Need more productivity? Try utilization cubed

This post is focused on the second of three themes on how companies can successfully thrive through a digital transformation.

It’s what I call Utilization3   (utilization cubed). The successful companies I study have extended beyond traditional means of driving productivity through high utilization of resources. They are innovating and successfully executing new methods with the effect of yielding high levels of productivity for themselves, their partners and their customers.

The first dimension of utilization is the traditional method. It’s basically Lean methodology. Cut wasted efforts out of your processes and your resources will become more productive. Mark Graban writes extensively about this for healthcare and does a great job explaining it in very simple terms. John Frehse specializes in labor strategies at Ankura and I wrote a book on this subject several years ago, called Lean Labor.

The second method of improving utilization is to take full advantage of not only the physical attributes of your workforce but also the skills they bring or have developed on the job. In healthcare, Mark Graban talks about working to full licensure. This idea has been around a long time but not as many company takes advantage of it for two reasons. The first is that often companies simply think of their most expensive resource (usually equipment) as the highest priority to utilize. But this can lead to a sub-optimal customer experience because the overall process is not optimized. Secondly, it’s relatively easy to optimize one resource. Optimizing a process including labor skills means thinking through the entire process, redefining jobs and potentially targeting different segments of a market. This is not easy, but those that get it right wield significant advantage.

Manufacturers have done this historically by training their line operators to perform simple tasks such a adjusting machine parameters such as tooling alignment, temperature, speeds and feeds to keep the line running rather than the traditional method of calling a more expensive maintenance mechanic for every adjustment. The benefit is this frees up the mechanic to spend more time on preventative maintenance.

As I write about in my latest book, Walk-in medical clinics in Pharmacies have redefined a healthcare service by focusing on non-acute patients and hiring nurse practitioners versus trying to create a more efficient primary physician service delivery model.

Southwest Airlines has a fleet of approximately 550 planes in its system. It’s the Boeing 737 with a couple of variations. Is the plane optimal for every route? No, but Southwest has designed its business model and target markets for where it is efficient. And guess what, it’s significantly easier to train mechanics, and move crews throughout their system when everyone can perform their role efficiently on every plane in the fleet.

The last method is the hardest to achieve but is turning industries upside down. This method is crowd-sourcing. Simply put it’s leveraging a network of “part-time resources” in a more efficient way than if a company simply owned/managed the resources full-time. The trick in this technique is at the heart of digital transformation. Companies must first attract and then efficiently co-ordinate those resources to deliver an even better customer experience than if resources were dedicated to that particular task for a single company. This is well explained in the book The Digital Matrix by Professor N. Venkat Venkatraman

The most well-known examples are Uber with cars and drivers and Airbnb with short term housing and hosts. If you are not familiar with how they work (and the controversies they are causing) simply type their names into your browser.

I’m continuing to see interesting examples along these lines with more traditional companies. Walmart has woken up since hiring Marc Lore through its acquisition of Jet.com and is now innovating like never before. Last June, it announced a method and experiment to improve customer experience and reduce delivery costs by paying their own employees to drop off packages on their way home from the store.

It turns out customers don’t really love assembling their own furniture…but were willing to put up with Ikea’s business model because they loved the furniture and prices…until customers began to find people willing to assemble the furniture for them on Task Rabbit. In order to scale this, Ikea purchased Task Rabbit and can now has more control over the total customer experience.

Airbnb continues to evolve this crowd-sourcing model to extend what it can offer to its customers beyond housing/hosting to include Experiences. It has developed a platform that allows small businesses and individuals to offer a local experience to its customers. This solves two problems…Airbnb’s customers now have more transparency in what activities and tours are available locally as well as reviews. Secondly, local providers have an inexpensive way to market their services to a global, highly targeted audience.

It’s an exciting new world out there and as these companies have demonstrated, it is not simply building robots and developing artificial intelligence. Managing traditional resources, including people, remain squarely in the center of these successful companies’ strategies.

 

How to achieve the financial performance of a successful technology company: Think like 3M

As I mentioned in my previous blog entry, I’ve identified three themes companies employ to successfully  compete in a digital economy. This is the first: Relentlessly innovating and executing on those ideas.

Everyone loves a founder’s story. They often tell about experiencing some type of everyday problem and through a serendipitous event, a solution is imagined. This solution along with an unbelievable amount of hard work formed the genesis of a now highly successful company.

Sarah Blakely, founder of Spanx tells her story as a one-woman innovation wonder as do the founders of Uber, Airbnb and countless other start-ups. These journeys are driven by the sheer will of individuals who have the passion to see their ideas become successful.

