The How and the Why of Operations Strategy

Many companies focus on the tactics of continuous improvement and are often disappointed with their lackluster results. They look at top line growth and see anemic improvement, and instead of bottom line profitability they see little or no growth. Because company value is often based on top line and bottom line growth as well as cash flow, a steep positive improvement curve helps rapidly increase your business’s value.

But isn’t it best to just move ahead with improvement efforts to get the quickest bang for your buck? Not if you really want exponential improvement. The problem with tactics is they focus on the how of improvement efforts without the context of why.

Why is powerful. Why:

  • Informs your employees of the purpose of their efforts and ultimately what’s in it for them.
  • Puts things in context so priorities are easy to set and decisions are easier.
  • Helps focus on what’s important to be sure your improvement efforts are targeted correctly.

Why is strategy, how is tactics. Putting tactics first is putting the cart before the horse. Do you have a strong operations strategy that aligns with your business model and vision? Are you achieving breakthrough results in your business?

© 2019 – Rick Pay – All Rights Reserved

Are You Postponing Profit?

FreeImages.com/Nick Benjaminsz

It seems like there’s always a better time to do something, and that time is “later.” Many companies believe that improvement initiatives – like Lean, supplier partner programs, global expansion, or new product launches – will wait. The trouble is that while they’re waiting, their competitors are moving forward.

What executives don’t always realize is that return on time (ROT) is often much greater than return on investment (ROI). Waiting until empty positions are filled or current priorities are completed before beginning a new, profit-boosting project doesn’t yield a very good ROT.

To move initiatives forward quickly, companies need a clear strategy and vision for improvement. A client recently told me that because of the strategy and roadmap we created, they achieved results far beyond their expectations in a very short time frame. In fact, the results were so quick and dramatic that a university studied the process to see how it was done. Vision is key to driving change and defines where the future state is.
In my latest Growth Accelerator newsletter, I shared ways that companies can get things done now, not later, and reap the profitable rewards. Click here to read more.
© 2018 Rick Pay, all rights reserved.

Operations Strategy – What Are Your Options?

At this time of year, many companies conduct their annual off-site planning retreat to develop strategic plans for the next year. Then it’s back to work and the plan sits on the shelf until next year’s retreat. Operations Strategy encompasses the means to achieve the vision, which sets your goals for the next two to three years. Strategic planning is actually an oxymoron, since strategy and planning are on different levels. Planning involves the tactics used to implement the strategy.

 

There are five different operations strategies, and you get to pick no more than two:

  • Low cost
  • High Quality
  • Speed/flexibility/responsiveness
  • Wide line/custom
  • Innovation

For example, part of what drove the offshoring trend in the 1980s and 1990s was the strategy of low cost. Then speed started the reshoring process. Tesla has a strategy of innovation, while Lexus is quality.

What is your company’s operations strategy? Do you have a clear vision that you want to support? Establishing a vision and then picking your strategy before you start the tactical activities allows you to prepare for the future and dramatically increase the value of your company.

 

© 2018 – Rick Pay – All Rights Reserved

One Thing Can Make All the Difference

FreeImages.com/barun patro

Over the years I’ve helped many clients develop and implement innovative operations and supply chain strategy. One thing seems to make all the difference in their success:  key managers who have the passion to get things done.

I visited one client with whom I had an advisory relationship every other month, and we talked about implementing supplier partnerships, JIT inventory management and supply chain strategy. At my next visit, the Director of Supply Chain took me by the arm and said, “You’ve got to see this.” We went into the warehouse to see the latest ideas they implemented on their journey, and the results were really impressive. I asked myself, “Why is this client so successful when others aren’t?” They had the right people on the bus – those that drive change and have a passion for the ideas we developed to improve their operations.

The keys to implementing breakthrough Operations Strategy are:

  1. Innovative thinking creating a vision for success.
  2. Having the right people in place, particularly at the mid-level, who drive improvements with passion and discipline.
  3. Developing partnerships inside and outside the organization.

The vital element is having the right people who keep moving toward the vision of the future, not allowing roadblocks to impede their progress.

Do you have the right people on your bus? Are they passionate about your vision of the future? Do they break down barriers and move quickly? Do your results reflect that?

© 2018 – Rick Pay – All Rights Reserved

 

Success and Intention (On the River, and in Business)

Recently I had the opportunity to fish for rainbow trout for three days on the Grande Ronde River in northeastern Oregon. The Grande Ronde, a tributary of the Snake River, flows through a deep, heavily forested canyon. The gradient of the river is steeper than most in Oregon, and the river’s fast flow requires casting so precisely that you need to put your fly within inches of a rock or cliff. If you put the fly even a few inches too far away, you won’t catch any fish.
To be successful in fly-fishing, just as in business, you need to be very intentional. First, you need a clear vision of exactly where to place your fly to catch fish, and sometimes that requires help. On our trip, since none of us had ever fished the Grande Ronde, we used experienced guides who told us where we needed to put the fly to catch the big one. If we missed the spot, we didn’t get a strike.
In business, you also need a clear vision of where you want to go; a vision that defines the future state and context for success. This perspective is often short to mid-term, anywhere from 18 to 36 months out.
While fishing, we need to know what we’re fishing for and be familiar with the particular environment where we’re fishing. It would be the equivalent of knowing our market and customers in business.
To read more about intentionality in business (and in fishing), check out my latest Growth Accelerator newsletter.
© 2018 Rick Pay, all rights reserved.

Bezos Has a Vision

FreeImages.com/Philippe Ramakers

A stock analyst recently declared Amazon a “buy,” because Jeff Bezos has “a very solid vision of where he wants to take the company.” Vision is vital to make a company attractive to investors, and becomes even more important when you’re driving improvements to accelerate profit and growth.

