Unlocking Hidden Value: Strategies for Seamless Operations

PODCAST TRANSCRIPT

Brian Betkowski

Welcome back to Jabian’s Strategy That Works podcast. I’m Brian Betkowski. I’m here with my friend and colleague, ed Haines. I got to say I’m pretty fired up about today’s topic. As you all know, Ed and I, and many of us think in spreadsheets and process flows and this topic of efficiency, operational efficiency and all things efficiency make us pretty excited. So I’m pretty fired up, especially the guest that we’re going to have today just makes it extra special. So ready to go.

Ed Haines

Excellent. Yeah, I mean, so before we start, I thought it would be good as we did and have done in the past, to put this in a bit more context of what it really means. And so the only way, when we were thinking about this, one of the ways we were sort of thinking through it was, well, what does operational efficiency mean and how do you scale that? And so if you took the GDP of the US for example, which $28 trillion probably last couple of years, and you said maybe 50% of that is operational costs. So takes you 50% costs to produce $28 trillion, which means you’ve got $14 trillion in costs. And so that’s the area that you could attack. And if you say, let’s say took one basis point out of that, which is 0.01%, that’s $1.4 billion. I mean, the scale is tremendous. And what does that mean? That could be an R&D budget for a large company, a pharmaceutical company, for example. Or it could be a couple of new plants somewhere, manufacturing parts. So it’s real money and it’s real proper bottom line investment, reinvestment type activity you can do with that. And then you really then drill down a little bit further and say, what does that mean to individual companies? I mean, that’s obviously a larger scale, but equally individual companies can do more than a couple of basis points perhaps, and really kind of having an innovative look at that, it’s important.

Brian Betkowski

Yeah, combine that with the AI topic, which is everybody’s topic these days. And then the neat thing about the AI topic is it basically just made people wake up and say, “You know, I bet you we can do this a lot more efficiently, whether I use AI or not, but I bet you I can do this a lot more efficiently if I can figure out how to combine people, process, technology and use a bunch of these new tools, whether they’re AI, automation, whatever, how I can use those tools and go get some of this efficiency.” And that brings us kind of to today and it’s exciting to think about our guest today who spends his days thinking about this every day, how to either make things more efficiently, create methodologies, create frameworks, help people do this better. And so joining us live, streaming from Charlotte, North Carolina, he leads our Jabian Charlotte office as well as our operational efficiency service area. Welcome, Will Funderburg.

Will Funderburg

Great to be on, guys. Thanks for having me on the podcast. And like you said, I do think about this stuff all the time, so excited to have a conversation with you all about it.

Ed Haines

Well, brilliant. So let’s start at the high level. When you think about cost savings, it’s not something new or not cost savings, but operational efficiency generally, it’s not anything new. The more you need to do it, the harder it gets. What’s your approach and your thinking around how you get started on operational efficiency? Where do you begin?

Will Funderburg

Yeah, I like the way you framed it earlier to think about all of the costs in the business, all the things you spend time on, whether it’s labor or assets or maintenance or just the activities that everybody’s doing and starting that and saying where is the cost basis and how do we compare to peers at the very highest level? And then diving in from there, and then looking at each function of the business and how each of the functions interact with each other. Because I think as you all were mentioning, AI and new technology coming out all the time, new practices or trends, new products rolling out. The market and business world is constantly changing and there’s constantly new things to integrate into this sort of end-to-end system of a business. Every business is super, super complex when you think about the number of moving parts. So starting at the highest level like you did, I think is the right way to say how much is there to go get, we believe. And then working your way down into what new things have we introduced or what new things have come into the market that we might introduce and what might the opportunity be? And then not to jump over the obvious, of how well are we doing now with the existing pieces we have?

Brian Betkowski

You mentioned these options, almost infinite list of options of things to go make more efficient. I think sometimes that is a good thing and sometimes that can be a hindrance to people getting started. It’s almost like a paralysis of not knowing where to begin. Have you seen or do you have ways to think about this and simplify this or make it easier or codify it in some way? How do you attack that?

