LNS Research, Dan Miklovic continues his blog series on Enterprise Architecture in Digital Transformation.
Where is your company’s strategic direction, and how well aligned are your actions and strategy to this direction? This might be the most important question you ask today because if you aren’t aligned or aren’t sure what your alignment is, it’s also likely that you suffer from low top management priority, cultural challenges, and insufficient funding.
The Missing Link
If you don’t know, you aren’t alone. Follow this: when quality teams were asked how quality aligned with executive strategy, only 31% said that the quality team understood this alignment, 13% said the entire organization understood this alignment, and a mere 7% said it was supported by the entire organization (N=171). Is it surprising then that only 13% report that quality is a top management priority? Did you know that those without top management priority adopt an average of 2.6 times fewer best practices than those with priority (N=1198)?
The message is: Connecting Operational Excellence to strategic objectives increases priority with top management, gains alignment across the organization, and results in the adoption of many more best practices. Delivering strategic objectives cements the value of mature Operational Excellence to the corporation.
What percentage of your company would be willing to make the following powerful statements being made by your peers?
“Operational excellence contributes to our top line revenue by improving customer retention and increasing our online review scores.”
“Operational excellence is integral to our Digital Transformation by leveraging connected products and connected operations to both improve quality and drive product and process innovation.”
“Operational excellence increases the success of our expansion plan by reducing risk in mergers and acquisitions.”
Strategies, Objectives, and Initiatives
If not, you need to build and communicate an effective strategy.
So, what’s a strategy? Let’s take a moment to define some terms. While many approaches exist to define and detail strategies, none are universal. Rather than selecting an existing taxonomy that only a portion of the market uses, LNS chose to create a simple-to-understand approach which can easily translate if need be. That approach consists of just three items: strategy, objectives, and initiatives.
- Objective: The desired outcome. There are often layers of objectives, from strategic objectives that drive corporation direction to departmental objectives, to tactical objectives on an individual project.
- Initiative: A specific project or program intended to achieve one or more objectives. There can be multiple initiatives per objective, and like objectives, there are often layers.
- Strategy: The framework that binds together multiple related objectives and initiatives into a cohesive approach.
A consumer goods manufacturer plans to increase its market share and become a global leader in its segment. It plans to do this by improving the market share of existing products, gaining additional share through innovative new products, and through strategic mergers, acquisitions, and partnerships to access new markets.
- Strategic Objective #1: Improve market share of existing products
- Strategic Objective #2: Gain additional share through innovation
- Strategic Objective #3: Access new markets through M&A
These are the objectives that now guide the Operational Excellence objectives and initiatives, as shown below. The Operational Excellence objectives are desired outcomes, where the initiatives identify improvements in people, process, and technology. The strategy below can be connected with site level initiatives and objectives or strategies from other portions of the organization, such as engineering.
Initiatives that are not connected to these strategic objectives should be reviewed. Should they be connected? If they are truly disconnected from strategy, should they still be prioritized, or should they be deprioritized in the near term?
Operational Excellence leaders should understand strategic objectives, identify how their organizations can contribute to achieving these objectives, and develop and communicate a cohesive strategy. Successfully execute this strategy by connecting it with LNS’s Digital Transformation framework.