What Is Operational Excellence?
Operational excellence is a mindset embracing key principles and tools to develop a culture of excellence within your organization, paving the path for every team member to always see, deliver, and improve the flow of value to your customers. At its core, operational excellence leads to elevated organizational performance, as your business operations are always in order and always being improved upon.
Key Takeaways
§ Operational excellence can lead to key business
results such as higher revenue, lower operational risk, and lower operating
expenses.
§ If you create a culture of excellence, you won’t have
to hold or force your team members’ hands when it comes to executing your
operational excellence plan.
§ As long as the end result meets your goals, the
simpler the process the better.
Operational Excellence Explained
Practically speaking, operational excellence is the
ability to execute a business strategy with greater consistency and efficiency
than your competition. The business results? Higher revenue, lower operational
risk, and lower operating expenses.
First introduced in the 1970s before being formalized
as a business practice in the United States in the 1980s, the operational
excellence approach uses tools of continuous improvement methodologies such as
lean thinking, Six Sigma, and scientific management. Today, there are numerous
operational excellence models. Each model has the same goal: cultural excellence
that leads to improved business results.
Steps to Achieve Operational Excellence
Operational excellence is achieved when every team
member can see the flow of value to the customer and is empowered to fix that
flow before it dissolves. Processes can make that flow happen, but those steps
and processes stem from a unifying philosophy of why you’re striving to reach
an optimum state. Beginning with that philosophy — a core statement that
defines your drive to achieve operational excellence, your organizational
mindset, and the value your principles and purpose bring to the endeavor — will
help ensure that any steps you take are rooted in the soil that will let
operational excellence thrive.
Of course, philosophy alone isn’t enough. Here are
three key steps to help your organization achieve operational excellence:
1. Define your business goals. Just as every
business is unique, you and your team’s business goals should be unique to your
organization, not a vague goal such as simply lowering operating costs. Your goals
should be SMART — specific, measurable, achievable, relevant, and timely — and
each one should be operationally oriented, financially oriented, or
people-oriented. Encourage your team to always operate with these goals in
mind.
2. Create a multidimensional plan and communicate it
clearly. Operational
excellence extends to manufacturing, maintenance procedures, supporting
systems, and every other aspect of your business operations. Your plan should
too. It should also incorporate a human component, such as prioritizing leading
with humility and respecting every team member. Pro tip: Seek perfection in
every facet of your plan — if you create a culture of excellence, you won’t
have to hold or force your team members’ hands in the next step.
3. Focus on the execution. When you and
your team can focus on executing the multidimensional plan you’ve set in place,
it can be easier to diagnose and resolve mistakes. If something goes wrong, the
problem is more likely to be with the process than the person, so there’s no
need to point fingers. Instead, you can assess where in the process the error
occurred and attend to it, capitalizing on the opportunity for improvement.
Achieving operational excellence isn’t easy, but taking these key steps can help you and your team make operational excellence a reality for your organization.
Why Is Operational Excellence Important?
Operational excellence isn’t just a nice-to-have when
it comes to your company culture and business results. It’s a must when it
comes to the quality of your products and their attributes, the experiences of
your team throughout product development, and ultimately the amazing
experiences you want your customers to have.
Organizations that embrace operational excellence
unlock their greatest growth asset: the brainpower of their full team. When
people at all levels of an organization are empowered to take ownership of
their work and collaborate with each other to elevate the efficiency and
effectiveness of the tasks at hand, managers and other leaders can spend less
time on troubleshooting operations and more time embracing creative thinking,
fueling companywide innovation.
Status quo isn’t good enough. Operational excellence
is imperative to the sustainable improvement of your operations teams, the
products they develop, and the achievement of the business objectives you set
in place.
How to Improve Operational Excellence
Just as operational excellence will improve your
business operations, your operational excellence can itself be improved. Here’s
how:
1. Assess where you are. It’s tough to
know what you should do differently if you don’t know what’s working and what
isn’t. Take the time to thoroughly evaluate your operational excellence plan —
from production processes to maintenance requirements to team training — and
its execution, then determine what, if anything, you need to change.
2. Choose simplicity over complexity. Over complication
can be a waste of valuable time, energy, and resources. As long as the end
result meets your goals, the simpler the process the better.
3. Use the right tools. Having a full toolbox is less important than using the
right tools for you and your team. Whether it’s workflow apps or another
acceleration solution, the right tools can help provide long-term solutions for
every aspect of your team and operational dynamics.
4. Let every voice be heard. The best ideas
won’t always come from product managers or the chief operating officer.
Sometimes the best ideas will come from those on the ground floor, so give them
a voice — create open lines of communication so that your entire team feels
empowered to share their ideas in meetings, emails, and calls. The more you do,
the more invested they’ll be in the process, bolstering your organization’s
burgeoning culture of excellence.
Stages of Operational Excellence
From just starting out to excelling with ease, here
are the four stages of operational excellence:
1. Essentials: This is level one: the basics. During this stage, you
and your team are establishing repeatable processes for consistent development
and delivery of your business’s products and services. At this point, it’s
crucial to document all processes — product design, inventory forecasting,
quality control — to ensure the customer experience is the same high quality
for every customer, every time they interact with your business.
