Operational Excellence[1]


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  • Companies can no longer raise prices in lockstep with higher costs; they have to try to lower costs to accommodate rising customer expectations. Companies can no longer aim for less than hassle-free service. Their customers enjoy effortless, flawless, and instantaneous performance from one industry and want it from every other. Companies can no longer assume that good basic service is enough; customers demand premium service—and raise their standards continuously. Companies can no longer compromise on quality and product capabilities. They must build products to deliver nothing less than superiority and eye-popping innovation.
  • Operational Excellence[1]

    1. 2. OBJECTIVES <ul><li>Choose Your Customers </li></ul><ul><li>Narrow Your Focus </li></ul><ul><li>Dominate your Market </li></ul><ul><li>Old News: How to run the race </li></ul><ul><li>New News: Choosing the race to run </li></ul>No company can succeed today by trying to be all things to all people Companies thrive because they shine in a way their customers care about They have honed at least one component of value to a level of excellence that puts competitors to shame
    2. 3. Why is it that some companies endear themselves to us while others don’t seem to please? Why is it that it takes only a few minutes for pick up or drop off a rental car at Hertz’s #1 Club Gold, but twice that time and an annoying address form to check into a Hilton Hotel? Why is it that FedEx can ‘absolutely positively” deliver a package overnight, but Delta, American and United Airlines have trouble keeping your bags on the plane?
    3. 4. To Be A Leader… Companies must sell something more than the obvious. This something is customer value. Not just ordinary value…superior value. And, not just superior value… but continually improving superior value.
    4. 5. Customer value is the sum of benefits received minus the cost incurred by the customer from the product and the service that we provide. <ul><li>Different customers buy different kinds of value. Choose your customers and narrow your value focus. </li></ul><ul><li>As value standards rise, so do customer’s expectations. Stay ahead by only moving ahead. </li></ul><ul><li>Producing an unmatched level of a particular value requires a superior operating model – a “machine” dedicated to just that kind of value </li></ul>Customers want superior value .
    5. 6. Components of Value <ul><li>The Price is Right – best total cost </li></ul><ul><li>Time – speed of response – drive-thru life style </li></ul><ul><li>Premium service – extraordinary service is becoming ordinary – speedy, flawless, and responsive is commonplace </li></ul><ul><li>Quality – must constantly revamp products to reflect the latest technology </li></ul>
    6. 7. Customers’ Expectation of Value <ul><li>Rule 1: Provide the best offering in the marketplace by excelling in a specific dimension of value </li></ul><ul><li>Rule 2: Maintain threshold standards on other dimensions of value </li></ul><ul><li>Rule 3: Dominate your market by improving value year after year </li></ul><ul><li>Rule 4: Build a well tuned operating model dedicated to delivering unmatched value </li></ul>
    7. 8. The New World of Competition <ul><li>Companies can no longer raise prices in lockstep with higher costs. </li></ul><ul><li>Companies can no longer aim for less than hassle-free service. </li></ul><ul><li>Companies can no longer assume that good basic service is enough. </li></ul><ul><li>Companies can no longer compromise on quality and product capabilities. </li></ul>Four New Premises Underlie Successful Business Practice Today:
    8. 9. <ul><li>Arco over the past 5 years averaged a 20 percent return on equity…more than triple the average in its industry. </li></ul>Sony outperforms its competitors by almost every financial measure. Its average annual revenue growth over the past 5 years was 29%, compared to 14% for rivals. These companies aren’t doing just a little better than the competition … they are leaving their competitors in the dust! Home Depot has averaged 37% annual sales growth over the past 5 years, almost triple the average for the industry.
