Is Operational Excellence the Enemy of Strategic Breakthrough?

Operational excellence requires focus. We must know our customers and focus on their needs. Resources must be unleashed on the priorities and pried away from wasteful efforts. Processes must be tuned to ensure costs are controlled while simultaneously boasting top quality products and services. But at times, that same focus can be an enemy.

Every time you describe your business to someone you verbally trace the boundaries of a box that defines your business. This box is not two dimensional. No, there are many dimensions. For each dimension, you have selected a segment for your focus: markets, customers, industries, products, services, production capabilities, core knowledge, distribution channels, sales channels, supply chain models, technology, natural resources, geography, and more.

The clearer your focus, the firmer the boundaries of that box may become. Fine-tuned operations likely follow. Your focus keeps you on track and helps you continuously improve. It helps you deliver quality, reduce costs, retain customers, and grow the business.

So Where Is The Problem?

The problem is that while focus is essential to operational excellence, focus also makes strategic breakthrough harder to envision and harder to implement. And no matter how well a company is doing, the day will come when a significant shift will be necessary.

The keen focus of operational excellence can inhibit strategic breakthroughs in three ways:

1. Creates blinders to opportunity
2. Instills fierce loyalty and pride in the status quo
3. Increases implementation difficulty

First, as already discussed, operational excellence requires focus, and focus, almost by definition, prevents people from seeing things outside that focus. Many facets of what is done, why it is done, and how it is done can become firmly entrenched. All questions and improvements are discussed and debated within those boundaries. Even the strength of knowledge about the boundaries and the interdependencies within the boundaries contributes to the difficulty of seeing beyond those boundaries. Strategic breakthroughs, even incremental breakthroughs, require shattering one or many of those boundaries.

Second, operational excellence does not happen by accident. There is often a substantial investment in equipment, technology, new employees, training, and the hours spent developing efficient systems. A new strategy often demands different resources, different skills, and new systems. No one wants to see hard-fought acquisitions rendered obsolete. Furthermore, operational excellence instills great pride in those who have created and maintained the well-oiled machine. You can't take their baby away without evoking disappointment. With some people, you may be tampering with their very identity. Thus, it is only natural for people, regardless of level, to see all changes as an extension of the status quo in order to protect investments made. However, strategic breakthroughs almost always require seeing the business in a new way and abandoning some aspect of the status quo altogether, whether the components at risk came with a big price tag or not.

Third, like any well-oiled machine, the parts all hum together. Expectations are high, the slack is gone. Changes to one part affect many other parts. In contrast, ad hoc systems can undergo piece-meal revision and those out of sight may never even know the difference. However, in the well-tuned system, implementing major change likely requires careful, system wide planning.

What Can You Do About It?

First, have a clear strategy distinct from the plans needed to execute the strategy. Many of the boundaries you have created are operational, not strategic. They were choices you made to support a strategy. Only a few of the boundaries are sacrosanct and everyone should know which ones they are. Everything else can and should be challenged regularly at all levels. And, of course, even the sacrosanct may require a shift at some point.

For example, Southwest Airlines provides "shorthaul, high-frequency, point-to-point, low-fare service" – the speed of a plane at the cost of driving – with friendly, exceptional service. This strategy says nothing about flight amenities, reservations, destinations, connections, sales methods, partners, pricing systems, advance purchase, or any number of standard assumptions about air travel. The simplicity and clarity of the strategy helps employees maintain focus while simultaneously encouraging innovation on all the other fronts.

Second, take time out for strategic thinking. It is hard to innovate, a process requiring divergent thinking, when you are mired in the daily details of execution, which generally requires mostly convergent thinking. There are a variety of innovation techniques that help people see things in new ways. Creative exercises to explore life without certain assumptions keep people sharp and interested.

Third, don't confine discussions of strategy to the top ranks of the organization. Not only might you find powerful insights and ideas while discussing strategy with the rank and file, but regular strategic thinking helps people see that excellent systems are not an end game, but a journey that benefits from innovation and flexibility at all levels.

It takes a lot of focus, energy, expertise and ingenuity to develop excellent systems. Developing those systems with a clear understanding of the strategy and with the expectation that many parameters can and will change to support that strategy is far more satisfying than doing the same with an expectation of permanence and then seeing those systems destroyed. Let pride build around the ability to be flexible in addition to being good. Let the investments be seen as they are – informed choices given the current assumptions and risks. Most important of all, always be clear about which boundaries of your focus are firm and which are secondary.

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