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Operational Excellence & 11 Key Principles

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Operational Excellence is a systematic organizational change that lays the foundation for workplace culture. Read about its 11 key principles.

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Operational Excellence

Operational Excellence is a systematic organizational change that lays the foundation for workplace culture. It develops a mutually beneficial ecosystem of employer-employees. Read all about you need to know about operational excellence along with examples.

What is Operational Excellence?

Operational excellence is a business philosophy that embodies a strategic approach to sustain continuous improvement.

In simpler words, it blends the good bits of teamwork and collaboration, problem-solving abilities, and leadership to help businesses grow and improve continuously. Another element of operational excellence relates to the execution of excellence better and more reliably than your competition.
What is Operational Excellence
This end-to-end process promotes employee’s interests and well-being, fosters a nurturing work culture, surpasses customer expectations, and overcomes the competition. All in all, operational excellence unlocks the secret to a business’s success.

What are the principles governing operational excellence? How does it impact your business? And what are the operational excellence methodologies that are worth their salt? Let’s take a look.

How does Operational Excellence enhance Business?

Operational excellence dictates that businesses undergo a 180-degree change in how they operate. Naturally, achieving it may be a mammoth task.

However, here are a few favorable outcomes of this ambitious undertaking:
  • It aligns your business strategy with the work culture.
  • It harmonizes your workforce and their personal goals with the company’s objectives.
  • It streamlines the decision-making process and improves its end results.
  • It recognizes and acknowledges the customer feedback and adapts accordingly.
How Operational Excellence enhance Business
At first glance, operational excellence may appear the same as the idea of continuous improvement. Both improve the organization and add value to it in the same ways. And given its intricate correlation, they may not seem too far from each other.

However, one is a cause, and the other is an effect, which forms the primary differentiating factor in the operational excellence vs continuous improvement argument.

Thus, one can think of operational excellence as a river that feeds the sea of continuous improvement!

11 Key Principles of Operational Excellence

Dr Shigeo Shingo is hailed as the father of operational excellence. He authored several books around the ideology and worked closely with organizations that could practically implement his theories. In this manner, he was successful ins perfecting the Shingo Model of operational excellence. His work laid the foundation for six sigma principles and lean manufacturing methodologies that further catalyzed a business’ growth.

Accordingly, these 11 principles form the pillars of operational excellence:
  1. Respect for all Individuals
    People are an integral part of any organization. And treating them with respect is plain, common decency.

    When individuals are treated with respect, they become emotionally invested in the organization and drive the desired results. Operationally excellent businesses make stakeholders an active part of the decision-making process.

    This circle of respect is not limited to just executives and employees but also extends to suppliers, partners, and, of course, customers.
  2. Lead with Humility
    For continuous growth and improvement, business leaders must be humble enough to accept the shortcomings and work on them. Leading with humility calls for gathering inputs from others, regardless of their status, to identify an appropriate solution.
    Lead with Humility
    Typically, we see leaders as strong characters that refuse to budge from their decisions. While it may help to maintain a firm iron grip in some conditions, it will limit your business’s ability to grow.
  3. Seek Perfection
    One may debate that perfection is a vague, unattainable quality. However, why should that deter your business from delivering its best?

    Irrespective of the project limitations, every company must try to deliver high-quality outputs. Even if you cannot achieve perfection in all ways, organizations must strive for it to achieve operational excellence.
  4. Embrace and Cultivate Scientific Thinking
    Several operational excellence tools rely on solid data and scientific facts to extract meaning. These values are then measured and analyzed against operational excellence metrics to test out the effectiveness of experimental strategies. Hence, one needs to adopt a scientific mindset to observe and identify effective strategies from ineffective ones.
  5. Focus on the Process
    Poor processes can lead to failed operations.

    And in such cases, businesses that are quick to trigger the blame game fare poorly in the execution of operational excellence. Thus, when things go wrong, it is the process and not the people that should come under scrutiny. Leaders must focus their energy on locating the hidden culprit behind process failure and take reparative actions accordingly.

    You can try Breakout's automation platform to streamline your processes.
  6. Assure Quality at Source
    If the quality of the deliverables falls short at the source, the defects will only accrue through the subsequent stages. Thus, quality assurance and maintenance should start right at the beginning and set high standards through all processes. Businesses must set up checkpoints to collect operational excellence metrics that will highlight existing or potential problems immediately. And once such a concern comes to light, it must be given priority and resolved before continuation.
  7. Flow and Pull Value
    Operational excellence calls for businesses to offer maximum value to their customers without experiencing workflow disruptions. This principle strongly recommends striking the demand-supply balance. Hence, organizations should carry out regular exercises to flush out inefficiencies and streamline the process to avoid under or overstocking of products or services.
  8. Think Systematically
    Thinking fast & slow
    When you observe operational excellence tools, metrics, or even processes, you will find that these interconnected entities rest on the foundation of logic. Thus, if you were to remove or modify a segment, it would create a ripple effect and affect other elements.

    For execution excellence, one needs to think systematically to analyze these relationships and estimate the impact of the changes. In some cases, the larger picture may discourage the move, which one could have missed through a narrow vision.

