The question on COOs’ minds: “So now what?”Follow @PwC_LLP
According to our latest Annual Global CEO Survey, the challenge for CEOs is balancing efficiency with agility. They’re trying to cut costs without cutting value or leaving their organisations exposed to external upheavals. Meanwhile, many COOs may be wondering, “So now what?” It’s a really good question, and it emanates from two places.
First, after over half a decade of economic turmoil, slow growth, and relentless profitability pressure, the low-hanging fruit is simply gone. Obvious levers to drive margin through cost reduction have been pulled. COOs have borne the brunt of these cost-cutting initiatives. It’s often unpleasant business that takes a toll on relations with suppliers and employees, not to mention an emotional toll on the COO and his or her leadership team.
The second source of the question is the parade of shocks to the system. These come from all angles and with increasing rapidity: macroeconomic shifts, natural disasters, geopolitical unrest, and regulatory and tax changes. And that’s all on top of changes in technology, customer preferences, and the competitive landscape.
There’s no place for a trite answer to such a serious “now what?” question. I will offer up, however, two vectors that may spur productive thinking in your company:
- Innovation: Going beyond new products and services, some executives are looking at innovating the company’s operating model itself. Uni-dimensional views of the P&L and business processes are replaced by a fresh, multi-dimensional view of the business that seeks fundamentally new ways of doing things—ways to serve customers better with a completely different cost structure. Creativity can be spurred by leaving your industry sandbox and looking at practices in other industries. These insights can be both unexpected and profound.
- Flexibility: There's no reason to expect volatility to subside. Operationally, the antidote to uncertainty is flexibility. Cost-reduction campaigns often work at cross purposes to building resilient, nimble operations. Minimally, it’s time to balance the criteria for what's 'good' by elevating flexibility and customer satisfaction to the same playing field as efficiency and cost. Some executives are benefiting from a little catchup by taking special initiative to relook at operations through the flexibility lens, and some are pleasantly surprised to find that the assumed cost trade-off doesn’t really exist, particularly when they factor in the effects of the uncertainties that will likely hit.
Don’t feel guilty if you’re feeling exasperated—many of your peers in the C-suite are. Open the doors and windows, breathe deeply, and dedicate some effort to thinking anew about your operations. It’s a great time to do it.
Global Operations Leader
Email: Mark Strom
Mark Strom is the global head of operations consulting services for PwC, leading a team across the network of more than 4,000 professionals. Mark and his colleagues specialise in helping clients realise strategic goals and competitive advantage by defining and implementing world-class operations.