SOURCE: Kay Sever | January 3, 2025
In 2024 we learned that the method we use to account for revenue, cost and profit was born 800 years ago at the dawn of the Renaissance. We also learned that the numbers captured/reported by the financial system (also used to build budgets, approve capital and justify expansions) do NOT quantify “best possible” performance. This seldom recognized void in the optimization process helps explain why achieving your “best” performance is harder than it should be.
In 2025 we will focus on sustaining the gains achieved via the optimization process… gains from investing in new equipment (designed to optimize performance) and gains from positioning an organization to achieve its best performance.
Why spend a year talking about sustainability?
One answer overarches all other answers… your optimization gains are at risk of being lost in future months/years unless certain actions are taken to prevent this loss. The risk of losing what you have worked so hard to achieve is worth some investigation and contemplation.
Let’s talk about optimization gains for a moment and what they represent. During the optimization process, your goal is to maximize the flow of profit from the activities of equipment and people AND sustain this new level of performance and profit into the future. If you have achieved your ROI goals for optimization, you probably expect your gains to be automatically sustained by the targeted equipment and processes. This is when management teams believe they are “finally done” with optimization and can shift their focus to other matters… unaware of steps they could take to sustain their gains over the long term. At this moment, millions of dollars of future profit can be at risk of loss.
An Introduction to Optimization Sustainability Concepts
- During optimization, profit is increased by removing the restrictions or barriers that were hiding or trapping additional profit potential (by equipment or people). Sustaining the gains from optimization depends on these restrictions/barriers NOT reappearing or returning over time.
- Strategies for sustaining gains are different from the strategies designed to maximize/optimize performance. Sustaining strategies are often unknown, overlooked or skipped by executives and leadership teams, which exposes the company to the risk of losing the gains achieved.
- Executives and management teams are seldom aware of the vulnerability of optimization gains over time. They may have never considered the existence of organizational factors that drive “profit erosion”, especially when most of the profit comes from equipment activities.
- After investing the time and money to reach a new sustainable platform for performance, you may report a “significant positive bump” for a year or two on your earnings trend, followed by a slow decline in future years that is somewhat unexplainable. Excluding external factors out of your control, some of that decline may be related to backsliding towards your old level of performance.
- Sustainability of Gains starts with a Sustainability Mindset. Here are some topics we will cover in future articles… food for thought if you are a manager or part of an executive team:
- What you believe about optimization gains and their vulnerability to loss.
- Your context for “risk of loss”. You analyze “risk of loss” for insurance requirements and severe weather events, but may seldom think about the risk of loss linked to millions of dollars of optimization gains.
- Your belief about initiatives and the “flavor of the month club” (i.e., you shop for new initiatives every two-three years because the last initiative failed to deliver/sustain the results you expected). The root cause of repeated initiative failures/shortfalls may not be what you think.
Over the next 11 months, we will be talking about Sustainability Strategies. We will cover different aspects and actions linked to the longevity of gains, including real life examples of success and failure with sustaining gains, analogies and some history to make it even more interesting.
Thought for the year: Connecting intentional strategies to the sustainability of optimization gains is a winning combination. Your team can maximize the chance to sustain today’s gains (and gains yet to be discovered) with tactics designed for that purpose. Taking Intentional actions to sustain gains is an overlooked strategy for “being the best” in your industry and maximizing shareholder value long-term.
Kay Sever is an Expert on Achieving “Best Possible” Results. Kay helps executive and management teams tap their hidden profit potential and reach their optimization goals. Kay has developed a LIVESTREAM management training/coaching system for Optimization Management called MiningOpportunity – NO TRAVEL REQUIRED. See MiningOpportunity.com for her contact information and training information.
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- About Us
Kay has worked side by side with corporate and production sites in a management/leadership/consulting role for 35+ years. She helps management teams improve performance, profit, culture and change, but does it in a way that connects people and the corporate culture to their hidden potential. Kay helps companies move “beyond improvement” to a state of “sustained optimization”. With her guidance and the MiningOpportunity system, management teams can measure the losses caused by weaknesses in their current culture, shift to a Loss Reduction Culture to reduce the losses, and “manage” the gains from the new culture as a second income stream.