Deep Change

How operational innovation can transform your company

In the age of fierce competition, cutting back of price of the product being offered is quite difficult to
attain sustainable profits. So, in order to minimize losses and tackle competition from the ever-growing
business rivals, operation is the key to it all. Keeping all other things constants, it is operations that reap
any business the most profit in long run. It is also the place which lets you scope for innovation.
Marketing, for some might be a sector, but marketing schemes goes out of spotlight quite fast that it
becomes difficult for the business itself to keep track of. For profits, it is all but operations. Cutting down
costs at operations level and that too coupled with innovations have time and again, at various levels,
have paved ways for profit. Large companies have drawn parallel to this to stay in the race and have
moved ahead of others. Toyota, Wall mart, etc. are the ones that have resorted to reengineering their
entire systems, cutting operations cost down and innovate in operations making them the most valuable
companies and have thrived for so long. Hence. operations management is the key to business success
considering the long-run scenario.

Michael Hammer, in the article has been able to define the importance of operation management
referring to Progressive Insurance, an automobile insurer whose growth came “Nor through acquisition
or mergers” But through:

 Substantial innovations in everyday operation,

 Revealing their potential to produce significant reduction in cost
 Increase in productivity, and
 Improved customer satisfaction

Through these improvements, Progressive was able to see the significant growth of sales in 2004
compared to 1991.

In this article, the way Hammer explains operational innovation definitely have its effects on business.
Observing companies like Progressive, Wal mart and Toyota this article explains how a company could
implement operational innovation, in the end proving to be much more valuation than the loud and
exciting short term changes several companies indulges in today.

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Progressive has accepted a cost leadership strategy. They use their rate comparison website which help
their customer to compare its price with other competitors. For example if you have an auto accident,
progressive representatives would be on hand 24 hours a day to take your call and schedule a claim
adjuster. The claim adjuster works out of a mobile van, enabling a nine hour turnaround rather than the
industry standard seven to ten days. The adjuster prepares an estimate on the spot and will, in most
cases, write you check immediately. This strategy differentiated from other competitors in the market.

Among options available for managers to stimulate growth, operational innovation is relatively reliable
and low cost. But more companies do not embrace it. The reason is operational innovation entails
departure from familiar norms and require major changes in how department conduct their work and
relate to one another. It is truly deep change, affecting the very essence of a company: how its work is
done. The effects ripple outward to all aspects of the enterprise, from measurement and reward
systems and job designs to organizational structure and managerial roles. Hence involvement of
leadership is essential and unpleasant characteristics of contemporary corporate leadership have
become a barrier.

The other cultural barrier to operational innovation is that contemporary managers undervalue
operations and give high priority to functions like finance and strategy and second priority to marketing
and sales and operations the least. Operations is a branch of engineering it requires a skill set and a
mindset different from those needed in most other executive activities and many top managers are
ignorant about operations and uninterested in learning more. The other critical barrier that prevents it
happening is nobody owns it. Functional line managers interested in meeting the deadlines and try to
find new ways within departments but operational innovation should cross the departmental
boundaries.

As discussed, operational innovation is limited by the need for constantly responding to the demands of
the product release cycle deadlines. Yet, the most spectacular operational innovations come under
pressure. Operational innovation most often start as grassroots movements in organizations and
executive must have both the imagination and the charisma needed to drive major operational change.
Companies should look for the areas where innovation would have the greatest effect on achieving key
strategic goals. After selecting the area for innovation, company must set stretch performance goals.
Reimagining processes would be the way for this.

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The four ways that Hammer listed would help to discover new ways, not just better ways, of operating
are:

1. Benchmark with companies outside your industries – a bank can learn customer service from
hotel.
2. Identify the assumptions that constrains how you think about your work
3. Turn special cases into everyday actions
4. Rethink critical dimensions of work

The author has discussed the best way to implement operational innovation. For instance, because they
are disrupted by nature, projects should be concentrated in those activities with greatest impact on
enterprise strategic goals.

Operational innovation is a lasting basis for superior performance. If we understand how operational
innovation happens and understands the barriers that prevent it from happening, it can add on to
competitive edge of the company.

Any successful operational innovation should examine following seven key dimensions of work:

1. What results are required to be delivered?

2. Who should do the work?
3. Where the work should be done?
4. When should the work be done?
5. Does the work or all aspects of it need to be done at all?
6. What information should be provided to the performers?
7. How thoroughly does each aspects of the work need to be performed?

Breakthrough innovation in operations-not just steady improvement – can destroy competitors and
shake up industries. Such advances don’t have to be rare as they are. The management of any
organization must be made well aware about the advantages that operation innovation brings into the
business. It doesn’t require a large amount of investment in R & D, all we need is a simple yet clever trick
that get things done more efficiently. This well yield tremendous amount of profit in the long run than
any other department in the organization cannot deliver.

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