Author: This article is part of LebNet’s expert series written by Dimitri J. Stephanou, a former CIO and Managing partner of Pekasso Group; a Management Consulting boutique firm that provides advisory services in digital transformation, operational excellence, strategic planning, IT organization assessment and restructuring, data domain definition and strategy, service design, systems implementation and cloud migration, and M&A integration support,
He holds an MS in electrical & computer engineering from George Mason University, and is certified in ITIL® Service Management Foundation.A dynamic business innovator, Dimitri is the sole inventor on several patents in the technology and SaaS space, served as an independent judge for SAP, and is the winner of the Gold and Bronze SAP ERP Awards.
Digital transformation is the integration of technology into every business process, fundamentally automating business operations across the enterprise and delivering on the business value proposition communicated to customers and partners. It's also a cultural change that requires organizations to disrupt the established status quo, innovate and continuously improve in an agile manner.
Operational Excellence (OpEx) is the discipline of optimizing the 3 pillars of a business—namely people, process, and technology—to innovate the business and deliver exceptional customer experience (CX), while achieving significant improvement to the top and bottom lines. Optimizing this triad of people, process, and technology must be done in close alignment with an agile business strategy focused on agile, innovative digital transformation.
Borrowed from software development, being “agile” enables the business to implement incremental innovation within several “sprints,” where each sprint is reviewed and tested while maintaining momentum across the larger strategic digital transformation plan. A sprint is, thus, a time-boxed iteration within the continuous improvement and transformation cycle that allows a business to validate the work done in that iteration and fix any deficiencies or improve on the work done in subsequent sprints. An agile business can, thus, respond quicker and more effectively to opportunities and threats found in its internal and external environments.
The agile methodology allows the business to learn from mistakes much earlier in the digital transformation cycle, thus saving time and money and, more importantly, improving the quality of the final product or service that the business creates. Consequently, an agile business is customer-centric, with the goal of maximizing customer experience in every touchpoint on the customer journey.
Strategy serves as the compass for the organization and incorporates the long-term purpose of its actions. Agility suggests a fundamental flexibility to experiment and iterate at the tactical level. When both are incorporated into the business fabric as an OpEx framework, the result is a continuous improvement and innovative transformation culture that positions the business to become an industry disruptor rather than run the risk of being disrupted by more innovative, agile competitors.
It is this balancing act between strategy, organizational agility, and innovation that enables effective digital transformation and operational excellence. By balancing all three effectively, an organization can prioritize its project streams and associated sprints, allocate the right talent on those streams, streamline, and automate enterprise processes, and innovate the business model through introduction of new technologies and systems.
Innovation versus business as usual
It is very important to separate innovative transformation plans from the plans that help a business do things better. Both are necessary for it to become an industry disruptor, and both should be executed and measured apart from one another. Even so, separating those plans doesn’t mean losing holistic visibility at a strategic level on how those plans work together and feed each other to achieve the common goals of superior customer experience and long-term sustainable business growth.
A successful agile OpEx framework is one that enables this holistic visibility and measurement of progress on the above mentioned two types of plans vis-à-vis the corporate strategy through a unified management system. Such a system allows for a more effective quarterly prioritization of objectives and measurement of key results. More importantly, it allows for agility on the tactical level, enabling management to adjust the previously agreed quarterly objectives, replacing them, or introducing new ones.
Benefits of such a system include:
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Improved customer experience
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Efficient use of resources
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Process optimization and elimination of waste
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Faster learning cycles
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Lower defect rates
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Creation of shareholder value
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Higher employee engagement
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Closer collaboration with partners and suppliers
A proven example of such a unified management system is the Objectives and Key Results (OKRs) framework used for many years by successful companies, including Google, Amazon, Spotify, LinkedIn, and Intel. The objectives (O) are typically stretched, while the key results (KR) are quantifiable and measurable as a percentage of completeness. The OKRs framework is typically limited to the formulation of five key objectives, each with a handful of key results. By limiting the number of objectives, the system forces the organization to select and focus on the most critical ones. The quarterly review process provides the mechanism to make changes if and when changes are deemed needed.
The OKRs quarterly management system thus ensures that all tasks from each level of the organization are feeding into the operational and innovative transformation objectives, which, in turn, feed into the overall strategy of the organization. This agile system enables all staff to know clearly how their specific goals are contributing to the company’s overarching strategic plan and provides the holistic visibility needed to both tactically and strategically execute well, thus achieving Operational Excellence.
