Imagine this scenario: your chief operating officer gets to work on a Monday morning, sits down at her computer, and is able to ascertain at a glance what work is being done across the organization, what resources are being used, what progress is being made and how the work output supports the organization’s desired outcomes.
Later that morning when she meets with the CEO and CFO to discuss proposed investments, she is able to provide an integrated financial and non-financial based business case behind each proposed investment. These standardized business cases quickly align the three executives to a shared understanding of impact on customers and company value. The result of the meeting is fast, quality decisions.
In a meeting after lunch, she engages with one of her delivery teams, which is working to address a steady-state KPI that is in danger of dipping below their target performance threshold. This team, like all her delivery teams across the company, is empowered and equipped to determine the best tactics for course correction. She understands her role is to guide, support and coach as needed – not to command and control.
She smiles as she watches them expertly apply their training on identifying, prioritizing, and testing improvement opportunities and solutions that will quickly get the KPI back to health and better than before. The team leaves the meeting feeling confident in their abilities to deliver value and they clearly enjoy being members of this high-performing team.
Before she leaves for the day, our COO sits back down with her Value Chain Intelligence dashboards and sees any shifts in work, resources, progress and outcomes that occurred over that day. It’s clear where she should focus her time tomorrow to once again maximize value across her organization. She plans her day accordingly before shutting down and leaving work at a reasonable time.
That night, she has a great night’s sleep.
The importance of Value Intelligence
For most COO’s, this kind of day is highly aspirational and highly unlikely. In most organizations, operations lacks the structure to do its most important job: continually deliver value. This limits leaders’ ability to make quality decisions quickly, which opens the door for the competition.
The primary purpose of any company is to deliver meaningful value to customers in a way that also drives value to the company. Yet there has been no standard structure for companies to manage their value—until now.
Every company has a Value Chain behind their customer-facing products and services. For most companies, it is almost never explicitly defined end-to-end. Yet by having a well-defined and managed Value Chain, all systems, activities and decisions can be measured against impact on customer and company value. Financial and operational performance data is integrated at each link of the Value Chain. This surfaces insights that provide clarity as to how to proactively maximize the value of your company resources and capital.
Leaders who want to experience the same benefits as our COO require a Value Chain Intelligence system to enable fast, quality decision making.
A Manifesto for the COO
Over my decades of working with nearly all functions of operations across dozens of organizations, I’ve come to believe that operations is hamstrung from doing their most important work—delivering value—because they don’t have access to reliable, defensible value/cost/risk information when the myriad of decision points arrive. I’m incredibly passionate about helping address this challenge to the point of founding Insights7, but also creating a point-by-point argument for what COO’s need to do their job most effectively. It’s become something of a manifesto that I hope all COO’s will embrace:
- It all starts with company strategy. The most important job of operations is to execute on the strategy. If there is not a clear and effective strategy, then the COO is set up for failure because delivery teams will have no strategic outcomes to rationalize findings, decisions and activities. For COOs in this position, it is critical to compel the CEO to lead the senior leadership team in optimizing the strategy to ensure that it clearly outlines desired strategic outcomes along with delivery constraints.
- Organizations should apply the same or greater level of focus and rigor to value chain management as they do for financial management, organization management and other enterprise systems.
- Organizations must manage operations as a Value Chain that integrates financial and non-financial metrics.
- Organizations must give operations a Value Chain view where every finding, decision and activity is tied to customer and company value outcomes.
- The right information in the right peoples’ hands at the right time translates to value-based insights which increases speed and quality of decisions.
What’s at Stake
For long-term growth and value creation, companies need to focus on more than rearview-mirror financial analysis.
The current value model of focusing strictly on shareholder value and quarterly returns is incomplete. In today’s knowledge economy, organizations must accelerate improvement and focus on outcomes, not output, to maximize their long-term value.
Every function in the organization is responsible for delivering value, so it stands to reason that they should be equipped with the right processes, tools, labor resources and service to be successful.
I founded Insights7 with the mission to simplify the process of accelerating long-term growth for companies by maximizing the value of their decisions and investment of company resources. Over the coming months, I’ll be discussing how companies can manage and improve their value. And I’ll be providing insights that will help companies foster the kind of empowered value culture the COO in my story has at her company. My hope is that every organizational leader has the opportunity to continually maximize the value of their company’s capital—and make every night a great night’s sleep.
Mike Hogan, founder and CEO of Insights7, has spent the last 25 years helping organizations optimize their operations to facilitate growth and increase organizational value.