrated, and systematic approach to improvement – especially the cultural and technology elements of transformation.
There are so many complex developments in core enterprise professional and knowledge-based processes, emerging technology, kata and cultural development, and other areas that make this paradigm shift in Lean logical, possible, and necessary. The good news is that the unknown and undiscovered opportunities for breakthrough improvement are much larger today than any other time in the history of improvement. If you do not recognize this, then your organization is falling behind in our improve or die world.

Summary

Failure to implement, sustain, and achieve the entitled benefits of a fully engaged and culturally internalized CI operating environment is not acceptable. Every organization needs to knuckle down and master CI as a cultural standard of excellence. This goes way beyond mastering the tools, practices, and jargon of someone else’s CI initiatives. Toolitis and knocking off what others are doing has been the largest detractor to success for decades. Branding and repackaging many of the same basic fundamentals has not helped much. Think, Think, Think: If every organization is working on the same problems with the same approaches, where is the competitive advantage? The greatest powers of CI are engagement and empowerment, internalization, self-management, and continuous discovery (i.e., How can we get even better?). We need to inject innovation, creativity, and technology into the CI sauce. This requires more recognition and common sense than it does integral calculus and rocket science. Put your CI keys down, take a closer look at the world, critique and rethink your journey, and get on a higher order path of success. If you’re not good at continuous CI, you probably won’t be so good with future CI and transformation initiatives.
Everyone throws the words disruption and transformation around. For those who actually implement complex transformation initiatives, it is never a perfect giant step forward. Rather, it is a big giant step in the right vicinity with many loose ends that must be pulled in quickly to achieve success (through CI behaviors, choices, and actions). Failure to do this well results in new processes with even more new and far reaching defects. Transformation is not a destination but a journey. A strong and innovative CI-embedded culture helps organizations to move beyond the current state and discover the next innovation cycles of transformation.

My Part II Post – “How To Achieve Transformation-Scale Benefits From Continuous Improvement,” will provide a renewal guide for strategic improvement including leadership, strategy and alignment, infrastructure best practices, integration of digitized technologies, and cultural transformation.
If you are interested in achieving greater benefits from your Lean, TPS, OpEx, or other improvement initiatives, please contact us to discuss your current status and assessment needs. 

Terence T. Burton is President of The Center for Excellence in Operations, Inc.

For additional information or questions, navigate our website, use the GET IN TOUCH feature below or contact the author directly at burton@ceobreakthrough.com.

How To Achieve Transformation-Scale Benefits From Continuous Improvement

How To Achieve Transformation-Scale Benefits From Continuous Improvement

Introduction To The Lean Business System Reference Model™
The diagram below provides a concept overview of the Lean Business System Reference Model™. Our reference model serves as a guide and playbook for creating a higher order paradigm of Lean and strategic improvement in general. The reference model provides the adaptive leadership guidelines, overall architecture, operating processes and sub-processes, cultural development best practices, and key performance metrics of a holistic XYZ Business System. Obviously there is a wealth of detailed operating system design criteria, best practices experiences, and “how-to-do” guidance behind this overview chart.

Simplified Understanding

  • The reference model is not an ad-hoc, sequential collection of improvement activities or more tools, techniques, and updated jargon.
  • The reference model is a proven guide for designing (“in your own way”) the systematic architecture of leadership, infrastructure, digital technology integration, and behavioral/cultural development to achieve higher order improvement and sustainable success
  • The reference model is named “Lean” but it is a practical guide for any major transformation initiative because it integrates all of the formal critical success factors, totally integrated processes, and best practices working harmoniously and continuously to achieve breakthroughs in operating performance. Regardless of the labels (e.g., Lean, TPS, OpEx, Business Transformation) the architecture incorporates the same success-enabling elements.
  • The world of strategic improvement is evolving very quickly from a “manufacturing excellence” approach, to a bolder, higher order “enterprise-wide cultural and digital process excellence” approach.  Behind KATA’s deep rooted meaning are continuously developing patterns of evolutionary thinking. This does not happen in “copy and mimic” improvement environments.

A major objective of the reference model is to guide organizations away from the superficial mimicking of other organization’s improvement efforts or the perceived Toyota way – and think, innovate, and become the next Toyota in their own way. The reference model concentrates on precisely adapting, expanding, and aligning improvement to today’s global business and economic needs. It goes much deeper into the enterprise and extended enterprise opportunities for global improvement, the enabling patterns of behaviors or “kata” attributes of cultural development, and the integration of emerging digital technology.

