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Name : Ajay Pokhrel

Term: v A
MBAe

How Operational innovation can transform your company?

Operational innovations are the changes in operations that are performed in an


organization in order to establish something new and extraordinary with aim to
increase profit.
Operational innovation is simple creating changes in organizational performance
but plays vital role in uplifting organizations efficiency and performance.
Once in 1991, an insurance company increased its scalar profit much more than
expected. Lots of question was raised that what might be the main strategy
behind that success. The company was never found applying marketing
strategies nor applied acquisitions. The company never grow at expenses of its
margins nor several campaigns except few advertisements. But dramatically
came to be countries third largest insurer under heavy profit. And the secret
behind it is that it out operated its competitors by offering lower price with better
services than other competitors company. And the secret was to take costumers
away from them. This enabled progressive to have a better price service as
operational innovation which should not be confused with operational
improvement. Rather operational innovation means not improvement but new
ways of filling orders product development and change in service performance.
The operational innovation has created several success stories in companies like
Toyota, walt-mart, dell etc. Though Walt-marts success was not role operational
innovation but also was culture, strategy, human resource, policy and host of
other elements.
Operational innovations being extra ordinary and rare, dell and Toyota are
repeatedly their stories as example are told. No Korean 10%companies have
made progressive efforts to profits.
But no single innovation last for long. In addition to immediate response
progressive companies have to introduce continuous innovations. Regular
monitoring on feedbacks and competitors activities should be taken into
consideration. Mechanization in credit system has helped the company in credit
calculation and has accuracy on it which made transactions comprehensive.
Several other such companies acquired such strategies of operational
innovations. Eg: IBM invented new product development process. In 2002 shell
lubricants reinvented its order fulfilment process by replacing group of people
who handled different parts with individual doing it all.

List of innovation operations are:


1)
2)
3)
4)
5)
6)
7)
8)
9)

High consumer retention


Great markets share
Enter new markets
Low price
Strong costumer relation
Low direct costs
Increased accuracy
More added value
Simplified process

Organizational barriers:
Most industries are struggling with lower growth, even stagnant markets. The
best way to take over the competitors is to take market share from the
competitors by running operational innovations around them by fixing low price,
ordinary quality services. The only way to get ahead is to execute in totally
different ways through operational innovations. But still this may affect the
essence of company how work is done. It changes designs of work and
organizational roles.
Some barriers about this process is that according to managers, seniors do not
supports the idea, some think it is not so glamorous. as operational sector is at
bottom tier of organizational activities. As operational requires skills set and
mind set, it is not so common to other managerial level. Most organizational
senior managers only focus on planning, budgeting finance management, but
very few efforts is applied to operational innovations and they are ignorant
about it. They think they can achieve success without getting their hands dirty.
Also one of the barriers is that no separate or specified division of the title as
operation manager or some posts are allocated, so on specific working
department is responsible for it and remaining just want to take risk. Because
operational innovation activities are skilled based which need regular updates.
Making it work even though operational innovation efforts are difficult to apply
successful organizations implement them. First of all what is needed is
convenience to the top level managers or executives. It is much that executives
need to realize it is profitable. Seek role models out of industry and make similar
environment to follow these operational innovations. Identify what are major
barriers on implementing them.
Sustainability:
Talking about sustainability, operational innovations are always dynamics. It
needs regular updates and monitoring process. Once innovations are introduced
all competitors follow it and again new should be innovated. Therefore it is
dynamic. That is why companies should make operational innovation
extraordinary but a way of life. It may seem unglamorous but it is only the
lasting basis for superior performance.