Will Funderburg

Yeah, I mean, I think again, looking at a business model and just the common functions of strategy, product, marketing, sort of your order to cash, procure to pay, and then back office. So what is that, the eight to 12 common functions of a business and how well are those interacting or working with each other? So starting at the top, the latest strategy that’s been set or targets, how is that propagating into a product plan? Are you working on the things that you have set over the next two, three years that you want to make a big difference in the market or capture share, et cetera? And then how does that work its way into sales? Is sales pushing the things that you’re trying to make a difference in the market or is it just the easiest thing to sell? And so working through the main business functions, I find is maybe the easiest way to skip a rock across the top of something that’s so complex to find maybe the areas where it’s easiest to go capture some inefficiencies or improvements.

Brian Betkowski

Yeah. From a quantification perspective. It’s definitely a big topic today around AI, which is, there’s obviously lots of opportunities to figure out how to leverage that, but then you want to talk about business case and how do you quantify it? So curious to get your take, whether it’s around AI or any of the areas, what’s been the way that you’ve attacked the quantification of it or helped people put their arms around that?

Will Funderburg

Whether it’s AI or RPA, not very long ago is pretty new to folks. And so we had a concept for a client of ours here in Charlotte called the hit list and the wish list. So what are the things that you would really wish you could take off your plate that is highly repetitive, not energizing to you, maybe not differentiating you to the customer, but it’s real work? Put that on your hit list. And then the wish list, what are the things you would reallocate your time to if you had time to do that? And so going around and doing interview, you can do that in a specific business unit or geography or something more broad, but starting to gather those real world business situations or scenarios that you can apply these new technologies to and then start to see where themes are. And then again, the business case from that is doing it better, faster, higher quality, less errors, that kind of common checklist. And then the other side, what value do you think you can get with the reallocated time or budget from again, the savings that you think you can get.

Ed Haines

When you talk about breaking down the business into functions, you end up looking at a particular area and then seeing how you can reduce or increasing efficiency there. Is there a benefit to looking across functions and those interactions within different businesses? And do you typically find more opportunity there that wasn’t quite as obvious because people are maybe doing things they don’t need to do versus doing them faster?

Will Funderburg

Yeah. And I’m interested in y’all’s take on this too. I think one thing that’s sort of continually surprises me about businesses and new clients that we work with or hear about is that there are consistently silos almost in every business. As much as you try and break all of them down, whether it’s again, a product division or a region or the classic business functions, and each of them are all trying their best every day to be great and do better than they did yesterday. And so that’s a good thing, but it also can create some misalignment or differences between functions if they’re each pursuing excellence agendas, but not exactly in an orchestrated or coordinated way. And so, one of the things that ends up being a theme and a lot of our work is setting up access to accurate data across functions or shared KPIs and having leadership team management systems or management operating systems such that you ensure you’re looking across those silos and are forcing investment decisions or major decisions across silos. But yeah, every time we jump into one of a big project, I think just seeing how different companies operating models are set up to then say, okay, we need to pay attention to these areas because there’s likely potentially some improvement opportunity.

Ed Haines

Do you find yourself afterwards reviewing and redoing the operating model, or is that part of the approach to begin with? So efficiencies become an outcome of that operating model review rather than operating model change becomes an outcome of operational efficiency?

Will Funderburg

Yeah, I think a big effort like redoing an operating model certainly could get a lot of attention or be flashy, but other than what maybe a client has told us is a hypothesis we come in with, I generally find that there’s not some big undiscovered transformational thing no one’s ever thought of. A lot of times it’s the less sexy or maybe untransformational profitability leaks that are happening just from not operating in as a disciplined or informed way because either the data doesn’t exist or there’s multiple systems that aren’t talking to each other. And so, that’s one thing that I think is nice to know that that sort of accountability and discipline can be a differentiator. And again, like I said earlier, organizations aren’t operating in a static market. Organizations themselves aren’t static. Leaders are coming and leaving, the technology they implement the processes they implement, the people they hire live long after maybe their tenure with the company. And so these organisms are constantly changing. So going back to maybe not basics, but foundational, having a good strategy, having a good way to measure, making sure it’s communicated, having a good way to measure how well you’re doing is always going to find some room for improvement, at least I’ve found.

