Talk to any business executive today and he would cite differentiating effectively in the market as one of his highest business priorities. It seems counter-intuitive, but standardization of processes, technology and even people can be a winning strategy for companies in this day.
Having different approaches in various organizational silos? ultimately translates into a lack of control. Standardization positions companies to achieve cost savings, increased customer satisfaction and improved competitiveness. Fragmented processes result in higher maintenance costs and unpredictability of outcomes in even slightly different scenarios – both of which translates to higher cost of operations. Standardization on the other hand enables consistency, predictability, uniformity and flexibility of operations.
McDonald’s is a good example of how a large corporation has standardized processes to an extent where most of the creative energies of the organization are spent in finding solutions to core business issues like product development, driving growth and marketing. McDonald’s is no longer “manufacturing” a hamburger, but instead customers are experiencing the service side of a standardized platform. This is achieved along with reduced manpower costs and consistency of product and experience – which ultimately builds brand equity for McDonald’s.
According to Karl Ulrich, Wharton professor of operations and information management,following a platform approach also allows for very effective product innovation. Most modern automotive companies follow this approach with several models for different markets evolving from a common platform. This helps in a “top-down” approach to product development, faster time to market and greater variety of vehicles from one basic set of engineered components. For instance, several models from Ford, Mercury, Lincoln and Volvo brands share the same basic platform and were launched within months of each other in different markets.
Standardization of IT infrastructure is one of the most strategic, yet simplest to achieve in a company’s journey towards differentiation. Repetitive and redundant work can be automated to a large extent saving the energies of the organization for more strategic initiatives.
Even with these seemingly obvious advantages, standardization initiatives should be undertaken with care. Executives should strive to strike a balance between standardization and customization so that the products don’t lose their distinctiveness. Also, execution should be well planned, thought through and driven consistently to its logical conclusion.
All of this is especially important in the context of an organization’s global aspiration. With standardized processes and products as the norm, a differentiated after sales service can become a competitive advantage. This “servicization” of IT products and infrastructure solutions will become more and more prevalent as organizations move towards standardization of business processes, infrastructure and applications.
Do share your thoughts on the business benefits you have realized as a result of adopting standardization and its tenants in your organization?