2. Effectiveness: Once you’ve mastered the internal essentials, it’s
about effectively delivering on the promises made to customers. You need to
ensure that products and services are provided at an acceptable quality within
the given timetable. Any customers who purchase the same products or services
should receive exactly that — the same, identical quality products or services,
delivered when your team said they would be delivered.
3. Efficiency: Speed and efficiency aren’t the same. More than
completing tasks as fast as possible, operational efficiency is about achieving
maximum productivity with minimum waste. By the time you reach this stage, the
process enacted in the first two stages should be maturing as your organization
invests in technology to help enhance quality and overall lean operational
management, bolstering your ability to expediently deliver any promised
products or services without wasting any resources.
4. Excellence: You can’t achieve this final stage until you master
the prior three foundational stages. Once you do, however, scorecards — a
visual representation of performance progress over time — and business alignment model reinforce
each other and the initiative and projects integral to your organization’s
sustained performance to help bring all of these dimensions together.
Then, it’s up to the most important ingredient of
operational excellence: your people. Having the right people with the right
skills at the right place — the best problem solvers working on supply chain
management, the best data interpreters
working on product design — will push your organization to provide and
standardize top-tier service.
Characteristics of Operational Excellence
You’ll know you’re working with operational excellence
when you start seeing the fruit it bears. Here are some characteristics to
watch for:
§ Team involvement: There’s a reason highly engaged workforces have 17%
higher productivity than disengaged workforces. Operational excellence requires
the collaboration of your entire team — there should be no weak links. When
your full team is actively engaged, you’ll know you’re on the right track. One
caveat: This engagement has to be genuine and organic. Forced enthusiasm can
backfire and actually decrease morale.
§ Exceeding customer expectations: Your customers
expect you to provide quality products or services, and they expect you to do
so in a timely manner. To exceed these expectations is to go above and beyond
in every aspect of your service, a sign that you’re achieving operational
excellence. And as with team involvement, it needs to be genuine — saying
you’re pleasing your customers without actually doing so can lead to distrust.
§ Innovative products: Products can and should evolve over time in order to
address the evolving needs they combat in an increasingly succinct manner. When
your products are continually on the cutting edge, you’re doing something
right. When operations have a foundation of excellence, people have more
freedom to explore creative pursuits and deep work.
§ Process excellence: A key characteristic of operational excellence,
process excellence is made possible by the designing and testing of various
flows to establish which consistently produce the results most desirable for
your organization. Once your processes are consistently performed with optimal
efficiency and minimal waste, the resulting effectiveness is a sure sign you’re
going in the right direction.
§ Superior safety: It’s easy to think of safety as being siloed; it’s an
expert’s job. In truth, safety is a sign of operational excellence. If your
team is going so fast that their safety is at risk, you’re not operating
efficiently. Conversely, proper safety measures ensure your team members can
focus on executing their respective tasks without worrying about personal
injury.
§ Commitment to quality: When
functioning with operational excellence, delivering a product or service of
subpar quality is never an option. Your full team’s commitment to delivering
quality products or services is a key characteristic of operational excellence.
§ Strategic direction and focus: Every
operational process should have a clear purpose. And every process should
propel your business in the same direction. When a strategic direction is
established and draws the full focus of all team members, there’s a good chance
you’re experiencing operational excellence. But without operational excellence,
strategy can stay in a touch-and-go limbo instead of taking root.
§ Supreme communication: To execute
processes, innovate products, and ultimately exceed customer expectations, team
members need to share information among themselves and with other teams. The
better an organization’s operational excellence, the better this communication
probably is.
§ Operational Excellence Examples
Operational excellence isn’t a new idea just now
making the rounds among companies. It’s something that businesses across
industries have been implementing for years.
Take Marathon Petroleum. All levels of leadership are
accountable for the effectiveness of its Operational Excellence Management
System (OEMS), which includes seven focus areas that align with its health,
environmental, safety, security, product quality, and sustainability standards.
To date, the company is 100% in scope of its OEMS.
Similarly, McDonald’s and Walmart make operational
excellence a strategic priority — it’s why all of their systems are built
around the core aim of providing highly efficient ordering and fulfillment
systems. With the belief that there’s no such thing as standing still, only
moving forward or backward, McDonald’s fosters full team involvement and
accountability to high standards in the process of updating operational
approaches at both the franchise and corporate levels to remain a “green and
growing” company. Implementing ERP software, Walmart Canada has been able to
consolidate, view, and accelerate workflows to the point that project approval
times have been reduced to near zero, allowing teams to spend more time
executing their operational roles with supreme efficiency.
Take Your Business from Surviving to Excellence with Digital
eStrategy
Digital eStrategy ERP is a technology solution that
can serve as your organization’s center of operational excellence. Providing
seamless creator and customer workflows alike, Digital eStrategy ERP can be a
one-stop shop for your organizational needs, unifying business intelligence and
operational analytics while also keeping you lean. Learn how Digital eStrategy ERP can
help take your business from surviving to thriving with operational excellence.
At the end of the day, operational excellence isn’t an easy thing to achieve, but it’s well worth the effort. When done correctly, operational excellence will improve more than your bottom line — it will elevate your reputation with customers and improve your team members’ experience.
