How much have you budgeted for improvements in 2020? How do you expect to achieve the desired operating results? Many organizations cannot answer these important questions, nor do they have a formal process in place to mine, plan, and execute budgeted improvements to their business. 

Stop wishing and hoping for your discombobulated improvement initiatives to deliver something by chance, and take a more deliberate approach to achieve new breakthroughs in operating performance. 


What Is The Intent?


First let’s talk about your intent.  If you don’t have an intent around this topic, then don’t expect things to improve on their own.  Too many organizations are stuck in a mode of blindly clinging on to their failing improvement initiatives while expecting different results.  Our intent is to help you break this cycle and realize new breakthroughs in improvement and operating performance.

Some of our best performing clients have become great at defining and extracting strategic improvement themes and detailed implementation tactics from their business plans with the boldness and confidence to incorporate the expected results (growth, cost reductions, overhead savings, purchasing spend, human capital development, etc.) into their budgeting process . . . Right up front, before it happens.  They are highly proactive in their strategic and operating improvement initiatives, and do not wait to address problems after the fact.  Their thinking is open and right out of the box – “We need to get much better at (strategic theme).”

Some example strategic themes might include the following:

  • Time-to-Market: Improve velocity, robustness and reliability, and development costs of introducing new products, and increase market share and the ROD (Return on Development) metrics.
  • Sales Returns and Allowances: Understand the recurring root causes of returns, allowances, samples, credits and discounts, etc. and improve gross margins and profitability.
  • Excess/Obsolete Inventory: Why do we continue to have low turns, excess inventory, and continued write-downs for obsolete products and materials?  What are the recurring root causes of excess/obsolete inventory? (If you simply allocate financial reserves to cover these wastes, then you will never know the true answers – And the wastes will never go away).
  • Warranty and Returns: Understand the dynamics and reduce warranty and returns (e.g., customers, products, geography, root causes, corrective actions, etc.)
  • Sales and Operations Planning: Why are there so many repetitive mismatches in demand and supply that detract from customer service, inventory performance, and other supply chain costs and inefficiencies?
  • Cost of Quality and Compliance: What are the fully loaded costs of quality and compliance, and is there something that we can do radically different (innovation) to improve both while significantly reducing costs?
  • Procurement Spend: Have we optimized sourcing, supplier management, outsourcing vs. insourcing, administration and material overhead, and other purchasing costs?
  • Operations and Facility Rationalization: Are we sourcing and building the right products in the right locations close to our customers and markets? Are there any economies of scale and scope through consolidations and relocations?
  • Financial Performance:  Do we really understand the most influential drivers of our operating and financial performance, and are all of our people aligned and working on the right things?

Every organization can do a much better job in each of the core process areas above, representing millions of dollars in new opportunity.  However, tackling these strategic themes is extremely complex and challenging.  Leading organizations are not in the business of launching token improvement programs all over the map and then hoping that something sticks.  Their playbook approach is laser targeted with flawless alignment and execution.  They have flushed out the right causes and effects, and the above examples require multiple, well-orchestrated initiatives from many different fronts.  They also have a finely tuned, working business system approach to improvement in place to anticipate and mine for unknown/undiscovered improvements and efficiently evaluate and tee up their most critical improvement needs in near real time.


Budgeting For Strategic Improvement: Why Is This Best Practice So Important?


Budgeting for Strategic Improvements (BFSI) is critically important to business and operating performance. This solid best practice significantly increases the odds of success because the budget sets the stage for operating commitment and execution success.  BFSI drives a higher standard of expectations and ownership, a done deal rather than excuses for poor performance after the fact.

Most organizations don’t have a clue about what their improvement initiatives will yield in 2020 and beyond. One of the major reasons for this is their lack of a well operating business system approach to improvement.  Many executives claim to have formal improvement initiatives in place, but a closer look reveals that it’s a mish-mash of disconnected activities and knock-off efforts from some other organization’s improvement programs.  Some initiatives generate positive results initially, but sustainability is very questionable.  The benefits from many of these initiatives are more delusionary and funny money that real tangible value contribution to the business.

Organizations are missing the deep leadership commitment and internal talent pool to adapt, identify, and align the right improvement strategies to their business plans, and at the same time develop the right capabilities to execute efficiently and achieve the desired results. So forget about budgeting for improvement in 2020 and beyond!