    9. 10. Market Leaders <ul><li>These companies became market leaders by getting their business to master one band in the value spectrum. They don’t try to be the best in everything. </li></ul><ul><li>Best Total Cost…Operational Excellence </li></ul><ul><li>Providing customers with reliable products or services at competitive prices, delivered with minimal difficulty or inconvenience. </li></ul><ul><li>2. Best Product…Product Leadership </li></ul><ul><li>Providing products that continually redefine state of the art. </li></ul><ul><li>3. Best Total Solution…Customer Intimacy </li></ul><ul><li>Selling the customer a total solution, not just a product or service. </li></ul>Three Value Propositions:
    10. 11. Not providing lunch? Not providing baggage handling? Not providing advance check in?
    11. 12. SOUTHWEST AIRLINES <ul><li>Makes you happy to stand in line. </li></ul><ul><li>Makes doing business with them FUN ! </li></ul><ul><li>Makes you want to come back another day – to work or fly. </li></ul>Hint: Other airlines are building zero loyalty (other than frequent flyer miles).
    12. 13. <ul><li>Total change in solution paradigm </li></ul><ul><li>Jump to new technology </li></ul><ul><li>Shift to new asset base </li></ul>MAJOR IMPROVEMENT CHALLENGES <ul><li>Problem expertise </li></ul><ul><li>Service customization </li></ul><ul><li>Product technology </li></ul><ul><li>R&D cycle time </li></ul><ul><li>Process redesign </li></ul><ul><li>Continuous improvement </li></ul>IMPROVEMENT LEVERS <ul><li>Client acquisition & development </li></ul><ul><li>Invention </li></ul><ul><li>Commercialization </li></ul><ul><li>Market exploitation </li></ul><ul><li>End-to-End product delivery </li></ul><ul><li>Customer service cycle </li></ul>CORE PROCESSES <ul><li>Solve the client’s broader problem </li></ul><ul><li>Cannibalize your success with breakthroughs </li></ul><ul><li>Variety kills efficiency </li></ul>GOLDEN RULE <ul><li>Best Total Solution </li></ul><ul><li>Best Product </li></ul><ul><li>Best Total Cost </li></ul>VALUE PROPOSITION CUSTOMER INTIMACY PRODUCT LEADERSHIP OPERATIONAL EXCELLENCE
    13. 14. Threshold vs. Leadership in Customer Value Product Leadership “ best product” Operational Excellence “ best total cost” Customer Intimacy “ best total solution” Product Differentiation Operational Competence Customer Responsive
    14. 15. Can you name other icons of Operational Excellence and describe their formulas? Question -
    15. 16. Why Choose? <ul><li>Commits company to a single path to achieve greatness </li></ul><ul><li>By design, propels a company to choose a secondary role in the other disciplines </li></ul><ul><li>Shapes company’s plans and decisions – from it’s culture to it’s public stance </li></ul><ul><li>Makes a commitment to an underlying operating model </li></ul><ul><li>Creates an environment for a breakthrough on any one dimension to reach new heights of performance </li></ul><ul><li>Thus, choosing a discipline is the choice of winners! </li></ul>
    16. 17. Class Excercise <ul><li>Divide into 2 groups and create a position statement which states how we wish to be perceived in the minds of out clients. </li></ul><ul><li>Hint: It is the core message you want to deliver in every medium, including elevators and airport waiting areas, to influence the perceptions of our service </li></ul><ul><li>You can establish your positioning statement by answering the following questions: </li></ul><ul><ul><li>Who? Who are we? </li></ul></ul><ul><ul><li>What? What business are we in? </li></ul></ul><ul><ul><li>For Whom? What clients do we serve? </li></ul></ul><ul><ul><li>What Need? What are the special needs of the clients we serve? </li></ul></ul><ul><ul><li>Against Whom? With whom are we competing? </li></ul></ul><ul><ul><li>What’s Different? What makes us different from our competitors? </li></ul></ul><ul><ul><li>SO…What’s the Benefit? What unique benefits does a client derive from our service? </li></ul></ul>
