The following question was asked by an executive at a startup:
Is it ever too soon to start working toward operational excellence? What, if anything, needs to come before this?
Here is my answer:
Excellence is one of those “know-it-when-I-see-it” words. It’s always worth trying to be as good as you can be.
The more interesting word is operations, and that is something that needs to be defined in the context of the organization’s business model, starting with the related questions of “What are you producing?” and “What is your value proposition?” If your business success is dependent upon selling and services, you need to have a sound operational model in the areas of customer relationships (transactional, loyalty based, etc.) and distribution channels (direct sales, alliances, etc.).
If your business success is driven by production, operations executives should focus on the key activities (sourcing, assembling, etc.) and key resources (capital assets, intellectual property, key knowledge, etc.)
Too many executives are unable to answer the question, “How is value created?” If you want to have operational excellence, or strategic excellence, or any other kind of excellence, you have to understand and design your business model. There are no textbook answers for those questions: it comes from the fluid intelligence of strategic thinking.
Finally, remember that the purpose of strategic initiative is to close a performance gap. Rather than chase so-called best practices, it’s better to identify the big challenges that face the organization and apply the best energies and measures to closing gaps that make the firm vulnerable to competition.
Do you agree that understanding value creating is more important than understanding excellence?
I agree completely that you need to be very clear about where you create value before starting initiatives in any one area. It is far to easy to start activities to become “excellent” or “world class” in every area of the company. This will lead to too many projects with too little payback and a company that is not aligned on where it wants to go.
Your posting reminds me of one of my favorite business books, “The Discipline of Market Leaders” where the authors argue that you need to be world class in the area where you create value and good enough in the others.
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A business boom is one thing that no one can ignore at any cost. Thus, operational excellence is designed for businesses making them effective to serve clients and customers with latest strategies without any hassles.