How to Budget for Strategic Improvements in 2020


There is no rocket science needed for this approach. However, there are some very imprint end efforts that are required to get a BFSI initiative underway and on the right track.  The first step in this process is a review of the business plan followed by a thorough, objective assessment of the organization’s current state operating infrastructure.  This includes:

  • A review of the operating budget, and recasting traditional accounting expenses into activity-based core processes, costs, and operating themes. For example, what are the fully loaded costs and value propositions of quality, customer service, maintenance and facilities, supply chain, sales and marketing, other support operations?
  • Mining, analytics, and decisioning to further categorize the lower level drivers of costs, wastes, time, and other inefficiencies in operating infrastructure (e.g., Process owner interviews, Pareto and ABC analysis, 5 Why drill downs, attribute mapping, clustering and activity-based metrics, gaps between current and desired performance, etc.)
  • Developing and prioritizing the key strategic themes and detailed implementation tactics in the operating The playbook explodes the strategic improvement themes into many actionable execution plays.
  • Integrating and aligning all budgeted improvement initiatives into the organization’s formal business system architecture. The business system incorporates best practices and operating standards for planning, deployment, execution, and sustainability of all improvement activities.
  • Adjusting the operating budget to reflect the benefits expected to be achieved in the following year(s). This is the bold removal of funds based on the confidence and right planning and execution infrastructure to achieve success.  These benefits relate to growth, market share, margin improvements, cost and overhead reductions, human capital improvements, key operating and financial ratios, and all other benefits to the business.
  • Implementing the required plays (execution of the right improvement activities) concurrently in the desired timeframes to achieve the desired budgeted results. This is a much more aggressive approach with frequent performance monitoring and course corrections as necessary to meet the desired outcomes.

This is a simple explanation of how the BFSI process works. There is much more logic and science behind this approach, and it is much more effective than arbitrarily slashing the individual chart of account numbers.  Budgeting is also required for internal human capital development, related technology and financial capital initiatives, talent guidance from external sources, and acknowledgement of the major skills/competency detractors to success.  Otherwise, improvements are empty afterthoughts and not possible at all to achieve.

The reality is that it takes very seasoned people who know how to quickly understand your business and gaps in performance, mine for the right causes and effects, adapt a successful working approach to your business and organization, and develop talent to implement the required plays and continue to sustain the gains internally. Many executives are reluctant to admit that they don’t have this capability and capacity within their organizations.  BFSI also means budgeting for the right implementation resources and other spend requirements to achieve the desired results.  These incremental expenses are insignificant when dealing with breakthrough improvements and rapid double digit ROIs.

By the way, the answer is not hiring a brand name consulting firm. This is very costly, risky, and the results are unpredictable.  There is no correlation between consulting brands, fees, and success – It usually turns out just the opposite.  The answer is finding the right, experienced and proven talent that can transparently plug into your organization and provide know-how and value from day one.  Acquiring and engaging the right talent is the key to great results.


The Playbook Mindset And Approach Are Essential


Let’s talk about the playbook in greater detail. The knowledge and experience of going through the above mechanics are key core competencies in themselves.  Translating the findings, conclusions, recommended actions, talent needs, and all other execution details into the playbook is also a key core competency.  Finally, managing executives and their organizations through a major operating transformation process is the most important core competency.



As we mentioned previously the playbook explodes the strategic improvement themes into many actionable execution plays.

  • Playbooks align strategic improvement themes with the detailed, prioritized implementation tactics required to actually realize or exceed the expected benefits on time.
  • Each play includes a problem statement, baseline performance gaps between current and desired performance, objectives, execution plans, expectations, roles and responsibilities, metrics and timelines, milestones and deliverables, talent development needs, detractors from success. Benefits can be both hard and soft as long as they contribute lasting value.
  • The playbook is an important instrument for communicating a shared vision of improvement and the requirements and expectations for success. The playbook is a training aid in itself, helping the organization and participants by clarifying a uniform story about the why, what, who, where, when, and how of the budgeted improvements.
  • A playbook addresses detractors from gap closures such as current skills and capabilities vs. professional development needs, leadership strengths and weaknesses, competencies in guiding concepts, methodologies and tools, resource capability/capacity, and further education needed to execute the playbook assignments successfully.
  • Playbooks facilitate and drive best practices in planning, deployment, execution, and sustainability of the desired results.

Playbooks provide the structure and discipline required for flawless execution and achieving the desired results. Managing playbooks also involve leaving the door open to changes in how organizations improve, whether it be incrementally or through some other evolving technology or innovative breakthrough.  In other words, playbooks should not be executed as mechanical procedures or canned improvement practices that may stifle creativity and innovation.  Implementation is a journey of discovering better practices, setting higher standards, and uncovering even more new opportunities.  An effective BFSI process requires the continuous integration of people, process, equipment, and technology.