    17. 18. Corporate Strategy to Focus on Operational Excellence <ul><li>Which Products have become a commodity. </li></ul><ul><li>Product is in mature life cycle stage– tremendous competition, harder to differentiate, and constant pressure to reduce price. </li></ul><ul><li>Our organizational structure is based on execution. Corporate drives and maintains the large relationships, we execute the services. </li></ul><ul><li>Management chose to focus on Operational Excellence…expediting this plan. </li></ul><ul><li>Operationally excellent companies seek to deliver a combination of quality, price, ease of purchase that no one else in their market can match. </li></ul>
    18. 19. STANDARDIZING OUR PROCESSES <ul><li>Improve process and workflow across departments </li></ul><ul><ul><li>Sales, ASU, OPS, IT, Product Development </li></ul></ul><ul><li>Improve internal processes and create accountabilities </li></ul><ul><li>Standardize processing/workflow across all centers </li></ul><ul><ul><li>Sales accountable for inaccurate paperwork </li></ul></ul><ul><li>Business accountable for time business requirements </li></ul>Company’s Goal: Operational Excellence = Lowest Cost Provider
    19. 20. GAIN COMPETITIVE EDGE MARKET SHARE <ul><li>Competitive Pricing </li></ul><ul><li>Lower Bureau Costs </li></ul><ul><li>Fast Account Approval and Set-up </li></ul><ul><li>New F1 Format </li></ul><ul><li>Integration With Other Products </li></ul><ul><li>Servicing Opportunities </li></ul>
    20. 21. COST REDUCTION THROUGH: <ul><li>Elimination of System Workarounds / Slowness </li></ul><ul><li>Billing Standardization/clean-up </li></ul><ul><li>MIS Reporting – Sales, Ops </li></ul><ul><li>System Flexibility With Changes </li></ul><ul><li>Standardized Processes </li></ul><ul><li>Offshore Initiative </li></ul>
    22. 23. To Deliver Superior Basis Service: <ul><li>Hassle-free = unmatched value proposition </li></ul><ul><li>Operating model supports efficient, zero-defect service </li></ul><ul><li>Effectively exploit information technology to redesign basic service </li></ul><ul><li>Find new ways to use their existing assets; replicate their formula in other markets </li></ul>
    23. 24. Operational Excellence Model’s Key Features 1. Processes for end-to-end product supply and basic service that are optimized and streamlined to minimize costs and hassle. 2. Operations are standardized, simplified, tightly controlled and centrally planned. 3. Management systems that focus on integrated, reliable, high-speed transactions and compliance to norms. 4. A culture that abhors waste and rewards efficiency.
    24. 25. The Discipline of Product Leadership <ul><li>ORGANIZATION </li></ul><ul><li>Centralized functions </li></ul><ul><li>High skills at the core of the organization </li></ul><ul><li>CULTURE </li></ul><ul><li>Disciplined teamwork </li></ul><ul><li>Process focused </li></ul><ul><li>Conformance, “one size fits all” mindset </li></ul><ul><li>CORE PROCESSES </li></ul><ul><li>Product delivery and basic service cycle </li></ul><ul><li>Built on standard, no frills fixed assets </li></ul><ul><li>INFORMATION </li></ul><ul><li>TECHNOLOGY </li></ul><ul><li>Integrated, low-cost transaction systems </li></ul><ul><li>Mobile and remote technologies </li></ul><ul><li>MANAGEMENT SYSTEMS </li></ul><ul><li>Command and control </li></ul><ul><li>Compensation fixed to cost and quality </li></ul><ul><li>Transition profitability tracking </li></ul>
    25. 26. To Climb the Pinnacle of Operational Excellence: <ul><li>Sweat the details </li></ul><ul><li>Measure and reward </li></ul><ul><li>Tie compensation to achieving daily quality objectives </li></ul><ul><li>Live and die by principles of total quality management </li></ul>