Kata: A systematic global cultural development process where patterns of behaviors, values, and codes of conduct are routinely practiced through continuous structured means and deliberate actions, until the protocols become second nature with little conscious attention.  Behind KATA’s true meaning are continuously developing patterns of evolutionary thinking.

Most Lean consultants, experts, and practitioners agree with the first part of the above underlined statement (culture), but they have a difficult time wrapping their arms around the  emerging digital technology part of the statement. Many view technology negatively as “Oh no not another Y2K/ERP fiasco.”  Several have grasped and benefitted from the compatibility of Lean + emerging digital technology such as the cloud, mobility, business analytics, real time performance dashboards, digital andons and kanbans, predictive and preventive CI countermeasures, and the like. Make no mistake about it – Digital technology is rapidly becoming a major differentiator in strategic improvement.  It’s not a replacement for the tough work of improvement by any means and it’s not the next golden egg. However, refusal to embrace and connect digital technology and improvement will leave organizations in a serious competitive disadvantaged state. It’s about people engagement to adapt the right technology applications that take improvement to the next levels of excellence. People are the heart and soul of transformation and the organization’s greatest asset.

What is the purpose of a reference model and why is it needed?
The reference model is an architectural framework of integrated concepts, principles, frameworks, processes, an expanded body of improvement knowledge, and best practices that is used as a guide to communicate, educate, and create a shared understanding of a holistic, higher order, enterprise-wide Lean Business System.
A true Lean Business System is a fine-tuned network of integrated and interdependent sub-processes working together. The Lean Business System Reference Model™ helps organizations to adapt the architecture, sub-processes, best practices, and underlying patterns of behavior to their own operating environments. The intent of our reference model is a design guide for Lean Business System success, and also a cultural transformation guide to keep the continuous in continuous improvement.

Purpose of the Lean Business System Reference Model™
The Lean Business System Reference Model™ provides a working framework for designing, developing, and implementing best practices relative to adaptive systematic improvement. This reference model provides the total architecture and sub-processes for creating a for real, forever Lean Business System. It serves as the organization’s relentless, never-ending operating system of improvement, and includes guidance and best practices around adaptive leadership, strategy alignment, sustainable infrastructure, digital technology integration, talent management, and cultural development. The reference model is a guide to adapting and architecting an organization-centric and culturally grounded Lean Business System. It provides the detailed architecture, sub-processes, and best practices for both the visible (operating system, principles, methodologies, tools) and invisible (leadership, communication, human capital development, behavioral alignment and cultural development) sides of adaptive systematic improvement.

Need for a Reference Model Approach

This is not a replacement for Lean, TPS, Six Sigma, or any other CI labels. And it’s not the replacement of Lean with more Y2k or ERP technology fiascos. It’s a logical means of “improving how we improve” upon enterprise-wide CI with the right leadership, infrastructure, sustainability best practices, cultural acceptance, and superior (validated) operating performance.
The reference model is a guide and roadmap that helps organizations to implement and sustain a superior, enterprise-wide, digital technology-enabled, and culturally grounded Lean Business System . . . “In their own way.”
The Lean Business System Reference Model™ helps organizations to design, integrate, adapt, and systematize high velocity and high impact improvement in a variety of different industry environments, business requirements, cultural situations, and industry segments. It helps organizations to implement and sustain a superior, enterprise-wide, digital technology-enabled, and culturally grounded Lean Business System . . . in their own way. Think of it as a the next logical evolutionary addition beyond the Toyota Way and Toyota Kata, both an important part of a holistic, enterprise-wide Lean Business System.

Lean Business System (LBS) Analytics

LBS Analytics® is the assessment and evaluation criteria in the Lean Business System Reference Model™. We have developed an evaluation software solution as part of the reference model to help executives, change leaders, and strategic improvement practitioners think through the design, architecture, implementation, and sustainability requirements of a higher order, enterprise-wide, technology enabled, and culturally grounded Lean Business System. Below is a graphical example of one of the largest detractors of success: Misalignment of business strategy and improvement strategy.

We provide a Strategic CI Assessment to our clients, using the reference model to help clients evaluate current CI performance and develop the right road map toward a higher order model of strategic improvement and value contribution. Clients can also use the reference model and do this on their own. LBS Analytics® incorporates over 600 best practice evaluation points and 50 graphical analytics, and is very useful in pointing out gaps, root causes of underperformance, and missed opportunities with an organization’s Lean and other strategic improvement initiatives. No it’s not over 600 metrics but simply a guide of best practices, templates, checklists, and other resources that are to be applied and interpreted for your own organizational situations – In your own way. The analytics model has been architected to provide significant value to organizations in three major areas of their Lean and strategic improvement initiatives:

  • As a reference guide for the initial design, architecture, implementation, and ongoing sustainability of a for real Lean Business System. The application provides an effective roadmap of critical success factors for creating a holistic, enterprise-specific, technology-enabled, and culturally grounded XYZ Business System for any organization in any country; and
  • As an assessment and corrective action process to baseline, evaluate, and understand gaps in current performance of an existing Lean Business System relative to leadership, strategy and execution, cultural development, desired performance, and best-in-class performance. The application generates visual analytics that display the relative strengths, weaknesses, and improvement needs across many critical success factors in an adaptive systematic process of improvement and in the existing Lean and strategic improvement initiatives.
  • As a continuous improvement and sustainability guide to measure relative progress against previous assessments, across different business units, or periodic comparisons to best-in-class performance (which is always being updated, it’s a living reference model).

Collectively the assessments generate very objective and pragmatic guidance, with pointed prescriptive and graphical analytics for developing a for real, higher order XYZ Business System. The largest value of LBS Analytics® is its ability to help organizations discover a new and superior paradigm of Lean and strategic improvement, and identify millions of dollars in new improvement opportunities.

Visit https://www.amazon.com/Global-Kata-Success-Business-Reference/dp/0071843159 for additional information

Summary
Nobody can downplay the tremendous success of The Toyota Way for the past 70 years. I’ve been admiring the achievements of Toyota and hundreds of other great organizations for nearly four decades . . . And I’ve also seen a lot of CI programs (and companies) come and go during this time. We’re out of time.
This is an exciting time. Customers, global market dynamics, and digital technology are literally shifting the CI paradigm to a higher order model. Keep in mind that global market dynamics, digital technology, and human potential is transforming the way organizations improve very quickly – In fact quicker than ever before, with greater opportunities for success. Toyota or no other organization holds the keys to the future possibilities of strategic improvement: You do – If you choose, innovate, and act accordingly for the next decades. Check out this recent post for a 150 year old lesson about Lean.

Toyota or no other organization holds the keys to the future possibilities of strategic improvement: You do – If you choose, innovate, and act accordingly for the next decades.

The Lean Business System Reference Model™ is not another new spin or rehashing of Lean. It is a structured design and operating guide, and a collection of best practices to achieve a culturally connected, daily “business system” approach to improvement. The reference model is a very practical and useful framework because it presents a true, higher order Lean Business System as an integrated system of leadership, strategy, critical processes of improvement, people and cultural development, and performance into a unified structure. There’s no new branded buzzwords, knock-offs of other programs, or jargonese – Just practical “how to” guidance, design criteria, templates, performance metrics, and best practices based on years of experiences with hundreds of different organizations.

The Lean Business System Reference Model™ can help any organization around the globe to develop an exceptional core competency of improvement and a higher cultural standard of excellence throughout the total value chain: customers, stakeholders, the enterprise, supply chain and other trading partners.

The philosophy of improvement is universal, but the correct path to adaptive systematic improvement is very different in different industries, operating environments, and cultures. Like all reference models it evolves every day as we acquire new knowledge through our own experiences and the successes of others. However, the reference model is a bold step to the next evolution of enterprise-wide, technology-enabled and culturally-powered Lean.

If you are interested in achieving greater benefits from your Lean, TPS, or other improvement initiatives, please contact us to discuss your current status and assessment needs.

Terence T. Burton is President of The Center for Excellence in Operations, Inc.

For additional information or questions, navigate our website, use the GET IN TOUCH feature below or contact the author directly at burton@ceobreakthrough.com.

A Guide To Successful Operating Model Transformation

A Guide To Successful Operating Model Transformation

Every executive I meet with has concerns about the future. They all understand conceptually, that business stability and remaining the same is not a viable option. They observe the Amazons, Home Depots, Walmarts, and other giants battling it out on the e-commerce playing field and wonder how their market disruptions will impact their own $150M company or business unit’s future state. These inevitable disruptions are being fueled by warp speed emerging global market opportunities, technology and process innovations, empowered consumers with changing preferences, and evolving regulatory and compliance challenges. Welcome to the digitized economy . . . Where the world and business are evolving at a faster pace than ever before, where the rate of adoption is increasing exponentially with no end in sight.

These harsh realities leave executives daunting and confused about how to change at the required scale of magnitude, velocity, and repetitiveness to achieve sustainable success. The chaos, turmoil, fears, unknowns, perceived risks, costs/benefits, and other critical factors of change are very real and in fact, even higher in business model transformation initiatives. To top it off, protecting revenue and short term financial performance often makes major change the first casualty. Returning to the well (i.e., same thinking, same processes, same people, same metrics, and same results), procrastination, postponement, or complacency are all much riskier and costly choices.

