Role of operational excellence in the financial services industry

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Role of operational excellence in the financial services industry


Summary

  • When the coronavirus hit, banks, insurance companies and other financial service providers immediately faced unforeseen operational stresses on business continuity.
  • The need to respond to fundamental changes in the business environment and customer behavior has made operational excellence a topic of great interest in the financial services industry.
  • Operational Excellence, or OPEX for short, was first developed as a modern concept in the 1970s by Joseph M. Juran, a prominent engineer and management consultant.

The Covid-19 pandemic has imposed hitherto unfathomable challenges on businesses to maintain operational excellence, including those in the financial services industry.

When the coronavirus hit, banks, insurance companies and other financial service providers immediately faced unforeseen operational stresses on business continuity.

A new way of working – working from home – began that few in the industry had tried, resulting in productivity tracking challenges, reduced customer responsiveness and the usefulness of human interaction face to face. This, however, quickly stabilized with intentional strategic interventions.

The need to respond to fundamental changes in the business environment and customer behavior has made operational excellence a topic of great interest in the financial services industry.

Operational Excellence, or OPEX for short, was first developed as a modern concept in the 1970s by Joseph M. Juran, a leading engineer and management consultant, when he was teaching business leaders. Japanese companies how to improve quality.

Dr. Juran envisioned OPEX as a means to ensure excellence, drive customer value and promote continuous quality improvement. This requires companies to nurture and embed a culture of operational excellence in everything they do.

Simply put, OPEX is about “having a mindset of continuous improvement to achieve excellence,” but more importantly, focusing on delivering a superior customer experience at all times.

From a financial services perspective, operational excellence involves exceeding customer expectations while reducing operational risk by creating more efficient processes.

With the onset of the pandemic, financial services firms have had to innovate, evolve and retool their operations to stay relevant in an environment characterized by rapidly changing customer preferences and loyalty.

Being a highly regulated industry, financial service providers cannot afford to ignore the role of operational excellence. Given the need for maximum customer loyalty, no one can argue with the need for sustained improvement in processes and the overall customer value proposition.

Operational excellence has therefore become the appropriate tool to drive this execution. With clearly defined goals of customer experience superiority and cost management optimization, the operational excellence toolkit of business process design, reengineering, waste management, Root cause analysis, among other factors, is now imperative.

To achieve a positive paradigm shift in the customer value proposition from an OPEX perspective, it is necessary to have smooth processes and personalized products that speak or even predict the current need. Additionally, we must balance risk management, business efficiency and revenue growth.

Often, these factors are at loggerheads. It is the job of the operations manager to discover their confluence in the development of an appropriate Business Operating Model (BOM).

Appropriate metrics such as lead times and cycle times will provide a view of BOM effectiveness while Net Promoter Score (NPS) will give a measure of customer experience. NPS are metrics tracked using a dashboard and as part of the OPEX function with daily targets to cascade results.

So the importance of operational excellence in a business that wants to take the pulse cannot be overemphasized. Moreover, the Customer Value Proposition (CVP) can only register a positive paradigm shift with improved and smooth processes and personalized products that speak or even predict the need at hand.

Execution is paramount in operational excellence. Plans must be followed by actions to achieve the desired results. This is where the discipline of execution as expounded by Frankline Covey in her 4DX or Four Disciplines of Execution Framework comes into play.

Discipline One talks about focus and execution on the most impactful goals under prioritization. This ensures that you are not lost in the whirlwind of business as usual. However, this should never be confused with tunnel vision given that we exist in a volatile environment.

The second discipline is aligned with the Pareto 80/20 principle that 20% of your activities produce 80% of results. Focus on those activities with the highest leverage. Much like the animal farm analogy, not all actions are created equal.

Discipline three is arguably the most important as it carries the main principle of continuous improvement (Kaizen) on its back. Considering the impact of all workplace initiatives and actions would be the key factor in identifying your true north.

This is also where the data defining your decisions can be collected. Also note that the only defense against false positives is to have a proper dashboard in place.

Discipline Four on Establishing a Cadence of Accountability simply articulates the culture of performance management based on ownership and accountability over a period of time. Here, successes and failures are subject to root cause analysis and correction.

Mr. Kiplang’at is the Head of Operational Excellence and Analytics at UAP Old Mutual

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