    26. 27. Other Elements of Operational Excellence <ul><li>Low-or-lowest prices (consistently low) </li></ul><ul><li>Convenience </li></ul><ul><ul><li>the absence of tangible or intangible costs stemming from annoyance and irritation </li></ul></ul><ul><ul><li>swift and dependable service </li></ul></ul><ul><ul><li>transactions that are easy, pleasant, quick and accurate </li></ul></ul><ul><li>Standardized assets and efficient operating procedure </li></ul><ul><li>Do it one and only one way – Variety kills efficiency </li></ul>
    27. 28. Class exercise: <ul><li>Tell people, in a single compelling sentence, why they should buy from us instead of our competitors </li></ul>
    28. 29. Formula! Formula! Formula!! – From Operational Competence to Operational Excellence, we must make hard choices. <ul><li>Less product variety </li></ul><ul><li>Courage to not please every customer </li></ul><ul><li>Forging whole company into a single, focused instrument </li></ul>
    29. 30. What Does This Mean? <ul><li>Less customization for customers and more standardization. </li></ul><ul><li>Still customer facing but not as customer intimate = select or choose which customers we want and may turn away others seeking other value. </li></ul><ul><li>Look at individual processes for each department and streamline for efficiency. </li></ul><ul><li>Reduce waste/costs. </li></ul><ul><li>Strong focus on quality. </li></ul>
    30. 31. U.S. RESULT OF TRANSITION <ul><li>Smaller Centers – Reduction in U.S. Force </li></ul><ul><li>Higher Level Opportunities </li></ul><ul><li>Higher Skilled Staff </li></ul><ul><li>Reduction of Cost – Lowest Cost Producer </li></ul><ul><li>More Price Competitive </li></ul><ul><li>Maintain Our Leadership Position </li></ul>
    31. 32. CREDCO 2004 GOALS <ul><li>Complete System, Project </li></ul><ul><li>and Client Migrations </li></ul><ul><li>Standardize Out </li></ul><ul><li>Processes/workflow </li></ul><ul><li>Offshore Initiative </li></ul><ul><li>Uniondale Relocation </li></ul><ul><li>Re-alignment of Centers </li></ul><ul><li>Redefine Credco </li></ul><ul><li>Successful Completion of Initiatives – Goals </li></ul><ul><li>Increase Revenue and Market Share </li></ul><ul><li>Improved Efficiency </li></ul><ul><li>Cost Reduction </li></ul><ul><li>Improved Client Experience </li></ul>
    32. 33. STRATEGY <ul><li>To Become As Operationally Excellent As Possibly While Increasing Revenue and Retaining #1 Position in the Industry </li></ul><ul><li>Operational Excellence = Lowest Cost Provider </li></ul>
    33. 34. OPERATIONAL EXCELLENCE <ul><li>PROCESS FOCUS </li></ul><ul><ul><li>Standardization </li></ul></ul><ul><ul><li>Defined Steps to Improve Quality (Error Proof) </li></ul></ul><ul><ul><li>Highest Quality at Lowest Cost </li></ul></ul><ul><li>EMPOWERMENT </li></ul><ul><ul><li>Empower Staff with Quality Checks </li></ul></ul><ul><li>TEAMWORK </li></ul><ul><ul><li>Everyone’s “Head in the Game” </li></ul></ul>
    34. 35. SUMMARY <ul><li>Commitment to one value discipline </li></ul><ul><li>Put unmatched value of one chosen kind in the marketplace </li></ul><ul><li>Meet threshold standards in other dimensions of value </li></ul><ul><li>Make a proposition better every year </li></ul><ul><li>Build a superior operating model to deliver on the promise </li></ul><ul><li>Choose customers deliberately </li></ul><ul><li>No longer “all things to all customers” </li></ul><ul><li>Dominate our market </li></ul><ul><li>Upgrade operating models to deliver unprecedented levels of customer value </li></ul><ul><li>FOCUS on nothing else </li></ul><ul><li>EXCEL in Operational Excellence </li></ul>
    35. 36. Operational Excellence