operations success factor

The 5 Key Success Factors Of Business – No. 3: Operations

This is the third in a series of posts on the 5 Key Success Factors of Business which can ensure your success and stand the test of time.

5 key success factors of businessIn addition to the information on this page, you can learn much more about the Operations success factor in our new book, The 5 Key Success Factors of Business: A Powerful System for Total Business Success, available in all formats at amazon using this link.

Today we want to give insights into what the world’s best companies do regarding operations – also called processes, or the work people do in your company.

As a reminder, the 5 Key Success Factors are:

  • Strategy (Strategic Focus, Leadership, Management, Planning)
  • People (Personnel, Staff, Learning, Development)
  • Operations (Processes, Work)
  • Marketing (Customer Relations, Sales, Responsiveness)
  • Finances (Assets, Facilities, Equipment)

Here’s what the world’s best companies do for Success Factor No. 3. Operations

1. Operate for Superior Customer Value

      The successful company is customer-driven, understands what customers value most, and aligns its operations to deliver superior customer value with dependability and excellence.

      Many companies start out delivering the products or services that the owners or leaders like. Someone loves collecting antiques, so she opens an antique store. Someone likes cooking seafood, so he opens a seafood restaurant. While it is important for the key people in the organization to enjoy what they are doing, business is all about meeting customer needs, specifically what customers value most.

      For example a McDonalds restaurant is geared for low cost and speed. McDonalds’ customers do not expect a gourmet restaurant experience. They value low cost and fast service, so they go to McDonalds and other fast-food restaurants to get it. McDonalds’ operations are documented with detailed operations manuals so that every customer gets what he or she values every time.

      Superior customer value can only be determined by asking customers what they value most, as noted in the section on marketing and research.

      If you want to improve your operations, build a system to guarantee delivery of the value which customers want. If your customers want quality, build a system that checks quality at every key step, not just at the end. If your customers want speed, study ways to cut out time-wasting steps and replace them with consolidated simpler ones, perhaps using computer systems to make things move faster.

      The key point here is, don’t just look at your operations and ask yourself, “How can we improve this?” Start instead with what customers value most, step back from day-to-day habits, and try to design an ideal system for delivering that value consistently.

2. Control Operations for Consistent Quality

      Quality-oriented companies pursue TQM (Total Quality Management) or ISO (International Standards Organization) certification by writing down specific operating procedures. Organizations like major fast-food companies and hotel chains have very detailed operations manuals for everything from fixing food to cleaning bathrooms. Nothing is left to chance.

      But any company no matter how small can simply start by asking its people to write down what they do step by step, then using that as a basis to develop a comprehensive operations manual and drive continuous improvements. Of course, just because someone writes down a series of steps does not mean this is the best way to do the job, but it is an excellent starting point that gets team members involved from the beginning. This first draft then needs to be reviewed by knowledgeable personnel, be they managers or line staff, to see what improvements can be made. Going forward, the documents can and should be reviewed periodically so that they reflect current practices and any improvements which arise naturally.     

3. Involve Your People in Improvements

      It is vital that each employee who is responsible for implementing any part of the operations manual fully understand what is expected and has a positive attitude toward doing so. If each person feels he or she “owns” that section of the manual in terms of responsibility and pride, following the steps is more likely to occur.

      Don’t come down from the mountain like Moses with your new Ten Commandments. Let all your people get involved in analyzing and designing how operations can be improved to deliver greater customer value.

      Involving your people will not only yield a much greater abundance of good ideas, it will also greatly strengthen the likelihood that improvements will happen.    

4. Encourage Innovation and Collaboration

      Continuous improvement in operations is just one of many ways a company can innovate. Someone may come up with an idea for a new product or service that has never been offered before but would be a good fit for the company’s range of services.

      Larger companies can have teams dedicated to research and development of new products. Smaller ones can have occasional brainstorming sessions on-site or off to a surge of innovative ideas.

      Frequent customer research, asking customers what they want and what improvements they would like to see, can further stimulate innovation.

      Reading trade journals, websites or emails can keep interested people apprised of new developments in their field and what competitors are up to.

      Everyone in the company should be encouraged to come up with innovative ideas and rewarded in some fashion such as money, perks, or recognition in group events.

      In addition to innovation, collaboration is also vital for peak performance. Sometimes the invisible lines between departments might as well be brick walls in terms of limiting collaboration, and some old-style companies even discourage people “getting out of their lanes.” But the most successful companies take a holistic approach and encourage collaboration. “We’re all in this together.”

      One way to increase collaboration is through cross-functional teams. Special teams can be formed including representatives from sales and marketing, operations, finance, personnel, management and more, so that each team is like the whole business in miniature. Or cross-functional teams can be more limited, combining only sales and operations for example, depending on the size of the staff and critical issues which need to be addressed.

