Unlocking greater business value through operations is a key priority right now for many COOs who are increasingly committed to both quantifying and qualifying the growth potential of their business.
Describing and debating the COO role in companies is something I love to do – and will most likely continue to do for a long time.
For one, of all the C-suite roles, the Chief Operating Officer (COO) is often the most misunderstood – it rarely has the clear functional definition of other peer Executive roles, it sometimes lacks a structured and well-established career pathway, and expectations of the role vary wildly – and yet, in today’s rapidly evolving and digitally-driven environment, it is unquestionably one of the most diverse, multi-faceted and influential Executive roles.
And it is changing. The responsibility is growing. In addition to ensuring smooth daily operations, COOs are increasingly responsible for managing organisation-wide performance, profit and loss (P&L) transparency, and cost efficiency to achieve strategic growth. In this sense, COOs can play a critical role in driving a relentless focus on enterprise-wide performance and value-creation, characterised by full end-to-end P&L transparency that builds upon, but also goes well beyond, the COO’s traditional focus on cost efficiency.
A question of growth – and survival
Of course the focus on value comes at a time when many executive leaders, including COOs, are looking beyond shareholder or economic value towards a broader picture of “stakeholder value” or “social value”. I definitely support this shift, and I am having many great conversations about it: As we are all facing societal and environmental shifts that threaten long-term economic growth, there seems to be a growing business imperative to better account for the positive and negative impacts of business – strengthened by customers, employees and societies who are becoming less forgiving of activities that make things worse. All over the world, this has led to businesses moving away from a purely shareholder-centric view in order to address the interests of a broader set of stakeholders.
However, in the midst of talking about stakeholder and social value, we cannot forget that shareholder value is also still a very essential part of running a company, and that companies face a very hard time securing their own survival if they are not able to somehow generate long-term stable cash flows that, at least over time, make them attractive to invest in. After all, throughout the modern business era, a company’s value has been defined as the returns it creates relative to the assets it ties up in creating them.
As a COO, regardless of whether you aim for short-term cost-out improvement tactics or long-term reconfiguration of operations for profitability and growth, what has not changed is that creating value is still at the heart of every organisation. Without a very sharp focus on value, any organisation will over time lose its competitive edge – and as COOs, I believe we should play a major role in making sure that this will not happen to our organisation.
Onwards and upwards
Thankfully, many COOs are already challenging conventional wisdom and leading their company on a journey of change, growth and value creation. The exponential rate of change in today ́s markets is opening the door to significant opportunities and challenges. Every change gives the opportunity to differentiate, the opportunity to disrupt and the opportunity to capture break-through value. Internal and external forces are requiring transformation of aging operating models that are not designed to deliver a company ́s future business strategy.
Here are few thoughts to consider on that journey:
- First, look closely but broadly at value: Traditionally, the perception of operations as a cost centre has often translated into a self-fulfilling prophecy where the role of the COO is to optimise the cost base, with commercial and product owners equally siloed in the role of revenue generators. Neither silo supports an optimal end- to-end customer experience or product/service P&L transparency. Instead, margin improvement requires an on-going dialogue between revenue and cost category owners to drive trade-offs between revenue, cost, risk and client service – with the COO at the end of the table.
- Secondly, strive for P&L Transparency to increase performance: In order to drive margin improvement, COOs need real-time P&L transparency across customer journeys and services, which involves sourcing data from end-to-end customer journeys, finance and business intelligence sources alike. Make sure to use the data to create effective feedback loops with continuous learning and clear accountability across all areas of operations.
- Finally, be tough on non-value adding complexity: Dealing with complexity has always been one of the Achilles heels of running an effective business – and it certainly is today. From all kinds of sub-optimisation in organisational silos to complex global supply chains, insufficient data management, duplication of work or ‘pseudo-work’ and operating models that lack transparency and accountability. For any COO, understanding and addressing non-value adding complexity is a key element to unlocking business value – and COOs today should work tirelessly to cut out the non-value adding complexity that is typically driven by unconscious decisions and misalignments in the company setup.
COOs are increasingly responsible for shaping and executing business strategy, leading the transformation agenda, managing enterprise risk and resilience, driving sustainability responsibilities, and the like – but it all starts with a clear focus on value. Already, many COOs look at the organisation’s wider business model rather than simply the operating model in order to gain an operational edge. However your role is shaped in your specific situation, I’m sure you will agree that value-creation does not happen by itself; it requires focus, transparency and tough decisions, and it is our responsibility as COOs to act.
Forfatter spotlight
Tore Christian Jensen
As a part of the Strategy & Operations practice Tore has worked with analysis, development and implementation of operational strategies. Tore has deep experience with aligning business models to changing market demands through optimisation of business processes and aligning systems, organisation and governance accordingly. He has industry experience from manufacturing, transportation, consumer products and energy. His main focus is on on the operational core processes but he also covers administrative support processes. As a program manager Tore has been leading transformation projects for international clients heading multiple parallel projects and reporting directly to executive committee members. His responsibilities cover everything from initiating assessments, identifying opportunities for improvement to building business cases and following up by designing solutions and driving teams through implementation.