Key Theme 4: Operational Efficiency

After several months of lockdown, we grapple with the implications and reflect on the only certainty – that things may settle, but they will not be the same! As we head through the summer and toward 2021, we look at what we have learnt in supporting our clients and the insights gained from the broader market. We have identified five key themes that are front of mind for all organisations as they focus on the changes that will prevail.

We have identified five key themes that are front of mind for all organisations.  

We will tackle each of these over the coming weeks, sharing our collective insights and vision. Last week we looked at Digital Transformation and this week we focus on...

4. Operational Efficiency

The speed and depth of the economic damage caused by COVID-19 has taken us all by surprise, with the implications for businesses varying significantly depending on the industry. 

Consumer goods, grocery retailers and telcos, have all enjoyed a significant increase in consumer demand, but have had to adapt rapidly to scale their operations whilst undergoing significant disruption to their workforce through the move to remote working. Meanwhile, the leisure and hospitality industries have been hit hard. Companies like Expedia saw their business models turned upside down - where once they were dealing with millions of customer bookings, they suddenly found themselves processing cancellations, obtaining refunds from partners, and trying to secure additional funding for the business.

The COVID-19 crisis has exposed and exacerbated so many operational inefficiencies within organisations and their suppliers, from moving inefficient back-office processes to remote work settings increasing the demand on employees, to a lack of resilience in the supply chain where suppliers are unable to meet demand or flex their own operational processes. 

The uncertainty caused by COVID-19 must be seen as a call to action, for organisations to remove their operational inefficiencies and ensure the effective allocation of resources to deliver the most value. Moreover, the focus should not solely be on costs – there should be equal emphasis on creating business agility that allows organisations to better flex to this changing environment. This will require investment in, and strengthening of, existing capabilities as well as building new ones. This rapid change also presents an opportunity to galvanise organisations to challenge conventional wisdom and provide a springboard for accelerated transformation.

In the first perspective of this series we explore:

How organisations could improve operational efficiency & create enterprise agility? 

Organisations should start the transformation journey by stress-testing business strategies based on the lessons learnt from the immediate COVID-19 crisis and the potential scenarios that might play out in the short to medium-term. Scenario planning is critically important (especially given the complexities around predicting what the post-COVID future will hold), allowing organisations to challenge whether their existing business strategies are fit for purpose, and which areas hold the greatest strategic importance. 

Secondly, business transformations will need to be guided by the refreshed business strategy and underpinned by clear transformational goals, so that operational improvements are not considered in isolation and to ensure that further inefficiencies are reduced in the long run.

We have focused on five operational levers that will enable businesses to drive efficiencies:

1. Operating model

Reviewing the existing operating model across the organisation and within business functions is important in order to assess whether the core services, processes and partners that currently create value are continuing to do so. Organisations should also look to assess their delivery locations and suppliers to understand whether they have the right partners to support the refreshed operating model. This may also include a review of the level of operational integration of any acquired businesses, with this period presenting a good opportunity to look at, and refresh, any changes to targets. 

In recent months it has been impressive to see how many organisations have rapidly flexed their operating models to adapt their operations to this changing environment. For example, Telstra and Vodafone had to immediately review their outsourced and captive call centres when lockdown measures were implemented in India. The rapid onshoring of services to Australia involved re-purposing of existing staff, hiring new ones and finding new partners, processes & systems to implement [1].

2. Process standardisation, simplification and automation

Anecdotal evidence suggests that some organisations have seen an increase in productivity as a result of the shift to remote working. The question remains however, whether organisations are experiencing true productivity gains, or whether employees have simply increased their working hours. 

In order to maintain this improved productivity in a sustainable way, there needs to be a shift towards simplified and automated processes. Our recent work with a telco company saw them simplifying their incident management processes as part of a new service roll-out across multiple new partners. The efficiency and effectiveness of this operation was only made possible by first streamlining the processes.

By redesigning internal processes, organisations can make full use of tools likes Robotic Process Automation, Chat bots and self-service helping to empower a workforce whose need for face-to-face interactions has now been challenged. In addition, process simplification is important where organisations want to leverage the expertise of more partners to deliver services. 

3. Organisation capability

A critical component of any transformation lies in assessing the existing organisational capabilities and then identifying any capability gaps that need to be rectified to support new ways of working. It is equally important for organisations to recognise that their existing skills and capabilities may need to be strengthened and enhanced.

New capabilities could include developing skills to fully leverage digital tools and data; helping teams become more digital; utilising automated processes; implementing continuous improvement methodologies; enhancing supplier management capabilities, and; considering how M&A strategies could help address any key long-term capability gaps. 

4. Procurement & Supply Chain

In order to create and maintain long-term value, organisations should reassess their supplier base and segment suppliers to identify a set of strategic partners, with a primary focus on delivering sustainable cost reduction. Critical to this is the ability to establish partnerships with key suppliers as the majority of third party spend resides with these firms. Furthermore, it will only be through collaborative ways of working that transformative opportunities are identified, leading to innovation and significant savings.

Strong partnerships are critical during times of market uncertainty. The speed of response, and delivery of the right know-how by suppliers is dependent on having the right commercial model and shared strategic goals in place.

Organisations who develop collaborative partnerships increase supply chain resilience and robustness so that they are better prepared for any potential disruption in the future, but this requires a different way of thinking and a shift away from traditional transactional relationships. 

Change in supplier approaches and the forming of new partnerships has been demonstrated multiple times in recent months. In the Pharma market, competitors GSK and Sanofi rapidly collaborated to commence work on a vaccine – these commercial relationships normally take months, if not years, to formalise. Meanwhile in Germany, McDonalds formed a ‘Personnel pact’ with Aldi to help their employees work under temporary contracts, at Aldi, while McDonald restaurants were shut. 

5. Real-estate footprint

Finally, organisations will need to review their real-estate footprints and facilities management services, to better align with their new operating models. 

The degree to which organisations will return to office life will vary from company to company, based on their culture and ways of working arrangements. Remote working will therefore need to be tailored to each organisation’s circumstances, with some shifting to a majority work from home model. We are currently working with several client who are looking to reassess what they do with their physical space, and getting the right balance is crucial, with many starting to trial approaches to test the right mix of home and office bound working.

We identified four outcomes that, as a result of strategic transformation, will leave organisation with the structures, tools and capabilities to adapt and thrive during uncertainty:


The operational improvement journey does not have to wait for the completion of the business strategy review or the operating model refresh. Instead organisations should be looking to act quickly, seeking to make incremental improvements across each operational lever, while assessing their longer-term business strategy.

If there is one thing we should take from the last few months, it’s the importance of understanding these inefficiencies and the benefits of making incremental improvements. 

Our follow-on perspectives will explore the implications of, and the opportunities presented by, the COVID-19 disruption for Supply Chains and M&A integrations.

References:

[1] (SOURCE).

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Authors

Amelia Gillingwater

Manager

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David Griffin

Principal

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James Morrish

Manager

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