Brian Betkowski

Yeah. Do you have maybe a story and experience share that you can share with us and share with our listeners how one of these projects came up, played out? What were some of the nuances? Just take us on the inside.

Will Funderburg

Yes. Yeah, so a couple of years ago, let’s call it 4 to $6 billion revenue company, it’s in industrials industry, had a new C-suite leader and essentially wanted to start fresh. We’d worked with them in the past and assessed the organization she was running sort of end to end. So we did a classic, in this case, there was a industry best practice framework to put benchmarks against, processes and KPIs against and laid out a, what we call it, a business process landscape or capability model. We had leaders aligned to it, budgets aligned to it, benchmarks aligned to it. And one of the things we found there was they had all the latest and greatest technology. In fact, they were two years out from implementing all of the latest, greatest stuff from SAP, right? Internal leaders had won awards for how well the implementations had gone. But when you looked at the leaders and you did the old, “Everybody has a hundred dollars to invest, where are you going to invest it across the org?” To identify where we thought the opportunity was, there was a lot of under utilization of the technology. So this isn’t always what we see at clients. A lot of times they have maybe a scattershot of technologies, they’re trying to rationalize and implement big transformation. But in this case, we were coming in after that and it really ended up being, again, more of the management operating structure and change management effort around getting better utilization out of the systems. I mean, one quote from a senior leader in her org said, “We pay, whatever it was, “2.1 million in licensing every year, and I bet we only use 20% of the capability.” Or we have this amazing cockpit for, in this case it was logistics, but I still have people manually going to the vendor’s website to check the status of the order. And so why is it that it wasn’t rolled out with the right utilization or why is it that people on the ground aren’t seeing the value and the potential? Again, that wasn’t because the investment wasn’t there, the technology wasn’t there, but it was really the rollout and change management and then actually getting that value out to customers where it becomes a feedback loop.

Brian Betkowski

So let’s quantify that one for us. So what were the quantifiable outcomes of that after you were able to better leverage the technology?

Will Funderburg

Yeah, so in that case, for the logistics one to pick as an example, the cycle times and actually getting… Or not cycle time, sorry, the throughput of servicing customer requests increased by 35%. So in their case, because they’re in a growing market, the hiring they were planning to do got to be pushed out, and those dollars got to be funneled back into other growth things versus maybe customer service in a labor sense. And then of course, they also had business process mining tools. Now that they had better utilization of the system, you can actually see the data flowing through it, and so you can plug in your business process mining tool and actually map that stuff out. So being able to see duplicate payments through AP as a classic example. So more people using the system means you can actually see the data, means you can measure it and improve faster. So utilization and maybe delay expense in this case was a big outcome for them.

Ed Haines

The point you’re bringing up I think is super important too though, which is how do you actually really realize those savings? Because I’m sure you’ve run into a few of these projects, Will, where you could possibly see it on paper, but then when you get down to that next level, and I suppose a basic example is you have a contract with someone, you go, “Well, we can save 20% on this contract, but the contract has to go for another three years.” You’re not going to get those savings when you want them. Do you have an approach to that so that it becomes more of a cash the check type activity? I mean, how do you approach that in the way that you are looking at these projects?

Will Funderburg

Yeah, I have a couple of thoughts there. One is, again, back to the discipline word or the accountability, getting really clear up front what you think it is and what you think the actual pace is. A lot of times we’ll gather business value potential from across the clients that our sponsors for a specific project or technology implementation say, “So where specifically is this coming from? When do you think it’s coming?” Of course, risk adjust it and then put together sort of a milestone plan to be able to go back and measure. A lot of times finance organizations will require something similar to that before they sign off on a project, a sort of productivity tracker, if you will. But the other thing is, again, not to forget the people side of it, of a culture of accountability and excellence. People all need to be in a place where they want to own the outcome and be proud of that as well. So leaving out that maybe cultural side of it too is something that we see folks maybe trip up if they don’t actually go get the value. And then the last thought on that at the moment is frankly going and digging up the business cases of recently completed projects in the last couple of years and saying, where is the meat left on the bone? Because a lot of times I’ve seen executives will create a business case to get something approved and then go run off and get it done and maybe celebrate or not, depending on how it went with the project. But it’s not that those ideas weren’t any good, right? And so how do we make sure we didn’t just move on to the next shiny object and how do we make sure we actually got the value from all the things we put time and budget into? So a lot of times those can be an easy thing to pick up.

