Prioritizing operational dexterity over operational efficiency
Blog: Capgemini CTO Blog
The historical capitalistic mantra has always been to “squeeze out profits.” As Wall Street continues to reward companies that follow this mantra, firms have endlessly looked to operational efficiency as the catalyst for their cost reduction efforts. However, research shows that a majority of these extensive cost reduction efforts lead to revenue levels that are not profitable.1 In addition, these stringent environments propel employees to become more concerned with justifying their existing work, leaving less incentive to create value in new ways.
Once companies go through these types of cost-cutting processes, they eventually plateau in cost savings and start to experience diminishing returns. For more sustainable returns, companies need to start creatively thinking about being adaptable and finding new ways to maneuver their existing resources to create value for customers. They need to start thinking about operational dexterity.
Operational dexterity is the ability to rapidly adapt operations to changing customer expectations, industry shifts, new technologies, and/or internal initiatives. Operational dexterity allows organizations to harness these changes and seize opportunities (and respond to disruptions) much more quickly than traditionally expected.
Operational dexterity may appear unglamorous or unfamiliar to many executives, but it is the only lasting basis for superior performance. In an economy that has found itself stuck in the hype cycle time and time again, and one in which customers rule as they never have before, operational dexterity offers a meaningful and sustainable way to get ahead and stay ahead of the pack.
Even areas of the business that have previously been evaluated can benefit from subsequent rethinking as new technologies and new customer needs make old innovations passé. Companies that bake operational dexterity into their culture leave competitors continually scrambling to catch up as they change the rules. Dexterity allows organizations to seize opportunities – and respond to disruptions and changes – much more quickly than their traditional competitors.3 Our research found organizations that are high on dexterity are more responsive, better at finding talent, and able to self-organize at speed.
Those companies have the opportunity to develop a reputation with customers for relentlessly improving performance and delivering a brand promise of extraordinary value. Our research found that firms with higher levels of dexterity have an easier time finding necessary resources, adapting to a changing environment, and responding to internal and external customer needs. This is why companies should strive to make operational dexterity not just an extraordinary project, but a way of life.
The Evolutionary Stages of Operational Dexterity:
- Stalling: These organizations are grappling with the possibilities of operational dexterity and are unclear on how to deliver results. They are inflexible, without any significant digital capability and unable to respond to emerging trends and customer needs.
- Initiating: These firms are mobilized to start the transition. They invest in digital expertise and initiate partnerships to leverage digital opportunities. They start developing operational dexterity related capabilities in digitizing operations, improving customer engagement and experience, and controlling brand image.
- Engaging: Enterprise transition is underway. Firms have various digital capabilities in personalizing customer experience, simplifying routine tasks and enabling collaboration across the firm. They are able to detect emerging trends and respond to changing customer needs.
Reinforcing: At this stage of evolution, firms become highly flexible organizations. They are able to rapidly reorganize or self-organize to take advantage of new digital opportunities. They have developed advanced operational dexterity related capabilities in improving customer experience, operational efficiency, and workforce enablement.
Four key dimensions of an operationally dexterous enterprise
- CX-first mindset: seeking and prioritizing the customer (internal and external) experience first and foremost
- Digitized practices: digitizing operations and encouraging collaborative ways of working and learning
- Empowered talent: raising the operational dexterity IQ of the organization, developing key skills, and increasing engagement
- Data access and collaboration tools: accessing data and collaboration tools to drive innovation and share intelligence across the organization
Operational dexterity fuels extraordinary results, but not many stories of these changes exist. By some estimates,2 no more than 10% of large enterprises have made a serious and successful effort at this type of innovative shift. Executives who understand how operational dexterity happens, and the cultural and organizational barriers that prevent the transformation can add to their strategic arsenal one of the most powerful competitive weapons in existence.
What do you think?
Does your company foster operational dexterity? What key insights can you share?
Consider the following questions in your response:
- “In what ways can you simplify processes and develop the agility required to execute rapidly? 4
- How can your organization benefit from taking on more complexity on behalf of customers or vendors/partners?4
- How will you integrate and analyze timely information to gain insight, make quick decisions and enable dynamic course correction? 4
- Have you implemented operational dexterity approaches, and defined partnering strategies to compete in your chosen markets?” 4
- How does your company adapt practices to different countries and cultures?
- What research has your company done to stay ahead of the pack and be an industry leader in terms of innovation?
- What are the steps taken when a new innovative approach comes to light? How long does it take to implement this new technique?
- Robert G. Atkins and Adrian J. Slywotzky, “You Can Profit From a Recession,” Wall Street Journal, February 5, 2001, p. A22.
- Hammer, Michael, “Deep Change: How Operational Innovation Can Transform Your Company,” Harvard Business Review, April 2004, p. 84.
- Capgemini Study on Dexterity
- Dan Nielsen, “Building Operating Dexterity”, NICHL, 2011
For more information connect with Niccolas Barton.