This is the second article in our feature on operational efficiency and cost reduction. Having posed the 10 key questions to be addressed, let's now look at the methodological approaches to be adopted.
Contents
A wide range of operational efficiency methodologies
There are many possible methods based on efficiency and/or costs (Zero-Based Budgeting, Benchmark, Activity-Based costing, Total Costs of Ownership , Process Mapping, Value Chain Analysis , Process Mining, etc.). They are more or less :
- complexes
- costly: consultants, mobilization of in-house teams, access to data, etc,
- fast and adapted to the specific context: organization, financial situation, emergency, strategy defined or being defined...
A choice of methodology that depends first and foremost on context
In our experience, the choice of these methodologies largely depends on the context and therefore on the guiding principles mentioned (urgency, top-down target already given, etc.), but also on applicability (available data, management control methods, etc.) and relative usefulness, given the data and analyses already carried out.
Operational efficiency must (continue to) rhyme with performance
For example, an IT benchmark can be useful if the indicators are comparable. However, comparing operational productivity can be complex, due to differences in organizational models, cost allocation between companies, the distribution and nature of distribution costs, etc.
And if a light benchmark is any indication, we can draw a parallel with BMI.
A company's cost management can be compared to a person's BMI. If the BMI is too high, it indicates excess, dangerous to health; too low, it reflects a lack of resources to function properly.
In the same way, a company needs to keep an eye on its costs: too much spending slows down its competitiveness, but too many cuts can weaken it.
The levers for adjusting these costs, like those for regulating BMI (diet, exercise, rhythms...), are generally known, but the key is to apply them appropriately, thoughtfully and sustainably, focusing on those most likely to be implemented, to keep the business performing well and balanced over the long term. And sometimes, getting help can help!
A "light" approach that can be quickly implemented and adapted
A "light" approach, which can be implemented quickly and adapted to the context, consists of combining two types of analysis focused on your own company: one focused on the levers, the other on the evolution of your performance.
The first step is to focus on the "maturity of implementation of optimization levers" (remaining potential, applicability, level of additional investment, desirability...). Based on a list of levers specific to the functions/processes analyzed, we will ask the following questions for each of them:
- Has the lever been used? if not, why not (unsuitable, skills, budget, maturity, etc.)?
- How was it implemented? What were the results? Can it be extended and deepened?
- What level of additional investment is required to reach full potential? Do we have the existing skills?
- What additional impact can we expect? What is the acceptability of leverage (e.g. near or offshoring)?
- What impact on service quality? Temporary disruptions, long-term risks...Is it manageable?
- ...
Objectivize impacts by analyzing historical KPIs
At the same time, we'll be observing internal performance trends and objectifying the impacts obtained ("internal" objectification) by analyzing a history of performance KPIs recognized by all and consistent with the breakdown used to analyze the levers (markets, functions, processes), wherever possible.
The KPIs selected effectively reflect the evolution of cost control/productivity/service quality, depending on the organization and the perimeters we wish to address; we measure them over time by comparing them with past projects/investments, and the levers implemented, to get an initial view of the impact generated.
The benefits of this approach
Depending on the project's objective, the time required and the budget available, the philosophy behind this approach is to quickly compare these two analyses in order to define priority areas and potentials, and where necessary, enter into a detailed vision.
It is therefore necessary to calibrate the levers considered and the level of detail considered for each of them.
The keys to a successful operational efficiency program
Of course, other methodologies can be used and mixed to define a specific and adapted approach, because the important thing is to implement an approach that is as consistent as possible with the guiding principles set out in the program, but also with the company's culture, history on the subject and challenges.
Whatever the levers and actions chosen, a project of this type is also an opportunity to push the creativity envelope, to bring out new ideas on business models, offers and products. Whether or not they are retained in the program, they can also infuse other areas of your strategy.
In short, the success of an operational efficiency program depends on in-depth reflection upstream, strong employee involvement and adaptation of methods to your company's specific needs.
At iQo, we're ready to help you turn these challenges into opportunities for sustainable growth.
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