Brian Betkowski

One of the classic ways to realize that is to reduce headcounts, which is a classic way. And we’ve definitely noticed since the hay days of ’21 and ’22, there’s been more of a sensitivity to that when talking about finding efficiencies and then perhaps that leading to a reduction in force, especially when you think about AI and AI replacing people’s jobs, it’s a sensitive topic, especially since it could be pretty acute in some people’s industries. What’s been your experience with that, Will, and how do you guide people through the anxiety around that, the reality around that, or perhaps other things that you can do besides reduction in force?

Will Funderburg

One thing I like to share on this topic at least is maybe a step back, and we work with a lot of PE-owned firms. We work with a lot of private equity firms that have operational or portfolio operations teams, and there’s actually a business insider article about this last year where essentially the portfolio operation teams are now becoming a little bit of the star or more than they were, at least relatively in PE firms because in the ’90s, early 2000s, the buy a company and shove a bunch of units together, get cost savings, have centers shared services, outsource, et cetera. A lot of that has been done. That trick is tried and true. And so now a lot of these companies who are being sold for the second and third time have to dig in and say, “Okay, we need revenue generation machines. We need not only revenue generation machines, but ones that translate that to the bottom line.” So it’s really about stepping up the maturity of the business and again, the profit generation of the business. And so that’s one side, is that I think it’s easy sometimes to believe that the barbarians at the gate or whatever, the ’90s version of just cost-cutting, slash and sell is what comes with new technology. I think the other side, productivity is pretty amazing as well. The new customer experiences that are available. I was reading an article, the Charlotte Business Journal yesterday that said something like 40% of interactions with one of a large bank here in town’s cash management system, 40% of them are using their internal AI. And so think about the difference in customer experience now that’s enabled by that. And then of course, I mean, y’all know me well enough, but the learning opportunity. The amount of things that I’ve learned and the amount of versions of our own internal tools and offerings that I and my teams have been able to turn around is pretty astounding. And so the value to clients, even in what we’re doing can be greatly increased by increased productivity and increased output..

Ed Haines

Yeah, I mean, what we’re talking about there is how you decide when you find those efficiencies, how you decide to reinvest them or where to take that money. And you could argue that the old cost-cutting, head count reduction was really just a deferral of future costs if you didn’t do it right, because you ended up hiring well back again and taking four months to train them up. And so really thinking through those, Will, I mean, as it sounds like what you’re doing is to make sure you’re really looking at long-term improvement and efficiency.

Will Funderburg

And sometimes we’ve also seen where you complete a business case for something and you realize, just like you said, if you’re looking at labor cost savings, I’ve seen a CFO sort of call out people and go, “No, you’re trying to count the same people two or three times. Let’s get serious. What are we doing a year from now? How are we better?” And so I think framing it that way, like you said, Ed, is much healthier for the longterm.

Brian Betkowski

We’ve also seen where if you’re doing multiple initiatives at one time, each of which have a business case, it’s easy to claim not only the same person twice, but it’s easy to claim that you’re going to make progress against the same KPI. And if you add up all of that progress, you’re going to bring that KPI to a level that’s a irrational level. And so the fact is, even if you did all of those projects and achieved all the things that it said that each one of those were going to achieve, you really wouldn’t get the sum of all of that benefit. And so you figuring out how to rationalize through that is an art.

Will Funderburg

Yeah.

Brian Betkowski

Sure.

Ed Haines

Biggest complaint of the CFO is like, “Well, where’s, where’s the money?” Or see when the spreadsheets, but yeah.

Will Funderburg

I was just going to say, and back to what we talked about before, the wish list and hit list thing. If you don’t have a wish list, that’s a problem. The leader has to have ideas around what we’re trying to do in the future to make the employee experience better, the customer experience better. To better penetrate market or grow. And so if you only ever think about the how do I cut cost side and don’t have ideas on the other side, that may be as big indicator as anything.

