Strategy•May 11, 2020
Think Bigger Than the Assembly Line: Two Unorthodox Applications of Operational Efficiency
Many people think of operational efficiency solely within the bounds of manufacturing or logistics. Amazon Prime’s one-day delivery, IBM’s microchips, or Ford’s iconic assembly line are likely the first examples that come to mind—but by no means represent an exhaustive list. While all these examples are epitomized for a reason, unorthodox efficiencies can be found in most areas of your business. Especially in the current economic environment, companies are hungry to grow lean and efficiency is much more than logistics and machinery.
Let’s start by looking at the components of operational efficiency:
Operational efficiency is comprised of three major attributes:
Duration: How long does it take? Whether an activity, a process, or a cycle, you need to be able to accurately determine how long it takes before you can improve it.
Dependability: Is this duration consistent? Being able to reliably perform that function over and over is important to reduce waste, either large or small.
Quality: You may be fast and precise, but if your product lacks quality, what good is it? Being compliant, without defect, and best-in-class is what keeps efficiencies on track while delivering superior results.
Let’s walk through two often-ignored areas of your business that also apply to the core competencies and definition of operational efficiency: technology investments and marketing technology (martech).
1. Operational Efficiency With Technology Investments
When it comes to your budget, are the technology investments you’re making truly giving you a healthy return and offering you stability or are shiny ideas preventing valuable dollars from liberating your organization from the ball and chain of tech debt? Optimizing your budget takes careful planning, tracking, and governance, but when done well, it can free your financials to bolster spend efficiency.
Duration: Having a “save your pennies and spend your dollars” mentality is important in recessive financial times such as these. Companies that invest capital toward products that seize a crippled market oftentimes come out on top. In a recent post from my colleague Cameron, he mentions the value of listening to your customers and applying your budget to work smarter not harder to serve your market’s needs.
Dependability: If you’ve ever managed a budget directly, one of the most critical pieces of hitting your forecast are accurately predicting fixed costs. Optimizing a function like payroll creates dependable processes, which in turn, lead to invariable costs. Credera recently partnered with one of the largest staffing companies in North America to help assess and optimize their payroll system leading to operating savings of $2.7 million per year. Solidifying unavoidable expenditures leads companies to further stretch their investment spend to target strategic initiatives.
Quality: A whitepaper by Red Hat and Intel observed that IT organizations normally spend 71% of their annual budget maintaining their existing systems, leaving only 29% of their budget to invest in growing features and products. Deciding to invest in structured IT optimization improvements goes a long way, reducing technology environment operating costs as much as 20%, according to the whitepaper. Beyond changing your operating model, choosing to retire and depreciate legacy systems can have lasting impacts on the efficiency of your budget for years to come.
2. Operational Efficiency With Marketing Technology
You may have heard it said, “data is the new oil.” But what exactly does that mean? Data is the fuel that powers most companies’ marketing decisions, and the amount of data and its utilization is not shrinking. So what does efficiency in your market technology look like?
Duration: According to Nucleus Research, market automation drives a 14.5% increase in sales productivity and a 12.2% reduction in overall overhead. Plus, companies that use marketing automation to nurture prospects see a 451% increase in qualified leads. Empowering marketing automation captures customers’ attention in their flow-of-life situations, but in order to do so efficiently, a marketer must have integrated data. In today’s world, by the time you’ve scraped around for the right insights and source data, your target audience has already moved on, or worse, gone with a competitor.
Dependability: One-to-one customer marketing is hard. Solutions involving data science, customer insights, and model selection are all viable, but the efficiency of your marketing budget depends on a smart perspective of your customers. You can fall short and leave dollars on the table or overreach and waste your resources. A survey from Rakuten Marketing shows that marketers waste 26% of their budget reaching out to customers with wrong strategies or channels. Personalizing your customer marketing maximizes marketing dollars so the strategy gets the right response from the customer.
Quality: Lastly, acquisitions, joint ventures, data contracts, and partnerships alike can cause data entry nightmares, collection, continuity, and schema. All these factors impact the quality of your data, or in other words, your data accessibility. Halo Business Intelligence reported that the average company losses were $8.2 million due to “dirty data,” while some stated losses up to $100 million. It’s one thing to have rich data, but it’s another to have right data that is clean and organized. If you are considering adding business intelligence or advanced analytics to your company’s capabilities, consider the quality and hygiene of your data today.
how we can help
When thinking of ways your company can improve, look outside of the stereotypical places where operational efficiencies are normally applied. While Credera is made up of lean thinkers, it’s not limited to Kaizen workshops and value stream maps. Common or unorthodox, Credera knows the value that efficiency has to help clients succeed with lasting results. Reach out to us at firstname.lastname@example.org.