How to maintain profitability when the future is uncertain

How to maintain profitability when the future is uncertain

In this post, we’re discussing how achieving operational excellence can help you de-risk and ensure greater security and maintain profitability when the future is uncertain. There are many factors that can affect profitability but for the purpose of this article we’ll focus on a typical scenario where income generation is reduced and controlling costs becomes a high priority. For example, in the first quarter if a business has significantly missed sales targets it’s most likely Operations have staffed, and based costs on what was expected to come in resulting in excess capacity and expenditure, increasing pressure and performance expectations in the next quarter to recover and regain profitability.

How does operational excellence help to provide security for the future?

Businesses with operational excellence in place can gain a much greater understanding of the effect of external factors on internal resources. They’re able to see changes and react to them at much greater speed. For example being able to understand the impact on costs from a decline in new business volumes or the additional resources required to manage regulatory change without a drop in service levels. With operational excellence in place, a business can measure, understand and control every activity. Measurement is crucial , enabling operations to understand the effects of making change, within timings, volume, or within the overall process from the end-to-end SLA perspective. By measuring everything, the operation can determine the results they will achieve from implementing changes not only in the present but the future too by forecasting based on current, historical and predicted data.

With measurement and forecasting mentioned above in place, there is far greater reporting and planning capability. This means operations can gain more clarity around the impact of external factors such as a new entrant, or internal factors such unnecessary resource generated through customer attrition or lower than expected new business volumes. With clarity based on data, operations have much more confidence to act and plan far more effectively. Consistent measurement enables an operation to pull together accurate information, that’s often disparate and siloed extremely quickly and easily. With a clear picture of the situation, operations are in a much better position to develop solutions and combat problems. Operational excellence transforms back offices from a reactive can’t do mentality to a positive, proactive can-do approach enabling a far more agile response significantly mitigating risk.

Perfection has to do with the end product, but excellence has to do with the process.

Jerry Moran
Operational Measurement

Measuring the right things, in the right way is key to security

Measurement is intrinsic to operational agility. If you’re measuring the wrong activities in the wrong way, dashboards will show everything as green and running smoothly when in fact it’s far from it. This fundamental flaw seriously impacts the direct reports that are used by senior management to make the decisions that maintain security and profitability for the future. The problem is that when these reports show nothing is wrong there are no decisions made and no action taken. It’s not until a things becomes more serious and there’s evidence, for example of sales against costs mounting up that its apparent there’s a serious problem and that the business is not where it should be. We have worked with many businesses that have found themselves in this exact situation because they were measuring the wrong things from the wrong perspective and have faced a challenging road to recovery that could have been avoided had they started their journey to operational excellence earlier.

Get operations into the strongest position

Marketplaces are subject to an increasing number of changes and more volatility than ever before. Technology is enabling new businesses to enter markets with radically different models with significantly lower costs bases disrupting even the biggest industry leaders. Legislation is continually updated bringing in rafts of changes and new regulations to comply with. Customers are operating in an omnichannel environment with technology creating new ways for them to interact with businesses every day. There are no signs indicating that the pace of change will slow down if anything it’s getting faster. Businesses that are not adapting and understanding their customers are going to get left behind. Business that understand they need to embrace change and be able to become more agile will survive. It’s essential that businesses get themselves into the strongest possible position with so many external factors changing the marketplaces they exist in. For every business that is not innovating their is a competitor who is and will pass them by and become the new market leader potentially with a huge competitive advantage. There is nothing more dangerous than standing still in a continually changing environment.

Perfection is not attainable, but if we chase perfection we can catch excellence.

Vince Lombardi
business team with hand together on the table for teamwork concept

Operational Excellence enables you to adapt

With operational excellence instilled businesses can adapt far more easily in uncertain marketplaces that are subject to change. Operational excellence gives a business the edge over competitors, enabling it to ride the wave of change rather than being left behind becoming overwhelmed and stagnating. Operational excellence enables greater agility with a deeper understanding of how external change will affect operations allowing greater control of cost base. With savings on costs, greater reserves can be accrued for future reinvestment in whatever is required to move the business forward and achieve its goals.

If you have an operational area that you feel is not in the strongest position then it represents a brilliant opportunity to improve. Hopefully, you will have identified there is potential for improvement long before any of the scenarios as mentioned earlier has occurred. Starting the journey to achieve operational excellence will reveal hidden capacity and resource enabling money to be released allowing for the changes that you want to become financially viable giving you a much greater chance of achieving the targets, goals and vision set out by shareholders.