Brian Betkowski

It’s that whole defense versus offense. If you only play defense and never play offense, it’s really hard to win any game. And so defense is super important, but you also have to play offense and figure out how you’re going to push the growth side. You mentioned something a little while ago, Will, about, I think you said tools, techniques, things that your team has created over the years to maybe help make this more efficient. Just tell us more about that.

Will Funderburg

Yeah, yeah. So specifically for operational excellence, we’ve got a tool we’ve been using the past year or so called SPOT360. So sustainable profitability optimization tool. And essentially it’s a diagnostic for what we’re talking about, starting from strategy product all the way through the business functions. And it’s just a way to gauge maturity for each of those areas. And then financial metrics that say, are you actually translating it into results or is it sort of wishful thinking for how mature you think you are? And not just having a single person take that, but a group of people. People from across divisions, people from across levels, and finding the differences and maybe opinion on that. So that’s something we use as a diagnostic because it helps us zero in pretty quickly on where we can make the biggest impact for clients. And it becomes an eye-opener as well, because anytime, I mean, you could have any sort of survey and you get a big group of people to take it, and finding those differences tends to be a pretty exciting or eye-opening thing for the leaders in charge of the thing you’re surveying about.

Brian Betkowski

You said take it, is it qualitative, quantitative, a mix? Tell us a little more about that.

Will Funderburg

It’s both. So essentially we’ve got, for each of the 36 questions, a graduated maturity description. Which one of these most closely describes you? Or NA, I don’t know enough to speak to this area or have the visibility to it. And then nine financial metrics, gross margins, free cash flow, things like that, return on total assets. And we process it through internal private AI tool to essentially bounce it against all of our operational excellence rubrics and benchmarks. And again, the idea is not that it replaces what could be a project to go do this diagnostic, but we’ve seen big three strategy consulting firms charge a lot of money for a four-week diagnostic project where now we can crunch something like this in under a week to give us great hypotheses to say, “Here’s probably where you are leaking profit. Here’s probably how much it’s worth based on similar size companies and your own financials. And so these are hypotheses we should go explore more.” So we’ve had really, really enlightening and fun discussions when we’re able to turn around something like that, that quickly and have a on topic, on target conversation in conversation two or three versus over time or weeks down the line.

Ed Haines

Do- do you often run into and do you flush out in that process like the sacred cows of cost savings, like, “Well maybe, maybe you should get rid of the private jet and fly…”

Brian Betkowski

Sure, why not? Street barbarian at the gates too? ‘Cause I’m reading again right now. [laughs] It sounds, uh, sounds like you’re reading it. Um-

Ed Haines

Do you run into, how do you approach those? I mean, the idea of what some places might be cornered off in a sense?

Will Funderburg

Yeah. Again, ours is very functional in interactions between functions. So it’s not specific budgets or employee census or anything like that. Essentially, is the strategy documented? Do you feel like frontline employees are able to make decisions from it? How integrated or how involved is financial reconciliation aligning product plans with demand plans, utilization of a CRM. All of these things that are maybe foundational or basic, but the math is a little shocking when you think through it. 36 questions with five potential answers is five times five times five, you’re going 36 times. I mean, there’s trillions of potential responses, not that anybody would answer level one maturity 35 times in a row, and then level five, but that along with sort of free text response, 30 different people taking it as an example. You get a super rich data sets to find out, not necessarily that we shouldn’t be taking the corporate jet, but you have completely differences in opinion of how mature products thinks they are versus the other functions of the organization that rely on them to set portfolio profitability goals as an example. So finding those, I think are things that the executive team may know about the private jet, but they may not know about all the differences in opinion or the breakdowns in KPIs or communication within the organization.

Brian Betkowski

That’s powerful. Well, we’ve been firing all the questions today. Is there anything on this topic that we haven’t hit on that you think folks would want to hear about?

Will Funderburg

Yeah, it’s a good question. I think AI obviously is at the tip of everybody’s tongue. And I guess to ask the two of you in the context of operational excellence, of course we do process improvement projects all the time. What are maybe some of the most innovative uses of AI you’ve seen as far as putting it within a process flow lately that you think folks should know about?

