We all know that a major initiative at the University of Minnesota is Operational Excellence. This is a priority from President Kaler, challenging all areas of the University to reduce costs. As IT Leaders at our first IT Leadership Community of Practice meeting in 2012, President Kaler emphasized the need for delivering IT at the lowest possible cost.
President Kaler describes Operational Excellence this way: "Operational Excellence is a long-term commitment to working smarter, reducing costs, enhancing services, and increasing revenues throughout the University." Outside the University, Operational Excellence is a term used throughout business as one area where organizations can focus. Typically, organizations would focus their business in one of three areas:
- Product Leadership
- Customer Intimacy
- Operational Excellence
The key word here is focus. While companies certainly need to be good enough in the other areas, successful organizations focus on one. This may be made clearer by discussing a few examples of well-known companies:
Aside from being a well-known search engine, Google is also an advertising company. I've sometimes heard it phrased the other way around, that Google is an advertising company that also provides an exceptional search engine. In addition, Google has built up a number of other products, usually based on their leading edge as a search engine. Gmail was extremely innovative as a new way to deliver email, and changed the email game by encouraging users never to delete emails. If you need to reference an older email, simply search for it. Google has since added the extremely popular Google Docs, and acquired other web companies for their top-notch products such as Blogger and YouTube. Their focus is to provide products that continuously define the state of the art, which is a classic example of Product Leadership.
Simply put, Harley-Davidson sells motorcycles. As a vehicle, the motorcycle isn't very complicated, and there's not much value-add to be found in a motorbike. So Harley-Davidson instead focuses on selling the customer a total package, an experience, not just a simple motorcycle. The front page of harley-davidson.com shows the 2013 Street Bob with the bold slogan, "Redesigned and ready to customize" to add emphasis to selling an experience that's tailored to the buyer. Elsewhere on their website, the "Why Harley-Davidson?" page answers the eponymous question with "The only way to truly understand is to ride one. No compromise. No cages." Their focus is on Customer Intimacy.
Jeff Bezos started the Amazon company as a mail-order book business. Later, they expanded to DVDs, video games, and other goods. Today, customers can purchase a variety of products from Amazon, instantly, at very low prices. Their providing reliable products at competitive prices, delivered with minimal difficulty, is a classic example of their focus on Operational Excellence.
Sam Walton's business innovation was to sell a variety of products at the lowest possible cost, passing any savings directly to the customer. As Walton grew the company, he experimented with ways to deliver his products at the lowest prices, to "buy low, stack it high, and sell cheap," to attract and maintain his customers. Walmart's previous slogan "Always the low price ... Always" embodied their commitment to savings. Today, Walmart continues to focus on delivering a variety of products at the lowest possible price, demonstrated by their corporate slogan on the walmart.com website, "Save money. Live Better." People don't shop at Walmart because of personalized service; they shop there for the low prices. Walmart's focus on always providing the lowest price makes them another example of Operational Excellence.
So by placing the focus on Operational Excellence, we are saying that we need to provide reliable products at competitive prices, delivered with minimal difficulty. In the IT frame of reference, that means we need to provide IT services and functions at the lowest price. I like to quote one of our faculty on this point: "Technology should be like a rock. It should be that simple to use." At the same time, we need to make those services and functions easily available to our customers. We need to be the "Amazon" of IT in higher ed.