Executive Briefings

How Business-Operations Alignment Can Manage Digital Disruptions

Analyst Insight: Many companies continue to struggle with ensuring their operations are fully aligned with, and are enabling, their business strategies. The rapid introduction of digital disruptions, and the resulting need for enterprise-wide digital strategies, have exacerbated the problem. Business strategies are mostly about products and target markets. Operations must deal with customer experiences and delivering on the services and value propositions for buying the products. - Gene Tyndall, executive vice president, Tompkins International

How Business-Operations Alignment Can Manage Digital Disruptions

Many people regard execution as detail work that is beneath the dignity of a business leader. This is wrong. To the contrary, "This is the leader's most important job," says Larry Bossidy, former CEO, AlliedSignal Corporation. This insightful quote gets to the heart of much of the misalignment. Senior executives are most comfortable with developing business strategies. They too often rely on operations managers to "deliver the goods" and use performance metrics to track their progress.

The performance metrics fail to achieve alignment. Rather, they are focused on cost management and operating measures that are connected with their functions, and thus may not track progress against strategic goals. Some companies have turned to management methods, such as A3 Thinking (based on the Toyota Production System) or Hoshin Kanri (based on MBO), to help achieve focus on the right objectives enterprise-wide. Both of these methods are based upon proven methodologies to encourage employees to analyze situations, create plans for improvement, conduct performance checks, and take appropriate action. We particularly favor Hoshin Kanri as it focuses primarily on the company’s strategic plan and its objectives. Moreover, it requires breaking down the strategic direction into smaller more manageable objectives and creating detailed implementation plans, with “activity owners” specified and held accountable.

Even when following the methods of Hoshin Kanri or A3 Thinking, companies can still be diverted from their business strategies, due to unexpected digital disruptions, supply chain risks/disruptions, or competitive pressures of some type. Recent examples of disruptions causing this problem can be seen in the cases of VW (emissions issues) and Samsung (smartphones). Both corporations are known for quality products and strong performance reputations, but have been disrupted by serious management mistakes or product failures. How will they align their operations with a business strategy that has been severely disrupted?

In today’s highly risk-driven world, companies are required to create operating models that are built for speed. They are also required to build capabilities that align with and enable the business strategies. Today’s Digital Age is challenging all of the conventional wisdom and traditional approaches to profitable growth.

The Outlook

The Digital Age is creating new and different needs for aligning business strategies and operations. The pace of change is mission-critical. This will be more prevalent in 2017 with the companies that survive the digital disruptions. Corporate cultures will adapt to digitalization, or else. Managers of supply chains will think more about how they are aligned with their business strategies than their costs and operating performance metrics, or else.

Many people regard execution as detail work that is beneath the dignity of a business leader. This is wrong. To the contrary, "This is the leader's most important job," says Larry Bossidy, former CEO, AlliedSignal Corporation. This insightful quote gets to the heart of much of the misalignment. Senior executives are most comfortable with developing business strategies. They too often rely on operations managers to "deliver the goods" and use performance metrics to track their progress.

The performance metrics fail to achieve alignment. Rather, they are focused on cost management and operating measures that are connected with their functions, and thus may not track progress against strategic goals. Some companies have turned to management methods, such as A3 Thinking (based on the Toyota Production System) or Hoshin Kanri (based on MBO), to help achieve focus on the right objectives enterprise-wide. Both of these methods are based upon proven methodologies to encourage employees to analyze situations, create plans for improvement, conduct performance checks, and take appropriate action. We particularly favor Hoshin Kanri as it focuses primarily on the company’s strategic plan and its objectives. Moreover, it requires breaking down the strategic direction into smaller more manageable objectives and creating detailed implementation plans, with “activity owners” specified and held accountable.

Even when following the methods of Hoshin Kanri or A3 Thinking, companies can still be diverted from their business strategies, due to unexpected digital disruptions, supply chain risks/disruptions, or competitive pressures of some type. Recent examples of disruptions causing this problem can be seen in the cases of VW (emissions issues) and Samsung (smartphones). Both corporations are known for quality products and strong performance reputations, but have been disrupted by serious management mistakes or product failures. How will they align their operations with a business strategy that has been severely disrupted?

In today’s highly risk-driven world, companies are required to create operating models that are built for speed. They are also required to build capabilities that align with and enable the business strategies. Today’s Digital Age is challenging all of the conventional wisdom and traditional approaches to profitable growth.

The Outlook

The Digital Age is creating new and different needs for aligning business strategies and operations. The pace of change is mission-critical. This will be more prevalent in 2017 with the companies that survive the digital disruptions. Corporate cultures will adapt to digitalization, or else. Managers of supply chains will think more about how they are aligned with their business strategies than their costs and operating performance metrics, or else.

How Business-Operations Alignment Can Manage Digital Disruptions