Corporate Inefficiency: Leaders Discuss System Dysfunction and Waste
At a Fortune COO Summit roundtable, executives from Okta, IBM, FedEx Freight, and BCG highlighted significant operational inefficiencies within corporate America. Discussions centered on how flawed internal systems, often defended by their original designers, lead to wasted resources like unnecessary expense report audits and accumulated, unused sponsorships. IBM shared that a two-year transformation focused on questioning existing processes yielded a 30% operating model improvement, saving approximately $4.5 billion.
At a recent Fortune COO Summit in Scottsdale, Arizona, industry leaders convened to discuss pervasive operational inefficiencies and systemic dysfunction across corporate America. Okta President and COO Eric Kelleher cited an example where an $18 over-threshold gratuity on a $2,000 dinner triggered an extensive internal auditing process, consuming significant staff time and resources. Kelleher described this multi-step flagging and processing of a minor discrepancy as "waste."
The discussion, moderated by Fortune Senior Writer Phil Wahba, featured Kelleher alongside FedEx Freight VP Patrick Maier, BCG Partner and Managing Director Geraldine Rhodes, and IBM SVP Joanne Wright. Panelists addressed how individuals who design internal systems often develop a "confirmation bias," making it difficult for them to identify and optimize the very processes they created.
BCG's Rhodes noted that approximately 60% of executives surveyed by her firm reported minimal or no return on AI investments. This outcome was attributed not to the tools themselves, but to companies deploying AI atop already broken processes without first addressing underlying systemic flaws.
FedEx Freight's Maier provided another example of accumulated inefficiency, discovering a local minor league team sponsorship and a prestigious country club membership that were not being utilized for customer-facing sales events. The spending had continued largely unquestioned over time.
IBM's Wright described her company's approach to confronting ingrained practices. Despite being 115 years old and adept at "doing more with less," IBM undertook a two-year "blank-page question" transformation. This initiative, which began by questioning fundamental processes rather than immediately deploying new technology, resulted in a 30% improvement in its operating model, equivalent to approximately $4.5 billion in savings.
Panelists concurred that addressing these inefficiencies is challenging because those most resistant to change are often perceived as essential to current business operations, viewing their value as intertwined with the processes they oversee.
(Source: Fortune)
