Operational Performance Improvement

What got a business started is not enough to sustain and scale its reach.

The average lifespan of a US S&P 500 Company is only 15 years today.

What gets a business started is not what will enable it to be sustainable nor is it what it will need to scale.

Sustainability and scale are all about:

  • Attracting the right management talent while instilling a culture for organic leadership development;

  • Building a foundation of processes;

  • Collecting and understanding how to operationalize data insights;

  • Focusing on Organizational Design to manage growth, risk and innovation; and,

  • Understanding the resources needed (capital facilities and equipment, systems, etc.) that will reduce dependence on any one person and increase reliance on a framework of processes.

    It starts with understanding the core elements that has kept your business alive (your value and differentiation to the marketplace), and ends with….how can we sustain and scale ourselves while maintaining that value and differentiation (?)

    Where do many businesses fail?

    • Not understanding what made the business exist in the first place;

    • Believing that process and product are the same thing;

    • Not measuring the key business metrics that matter in a way that provides insights that can be operationalized (i.e., customer satisfaction surveys that provide data, but nothing specific enough to actually address).

Businesses that fail in sustaining and scaling themselves do not focus on the most important thing - cash flow.

Cash flow is another item that seems so elementary but very few companies take the time and have the expertise to project their cash flow by week, analyze the variances, and refine the projection to create “predictive liquidity”. How can you comfortably scale a business if you cannot predict how much cash you’ll have in one quarter out. The best companies project cash flow at a granular level because every operational decision has an impact to liquidity.

Cash is the lifeline of every business - it is the universal language that everyone understands; it transcends accounting by being the ‘source of financial truth’. Aligning business performance around cash flow provides meaningful cross-functional engagement and creates accountability in a way that traditional financial statements never will.

Companies make many mistakes in building great processes that create a foundation for sustainability and scalability - most believe that software (in-and-of-itself) is the answer to a business problem without ever acknowledging that the best software in the world will not be worth anything if people do not know how to use it, IT leaders do not know how to integrate it, and leadership does not know what it wants from it.

You should always want to strive to use 70% of a software platform’s capabilities; far too many companies have 7 platforms that are used for 10% of the software’s actual capabilities - this type of fragmentation creates complexity, confusion and chaos - the 3 C’s that are almost always linked together.

Additionally, software platforms require people who know how to use them and processes to understand how to leverage the data is can create.

Software can be a critical enabler or an incredible waste of capital - and it is a choice - companies that create a roadmap of how they want to use the software, who will benefit, and what data they want to measure prior to buying it are the ones who enable its capabilities for scale.

Now that AI is all-the-rage, dashboards are being created for everything. Less dashboards often mean more attention to the data that actually matters. Does your business really need to be measuring 25 KPIs? And if so, who is actually going to review each KPI and actually understand what operational change needs to happen when a KPI deteriorates?

Customer Satisfaction is the number one indicator of future business success

It seems so obvious yet so few businesses actually measure customer satisfaction in a meaningful way. And meaningful means that the measurement has cadence (done regularly), is very specific to certain attributes of a business that customers value, and provides insights that can be operationalized.

It is great if a customer says their stay at your hotel was excellent, but it means nothing if you do not know why.

Businesses that scale all realize that there are 3 components to optimizing their operations: 1) Simple processes; 2) Flexible tools (software and data); and 3) Leaders who institutionalize accountability with objective information.

Leadership teams that work off simplistic principles maintain ‘dashboard discipline’. Too many dashboards and KPIs are distracting from the ones that truly matter. Furthermore, who has time to review all of these dashboards? Dashboards need to be centered around a few KPIs that truly matter to your product, operational efficiency, and customer satisfaction.

Companies that make decisions only using data are often the ones that do not survive because data (as great as it is) can be misinterpreted.

Identifying the KPIs that matter and building dashboards around those is the first step - understanding why a KPI is changing and what the operational change is to improve it is where the value lies. Being able to differentiate between an anomaly and a trend dictates when to act and when to wait. And sometimes that discretion has massive consequences on business operations and financial performance.