12 Dec How to achieve operational efficiency
How do you turn an underperforming, marginal operation into a world class business? According to Sir Dave Brailsford, the man who masterminded Team GB’s decade of dominance in track and road cycling, you do it by focusing on improving the little things. In an increasingly competitive world, operational efficiency enables companies to grow and thrive by focusing solely on what goes on within the business. Here we look at the methodology behind making continuous improvements in your business processes and interactions.
If you broke down everything you could think of that goes into riding a bike, and then improved it by one percent, you will get a significant increase when you put them all together.” Sir Dave Brailsford, Head Coach of British Cycling and Team Sky.
What Brailsford calls the ‘aggregate of marginal gains‘ has a lot in common with the concept of operational efficiency in business. Operational efficiency is about maximising the performance of a whole business by focusing on incremental improvements in individual processes and, just as importantly, the way they interact with each other.
Recent years have seen a plethora of new management approaches for improving operational efficiency. Most of them find their origins in Lean Manufacturing. Lean was >first fully formulated as a business approach in the 1970s by Toyota who called in ‘Just in Time’ manufacturing.
Just In Time manufacturing refers to the way each stage in the assembly line was arranged, so one process followed the next at the exact moment the first stage was finished. This included stock management – delivery of parts would only be triggered as and when demand arose, and then only in the quantities required. Just In Time was all about minimising downtime, overlap, surplus and shortage.
Tied in with Just in Time is Kanban. Kanban is the Japanese word for ‘card.’ Toyota line-workers used cards to signal steps in their manufacturing process. The system’s highly visual nature allowed teams to communicate more easily on what work was needed to be done and when. Kanban has since turned into the market-leading method for project delivery across multiple industries.
The ideas of careful workflow alignment, intelligent stock control, Just In Time processing and taking a holistic view on reducing waste are now applied to business management in general under the term ‘Lean Thinking’.
We look at three methods of Lean Thinking in detail here.
The ability to streamline processes effectively goes to the very heart of cutting waste from workflow. The points where one process finishes and another starts tend to be the sites of greatest inefficiency in a business, with overlap in operations, delays, errors and a general lack of ‘flow’ creating a gradual build up of costs.
The aim of effective streamlining is to align and integrate operations from suppliers all the way through to customers so they are as seamless and cost-effective as possible. Streamlining can be split into two types:
This is about getting the maximum value from your relationships with suppliers and customers. On the supply side, the focus will be on effective and responsive supply chain management, aiming for a Just In Time system where orders are placed and fulfilled as need arises, with quick, accurate, efficient stock control, ordering and delivery systems. One of the keys to an efficient supply chain is simplicity, focusing on strong relationships with a small, manageable number of suppliers rather than risking a tangled web of relationships which in turn risks duplication, delays and mistakes.
On the customer side, the goal is to make it as straightforward as possible for customers to find and purchase what they want. So, for example, a retailer would look at product placement and visibility, and how the ‘funnel’ is managed to maximise conversion of interest into sales. Purchase data would then feed back into stock control to drive cross-operational efficiency.
An issue many businesses face is a culture of different departments and teams working in isolation from one another. One of the challenges of internal streamlining is opening up the ‘silo culture’ and improving understanding of the ‘big picture’, or how each department fits into the whole. With better communication and understanding across the workforce, and the development of a broader range of business skills, many sticking points at the junction between two processes can be effectively smoothed over.
Establishing clear, fixed work routines for everyone to follow is one way to encourage this. Fixed routines make it easier for everyone to develop the kind of ‘whole business’ understanding which will lead to greater overall efficiency.
It also makes sense to manage work loads as they come into a business. Having sudden gluts of work in any department will create inefficiency – as soon as something cannot be done in time, you have delays which resonate throughout the system.
2. Transforming Processes
Looking for efficiency gains within individual processes is where the ‘aggregate of marginal gain’ philosophy comes into its own. Every little improvement you make, no matter how trivial or small it seems, will add up when repeated right across the business.
Transforming processes boils down to looking at ways of doing things differently. The decision to make a change should be based on clear intelligence that it will bring about an improvement. Trial and error is in itself inefficient.
It also makes little sense to view process transformation as a one off. Incremental improvements have to be sustainable if they are to aggregate into a larger impact. Also, making a change once does not rule out making further improvements in the future. Successful businesses have to be adaptable over time, and a commitment to improving efficiency should be continuous.
‘Doing things differently’ also translates to making changes to the way people work in your business, or shifting the entire work culture. Lean Thinking can help you find efficiencies in your organisational structures, your workflow and within individual processes, but you need people to drive them. That requires developing the right attitudes, the right relationships and the right skills, which in turn demands strong leadership in addition to careful management.
3. The Role of Technology
Alongside informed planning and strong leadership, the single most important factor in a business turning the idea of operational efficiency into real results is technology. For Toyota, automated machinery put the Just In Time philosophy into practice. For modern businesses across all sectors, digital enterprise and communication technology is central to driving effective streamlining and process transformation.
Here are the key technologies helping businesses improve their operational efficiency.
Mobile technology allows all business communication – with suppliers, customers, between colleagues or departments – to happen any time, anywhere, reducing delays in response which hold up work flow. In addition, employees can work on the move, accessing business software platforms and key information as and when needed. Similarly, customers can browse and shop on the move.
Data helps business leaders make better decisions, in seeking to improve business processes and elsewhere. Digital technology not only generates actionable information about business performance in quantities and detail previously unimaginable, it also provides the tools to gather, process and analyse that data in the form of data management software. Such technology can unravel complex sets of business stats to identify indirect jams in workflow or highlight otherwise hidden discrepancies in individual processes.
Once upon a time, project work would require groups of people to be in the same place at the same time to discuss and make key decisions. Nowadays, cloud productivity tools like Google Docs allow employees or business partners to share and collaborate on documents in real time wherever they are. As with mobile communication, this eliminates lag in decision-making and in the way work crosses between departments.
As with the Toyota example, automation was what really got Lean rolling in manufacturing. Process transformation became a matter of analysing data from computerised machines and simply programming in adjustments. Automated systems are already well established in business, for example stock control software, automated payments and accountancy software. All of these help to streamline essential processes, and as technology develops to manage entire front-to-back operations from supplier through to customer, the greater the rewards will be in reducing errors and delays.
Achieve Your Business Objectives
Businesses face a competitive pressure to be dynamic in seeking ways to improve, which means continually being on the lookout for positive changes that can be made.
Focusing on operational efficiency answers this competitive pressure. It looks to workflow and processes to seek continuous improvements – cutting costs by minimising waste and adding value through smarter, more streamlined working. The changes need not be major either. The cumulative effect of multiple small improvements can bring success to business the same way it did to British cycling.