    Eventually, you need to remove any barriers, which will only be possible through systematic thinking.
  9. Create Constancy of Purpose
    Your business’ mission and vision should resonate with every employee. However, do not restrict it to the onboarding process. Make it a point to echo these values over and over again, as they are the driving force behind the company’s very existence. When you reinforce these beliefs at every step of the way, it acts as a compass that guides you in the right direction of where your organization stands, where it is heading, where it aims to be, and how it will reach there.
  10. Design Lean Value Streams
    To achieve end-to-end operational excellence, you need to define the entire business flow, right from the source to the sink. Having a clearly defined roadmap will encourage the employees to align their actions, innovations, and decisions per these systems and deliver value accordingly.
  11. Generate Value for Your Customers
    Ultimately, operational excellence is all about the customer and the customer experience. But before you start delivering value, you need to understand what it is. For any customer, value is the justification of the cost in line with what the product or service offers. Thus, enterprises must make an effort to identify what constitutes value and deliver it over time.

Execution of Operational Excellence for Companies

Now that you understand the impact of operational excellence and the principles that govern it, it is time to explore how one can achieve it. The roadmap for operational excellence varies from business to business. However, here is a basic layout for it:
  1. Introduce operational excellence as a foundational business philosophy that dictates how your business should run.
  2. Every employee should undergo training to gain knowledge of operational excellence tools, metrics, and ideology.
  3. Empowering the front line employees and involving them in the decision-making process destroys hierarchical limitations and eliminates the top-down thinking approach.
  4. Set up a system of checks and balances to introduce transparency in the business flows.
  5. Identify any bottlenecks, inefficiencies, and irregularities and remove them from the process.
  6. Classify the business processes into a normal and abnormal flow, and outline the steps for each.
  7. Align process, strategy, and objectives to drive desired results.
  8. Create a system for performance evaluation and ascribe accountability for failure.
  9. Develop a framework for promoting collaborative activities.
  10. Finally, tie it all up with a feedback loop, which leaves room for constant improvement and development.

3 Methodologies for Achieving Operational Excellence

There are several operational excellence methodologies that support the realization and implementation of Dr. Shingo’s philosophy. The top operational excellence methodologies include:
a) Lean Manufacturing
Lean Manufacturing is one of the operational excellence methodologies that believe in the systematic elimination of wastes. Adding value to the product/service for giving rise to satisfied customers is the primary focus of this methodology.

Anything that does not add value is a waste, and thus, can be removed. Accordingly, these “wastes” are categorized as:
  • Overproduction
  • Delays
  • Transportation
  • Wasteful Processes
  • Over-processing
  • Excess Inventory
  • Quality Defects
b) Six Sigma
Six Sigma
The Six Sigma methodology relies on operational excellence tools to streamline business processes. It is one of the commonest operational excellence methodologies that is widely used by Fortune 500 companies.

It prescribes the DMAIC system, which is an abbreviation for:
  • Define: Identify and define the problem that needs solving.
  • Measure: Gather the operational excellence metrics that highlight the issue.
  • Analysis: Analyze the operational excellence metrics and find out the root cause.
  • Improve: Now that you know the core problem, you need to find the appropriate solution for it and implement it.
  • Control: Continuously maintain the process and ensure its efficacy.
c) Kaizen
Kaizen is Japanese for continuous improvement. This operational excellence methodology relies on incorporating positive, gradual, and constant changes to improve the business flow and processes. It calls for the proactive involvement of all staff members to improve the overall process. Kaizen also stresses on objective qualities such as cleanliness, orderliness, organization, and standardization.

The five founding elements of Kaizen include:
  • Quality
  • Teamwork
  • Heightened Morale
  • Personal Discipline
  • Feedback for Improvement

Operational Excellence Examples and Use Cases

Operational Excellence Examples
Businesses like Toyota, Motorola, Philips Lighting, Exxon, NeuroRestorative, Sanofi Pasteur, and Black & Veatch are shining operational excellence examples. Illustration of operational excellence may vary from industry to industry. Here are a few excellent operational excellence examples:
  • Manufacturing: Here, operational excellence focuses on waste reduction and maintaining a steady production flow. Commonly used operational excellence methodologies include Kanban and Lean Manufacturing.
  • Information Technology: Operational excellence revolves around improving the culture, product, and the process around creating the service. Agile and Scrum are some common operational methodologies in the IT sector.
  • Healthcare: In healthcare, operational excellence is all about adding value to the customer’s life. At the same time, eliminating wastefulness is also a concern. Hence, Total Quality Management (TQM) is the preferred methodology in this case.
  • Banking: Banking organizations aim to achieve operational excellence by incorporating technology, delivering consistently, and maintaining accuracy.
The above use cases can also help better understand the operational excellence vs continuous improvement comparison.

Common Challenges of Implementing Operational Excellence

The blueprint for operational excellence may seem straightforward. However, it does come with its set of roadblocks, some of which include:
  • Losing out on employee engagement and experiencing detachment from customers.
  • Inability to measure or analyze operational excellence metrics.
  • Lack of progress or delayed results, which mays be discouraging.
  • Constant modifications and snap-moment decisions based on the findings of real-time data.
  • Data from multiple sources also leads to confusion and avoidable complexities.
  • Lack of integration could result in siloed management.

Future of Operational Excellence

Business leaders acknowledge that operational excellence will radically enhance business efficiency and up the bottom line. However, they also understand that it may require a rampant change in the business processes.

Hence, it is only possible to facilitate this change through a set of operational excellence tools. These applications will help your business as you strive for perfection, collect operational excellence metrics, and measure the performance. They also play a crucial role in gathering feedback, tracking progress, and quantifying results.

Thus, for operational excellence, you would need execution excellence, which is possible with the right tool!
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