Operational Improvement is a common term in the business lexicon, and most generally it’s defined as, improvement in the way a process or business functions in order to improve efficiency and profitability of business operations.
What is important to appreciate, is that the completion of the initial improvement initiative is only the beginning of an on-going operational improvement cycle. According to Valuize, the operational improvement cycle requires that in order to continuously improve, an organization must continually design new processes, implement them and effectively manage the change, monitor the processes, collect and analyze related key performance indicator (KPI) data, identify improvement opportunities, and then start the cycle again.
Let’s dig into each stage of the cycle and explore how to do things right.
Process Design > This phase is critical as it requires the collection of input from all relevant process stakeholders, from senior management to front-line workers. Senior managers must align on overall process goals and outcomes and agree on success KPIs and the definition of success for the “improved” process. Input from all other stakeholders is critical for establishing what the process should look like in the context of their day-to-day responsibilities. Overarching considerations during process design should include, not only what the process will look like, but how it will be executed, by whom, in what timeframe, using which tools. When using a technology solution to manage a process, it’s best to implement as close to out-of-the box functionality as possible, and then build that out if it’s not meeting requirements. Custom development should be explored only when absolutely necessary as customizations can require on-going maintenance.
Change Management > Carefully managing this element of process redesign is often considered the foundational success factor, since without stakeholder buy-in and willingness to embrace the change, the initiative has a high chance of failure. What does effective change management look like? In summary, it involves understanding what the change means for all stakeholders, addressing any reservations they may have to the change, ensuring clear communication of the desired future state early in the change process, and explaining the reasons why change is required and the benefits to be enjoyed from embracing the change.
Data Collection > Once the change is implemented, related metrics (KPIs) must be tracked in order to assess the degree of improvement the change has facilitated. Having similar or ideally the same metrics from before the new process was implemented are helpful for establishing a baseline to measure against.
Data Analysis > The ability to drill into data to establish trends and relationships is powerful for leveraging that knowledge into strategic insights. Many ERP systems have reporting, many of which also have drill down capabilities such that you can drill into see the source values that drive the reporting results. If that functionality is not powerful enough or you still need to consolidate data from different systems to produce the required analysis, there are Business Intelligence (BI) tools that can be incorporated into the technology ecosystem to do that. Various BI options can be explored at sites such as Business Intelligence Market.
Gap Analysis & Iteration > Once the process is in place, it is important to set-up a post Go-Live Support infrastructure involving a formalized internal Help Desk/Feedback process and to designate key process experts on the various business teams to identify gaps or optimization opportunities on an on-going basis.
The importance of fostering an iterative operational improvement mindset and action plan are critical to supporting the on-going optimization of business processes. Including all relevant stakeholders in the design, testing and implementation of the new process(es) will go a long way to supporting the adoption of the new process(es). In addition, ensuring alignment of the new process(s) with overarching business goals will help ensure value-add of process improvement initiatives to the organization’s bottom-line.
About the Author – Alex Olano – CEO, Managing Partner