A vision provides a clear picture of the future, preferably for the next 1 ½ to 3 years. Visions that are longer than that aren’t very practical since things change so rapidly, particularly in industries driven by innovation. Many companies use visions that extend 5 or even 10 years. Unfortunately, they become stale, which reduces their impact on employees, and such a long-term vision can actually send the company in the wrong direction.

What Should the Vision Do?

  • Set clear goals and provide a means for people to establish priorities
  • Create context for decision-making
  • Serve as a sounding board for managers and employees at every level in the organization
  • Keeps the focus on the big picture
  • Answer the question, “why are we doing this?”
  • Serve as a ruler to help measure urgency, define relevance and apply resources
  • Set a foundation for action, which leads to ownership of results

To read more about the essential parts of a vision as well as how a vision works at the project level, read my latest Growth Accelerator newsletter.

 

© 2018 Rick Pay, all rights reserved.

Is Your Operations Strategy Aligned?

In my forthcoming book, Moving Into The Express Lane: How to Rapidly Increase The Value of Your Company, I explore how to align your operations strategy with the business vision. To prepare for writing, I interviewed CEOs, CFOs and COOs of middle market companies.

 

Some of the questions included:

  • What drives value in your business?
  • What is the 2 – 3 year vision for your company?
  • Is your operations geared to the various customer types/channels you sell to?
  • What operations capabilities do you need to strengthen to achieve that vision?
  • Who decides that?
  • How will your workforce need to change to support growth?
  • Do you plan capacity?
  • What metrics do you track to tell you that operations is ready to support growth?

Ask the questions to your own team about your company. You’ll discover if you’re in alignment. If you aren’t, the ride becomes very uncomfortable.

© 2017 – Rick Pay – All Rights Reserved

How Can I Make Things Easier?

When asked, “What one thing, when you do it, makes everything else easier?” my mentor Alan Weiss responded, “There are several things: speed, courage, lack of self-censorship and abandonment of perfection.” These are things that apply to business situations as well, particularly in leadership, operations and supply chain.

Embracing speed (and avoiding procrastination) prevents bad situations from getting worse, allows you to beat the competition and provides excellent customer service. In my Executive Command Center™, speed is the big dial on the dashboard and is the most important element of performance.

Act with courage. Know that you might make mistakes, but as long as you learn from them, don’t worry.

Remember: success, not perfection. Keep your eye on the vision or future state of how you want things to be, how processes should work, the results you’re trying to achieve. Trying to be perfect simply delays things.

Business should be fun and things need to keep moving toward the vision of the team, organization, partnerships and community. Speed, courage, and abandoning perfection will make things easier and help you enjoy the journey.

© 2017 – Rick Pay – All Rights Reserved

To Do Lean Or To Be Lean?

Being Lean achieves world-class performance. Doing Lean often only results in the deck chairs being reorganized just before the ship sinks.

Many companies spend months (if not years) doing Lean. In too many cases, they don’t achieve the results they set out to obtain, and the Lean effort slowly fades away. In fact, 70% or more of companies fail to get the results they wanted from their Lean initiatives. With the plethora of MEPs, Lean consultants and books available, why is that?

Doing Lean includes the tactical activities of training, implementing tools, shop floor and warehouse improvement projects, Kaizen events, and score keeping. If those activities aren’t driven by your operations strategy and company vision, there’s no alignment with your business objectives, and the ground level activities don’t get results or keep the interest of executives.

Being Lean

Being Lean is a whole different thing: it’s the context within which Lean activities occur. Being Lean provides the strategy for the Lean efforts, which help target activities to produce the greatest and most meaningful results. Being Lean changes the way products are designed, includes partnerships, eliminates superfluous activities, and changes the culture of the company. Being Lean provides breakthrough results.

An example is the implementation of a Kanban system. Kanban is a signal or trigger to do something, often associated with the movement and acquisition of materials. In the doing environment of Lean, safety stock and minimum order quantities are included in the calculation of Kanban size, and should be. But safety stock is a waste, and minimum order quantities optimize supplier performance at the expense of your company’s performance.

If you are doing Lean, once the calculation is set, the system is executed with good results, but safety stock and MOQs continue to impact overall performance. If you are being Lean, efforts to eliminate both of these issues take place, allowing you to achieve breakthrough results including turns over 12, 99.8% service levels, 20% annual materials cost reductions and more.

Wouldn’t you rather be than do?

© 2016 – Rick Pay – All Rights Reserved

Are You Ready?

Sutton Foster is a Tony Award winning Broadway star. She wasn’t always in that position, though. In a story on CBS Sunday Morning (Dec 12, 2016), she talked about her days as an understudy for Broadway shows. As understudy, she was the actress in waiting, preparing for her big chance. She learned all of the lines and the choreography, but never actually played in front of the audience unless something happened to the regular actress.

After years in this position, she got her big chance when a director called her to play the lead role in Thoroughly Modern Millie. She won her fist Tony Award for the role. She said, “One of the things I’m most proud of is that the opportunity came and I was ready!” That meant she was prepared, knew her stuff, had worked hard and could step in.

Is your business ready when the role of a lifetime comes? Can you take advantage of that big sale, new customer, or new product roll-out?

To be ready, 1) keep your vision in mind, 2) have a strong business strategy to attain the vision, and 3) have a solid operations strategy to ensure you have the capacity, cost structure, cash flow, speed and agility to meet the challenge.

Are you ready for the role? Can you respond in award-winning fashion when you get the call? If you would like an assessment of your readiness, let me know.

© 2016 – Rick Pay – All Rights Reserved