by Terry Burton | Blog, Uncategorized
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.
LEAN STRAIGHT TALK #6
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.
- 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.
- 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.
- 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
- 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.
- 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.
- 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.
- 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.
- 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.
Summary
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!
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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 burton@ceobreakthrough.com

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 edfagundes1@yahoo.com.
by Terry Burton | Blog, Uncategorized
LEAN STRAIGHT TALK #5
Introduction
Most organizations claim to have a formal business system approach to strategic improvement. However, most have reached a serious maturity, decline, or even extinction stage with their various improvement initiatives. Step back and take a critical look at why your improvement plans are years behind schedule or failing to produce a real value contribution to the business. The majority of business systems in organizations are superficial knock-offs and mimicking of efforts from other organizations. Most don’t acknowledge or (want to take the time to) understand that this approach is “not your way, it’s their way.” What works well for one organization is very different from what works in another organization based on their specific leadership and infrastructure, strategic and operating challenges, business requirements, and cultural development needs. The widely practiced, lite mantras and boilerplate recipes from other organizations’ business systems are a disaster strategy in an ever changing competitive digital economy.
A holistic, higher order, enterprise-wide, technology enabled, and culturally connected approach to strategic improvement is desperately needed by most organizations. Most organizations can achieve new and significant benefits through a well architected and deliberate approach to strategic and breakthrough improvement. This has nothing to do with the improvement methodologies and tools themselves. A high performance business system approach to strategic improvement helps to define and integrate the systematic architecture of leadership, aligned infrastructure, digital technology integration, and behavioral/cultural development to achieve this higher order improvement and sustainable success. Business systems should be an all-encompassing set of integrated processes and best practices that guide how organizations improve, and improve how they improve.
“But We’re Already Doing Our Business System”
This is an unpopular message, but many organizations who claim to have their own “XYZ Business System” in place (in name only) are merely mimicking or just going through the motions of business systems lifted from other organizations – With very questionable business value. Unfortunately, too many organizations believe that they have their business system and are clinging to it with a strategy of insanity (i.e., Doing more of the same things and expecting different results). After many years in this business, I will never understand why executives and their organizations wait so long to change something that isn’t working anyway, and will never work without the right positive corrective interventions.
“After many years in this business, I will never understand why executives and their organizations wait so long to change something that isn’t working anyway, and will never work without the right positive corrective interventions.”
Let’s talk about the very core of a true business system – Leadership, unwavering commitment, and for real culture change. Everyone talks a good game about leadership, culture change, or sustaining the gains, but people and organizations always seem to gravitate back to the tools and techniques. Why? Because it is “the accepted unquestioned religion.” It’s what people know and are comfortable with, like going back to the well. What happens in religions and continuous improvement (CI)?
- People stand their ground, strictly follow their beliefs, and shut out change. People are mandated to follow a rigorous recipe of methodologies and approaches.
- On the surface these initiatives have the look and feel of success. Organizations practice engagement and empowerment, teaming, using the tools and jargon, and other visual signs of progress. A closer diagnostic usually reveals that there is more going through the motions than well aligned and executed improvement efforts and tangible results.
- Organizations simply rename their improvement initiatives a business system without continuously evolving and integrating the critical best practices that make a business system a true, high performance business system. Their business system exists in name only, a mirage.
- Over time, organizations assign multiple leaders to their XYZ Business System who end up being caretakers for the same beliefs and practices that are not working so well, or have stopped working due to changing business conditions.
- When work and thinking become overly standardized, people lose creativity and their ability to think beyond the box. CI practitioners accomplish the exact opposite of what they are trying to do. People are going through the expected motions and talking the lingo, but there is no tangible continued operating results coming out of their efforts. When people don’t feel success, they disengage – And management commitment also fades away quickly.
- Leadership doesn’t help CI sustainability and internalization much with token commitments, management edicts, conflicting priorities, short term performance, and random behaviors all over the map. Culture is a continuously moving and churning outcome based on the combined behaviors, choices, and actions of leadership . . . and all people in organizations.
Many consultants, trainers, and practitioners are no longer adding value because they are preaching the same old generic 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). The methodologies, tools, and practices of CI have become so over-standardized to the detriment of what creative, continuous improvement is supposed to yield in organizations. When every organization is using the same check-the-box approaches and working on the same basic things, where’s the competitive advantage? Again, the answer is simple but not popular – There is no advantage, only more value detractors and hidden wastes!
Successful organizations are responding to the speed of change required to remain competitive with a more holistic, higher order daily business systems approach to strategic and operational improvement. How are they responding? They have a greater focus on the integration of leadership, strategy alignment, sustainable infrastructure, digital technology integration, talent management, and cultural development . . . And much less focus on just the methodologies and tools themselves.
How to Design “Your Own” XYZ Business System
Regardless of the specific structure and naming conventions, all best performing strategic improvement organizations have their own strategy, content, and best practices for their XYZ Business System in place. They didn’t copy it from another organization. They developed it organically based on their own strategic and operating challenges, business requirements, and cultural development needs. A few years ago, we developed a reference model guide to help our clients architect, design, implement, and sustain their own high impact XYZ Business System as shown below. For additional information visit Global KATA: Success Through The Lean Business System Reference Model.

