Going From Disruption to Business-as-Usual

The concept of operational excellence isn't new. Retailers have been striving to achieve efficiencies in their operating models since their inception. And while improvements can always be made, achieving a level of high performance seems mostly out of reach. But why?

Retail is hard. Achieving a fully integrated, cross-functional operating model is even harder. Traditional business practice has been to hire functional area experts. Professionals who operate in their lane and have a deep level of understanding of their defined discipline — e.g., CFOs who know finance, CMOs who know marketing, CTOs who know technology. However, when conditions change that ultimately impact all areas of the business, functional areas aren't equipped to seamlessly adapt in ways that are considerate of other areas within the organization. And given the current market, change is not only happening more frequently, it's happening at rates we haven't seen before.

More and more variables are surfacing and change is nearly a daily occurrence happening at rapid speed. Social media platforms, multichannel distribution points, fashion trends/influencers, new competition, consumer expectations and interrupted disturbances from any touchpoint within the supply and logistical chains can push the best strategies off course. Knowing how to respond, not just functionally, but cross-functionally, is the difference between reacting and responding — being disruptive to an organization vs. being business-as-usual.

In many standard operating procedures, we see a break in the strategic execution when a variable is introduced. The vertical flow of alignment is disrupted by an unexpected change in the plan. If cross-functional teams are not integrated, communication falters and deliverables aren't achieved. In a typical case, all functional teams are aligned at the start of the product/design cycle (probably the output of a fixed quarterly meeting) to deliver a specific key item for the season. During the course of operation, however, the product cannot be produced and only some teams become aware of the pivot early enough to respond. As a result, the other functional teams are executing to a plan that's no longer viable, creating disruption down the pipeline resulting in missed sales and customer disappointment.

Most cases of this type of disruptive operation are caused by a lack of understanding of what each functional area does and how they're impacted by the decisions being made. If sourcing knew the implications that unforeseen disruptions had on finance and marketing, they could be more proactive in centralizing the communication and making sure that all parties were fully notified and updated in a timelier fashion — minimizing the chaos and business impact down the road. While not intentional, the linear, functionally-focused process has not only deterred but prevented achieving overall operational excellence. Now multiply this scenario by 10x or more given the global economy, geo-political conditions, tariff changes, supply chain interruptions, increasing distribution channels, and the force of digital/social media amplifying outcomes. This is the environment of speed and complexity that retailers are now operating within.

Evolving the Operating Model: Making Operational Excellence Achievable

Perfection should never be the goal in business. Instead, retailers should seek a process of continuous improvements over time to become better and more prepared to embrace change in a productive, forward-thinking model. Pivots will happen, chaos can be prevented and loss/impact can be minimized.

Retailers need to adapt to a more centric operating process, moving away from siloed linear workflows. This can be achieved by taking two critical first steps:

1. Leadership Introspection
2. Team Learning

Leadership Introspection

Like any senior leadership position, talent is elevated from specific areas of the business. In many organizations, the CEO often comes from finance or merchandising and has a curated set of experiences and expertise. As is often the case, the leaders of an organization have a biased view based on their own careers. Of course, CEOs do expand their scope in order to properly lead the organization, becoming closer to functional areas but not necessarily well educated on what it takes to get their jobs done and the more granular implications of the business impacts they face.

For organizations to move from functional to cross-functional and truly achieve operational excellence, the senior most team members need to become more introspective and commit to understanding not just their areas of expertise, but to the entire organizational structure. They need to do a “full body scan” of the company and fully understand what's working, what's not, and what areas are weak and susceptible to break. They need to accept that they don't know what every functional area fully does and how they deliver the results needed for the organization to succeed collectively — i.e., they need to be humble.

Ask yourself if you fully know what a planning organization does. Not just in a general sense, but what they do day-in-and-day-out. Who they work with. What information/inputs do they require to perform. What variables affect them. What the timing of decisions needs to be. What their “hand-offs” are. What systems they use. What data is required. How they function within the rest of the organization as an integrated partner. Then ask yourself if you know how the other functional areas interact, what their inception points are, what they need to be. Can you fully assess where your organization is on the journey, from a performing to a highly performing team? If the answer is not a resounding YES, then there's work to do.

Team Learning

It starts with the top, but it doesn't end there. Every member of the cross-functional teams needs to be aware of and appreciate what their business partners do and how they're impacted by decisions. Through education and understanding comes appreciation and, ultimately, the elimination of “finger-pointing” and “blame-gaming.” Each functional area needs to understand the roles and responsibilities of their partners and should be able to assess how they and their teams are currently operating and what they can do better/differently.

The goal is that every member of the organization knows what their contribution is, how it fits into the overall performance of the business, and how what they do impacts/affects cross-functional teams. Again, the first step toward achieving this is to be honest and insightful. No one thinks they're a bad team member. No one wants to believe that they've caused a negative impact on their business partners, just as no one thinks others completely appreciate what they contribute and what it takes to do just that. With the right curiosity and mindset, a healthy organization can shift from siloed thinking to group thinking through education and team learning.

Start with the functional leaders. Interview them separately, and then as a group, to share their insights and needs, frustrations and expectations. Create a series of lunch-and-learns where each functional area leads a presentation/discussion on what they do, what they need, how they work, who they work with, and how they can perform better. Find out what creates chaos for them and how they can become more seamlessly proactive when change emerges.

This process will eliminate the “they don’t know what they're doing syndrome.” When, in fact, this mentality is really just a version of, “I don’t know what they do or what they need.” Defining, sharing and enacting a RACI (responsible, accountable, consulted, informed) methodology is a good starting point. Then implement a discipline of continuous learning, a constant process built into the organization to align and weave cross-functional teams at every level over time/turnover and change.

Too often organizations carry-on not being fully aware of the micro-changes evolving over time that fundamentally interrupt their businesses. With constantly changing market conditions, continual innovations and the speed of new digital and artificial intelligence norms, retailers can no longer rely on being functionally “best-in-class.” Rather, they need to become a highly performing, operationally excellent cross-functional team that's fully informed about one another and agilely prepared to adapt when any one area pivots. Awareness and education are the keys to moving forward in a highly volatile environment.

Retailers need to adapt to becoming less linear and more circular in their process approach. Being aligned isn't sufficient; becoming interdependent should be the goal. Look to resources to assist your organization in becoming highly aware. Ask yourself these five questions to determine where you are on your operational excellence journey.

5 Questions of Operational Excellence

1. Are you/your leadership open to operational change?
2. Is your organization currently composed of functional area experts or cross-functional teams?
3. Can your organization effortlessly respond to unexpected variables and simultaneously pivot to embrace them?
4. Does your organization practice continual introspection?
5. Does your organization have roles and responsibilities established that are clear to all business partners and team members?

Elizabeth Elliott is a managing partner at Columbus Consulting, a retail consulting company of industry experts.