Operational Debt – The ‘Silent Killer’ for Middle Market Companies
Defining Operational Debt
Middle market companies face a challenge: provide value to customers in a competitive industry while navigating limited resources. A refrain we hear from middle market companies is they often don’t have time to focus on long-term fixes and, as a result, they essentially band-aid the problem.
There’s a concept in software development called “technical debt.” It arises when your tech team implements an easy solution now instead of taking the time to put a sustainable solution in place. The “debt” is the cost of dealing with the consequences that arises from the inefficient solution. This concept isn’t exclusive to software development. Broadly we use the term “operational debt” when the concept is applied to sales, customer service, marketing, and more.
How to Tell if Your Company Suffers from Operational Debt
Operational debt is not necessarily a bad thing. Small, concerted doses of operational debt can be healthy. Companies will refer to this as ‘not letting perfect be the enemy of great.’ Companies will also embrace the concept to launch minimum viable products that can reach users faster for feedback. However, there is a point at which the incremental resourcing that operational debt requires far outweighs the benefits it may create.
Companies can easily fail by taking the wrong shortcuts to achieve short-term goals. These shortcuts can have the unintended consequences of creating inefficient workflows that consume company resources for long periods of time.
We often see previously successful organizations attempt to bring in extra resources that are not able to efficiently add value, as much of their time is spent filling holes. When you add an employee to simply manage the consequences of inefficient processes, that spend is not productive, it only subsidizes operational debt.
Solving Operational Debt: How to Get Started
The good news is operational debt can be overcome, but the exact solution will depend on the specific company. However, it’s important to remember that continuing with current practices is the equivalent of an operational band-aid.
Give the following a try if you want to solve operational debt:
- Address the underlying inefficiency. This can sometimes involve paradigm shifts and infrastructure replacements.
- Consider operational sprints. These allow you to table non-critical tasks and set your sole focus on accomplishing a single meaningful goal.
Operational debt is often caused by issues that are avoided due to complexity. By trying strategies such as operational sprints, you tackle the things you keep avoiding.
Avoiding Operational Debt in the Future
Jumpstart innovation. Companies can intentionally create structures and programs outside of their usual systems to generate new processes that are not buoyed by existing operational debt.
What do we mean by that?
- Internal innovation hubs
- Temporary task forces
- Dedicated time for employees to pursue business related passion projects