The light at the end of the tunnel in all of this is that an infinite world of new possibilities opens for companies to re-imagine their business models, the way they work, and how they compete. The limitations of old processes and old technology are lifted. The new limit is the self-imposed limits that executives and their organizations choose to place upon themselves.

Transformation Requires A Systematic Approach
The initial human impression to words chaos and disruption is negative. Face it – Anyone who has been in the change and improvement business for decades knows that these words do not make organizations jump for joy. The very real forces that we mention above are causing convergence between short term and the long term as we have known it. There is no long term, just Transformation Opportunity Horizons and S-Curves, appearing one after the other. Organizations ascend success via Jump-Off points, or they experience a maturity and a eventually a decline in success.

How do executives and their organizations respond to these breakthrough challenges? The answer is simple and easy: With a breakthrough operating model. We view this process as a series of major platform changes (transformation) followed by derivative (continuous) improvements. We also view transformation as a network of prioritized changes to core process segments based on a combination of innovation, science, and facts: Supply Chain, Manufacturing, Distribution, Customer Service, Order Fulfillment, Cash-To-Cash, Sales and Marketing, Advertising and Promotions, etc. In other words, don’t attempt to transform the universe based on emotions or someone else’s models. Understand and focus on the key value drivers (wherever they exist) within your business.

While no single operating model is applicable to every company’s business requirements and cultural development needs, there are common mission-critical attributes of an operating model transformation:

  • Bold, Courageous Leadership. Today’s global economy will continue to evolve disruptions at an endless, inevitable, and increasing rate.  Executives need to think beyond knocking off or mimicking someone else’s business models. Organizations must become business model innovators and forever alter their dynamic culture and very DNA to stay relevant. Forget calm, and embrace the humility situations – You can’t avoid them anyway in this global digitized economy. Humility disrupts the status quo and the you don’t know what you don’t know cycles of stagnation. This drives a higher order of KATA where we continuously and deliberately change patterns of behaviors so that people accept and embrace a fuzzy state of flux as the new norm.
  • Customer Centricity. Companies must spend more time exploring new business opportunities and relationships with customers. Voice of the Customer is important, but in this economy they are not always talking and expressing their needs and changing preferences. The knowns can be factored into the transformation sauce. A capability must exist to integrate the unknown and emerging requirements, and they must either be defined for the customer, predicted, or quickly adapted into transformation initiatives.
  • Strategically Sound and Executable. We talk with many organizations who have developed a holistic strategy to transformation, but it has not, is not, and will not be executable in its current state. Strategy alone doesn’t win the game, especially when the answers to the questions Why, What, When, Where, Who, and How are missing. There is nothing new here, just an old never-ending lesson about change. Transformation requires the unwavering leadership, strategy, governance, deployment infrastructure, talent, resources, time, bandwidth, culture, and metrics to achieve success. These are the critical underpinnings, and emerging technology is a given.
  • Global and Agile in Scope. Growth in developed domestic and regional markets is maturing. Organizations must place much more focus and effort on the next emerging customers, markets, products and services that will double or triple revenues. This includes a surfing and navigation capability to identify new opportunities, and a conversion capability to translate opportunities into competitive advantage and operating performance.
  • Scalable and Flexible. Well architected operating models have the stealth to compete fiercely on performance and own their existing customers and markets. They also have the flexibility to continuously morph and scale functionality into higher capabilities in near real time when new and emerging opportunities arise. This is an attribute of owning the bar vs. raising or following the bar. It’s a scale or fail world.
  • Digital Technology-Enabled. Transformation is impossible without leveraging digitization. Operating models must define and integrate the right digital technology capabilities (e.g., cloud, big data, mobility, business analytics, social media, real time performance dashboards, predictive and preventive process analytics, etc.). The digital strategy should be uniform from an enterprise perspective, but allow for digital enablement – The smart consumption of digital assets in order to maximize operational excellence, implement evolving intelligent processes, maximize internal and external value contribution, and optimize the customer experience.
  • Talent Management Rich. Operating model transformation requires the continual process of talent management: Acquisition, deployment, development, retention, rationalization, and planning. Organizational learning and development is not enough. Talent management also requires a complete rethinking about how people and organizations work in more of a freestyle thinking and flowing manner. Every platform and derivative change on the operating model transformation journey requires new injections of skills and talent.
  • Reconfigurable and Adaptive On-Demand. A concept operating model may have specific design footprint, infrastructure definitions, and operating capabilities. Often these criteria are directly applicable to a facility and its situational requirements. In emerging opportunity situations, operating models need to be reconfigured and adjusted to meet local market needs. Consider a distribution network in today’s economy. A single one-size-fits-all warehouse model is obsolete. Every warehouse should be configurable to its particular needs, and additional warehouses with different configurations of the same operating model footprint (e.g., capacity, #SKUs, equipment, people, space, etc.) to satisfy the new needs in that area. Other warehouses may be closed or consolidated to continually optimize the network over time.
  • Proactive Compliance to Regulatory Requirements. In a global economy organizations are challenged by country, state, and industry compliance expectations. In many organizations these known and hidden costs of compliance represents millions of dollars in opportunities. Governance, Risk Management, and Compliance (GRC) is an internal oversight discipline that must be integrated into the operating model transformation. GRC aims to synchronize process and information value streams in order to operate more efficiently by enabling effective process and information value stream management, sharing knowledge across these end-to-end streams, more effectively reporting non-conforming and/or corrective action activities, and avoid wasteful overhead maintenance and costly non-compliance penalties.
  • Mindware-Wired for Continuous Improvement. Unfortunately the need for improvement never goes away and operating model transformation does not occur in a single giant step. Transformations are never-ending journeys that require renewal through incremental and step-function improvements. This requires creative, no-fears talent that comes to work every day looking to push the limits, strive to get even better, look for the next operating innovation. When organizations are missing this valuable characteristic in their culture, transformation becomes a destination, a dead end of missed goals and disappointments. Transformation success also depends on age-old basics like engagement and empowerment, integrating process and technology, team and collaborative-based execution, visual performance, and many other fundamentals of previous improvement initiatives. Transformation is an evolve or dissolve proposition.
  • Culturally Grounded. The right cultural attributes of passion, commitment, one cohesive team, and open fluid collaborative holocracy structures. These organizational models increase focus, alignment, engagement, empowerment, self-management, innovation, and creativity in organizations. The never-ending challenge is how best to structure and deploy the right resources at the right time to get everything done. At the same time, organizations must leverage their operating models as a continuous developer of talent, individual behaviors, and nurturing the right cultural standards of excellence (Kata).
  • Collaboration Integration.  Many organizations do not have the unwavering commitment, internal skills competencies, bandwidth, resources, time, or technologies to transform their operating models organically. Hubris is transformation’s worse enemy, and executives should never underestimate the cost and complexity of transformation initiatives. Organizations need to set up and acknowledge the capabilities and risks of their transformation initiatives for success. This includes the right internal/external focus, competencies, time, and resources to overcome all the unknown obstacles of success.

