How to combine continuous improvement and technology
All companies want to be more efficient and profitable, but too often entrepreneurs see digital tools or system investment as the quick fix for their problems.
This belief, and hope, that a fast technology investment will solve recurring problems or high operational costs is the kind of thinking that unfortunately can often lead to failed investments in technology.
Many companies don’t put enough thought and energy into solving the root causes of their operational issues, says Josh Ramsbottom, Senior Business Advisor at BDC Advisory Services.
Investing in digital technologies brings benefits
“Technology must work hand-in-hand with a continuous improvement plan to expand your operational efficiency,” he says. “Why automate a bad workflow or costly process? All you did was speed up a bad system—not improve it.”
But Ramsbottom does not want to deter companies from technology investments either.
“The more you invest in digital technologies, the more you see the benefits” Ramsbottom says. A BDC study on use of digital technologies found that 60% of businesses surveyed boosted their productivity, 50% reduced operating costs and 42% improved overall product quality.
“Those are significant benefits for companies that found the right tools.”
Understanding how operational efficiency work with technology
“What is operational efficiency? Quite simply, it’s getting waste out of your business,” says Ramsbottom. “Waste is anything that doesn’t create value for your customers.”
When you work to eliminate waste consistently, you create a culture of continuous improvement in your company, reduce rework and costly mistakes and better support your employees. When you have a culture of continuous improvement combined with technology investments you can multiply your gains, become more competitive and more innovative.
Here are three steps that Ramsbottom recommends for your company to achieve operational efficiency.
1. Identify waste:
How do you find waste and eliminate it? Ramsbottom says you need to go to where production is happening and talk to your team. They are closest to the action, and they know what’s going right and what’s going wrong.
Common forms of waste could be inventory, overproduction, transportation, poor design or employee inactivity or waiting.
BDC’s operational efficiency team has worked with small and medium-sized businesses across Canada and has found that just 15 to 20% of a typical employee’s workday is spent on purely productive activities. By improving the “value add” activities your employees do and reducing the “wasteful” ones, people actually become more productive and usually find their jobs easier.
Empower your employees to make suggestions and implement improvements. Set targets and track your progress towards them.
2. Improve business processes:
Review your workflow: Have someone interview everyone in the company about how they do each step of their job, starting with you as the owner.
Next, work out an optimal workflow for each area of your company, including your own responsibilities. For guidance, look at best practices in other businesses.
Ramsbottom says it’s worth considering hiring an outside consultant, who can bring a fresh, expert perspective to this work.
“Remember that the ultimate goal is to simplify your business processes so you can provide more value to customers. This goal is achieved by identifying and eliminating sources of waste in your operations,” he says.
“Company owners and managers are often too close to the business and have a difficult time questioning things. By having an unbiased observer involved companies are forced to explain and examine why things are done the way they are.”
Continually analyze your processes to look for steps you can do more efficiently or automate. Those purposeful technology investments are the ones that can improve efficiency, reduce errors, help your business run better and boost its value.
3. Use technology to drive results
These days, customers expect the same levels of service, speed and customization from your small or medium sized business they experience from larger corporations. Ramsbottom calls this the “Amazon Effect.”
But how can a smaller shop hope to match the service levels of international players?
The correct technology investments working with optimized workflows and clear processes will help by enhancing your ability to make good decisions, automate processes and deliver an outstanding customer experience, Ramsbottom says.
It gives you the ability to systematically collect and analyze data to uncover insights about your processes, supply chain, equipment performance and team utilization.
However, many entrepreneurs are wary of the cost and complexity of technology investments, he says. There are dozens of vendors in Canada all who claim they can help your business and it can be overwhelming for many business owners.
For example, an entrepreneur could consider paperless instruction software, project management tools, sales demand and forecasting software. Where to start?
Ramsbottom advises that it’s best not to implement too many changes, too quickly. Instead, he says, look for quick wins and technologies that have the greatest upside for your business.
One of the most important ways to improve operational efficiency is by choosing key performance indicators (KPIs), setting improvement targets and then tracking your progress towards them on a visual dashboard. Finding a technology tool like a “digital dashboard” is a great way to start.
Digital dashboards allow your whole team to see your KPIs in real-time and follow their progress towards achieving identified performance targets.
As a metaphor, think about your car’s dashboard. It gives you continuous feedback on how fast you’re going, your fuel levels and whether you have engine trouble.
“So, start small, but think big—big in terms of a long-term digital strategy for your firm.”
When you work to eliminate waste consistently, you create a culture of continuous improvement in your company. When combined with technology investments such as a digital dashboard it will allow you to multiply your gains, become more competitive and more innovative.