Improving Business Operation Performance With Innovation

Dr. Henry Morris

The business operations job function (sometimes called “line management”) is responsible for key business processes such as manufacturing, supply chain, or procurement.

This role is central to the successful design, production, and delivery of a company’s products or services. Specific responsibilities differ by industry, according to the type of product or service the company is in business to produce or deliver. But the common thread is that it’s the job of business operations to optimize assets underfinancial constraints, meeting customer requirements, and supported by relevanttechnology. Applying technology innovation is critical to achieving optimization across a range of line-management functions.

The business operations function is complementary to other major functional roles of an organization, including financial, customer management (marketing and customer service), and technology management.

Business Operations Roles include:

  • Supply chain operations: Sales and operations personnel must optimize product production, balancing capacity and inventory levels in response to fluctuations in customer demand, measuring results using a metrics framework. Reducing the margin of forecast error reduces inventory costs, resulting in cost containment.
  • Procurement: Here you use spend analysis (and potentially crowd-sourcing and social analytics) to evaluate the performance of suppliers for specific products. This enables targeting the right spend categories in order to yield savings.
  • Manufacturing (or Product Development) is another role example.

Evolution of the Business Operations Role

Flattening organizations cause decision-making responsibility to be more broadly-based, including lower levels in a business function. Adding to the challenge, the speed of business change is greater due to new competitors, changing customer requirements, volatile economic conditions, and wider geographic dependencies.

The combination of these factors demands near-real-time access to information. What’s needed is the capability to monitor key project and portfolio metrics, generating an alert when business conditions change. The business operations job function can leverage analytics to determine the reasons for the change, and to recommend remedial actions to address the situation. According to IDC’s Vertical Research Group IT Survey in 2011, optimizing operations is consistently among the top three drivers companies cite as reasons why they implement an analytics solution.

Business operations staff also has the opportunity to lead by example, supporting a sense, predict, and respond approach to fact-based, cost-conscious business decisions. The lessons learned in this job function can be brought back to senior managers as a contribution to the corporate strategy process, completing the virtuous cycle from strategy to operations execution back to strategy.

Innovations in Business Operations

Using analytics to guide a business operations function is the path to continuous improvement. Innovative line managers are incorporating the following best practices:

  • Incenting employees to focus on leading indicators that have been shown (via analysis) to be the most impactful in determining future performance goals.
  • Focusing on a limited number of relevant metrics that impact performance goals, rather than a deluge of metrics that may or may not align with corporate objectives and strategic plans.
  • Using collaboration and crowd-sourcing as a method to drive innovation and solve problems (such as new product design and existing product enhancement, e-recruitment, and supplier evaluations).
  • Treating information as an asset, assuming responsibility for data quality, enabling analytics to support fact-based decisions and as an ingredient within innovative new products and services.

For a visual picture of these and additional practices, consider the accompanying model drawn in the shape of farfalle — the butterfly-shaped Italian pasta.

Above all, it’s import to invest in training on fact-based decision practices. This increases the analytical orientation of managers and line personnel within the function who have decision-making responsibilities. IDC research has shown that training is the single most important factor to increasing analytical orientation throughout an organization.

Impact of Technology on Business Operations

To run a business function that achieves optimal results, the importance of the following key technologies cannot be overstated:

  • Analytics:
    • Predictive analytics are used to identify leading indicators of key performance goals, then the KPIs are monitored to provide an early warning capability.
    • metrics hierarchy can provide a roll-up of the key performance and risk indicators, using root-cause analysis models to determine the reason for a change in performance.
    • Constraint-based optimization is a technique for continuous improvement in supply chain operations.
    •  Scenario analysis can model the financial impact of repeatable, operational decisions in order to choose the best alternative
  • Mobility: With the aid of mobile devices, you can deliver information at the point of decision (in the office or in the field) via real-time alerting and analytics-based, proactive recommendations. But the mobile device is more than a “view” tool. You can then take action using the device’s interactive capabilities
  • In-memory: This technology is all about speed and is well-aligned with the rapid changes in business today. You can retrieve data and perform calculations instantly to enable more frequent cycles of operational planning and impact analysis. (This replaces pre-aggregation strategies that trade off data latency to achieve acceptable performance.)

The combination of mobility with analytics based on in-memory provides an ideal platform for achieving best-in-class operations.

This post has been adapted from the IDC Multimedia site sponsored by SAP titled ‘Driving Business Innovation and Improving Job Performance’ (May 2012). To learn more visit the site.

Dr. Henry Morris

About Dr. Henry Morris

Dr. Henry Morris is the senior vice president for IDC's Worldwide Software, Services, and CMO Advisory research groups. He is also the executive lead for IDC's worldwide Big Data research initiative. Morris started the Analytics and Data Warehousing research service at IDC, and coined the term "analytic applications" in 1997 to focus on the value of analytics in specific horizontal business and industry processes. He speaks about major software trends driving the industry and has been quoted in and written papers for business and trade publications, such as Computerworld, Forbes, and KMworld, on trends in business intelligence, business performance management, data warehousing, knowledge management, and enterprise applications.