The Yin & Yang of Operational Excellence & Innovation
I'm pleased today to post another guest blog - written by Charles Searight of Vector Growth Partners. Charles offers a great viewpoint on a common issue - how to balance the needs of running a good business with implementing innovation. I hope you enjoy his point of view as much as I do:
Efficiency is a good thing, taken in moderation. The same with focus. It is good management hygiene to pay attention to what you’re doing and try to do it efficiently. This helps build a competitive cost structure and a results-based culture. From an operations standpoint that means that the use of an occasional stopwatch or its modern day equivalents in order to eliminate wasted effort and speed workflows makes perfect sense. Frederick Taylor made the great contribution in 1911 of helping companies recognize that labor is a controllable cost that can be managed, but he taught that a narrow focus on the optimization of each operation and repetition of the “best practice” was the key to success. He missed the point (among others) that it is really the improvement of the process as a whole that changes the game. It took Toyota and Yamaha and other Japanese companies to teach the world that lesson 70 years later – leading to today’s six sigma, lean, and time compression concepts.
We find the same phenomenon happening with most companies today – they are so focused on optimizing their operations and replicating “best practices” that they have totally lost sight of the process as a whole. The pursuit (often obsession) of operational excellence becomes an end unto itself and gets disconnected from the mission of generating growth and creating value. The end game is not to get lean and agile, but rather to get lean and agile so that you can compete more effectively – leveraging these capabilities to go to market in innovative new ways, to compete in new markets, and ultimately to create new markets.
Companies that stay locked-in to being the most efficient company at making widgets quickly find that low cost widgets have become a commodity and wonder how they suddenly got into trouble. Being an efficient widget maker gets them into the game, but not for long. In order to survive and thrive they must immediately begin planning new markets for widgets, innovations that will replace widgets, parallel markets targeted at widget users, new markets for widget-user data, markets unrelated to widgets that have been identified in conversations with customers, and so on, because there is always a competitor that will figure out how to make widgets just as efficiently as they can and undercut their price.
The companies that generate the most value, like Apple in recent years, are the ones who focus on trends and where the market will be, not where it has been. They use their operational excellence as a competitive weapon not as a marketing message or something to put in the trophy case. Instead of bragging about how agile they are, they just beat the daylights out of would-be competitors by launching new products and creating new businesses at a pace that leaves others in the dust. They do this by planning from the future and focusing on new ways to leverage their capabilities (or build new ones) to satisfy tomorrow’s unmet market needs – not by focusing on optimizing the core competencies of yesterday and today. They combine the yin of operational excellence with the yang of market innovation.Charles Searight is the Managing Partner of Vector Growth Partners headquartered in McClean, VA. His firm helps companies of all sizes and industries, public or privately held, and many with external funding from private equity pools, develop and implement growth strategies. Feel free to comment on Charles input right here, or contact him directly. If you could use help developing a growth plan you can contact Charles at CSearight@VectorGrowth.com. Website www.VectorGrowth.com
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