After a decade of economic growth across most industrialized countries, global growth is slowing. Some of the contributing factors are a rise in trade tensions, weaker growth in China and threats from political populism. At the same time, in an economy built on speed, many strategic digitalization projects and operational excellence initiatives have not borne fruit – at least not yet.
The way forward is to ensure an operational system that can adapt its structure and cost basis quickly to deal with harsher economic realities. It also means seizing the opportunity to develop and improve the business on a continuous basis. As a whole, we call this process “Adaptive Operations.”
Adaptive Operations are different than what is commonly understood under the term agile or agile organizations. Agile means being flexible, and that’s a big part of adaptive operations, but Adaptive Operations goes further. Adaptive Operations are operations that are permanently adjusting at a fundamental level, such as in their structure or processes, or via changes in the business model.
The paradigm of the digital age is the network, and companies need to be organized this way, too. With a network organization in place, companies are one step closer to Adaptive Operations, where change is an everyday process, ideas flow dynamically throughout the network ecosystem, and decisions are made on the front lines.
It means using some tried and true tools, such as an accelerated version of zero-based budgeting ,but Adaptive Operations also means a riskier way of doing business than before. That’s because companies with Adaptative Operations will make decisions with less certainty than they had in the past. But the advantages of speed, and the experience gained in constantly adapting, may counterbalance that risk.
As long as companies stick to the core values they’ve established around their own, unique culture, they will benefit from being more open and networked. The whole company will be more fluid and changeable as its structures, teams and processes become so.
With a solid cultural foundation in place, constant change can be part of a company’s DNA. In other words, permanence and constant transformation can and should co-exist.
Adaptive Operations applies to our operational clusters:
The level of adaptiveness achieved by operations is strongly correlated to that achieved in the Innovation Management and Engineering functions.
That’s because Innovation Management and Engineering are upstream functions, compared to operations: In Innovation Management, ideas spark for ways to meet future customer requirements; in Engineering, the technological opportunities that have become visible can then be designed, prototyped and tested.
One way the functions can become more adaptive is with Next Level Engineering . It enables companies to speed up and improve the process of product and service development with technologies such as artificial intelligence, robotic process automation (RPA), digital twins in engineering and virtual reality.
All these digital technologies add additional layers of adaptiveness to the functions. With them, Innovation Management and Engineering can improve the success rate of product and service innovation and engineering, as well as save time and money.
Procurement is the function in a company with the most internal and external interfaces. As such, it is well-positioned to identify trends and innovation that can shape a company’s product and service offerings, whether those trends originate from customers, suppliers or the competition.
But procurement can do more than just gather information about what the enterprise needs to be doing to stay adaptive. It should also analyze that information through precise questioning to provide the business with data-backed advice about methods, as well as options for emerging scenarios. With the introduction of technologies such as artificial intelligence and RPA , procurement is doing this in increasingly sophisticated ways.
Given its deep network of relationships and its position on the front lines, if procurement is set up and equipped properly, it can support Adaptive Operations by providing strategic insight and foresight to help the business define its priorities.
Production is a key area in which companies must be adaptive: They must respond to market and technology trends by quickly and effectively incorporating them into Production in the appropriate way.
It is in Production that ideas and innovation become concrete when they are manifested into a product or service. But Production is also the place where products and services must remain “fluid” so that they can adapt to the next change that is right around the next corner.
To make Production adaptive , companies need to ensure an operational system that can change its structure and cost basis quickly, for instance with a modular setup, through scalable manufacturing capabilities, or with human and bot workforces that can be quickly ramped up or sent in new directions.
Adaptive Operations in Production helps make it possible to improve on a continuous basis, for instance through machine learning or other opportunities in Industry 4.0.
Since Supply Chains enable operations in the first place, they also determine to a large degree a company’s ability to adapt.
As the interface between functions, suppliers, customers, and partners, Supply Chains are a web that gathers and processes information that can be beneficial to the whole organism.
Supply Chains must be adaptive to respond to rapidly changing scenarios, and their level of adaptiveness depends on how well the network collects and stores information and turns that into knowledge by applying it.
By nature, Supply Chain Management and Logistics are cross-functional: They balance individual functional interests and demand/supply conflicts, and they do that internally as well as externally. As such, adaptive Supply Chain Management and Logistics are a pre-requisite for Adaptive Operations.
Service and After Sales operations are resource-intensive, but Service can play an important part in sustainable profitability because it is independent of business cycles. Service is also a function that can "pre-sense" customer and market behavior, since it works together directly with customers.
Adaptive Operations in Service and After Sales has two aspects. Companies can seek to gain efficiency in Service to increase or maintain profits. They can also grow the revenue and profit potential of Services by improving reach into the installed base of a company, or even expanding to other elements of the customer value chain.
Adaptive Operations in Service is something companies need for their own offerings, and a greater ability to adapt is what they are providing to the customer, for instance by enabling uptime and availability of machinery for customers. It also allows customers to decide on specific output volumes (e.g. in "X-as-a-Service" business models).
Would you like to receive regular updates on news, studies and events in Operations? To subscribe to our quarterly Adaptive Operations newsletter just send an email to Melanie Habrock-Michels.