Blog > Finance & Strategy > 7 Pillars of Business Success, Part 5 – Operations
7 Pillars of Business Success, Part 5 - Operations, Brainstorming
31 March 2020

7 Pillars of Business Success, Part 5 – Operations

Introduction

No matter what business you’re in, your ability to bring on new clients while maximising lifetime profit value of existing ones will be determined principally by your product /service, so the methodologies, systems and processes you use to create that product – in short, operations – could not be more business-critical.

This is as true for a cake-shop owner as it is for a team of Google developers building their next global platform.

What’s more, for owners of SME’s, these systems and processes will determine if they actually behave as business owners or if instead, they fall into the trap of becoming a very busy and poorly paid employee.

Sadly, there is no blueprint to getting this right, but there are certain characteristics that the most operationally successful companies seem to share, and we’ll explore those in this article.

 

1. Think “customer experience”

Customer ExpThe first thing to realise is that the “product” is far more than the tangible output of your labour. From the way you answer your telephone through to your invoicing policies, your operational framework needs to encompass every moment of every interaction the customer has with your brand.

You shouldn’t even begin thinking about formalising systems and processes until you’re absolutely crystal clear on what great customer experience looks like for your business.

 

2. Understanding your core competencies

This is a particular challenge for small businesses, who have limited resources and yet want to say yes to every opportunity; a sure-fire way of delivering endless mediocrity.

Core CompetencyFor some companies, their core competency may be just one thing. These are the lucky ones, as it gives such clarity and focus to their operations. However, unless you’re in an ultra-niche or newly emerging market, you’ll probably find that doing just one thing is unlikely to give you a distinct position. Instead, you may have to marry two or three competencies, the combination of which you know will offer tremendous value to your audience. Such as an accountant that not only has outstanding financial expertise, but also decades of real-world business experience. An accountant that can effectively act as an outsourced CFO, offering strategic commercial guidance at every stage of the business journey (this should link to the relevant WP’s service page).

The question then is do you have the people internally to take ownership of each of these core competencies? If not, the business owner will keep getting dragged back into low-level operations – a trap many small business owners never crawl out of.

 

3. Determine what level of autonomy and ownership you want to give your employees – are you building a McDonalds or a Google?

For some companies, operational excellence is about rigid processes and rules. They have precise models to follow and any deviation is penalised.

McDonalds is, of course, the epitome of this, with detailed processes to follow that ensure every McDonalds on the planet delivers a consistent experience to the customer.

For others, however, this level of micro-management would be hugely counterproductive. Take Google, for instance – the majority of Google’s revenue comes from Adwords, and the story of how it came to be so successful gives great insight into their operational culture. In 2002, Larry Page became frustrated when looking for details about a bike called a “Kawasaki H1B”. While doing his Google search, he was shown ads for lawyers who could help immigrants get an American visa called an “H1-B,” but received nothing on the bike. Frustrated with that, he printed the pages and posted it on the whiteboard in Google’s kitchen, with the text “This ad sucks! “. A team of engineers saw this on a Friday and even though they weren’t officially responsible for ads, they believed they could find a solution, and by Monday they had. The team proposed a new formula that took account of a page’s relevance rather than simply its budget. The basis of this formula still exists today, and has effectively funded the growth of the company and all of the innovations it’s become famous for.

This kind of unstructured innovation could never be possible within McDonalds, so you need to decide – What kind of company do you want to be? One that creates systems and processes so tightly defined that you can hire super cheap labour to deploy it and expect the same outcome every time, or one that brings together brilliant minds and gives them the freedom to find solutions to complex problems that may not even yet exist?

 

4. Nail it before you scale it

Basic OperationsThere is often a misguided notion in business that if a company can just get bigger and sell more stuff, all of its other problems will float away. Nonsense. Any attempt to scale a business that has flaws in its operations will simply add fuel to the fire.

Before worrying about how you scale, you first need to ensure that you have the systems, processes and culture in place to consistently deliver the ideal customer experience (point 1) in a way that makes you money. If you can’t do those things at a small scale, don’t try to do them at a larger scale – the problems will grow far faster than the benefits!

(The one possible exception to this is if you are building a digital platform where scale is itself often key to the user experience. For example, social media networks don’t work if there aren’t lots of people to connect with, and search engines don’t work if you don’t have lots of content to return for any given search query).

 

5. Get the basics of change management

In today’s rapidly changing world, your operations need to be endlessly nimble. A company whose systems and processes standstill is sure to find itself out of touch with the customer before they know it.

The challenge of such an ongoing evolution is not to be underestimated. It doesn’t matter whether you’re a team of five or a global behemoth, people don’t like change. So any transformation programme, no matter what scale, needs to begin with the fundamentals of change management:

  • Paint a vision – people need to understand why the change is happening and how it will benefit them and the customer. Where are they going to end up and why is it worth the short term pain?
  • Consult, consult, consult – while effective change rarely happens via committee, people do need to feel like their thoughts and concerns have been heard.
  • Create an open environment for feedback – as operational systems change, mistakes will be made. The key is to ensure that there is an environment where honest feedback is encouraged. In fact, Alphabet (Google’s parent company) conducted a 2 year study into what characterised high performing teams, and the number 1 trait, by some distance, was what they called “Psychological safety”. In other words, the ability to be honest without fear of judgement or recrimination.
  • Start with the early adopters – identify an enthusiastic nucleus and prove the benefits of the change there, then watch as the rest of the organisation forms an orderly queue.

 

6. Understand what great project management looks like in your organisation

Project ManagementWhether or not their job title contains these two words, every company depends on the actions of great project managers. People who organise, drive action, manage quality, route information and hold others to account.

Depending on the size and nature of the organisation, the formality of such roles and methodologies they employ (lean, agile, waterfall, etc) will vary hugely, so you need to know what good project management looks like for your business, and ensure every team possesses at least one of these operational rockstars.

 

7. Build a culture of execution

CultureAs Stephen Kelly, former CEO of Sage Accountancy Software and COO of Government once said, “A class execution and B class strategy beats A class strategy and B class execution every day of the week.”

A culture of execution requires several things. First of all, you need to loosen up on strategy development and tighten up on strategy implementation. Not only does perfect not exist, but also strategy should be malleable. So, get the strategy 80% right and then commit every remaining minute available on getting things done.

Secondly, you need to stay focused. The single most effective way of increasing the time a company has available is to reduce the number of things it is trying to achieve, so be clear on your core objectives and ensure every strategic meeting and memo focuses on these topics. Everything else is AOB.

Finally – as well as recognising innovation, it is as important to reward those who get things done as well. Ideation and execution are an awesome combination.

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