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Operations in the spotlight: A leader’s guide

Smooth operators ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌   ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌   ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌   ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌   ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌   ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌   ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌   ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌   ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ 
Leading Off

Brought to you by Liz Hilton Segel, chief client officer and managing partner, global industry practices, & Homayoun Hatami, managing partner, global client capabilities

Operations was rarely a high-profile organizational function until the COVID-19 pandemic thrust it—and the role of chief operating officers—into the limelight. In a business environment that demands agility and resilience, how a company executes its strategies is critical to its success. This week, we explore the state of operations today and how logistics and supply chain executives can prepare for the tough challenges ahead by better prioritizing operations efforts and investments.
An image linking to the web page “Today’s good to great: Next-generation operational excellence” on McKinsey.com.

The business environment may have been far different in 2001 when author Jim Collins published his management bestseller Good to Great: Why Some Companies Make the Leap ... and Others Don’t. Yet a basic principle set forth in the book endures more than two decades later: performance improvement depends not on quick fixes but on consistent and committed strategies for growth. Our latest research on operational excellence shows that even in today’s uncertain business conditions, organizations go from good to great by sticking to fundamental principles, such as defining a purpose, establishing behaviors to achieve their strategic vision, and using technology to augment human capabilities. But the process takes time. “Operational excellence is not something that leaders can whip up in time for the next quarterly report,” note McKinsey senior partner Richard Sellschop and colleagues. “If leaders take shortcuts and decide that ‘the tools alone will get us where we need to go,’ the impact will likely evaporate in months.”

25

That’s McKinsey senior partner Nicolai Müller and colleagues on how an often-overlooked part of operations could, if transformed, help develop an organization’s competitive edge. Indirect operations such as engineering, maintenance, and quality management can be difficult to measure in a standardized way, but our research into more than 1,000 plants over the past five years has identified certain benchmarking practices that may help quantify indirect operations’ potential for improved performance. For example, decreasing the number of work packages, reports, and meetings can improve efficiency by 5 to 15 percent. Using such strategies, “it is not uncommon to identify and unlock a 15 to 25 percent optimization potential in indirect functions, which can translate to a sizeable impact on the bottom line,” suggest the McKinsey experts.
An image linking to the web page “Navigating the new normal: Operations insights for 2024” on McKinsey.com.

“This has been a unique time where operations and supply chains have moved into the boardroom, and I think that’s a really good thing,” says McKinsey senior partner Daniel Swan in a podcast on the operations landscape in 2024. “It’s especially good for companies to have more boards and CEOs thinking about supply chains and operations every day.” Meeting sustainability demands, strengthening supply chain resilience, and delivering on large capital projects may be among the urgent pressures that operations leaders will face, notes Swan. McKinsey senior partner Axel Karlsson adds that generative AI may be a game changer for operations: “We are expecting a new S-curve driven by generative AI. I think the shift will be almost as big as when the computer hit the desk in the office. It will be a big new revolution.”
An image linking to the web page “Getting warehouse automation right” on McKinsey.com.

Among this year’s Oscar nominees is a surprise entrant called Robot Dreams, an animated film about the close friendship between a dog and a robot that the dog builds as a companion for himself. That scenario may not be as far-fetched as it seems. Robots already perform many warehousing functions, and social robots have been shown to help older people lead independent lives. The future may see a “robotics revolution,” predicts philanthropist Bill Gates. New human-centered robots “can be programmed to do a wide array of tasks—from carrying boxes in a factory to helping out with household chores,” the former Microsoft leader writes in his blog. “In healthcare, hospitality, agriculture, manufacturing, construction, and even our homes, robots have the potential to transform the way we live and work.”

Lead by operating smartly.

— Edited by Rama Ramaswami, senior editor, New York

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by "McKinsey Leading Off" <publishing@email.mckinsey.com> - 04:17 - 29 Jan 2024