Digital giants continue this tradition even as they have grown. Companies such as Amazon, Google and Tesla generate and experiment with new ideas that rethink their customers’ experience by using the advantages of technology to deliver scale, scope and speed.

For entrenched incumbents who have invested their treasure optimizing processes and raising barriers according to the rules of an outdated supply chain playbook, the future can be worrisome. They are now held captive by the fort that previously protected them.

Fortunately for incumbents, this scenario is not permanent. Just as Amazon and Google have remained innovative and adaptive as they grew, a few companies such as 3M have maintained their spirit of innovation (and outsized financial returns) for decades. By studying 3M’s method of innovation, it becomes clear that it has figured out how to create its own serendipity to generate new ideas as well as emulate at scale the same passion to execute as found in a start-up.

3M’s ability to innovate and execute is well documented. It often ranks highly as an innovative company. I won’t duplicate other’s good work, so you can read what I found to be some of the more interesting articles for yourself. There were two key findings for me. First is that 3M is organized to create and then execute on new products beginning with customer interactions all the way through to revenue conversion. It’s not a single department’s responsibility to innovate, it’s the way the entire company operates. Secondly, 3M has also put the mechanisms in place to stop funding projects and put people back to work on productive projects just as effectively as it begins new projects. Clogging the system with poorly performing ideas hurts performance as much as never funding good ideas.

With the barriers to all types of technology continually falling, a company’s biggest differentiator becomes orchestrating these technologies through its ecosystem to redefine what it delivers to its ultimate consumer. To do this successfully requires the ability to forget the current supply chain rules, have a deep understanding of the processes available to deliver product and services and an intimate understanding of the needs of its customers. That knowledge lies somewhere within your workforce. A leader’s job is to unlock that knowledge and act on it. How close is your company to executing innovation at the level of 3M or Google? How exposed is your company to a new competitor figuring it out first?

 

Some reading on 3M innovation

https://hbr.org/2013/08/the-innovation-mindset-in-acti-3

https://www.fastcompany.com/3003229/how-superbulb-massively-brightened-3ms-innovation-pipeline

https://www.inc.com/linkedin/don-peppers/downside-six-sigma-don-peppers.html

Succeed in your digital transformation by focusing on these three areas

When I prepare to speak to a company about the topic of Human Capital, the first thing I do is map out their industry, highlighting how their environment is changing through digital transformation. Each industry is different of course, but in general I follow these themes: New technology that is a part of their industry’s digital transformation, customers that are expanding into their business, complementary companies that have now become competitors and large and small natively digital companies such as Amazon or a startup that is entering this space.

If you are reading this blog, you likely know my discussion will go down the path that a highly engaged workforce will make sense of all this and figure out a path forward.

The feedback I received in my first couple of meetings is generally along these lines: We agree we need a highly engaged workforce and thanks for the ideas to help us achieve/maintain ours. But even with a highly engaged workforce, there are so many moving parts and the pace of each is so different, how do we point our workforce in the right direction…we have limited resources!

To answer this, I went back to the research I performed on the companies highlighted in my book Your Last Differentiator: Human Capital. Each of these companies already has a highly capable, highly engaged workforce. But the workforce isn’t enough on its own. In addition to a great workforce, these companies are successful at executing in three very specific areas.

They all:

  • Innovate relentlessly
  • Focus on what I call utilization^3 (pronounced utilization cubed – sorry, formatting is a little limited in a blog)
  • Deliver a superior customer experience

Each company approaches these in different ways, but each of these elements are present in every company.

My guess is that most understand 1 & 3 but might question the second. Utilization cubed means that these companies have identified ways to unlock underutilized resources in a dramatic way that their competitors have difficulty copying. As a result they themselves are highly productive or they offer a product or service that enables the downstream supply chain including their end customers to be highly productive.

The first dimension of utilization is simply the effective use of a resource whether it is a person, machine or material. All companies understand this dimension and apply methodologies such as Lean to achieve it. The second dimension of utilization is redesigning jobs to ensure that the skills of people are highly utilized. I write about Walgreen’s and Southwest doing this in my book. The final dimension of utilization is the ability to use crowdsourcing to unlock underutilized resources of others through technology. The most obvious of this is Airbnb leveraging underutilized homes, but there are an increasing number of interesting examples around this.

In researching these areas further, I have found a number of creative examples in each of these areas. I’ll share what I consider good practices in future posts to spark your imagination. If you have any you’d like to share, please let me know.