When You Neglect Operations

A few months ago I heard that one of the companies I used to work for decided to shut down a business unit. I wasn’t surprised, but some people might have been. They had a diversified product line and a hard-working sales force that maintained a high level of demand. Large customers were excited about the new products under development. The supply chain was well-established. What went wrong?

I don’t think anyone is going to write a Harvard Business School case study about this company, but I do think this kind of failure happens more often that you might think, and deserves more attention. The company had great product designs, but they couldn’t figure out how to turn those designs into actual products, or at least not consistently. Production schedules weren’t met, customers became unhappy, and financial damages were incurred when shipments arrived late. Quality was sacrificed in order to get something, anything, out the door. Late design changes led to multiple revisions and created a nightmare for suppliers and inventory control, further adding to the cost. I’m sure this failure to execute had a lot to do with the ultimate demise of the business unit. 

You might have the best product or service, and you might have customers who want to buy it, but if you can’t make it and deliver it, then you really don’t have anything. 

The operations part of the business is often taken for granted. We worry about innovation and identifying new markets, but while doing that we may underestimate the dirty work of manufacturing and service delivery, particularly if we’re paying someone else to do it for us. Yes, marketing, and finance, and accounting, and engineering are all important and necessary to the business, but without operations you don’t have a business at all.

For the past couple of years I’ve been teaching in the business school at two local universities. I’m making it my personal cause to convince business students that operations is worth studying, regardless of what functional group they end up in. Companies that do this well are profitable and stay in business. Those that don’t, won’t last.