What Is Operational Due Diligence?
If there is uncertainty about whether your business operates efficiently, or if you feel that organizational changes are needed, or you have doubts about your existing processes, it is worth examining the current operational setup. This serves as the baseline state (“as is”).
How Is Operational Due Diligence Conducted?
The essence of the review is to work together with the company’s designated decision-maker or leader to identify opportunities for improvement and optimization within the processes. Business process transformation can be radical, partial, or gradual.
Commitment to change is crucial because in many cases, change is perceived as uncomfortable or even painful by employees:
- “This can’t be done that way.”
- “We don’t have time to retrain or transition.”
- “We’ve always done it like this.”
- “Why change it?”
- “If we have to do it like that from now on, I’ll quit.”
- “This will take much more time.”
Employees working within the processes often “can’t see the forest for the trees,” which makes it necessary for external experts to assess the current situation and provide advice on what and how to improve for greater efficiency.
During the process analysis, potential recommendations are identified along with their positive and negative impacts. Based on these, the desired future state (“to be”) is defined. When reorganizing business processes, concrete performance metrics must be established, since only by measuring these indicators can it be determined whether the transformation was successful.
It is also important to analyze whether achieving the goals requires a supporting system or whether reorganizing the workforce is sufficient. In some cases, companies do not utilize the full functionality of their software systems (typically ERP systems). This may be due to incomplete configuration or lack of user knowledge. The latter can often be resolved easily through training and by supplementing the user manual.
Process and Steps of Operational Due Diligence
- Analysis of the current situation (“As Is”)
- The company’s current operational processes and efficiency are examined.
- Potential deficiencies, inefficiencies, and areas for improvement are identified.
- Identification and Planning of Improvement Opportunities
- Finding Improvement Opportunities within Processes
- Radical or gradual changes are planned to make the processes more efficient
- Defining Goals and Implementation
- The goals to be achieved as a result of the review (“To Be” state) are determined
- Specific performance metrics are established to measure success and track the efficiency of new processes
- Transformation and Further Development
- The transformations are implemented, and the processes are optimized
- The results are analyzed, and further development opportunities are identified to increase efficiency even more