Brian Betkowski

Well, I was going to say first, it’s an interesting way that you phrased the question. I was going to say, first observation we definitely have is putting AI in the hands of folks and it being, for lack of a better term, their choice when and if to use it. Turns out surprisingly doesn’t have the business case or really the uptake that one would think, especially since how amazing some of the tools are and how efficient it can make you. This becomes a human thing, whether it’s a conscious or unconscious decision not to use something that might make you somewhat irrelevant, I don’t know. But the fact is that when given the choice, people are adopting those productivity tools way slower, and then the business case is way less than when you can embed it in a process that someone doesn’t have to choose when and if to do. But that process is either happening automatically or it’s happening because it’s the core process. If you’re in a call center, there are calls coming in. If something is triggered because of that call, then it’s going to happen whether a person decides to have it happen or not. And in a lot of cases, we’re watching AI just hand things on a platter to people, perhaps not do the job for them, but hand them things on a platter in the midst of that process that’s already happening, and that’s where the benefit really comes.

Ed Haines

Yeah, I mean, it’s process first rather than technology first. So when you go technology first, you end up with not a toy, but something that is useful and helpful but is not core, like you say. But when you go process first, you’re actually doing the job. And we were talking about this the other day, Will, as an example. When email came along, I imagine, can’t remember that course, but the idea of you give someone an email inbox and then you find them writing hand memos to people, you’d be like, “Are you crazy?” It’s similar to that. You need to find what that process is. And in that case, it was the process of writing memorandums that you then replace with technology and then made it core to how you communicate it. Finding the right use cases for that rather than just the technology there for the sake of technology.

Brian Betkowski

Yeah, I mean, we’re working with a client right now where their mind told them to say, “Hey, I think we should be able to use AI for this particular process around it was a sales process,” and where we then landed was, well, AI is one of many arrows in the quiver along with automation and with a advanced technologies around analytics and just tons of things that we can use. Let’s acknowledge that we have all of those arrows, and then first, let’s go decide that we’re going to be really good at this part of the sales process. What does really good mean at this part of the sales process? And use all the technology, all the process, all the people, all the strategy things that we can possibly do to make us really good in that. And that is what ends up having business value, not just celebrating getting a new tool out.

Ed Haines

Right. So yeah, there- there’s another example here which is, uh, you know, you can have AI that replaces, say, a function that a few people are doing. So, let’s say you had a- had a, um, a group of people who were looking at reviews off of, um, off of online, you know, and then handing them over to the marketing team. There you go, well, that’s a great use case for AI, right? ‘Cause they can… AI can read it and it can summarize it and give it to it. But what’s the process that happens in order for that to get there? Because it’s, yes, you can use AI, but it doesn’t work purely on its own. You have to orchestrate and think about the process and how that runs, and that’s where the true efficiency comes from. Otherwise, you end up adding more cost because someone’s then maintaining the AI- AI and- and also passing the documents and- … and information around, you know.

Brian Betkowski

Yeah. Sorry, we can go on all day. Oh, Will’s still there. Oh, sorry, Will.

Will Funderburg

Well, Brian, you asked one, is there anything else I wanted to share or thought? I mean, I’m biased, obviously, because I love this stuff, but I think anytime there’s sort of uncertainty in the markets or we don’t know what’s coming next, the ability to look in at your own business and say, “Where are we letting things fall through the cracks? Or where are we being maybe a little less disciplined than we have? Or where do we have design debt from past integrations or technology implementations?” I think there’s always some opportunity there. So just not overlooking that stuff and making sure you’re not letting maybe the easier, less transformational, but highly valuable stuff get away. So I’m always going to wave the flag for operational excellence, as you can imagine.

Brian Betkowski

This is great. Well, I really appreciate the conversation today. Will, thanks for joining us.

Will Funderburg

Yeah, thanks for having me.

Brian Betkowski

It was good to not only here about the tools and the practical things that you’re doing, but hearing some stories, figuring out how to quantify it, and it’s a new world with all these new tools. Let’s go figure out how to go get it done. So thanks for joining.

Ed Haines

Great. Thanks.

Will Funderburg

Thank you guys.

Brian Betkowski

Until next time. Thanks, Ed.

Ed Haines

Thank you.