Using Operational Excellence to Protect Your Angel Investment

For investors in the CPG space, risk aversion is a top priority. In an industry overflowing with competition, it’s essential for young startups to be on top of their game in order to maintain traction, and ultimately, growth. Investors can better safeguard their assets by providing guidance to founders and executives on operational excellence.

First, we will define excellence in the context of CPG startup operations. Subsequently, we’ll discuss three concrete operational excellence tools and techniques.

A Working Definition of Excellence

What does it mean to be excellent, and why does it matter? In the words of personal and professional development author Paul J. Meyer, “Productivity is never an accident. It is always the result of a commitment to excellence, intelligent planning, and focused effort.” In other words, if you want your people to deliver the optimum results, you need to instill a culture of operational excellence.

There are dozens - if not hundreds - of resources on the web that attempt to define excellence in business. Certain aspects of these definitions and descriptions are more relevant in the CPG space than others. Below is a list of the areas that investors should prioritize for operations optimization within their newly invested companies:

• Cutting costs and reducing waste, in regards to both materials and labor
• Streamlining processes and removing unnecessary steps whenever possible
• Enhancing intra-team and external communications
• Improving customer satisfaction
• Increasing reach and, in turn, the customer base
• Augmenting products to their optimal versions
• Accurately measuring the appropriate metrics
• Hiring personnel in the correct order
• Promoting employee engagement across all levels of the organization

These fundamentals serve as the framework for a comprehensive operational excellence strategy. How exactly can organizational leaders incorporate these principles into everyday operations? In the proceeding section, we’ll discuss three operational excellence tools and techniques investors can introduce to the COO’s and other key executives of their CPG investment companies.

Operational Excellence Examples

Applying the concepts described above throughout all levels of a CPG company might seem like a lofty goal. However, managers can tackle operations optimization from a more vertical perspective by segmenting individual moving parts of a business to focus on. The examples below pertain to achieving operational excellence in the functions of human capital, technology, and supply chain management, respectively.

New-Hire Onboarding

Employees’ successful integration into a new company is paramount for their own engagement and ability to execute. Simplify the onboarding process by documenting all policies and procedures a given team member will be responsible for. Having this information available digitally makes it readily accessible for reference at a moment’s notice.

Help get new hires into the daily groove by scheduling meetings into their calendars for them. Prepare the necessary paperwork before an employee’s first day to keep things moving along on schedule. Also, remember to make business cards for your newest team member.

Organize a company event (such as lunch at a new neighborhood restaurant, trivia night at the local bar, ice skating in the park, etc.) to reinforce camaraderie amongst team members. Strengthening workforce bonds encourages teamwork and elevated productivity.

Data Collection

As the age-old saying goes, you can’t improve what you don’t measure. Inefficient data collection is extremely detrimental for CPG startups, which are faced with dynamic consumer demands and omnipresent competition. Therefore, businesses that continue to document stock levels, retailer contact information, or competitor activity using pen and paper are only doing themselves a disservice.

There exists budget-friendly mobile and cloud-based solutions specifically tailored for CPG companies. These tools allow merchandisers and other team members working in the field to amass data in a customized digital format and sync that data to the company headquarters in real-time.

Giving managers immediate access to data that they once had to wait days for empowers a company to make agile, informed business decisions faster than ever before. What’s more, omitting handwritten recordkeeping prevents human mistakes from occurring.

Weatherproofing

Interruptions in supply chain flow can be catastrophic for CPG companies. Preventing out-of-stock instances, which hurt both sales and retailer relationships, is critical to a fledgling startup’s success. Businesses can counteract this phenomenon by mitigating risks associated with bad weather.

First, determine if there are additional funds in your budget for weatherproofing. Find out whether or not your distributors have the capacity to move increased product quantities in the case of an emergency. If your usual suppliers cannot handle the impact of several storms in a short time frame, consider using others temporarily if need be.

Final Thoughts on Driving Operational Excellence

As an investor, you are more than a source of capital for companies. You are a strategic partner with the know-how to assist your invested companies on the road to long-term profitability. The importance of operational excellence should be iterated at every founders’ meeting and championed everyday in the workplace. To learn more about how to attain operational excellence within your investments, download this complimentary playbook.