“Plans are only good intentions unless they immediately degenerate into hard work.”
– Peter Drucker
As important as the previous elements of the management system are, never lose sight of the absolute necessity of producing something customers value. The way that value is produced is called the work system, or even more simply, operations. The earlier elements of the system have pointed to an effective way to delight customers and create the conditions of success for your business. If you run good operations, you’ll make enough money to sustain the organization. Poor ops will open the door for others to capitalize on your idea.
How you deliver your work product to the market starts with design, which begins with an understanding of what your customers want. Who your customers are was defined in the strategy development component of the management system. What they want follows some common dimensions. Quality is sometimes a surrogate for robustness. Nobody wants bad quality; not everyone wants, needs, or can afford a robust product. Cost is a surrogate for value, with exceptions at the ends of the range of buyers: cash-starved customers just can’t afford better value, and spendthrift customers often subconsciously think ‘why pay less’.
It’s increasingly important to consider your customers’ expectations for the experience they have in dealing with you. These can be major differentiators, especially among commodity products and services.
Once you know what they want, you can design processes to deliver. The first distinction is for key processes that are fundamental to your business vs. the support processes that enable the enterprise to operate. An example: you won’t be in business long if customers think ‘their products stink, but their invoices are beautiful’. Support processes can significantly enhance, or diminish, your customer’s perception of you, but the core – key -- products or services you produce have to establish the value you offer.
Process design is a key factor in your profitability. Rather than exploring design principles here, we only wish to make two observations. Knowledge work is an increasing percentage of all work activity, but process design is several decades behind manufacturing concepts such as shop floor control. Workflow and the IT systems that enable it will become the drivers of process design and improvement. Our second observation is that processes are not carved in stone; they need to keep pace with changes in the market, including new technology and your workforce’s growing knowledge base. Customers evolve too, with what they value and what’s more important to their success. The rate of change in your industry must inform the need for agility, as well as a need for risk management for all aspects of ops.
With your processes designed, they have to run. To know – truly know – how they are running, measurement must be a byproduct of every process and not it’s own process. Variation is often the enemy of process management, and your key metrics should alert you to variations from spec or from plan in as close to real-time as possible. It’s essential to keep in mind that no matter how well your operations run, they always need to get better, so continuous improvement has to be regularly exercised among the management ranks and especially at the front line.
Another area that can have a material impact on performance is supply chain management. When there were fewer options, corporations were vertically or hierarchically integrated. Now with greater capabilities of a supplier base, operations are more a network model. But this requires a focus on supplier qualification, selection, measurement, and feedback. Your best suppliers become partners in planning, innovation, and disruptive improvement.
Among the metrics that will tell you how good your operations are is cost. Financial indicators tend to lag, so other indicators are needed that include cycle time, the amount of rework, the effectiveness of inspections. Management accounting and the enterprise systems that produce metrics keep getting better. Be sure that you know what the costs mean (care to debate what fully-loaded means?) and that you pay attention to both the current level and the trend over time. As businesses become more digital, the reliability of IT systems and data security concerns will only keep rising. These issues can increase costs, but these are insignificant compared to the financial, business, and personal impact of failures in either area. Reliable, resilient infrastructure is becoming tablestakes for operations. As businesses move more IT workloads to the cloud, the capabilities and capacity available from cloud service providers will become ever more important assets.