This is not by any means the full design guide for operating transformations. However, it provides a good starting point for testing and calibrating an operating model transformation strategy up front, thereby flushing out many of the largest detractors to success.

Summary

The sheer complexity of the above attributes is often underestimated and oversimplified – Or worse yet, not even considered. Failure to deal proactively with these attributes can create a false sense of security and invincibility by masking existing vulnerabilities and unforeseen polarizing forces that run transformation initiatives off the tracks. Let’s revisit implementation for a moment. Large organizations have more capital and resources to commit to transformation initiatives. For small and mid-sized organizations, a different implementation approach is necessary – A holistic strategy followed by deliberate, prioritized, high impact/quick ROI transformation activities that all fit together. Small and mid-sized organizations cannot afford the one-time investments, churn, and political complexities of their larger counterparts.
Operating models serve as a blueprint for how the company is organized, and how people, processes, and technologies are deployed and operated to produce breakthroughs in operating performance. It encompasses decisions about the shape, size, and scope of the business, where to draw the boundaries for each line of business, how resources collaborate within and across these boundaries, how the enterprise will add value to the business units, what behavioral norms and codes of conduct are encouraged and expected, and how to measure progress and success.
This begins by expanding the strategy in sufficient detail according to the attribute guidelines in this post.

A final thought. Many organizations are great on the strategy side of the fence, not so great on the deployment, execution, and sustainability side of the fence. Organizations must own up to their persistent gaps between strategy and execution and not continue to believe that the situation does not exist. The consequences of poor execution are much higher and costly with transformation. Diligent use of the above attributes will expose any elements of the operating model that present excessive risk or are not working in harmony. Operating models misalign, it’s a fact of life in an imperfect world. Organizations will benefit significantly by adapting the mission-critical attributes of a successful operating model transformation. If you don’t have the skill competencies, bandwidth, resources, and time to define, organize, and implement transformation initiatives with 100% success, consider the use of the right outside expertise to shore up the effort. In this economy you can’t afford to be wrong or too late. If you don’t overcome your limitations, you will be overcome by stronger competitors.

Terence T. Burton is President of The Center for Excellence in Operations, Inc.

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