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As Chairman of Columbia Business School’s Deming Center Advisory Board, I had the distinct pleasure to award this year’s Deming Cup to Jeffrey Immelt, former Chairman and CEO of GE, and Arne Sorenson, President and CEO of Marriott International. The Deming Cup recognizes leaders who make significant contributions and develop continuous improvement within their organizations.
In today’s business environment, operationalizing strategy matters more than ever. The Deming Center’s mission is to ensure that the operations skills, quality expertise, and leadership are made modern. At SSA & Company, we take these central tenants and build further upon them. This quarter’s newsletter focuses on topics surrounding continuous excellence in an environment of consistent change and uncertainty.
I am pleased to share these stories and practical insights with you.
– David Niles
This year’s Deming Cup Award winners, Jeffrey Immelt and Arne Sorenson, guided their businesses with operational skills, quality expertise, and leadership excellence. W. Edwards Deming’s impact on contemporary business is well documented. He was one of the first to develop and implement a management system as a corporate strategy. With this system, Deming formed bridges between operational excellence, winning in the marketplace, achieving lasting corporate success, and macroeconomic impact. In today’s constantly changing business environment, leaders must channel Deming once again to create value in their organizations by striving for an “A” system that generates alignment. The system then enables executives to punch above their weight and allows an organization to outperform the sum of its parts.
Even the most seemingly impervious industries and departments must evaluate how to best build and leverage a blended workforce. At Stitch Fix, an online shopping subscription company, the creative process starts with AI. A data science team working with designers analyzes the company’s order data to predict clothes customers will want to wear. These teams also use insights to identify gaps in the company’s inventory. But its human designers still evaluate seasonal trends and picks, feeding information to the software. Amazon also recently developed its own algorithm that scans social media and gleans insights for fashion trends to inform its garment production. Workforces powered by analytics and augmented with AI, not only gain efficiencies, but also a competitive edge.
With U.S. e-commerce sales hitting $390 billion in 2016, double the amount of five years ago, and continued pressure to ship faster, manufacturers and shipping warehouses continue exploring automation options to meet and exceed benchmarks while simultaneously cutting costs. Automation is close to overcoming retailers’ toughest hurdle—teaching a machine to pick up a variety of items and put them in a box. With human-picking being warehouses’ biggest labor cost, companies have built for this specific robotic automation revolution and have worked to accelerate the potential breakthrough by making their research public. Once finalized, these machines have the potential to work 50% faster than humans and can run 24 hours a day. As the pace of technology disruptions increases, leaders need to build capabilities to continuously understand use cases for their business, evaluate how automation and new tools can be operationalized, and assess the ROI—given price inflections, their specific products, and implementation costs. It’s not a one-size-fits-all approach. The future “lights out” warehouse doesn’t happen with a switch flip. Companies need to understand when and how to start going dark.
Today’s economy and political climate suggest that profiting from risk pooling is no longer viable, and health insurance will evolve into a third-party administrator of value-based claims processing. States are stepping up with respect to healthcare policy and financing with an increasing number of waiver requests of Health and Human Services. Consequently, federal, state, and/or private payers will pursue self-funded plans. SSA & Company’s benchmarking and scenario-based planning study evaluated 2015 CMS MLR data on nearly 200 payers and found that the payers best prepared for this shift have substantial scale, a substantive book of business in self-funded plans, and exhibit low SG&A costs. Payers can reduce complexities, decrease costs, and facilitate the transition to value-based reimbursement by modernizing their technology platforms, deploying process automation, and becoming more effective in using data analytics. But companies must strategically integrate new technology and analytics and streamline operations for its full effect.
As businesses seek to transform digitally, job descriptions and responsibilities continue to evolve. A dramatic shift is the CFO position, which now must focus on top- and bottom-line growth as well as oversee several new functional areas. SSA & Company’s John Rodgers and Nick Kramer share that CFOs can “identify, measure, and view non-financial performance indicators that predict financial performance,” and, “apply analytics to strategic KPIs to grow business.” CFOs who assume a larger role in their company’s overall transformation, “find ways to effectively make use of new analytics and digital tools will drive stronger performance, create efficiencies, and steer their company’s innovation.”
Many companies overlook and underutilize their social media data as a vehicle to improve operations and results. Today’s digital landscape demands that businesses liberate social media’s treasure trove of actionable data from the marketing silo and bring it to other business functions. Nissan’s teams scan structured and unstructured social media data to understand sentiment, volume, and influence of consumers. The team uses collected and analyzed data to validate and resolve consumer satisfaction and problems. One measure of a successful, consumer-centric, digital transformation occurs when companies eviscerate organizational silos and push for a larger initiative with all available unstructured data. Combining social media data with current analytics initiatives and operations data enhances products, advertising, and customer experience—improving top and bottom line growth.
Blockchain is not just fueling a hot-trading currency. Organizations can utilize the data-fed technology to mediate trust and promote transparency with their supply chain and procurement relationships. The technology enables tracing permissions and activity logs to identify where the contamination originated. By automatically logging each procurement and supply chain transaction into an encrypted ledger, there will be less room for data-input errors, which could then alleviate bottlenecks or issues that might occur further down the production line. Adopting blockchain into your procurement process and supply chain is a net-efficiency gain that can streamline operations, reduce errors, and rapidly increase your response time and accountability.