During the next few months, we must focus on Operations and more critically we must modernize the IT systems and processes that run your operations.
For 2023, we see 3 trends in the enterprise technology and tech based businesses in general:
1. The Inevitable return to the office?
2. The disassembly and reassembly of your IT department, your stodgy enterprise software and vendor eco system, and
3. The rediscovery of the lost art of operational excellence
Of these, I will expand today on item 3 today, Operations.. Let me know if you want me to expand on the others as well.
Roughly half of my work experience have been in traditional fortune 50 companies and the rest in fast growing high tech Silicon Valley companies. When I was with traditional manufacturing companies, I missed the pace of innovation and drive for technology based growth . And when I later moved to Silicon Valley, gosh, do I miss the excellence in operations!
Traditional companies often excelled in operations because of razor thin margins. And the Operations DNA came out of manufacturing, supply chain and and a tight focus on SG&A costs.
Current high growth companies have not had a chance to learn this. They have quickly grown from a startup to a huge company and are experiencing growing pains, especially while operating at scale. High margins and growth often hide operational inefficiency. These companies often build scale by throwing people at problems rather than digitization. This may appear counter intuitive, since one would think that technology companies would have the best IT systems running their operations right ? Sometimes, “cobbler’s children do have no shoes”
I was recently simultaneously leading Digital transformation for Dell in Austin and VMware in Palo Alto. The contrast in the culture around operations was palpable.
How do we address this? Just hire experienced people from traditional companies? No. The goal posts have changed and so has the technology. Traditional skills in finance and manufacturing expertise often led to outsourcing, offshoring, creation of global shared services, ERP systems and a huge expansion in globalization of supply chain. All seemed good ideas in the past but are now creating new operational problems.
The recent meltdown of Southwest Airlines systems underscores that, these days, your IT is your Operations. Just managing costs and hoping that your legacy IT systems will run your operations for another year is highly risky. It is usually not the CIO who makes this call but the CFO or the CEO.
Just outsourcing of your core operations just hides the problem and a mistake can easily create brand erosion. Just look at the recent United Airlines lost baggage conversations on twitter. The airlines try to distance themselves by blaming the outsourced provider. But if a consumer is able to track her bags, why can’t the industry? In fact, I am sure all of us are going to buy some cheap baggage trackers. So we will rely on modern IOT for real time tracking while the airline industry will continue to track bags using an old bar coding process.
And offshoring or globalization beyond a certain point has created more headaches than necessary. Why would you shop for labor arbitration instead of just digitizing your processes? These days, there are several nimble systems that can deliver results in 30, 60,90 days.
While traditional companies need to modernize their core IT systems for operations, it is critical that the silicon valley companies start building the operations culture and and start digitizing their operations for enabling scale and reducing manual work.
The old adage of “don’t fix what ain’t broke” doesn’t work for most companies. But for growing companies, the mindset of “ move fast and break things” doesn’t work for operations. It is disastrous to break things in your operations.
Most board members now want the companies to focus on profitable revenue. Investors do now want to know if their money is being spent well.
What a difference a year makes !
The questions we are currently being asked are :
Where should operations reside in our organization?
How do we build a culture for operations and business excellence.
How do you build scale from grounds up so we do not have huge recurring costs?
Do we need a digital shared services?
Does offshoring really work? Where? And how?
If we are working remotely, how do we optimize net income? Do we need a HQ?
How can we transform all our core operations digitally?
Where is the talent that has done this elsewhere?
We get the strategy, but how do you do it?
This is a good year to invest and fix your operations. Especially “if it ain't broke”
As John F. Kennedy said, “The time to fix the roof is when the sun is shining”
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