      But operations improvements cannot be entirely delegated to teams or a committee (unless you lead it) or left to a consultant’s intervention. You as the manager-leader model the corporate culture of those who report to you. So you must have a passion for operations improvement in your gut, or it will not happen.

5. Correct Operations to Minimize Mistakes

      Sounds simple, but so often this does not happen. Earlier in this book we talked about the value of having a Learning Organization, which learns from mistakes and changes operations so those mistakes don’t happen again.

      Corrective actions only endure if the organization has standard procedures as noted above, in print or online, that people are expected to follow. If a standard procedure causes the failure, it needs to be updated and everyone involved needs to be informed. Often a failure is a learning opportunity – something that is not written down occurs or goes wrong – and then the standard procedures can be expanded and improved.

      A mistake can cost any company thousands of dollars, especially if you lose all the business of a major customer (think lifetime customer value). So don’t just improve in the moment – improve for the long haul so that this mistake won’t happen again and you benefit as a result.

6. Embrace Continuous Improvement

      It’s one thing to make a correction when something goes wrong. It’s another thing for your people to embrace continuous improvement with enthusiasm.

      Many Japanese companies practice what is known as kaizen, which means “continuous improvement.” They have learned that over time, dozens or hundreds of small improvements suggested by team members can add up to huge gains in productivity and profitability.

Some companies boost enthusiastic participation by recognizing through formal awards ceremonies the employees who make the most useful suggestions. You can do the same on a scale and method which works best for your business. 

      Although financial incentives may seem the obvious reward, studies have shown that group recognition is even more powerful. Of course if someone’s suggestion for improvement saves the company thousands of dollars or generates more in new income, it would only be fair to share the wealth with the person whose idea was the driver of the profitable improvement.

7. Support Operations with IT Systems

      Today the world’s largest companies practically all use advanced computer and information technology (IT) systems to keep every employee on track and connected. Virtually every staff member has access to a centralized database and relevant software. But that is not the case for the many millions of small to mid-size companies that employ a substantial portion of the nation’s and world’s workforce.

      The problem is often that off-the-shelf software is too generic to adequately capture the company’s business processes, but custom-coded software is too expensive.

      We once worked with a small group of restaurants that had standard POS (point of sale) software driving their cash registers, but no way to make sure each employee was following standard procedures for his or her job. For example each dish served was made according to a recipe, but once a cook or other back-of-house staffer memorized the recipe, they went about fixing that dish the way they remembered, sometimes improvising and sometimes leaving out one or more key ingredients.

      So the affordable solution we improvised was to create an online operations manual consisting of standard Word documents and Excel spreadsheets, listing step by step what was to be done for each part of the business. These documents could be accessed by any restaurant manager, and they were updated from time to time as needed for changes and improvements. They were also printed and bound in 3-ring notebooks so anyone on staff could quickly access the needed information for any particular job or task.

      Low-tech? Yes. Affordable and practical? Yes. Because following standard procedures is so essential for quality and customer satisfaction, any up-to-date information system is better than none.

8. Balance Quality, Price, Service and Speed

      As noted earlier, a business that wants to succeed must deliver what research shows that customers want, not primarily what the company or owners want. And that requires a lot of discipline and realism.

Now if you do or outsource an authentic market research study of customer value, you will find that customers answer in their own words, and you have to decide whether to translate that into your own words or leave it in their words.

      For example, instead of …

  • Quality, the customer may say, “I want something to last.”
  • Price, the customer may say, “Affordable.”
  • Service, the customer may say, “Treat me with respect.”
  • Speed, the customer may say, “Don’t make me wait too long.”

      And then there are trade-offs. Perhaps you have seen the sign or T-shirt that says, “Quality, Price, Speed. Pick two.” Do you get the point? If customers want a low price and fast service, they may have to sacrifice quality. If they want high quality and high speed, they are probably going to have to pay a higher price. And so on.

      The problem is made worse by today’s consumer expectations set by giant companies like Amazon.

  • Search for a product on amazon.com.
  • Find a five-star product at a great price.
  • Click the “buy” button.
  • Place your order.
  • Boom – it is at your front door in 24-48 hours.

      Why can’t everything be that easy, right? You got quality, price and speed all combined. So how is a small business going to compete?

You’re going to compete on customized service. Remember that is your competitive advantage when competing with the big guys in almost every case.

      Amazon can sell you standard food items, but it is not going to sell you a complete meal, freshly cooked just the way you want, or refill your wine glass or coffee cup whenever it starts to get low.

      Amazon can sell you all kinds of jewelry, but it is not going to gift wrap it with beautiful paper and a ribbon bow and place it in your hands at the moment of purchase.

      To compete with Amazon or any other company, make an effort to understand exactly what your customers want and deliver it to them with customized service that no one else can match. There will always be demand for that, and usually a willingness to pay extra for it too. 

Now, to learn about the Marketing success factor, click here.

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