Playbooks Are Also A Business System Best Practice


Playbooks are part of the BFSI process, and they are also a critical best practice in the overall business system. The same basic steps in the BFSI process should be conducted throughout the year as new challenges and opportunities arise in the organization’s ongoing improvement initiatives. Defining and aligning initiatives with a clear purpose, implementation details, specific deliverables and timelines, and all other business system best practices will also result in better execution and better results.  Again, this is very different from how many organizations run their improvement activities today.




Commit to BFSI Now, Enjoy Higher 2020 Successes


There is a simple postulate about BFSI. First, executives need to embrace the concept and make a visible commitment to its success.  If organizations are unwilling to step up and take improvement to a higher level, then more of the same will produce the same disappointing results.  Improvement is a culture of being deliberate.  It’s a leadership choice, and you get what you expect.  Wishing and hoping that a dysfunctional improvement initiative will deliver the goods on its own is not a winning strategy in a fierce, competitive, and rapidly changing economy.

  1. Review the business plan, and complete an objective assessment of the organization’s current state operating infrastructure. Be bold enough to acknowledge and define the broader operating and financial gaps between current and desired performance.
  2. Develop the general approach to budgeting for improvement, and communicate plans with the organization (e.g., the why, what, who, when, where, and how plans to budgeting for improvement). Let the organization know what you’re doing and their stake in the game.
  3. Engage the right external/internal resources in the mining, analytics, and decisioning to further categorize the lower level drivers of costs, wastes, time, and other inefficiencies in operating infrastructure. Also engage the right resources in the development of critical improvement themes and detailed implementation tactics. Make sure that there is a direct linkage between plays, and P&L performance and other organizational goals
  4. Develop the BFSI playbook of themes, detailed tactical plans, objectives and expectations, teaming structures, and all other issues/detractors to success. These detractors must be addressed and resolved right up front. Token participation is not the way to success.
  5. Share the BFSI playbook with the organization. As we stated above, playbooks are a great instrument for communication, awareness, and commitment-building around the BFSI process.
  6. Commit to the adjustments in the operating budget which are directly related to the successful execution of the playbook. Make sure that everyone is committed to the revised budget and understands the implications of failing to meet budget goals.
  7. Implement the desired plays in the playbook, monitor weekly performance to improvement plans, and make the right course corrections to guarantee success. Failure is not an option. This is an oversimplification of improvement.  The most critical factor with implementation is people on the same course, hungry for the same outcomes.
  8. Use the playbook to drive other related and more aligned improvement efforts in the organization. Playbooks can be used in the BFSI process, and they can also be used in daily work.  It’s never too late to mine, define, and implement the right desired improvements to the business.




Many of the core business processes we mentioned earlier are very complex in that there exists many fuzzy and multidirectional causes and effects in space in time. Stated a simpler way, problems are often viewed and defined based on the position and angle that people are looking at things in their complex network of business processes.  The result is very often finger pointing and symptomatic improvements, where people end up working on the wrong things and achieving disappointing results.

BFSI is not some new fad approach to improvement. Take a closer look at the process.  It’s a very logical, data-driven, fact-based, and proven approach to mining for much larger unknown and undiscovered strategic improvement opportunities.  If you are not satisfied with your current results to strategic and operational improvement, then modify the approach.  Quickly scaling up to annualized improvements equal to 2% – 10% of revenues are very doable, but it’s your leadership choice.  Develop a higher order business system approach to improvement.  Budget your expected improvements in 2020 and get what you expect.  Aim higher, engage people where they work, and get more!




 Call us today to discuss your current business improvement situation and operating challenges.  We can help you immediately with your lean business system or broader business transformation process.  We do this for a living.


The Center for Excellence in Operations, Inc. (CEO) is engaged with many different clients every day, within a variety of industries, operating environments, and with different Lean/CI and cultural renewal challenges.  We can get your Lean/CI initiatives back on track and operating at a much higher order, daily business system model level. Contact one of the authors below.  We will be happy to discuss your current situation and needs.


Terence T. Burton is President and Founder of The Center for Excellence in Operations, Inc. (CEO), a management consulting firm specializing in strategic and operational transformation. Terry has four decades of extensive operations and supply chain experience as a hands-on practitioner and executive in private industry, and has led consulting engagements in a wide spectrum of industries, having consulted with over 350 clients in 23 countries on their strategic and operations improvement initiatives. Terry can be reached directly at

Edward A. Fagundes is the West Coast Practice Director for The Center for Excellence in Operations, Inc. (CEO), with emphasis on serving clients in the West Coast, United States region. Ed’s career spans various leadership roles in general management and as a global business system executive. He has proven expertise and extensive experience with improving business processes, developing lean transformation strategies and plans, leading the implementation of business improvement journeys to address business issues, and implementing enterprise-wide continuous improvement applications. Ed can be reached directly at