Our 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 was initially 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.
At a high level, best performing organizations are proactively practicing and leading the charge in the following areas:
- Adaptive leadership, a highly focused but flexible operating strategy, and enterprise-wide governance to lead and reinforce improvement as a way of life;
- Tight real time alignment of strategic and tactical improvement opportunities to current and evolving business requirements;
- A living deployment plan where improvement initiatives are well defined, prioritized, teed up, and regulated based on resources and quick implementation;
- A purpose-driven communication and awareness effort to communicate, reinforce, and continuously evolve their success-enabling culture;
- A strong, laser focused talent, teaming, engagement, and human capital development initiative to provide a higher personal and professional work environment;
- Flawless and efficient execution and sustainability of top priority needs for rapid results;
- Visible, real time metrics (digital performance dashboards) that are well aligned to business objectives and cultural development needs, with broad ownership for results;
- Selection and integration of the right emerging and enabling technologies (a holistic IT approach, not piecemeal apps) that allow for quick response and adjustment to market, customer, and other internal operating changes;
- Continuous targeted people and cultural nurturing and development as the foundation of their success; and
- The business system model is a deliberate, highly integrated and aligned set of processes and best practices that replace firefighting, going through the canned motions of improvement, and wandering off point.
These essential, critical characteristics and best practices are either inconsistent or totally missing in the business systems of many organizations. Many organizations underestimate and oversimplify the critical elements and synchronous best practices of a true, high performing XYZ Business System. Remember this is a reference model. The particular graphical representation is not important. The specific element architecture and best practices content is what makes this systematic and culturally infused business system model work to achieve breakthrough and sustainable competitive advantage.
“The good news in all of this is that turning mediocre performance into superior performance is a leadership choice and very achievable in a relatively short time frame.”
Cultural transformation has taken on a more center stage position in our reference model. Within each of the architecture elements of the reference model are frameworks of integrated concepts, principles, guides, processes, an expanded body of improvement knowledge, and best practices. The intent of the reference model is to guide, communicate, educate, and create a shared understanding of a holistic, higher order, enterprise-wide business system approach to strategic improvement.
How To Measure Business System Performance
Our reference model includes assessment and evaluation criteria and incorporates over 600 best practice evaluation points and 50 graphical analytics. This analytics capability is very useful in pointing out gaps, root causes of underperformance, and missed opportunities with an organization’s strategic improvement initiatives. For example, have a look at the example metric chart below:

This particular chart is a graphical example of one of the largest detractors of success and sustainability: Misalignment of business strategy and improvement strategy. The example shows that the organization’s current focus of improvement is in manufacturing while the largest strategic opportunities and needs are within other work/value streams of the organization. What happens to commitment and interest levels when everyone is working on the wrong things? The answer is obvious.
Summary
Organizations can never achieve renewed success with their strategic improvement initiatives through the continuation of daily knee-jerk reactions and the same traditional approaches copied from other organizations. Strategic improvement is an innovative, exploratory, never-ending journey – Not a series of discrete fad check-the-box programs with a perceived end point. Learn from the best practices of other organizations, but recognize that your success is a custom architecture and remix based on your ever evolving customer expectations, your operating strategy, your critical value stream requirements, your business system model, and your timeline. Recognize that this is not a criticism: The world has and continues to change beyond the capabilities of existing beliefs, practices, and approaches.
“Learn from the best practices of other organizations, but recognize that your success is a custom architecture and remix based on your ever evolving customer expectations, your operating strategy, your critical value stream requirements, your business system model, and your timeline.”
A higher order of strategic improvement is desperately needed in many organizations – One that quickly identifies and capitalizes on new opportunities, executes effectively and efficiently with all the necessary competencies, and continues to produce sustainable success. The good news in all of this is that turning mediocre performance into superior performance is a leadership choice and very achievable in a relatively short time frame. A reference model approach to breakthrough improvement incorporates all of the lessons learned (and continue to learn – it is an evolving reference model) and best practices about how to design and integrate all of the necessary critical success factors. It’s not the recipe – But it engages people about how to better adapt the most critical success factors of strategic improvement into their own organizations based their own ongoing business requirements and cultural development needs.
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 strategic improvement correctly and effectively 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 still the heart and soul of strategic and operating transformation and the organization’s greatest asset.
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Liking our blog or posting a comment, and then returning to business as usual will not improve your business system performance. Call us to discuss your current situation and challenges. We can help you immediately with your lean 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 burton@ceobreakthrough.com

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 edfagundes1@yahoo.com.