Over the last two decades businesses have undergone constant changes due to society’s high level of demand. Customers no longer accept products or services with medium level quality - and low quality – forget about it! Today, low quality products and services are deal breakers – they have major negative consequences on a company’s profitability and reputation.
In this post, we’ll talk about the importance of operational excellence as a driver for long-term business success. We’ll briefly define operational excellence, explore a few tactics companies can use to achieve operational excellence, and discuss the importance of building and incorporating an operational excellence-based culture.
So, what is operational excellence? In its simplest terms, operational excellence is a business philosophy that focuses on continuous improvement and the optimization of business processes and systems to achieve better results. It aims to increase efficiency, reduce waste and costs, and improve quality and customer satisfaction.
An operational excellence-based culture is a mentality deeply ingrained in a company’s culture that empowers its workforce for continuous improvement.
So, in a nutshell, operational excellence (sometimes referred to as OpEx) is an approach to business management that emphasizes continuous improvement across all aspects of the business by creating a culture where management and employees are invested in business outcomes and empowered to implement change.
When OpEx is implemented well, every member of that business sees the flow of value to the customer and, if problems arise, finds a solution before any disruptions occur.
For this reason, operational excellence begins with a culture shift, where all leaders and employees are dedicated to creating not only a quality product/service but also providing great customer experiences. Businesses that use operational excellence methodologies clearly define leadership and workforce roles and how they work together to improve operations. At all levels, employees can initiate change and drive toward efficiency, effectiveness, and agility.
The definition of operational excellence has its roots in the Shingo Model, an approach to business that emphasizes quality at the source, value to the customers, and a zero-inventory supply chain.
At the start of this blog, we promised to explore a few tactics companies can use to achieve operational excellence. A great starting point for your business is to look at the 10 Shingo Guiding Principles and find ways to incorporate them into your business processes:
Respect every individual: When people feel respected and valued by an organization, they are more likely to give more. Respect seeks to draw the best from individual contributors.
Lead with humility: To lead with humility, companies must implement a management system where leaders seek input and buy-in from stakeholders at all levels. (when unilateral decisions are made, frontline employees are less likely to respect or “buy-in” to those decisions – that’s a big miss for operational excellence).
Seek perfection: By seeking ways to continuously improve, you can open the door to new ways of thinking and innovating. While perfection is not actually the goal – aiming for perfection means your team will constantly focus on ways to do better.
Embrace scientific thinking: Creating a culture where employees can “experiment” and test new ideas based on observations and data will foster greater innovation. (This principle is not just about being data driven – it’s about using that data to empower teams to think differently and continue to try new things – which leads to finding new and better solutions.)
Focus on process: If something goes wrong, find ways to improve the process (don’t blame people – that ends up being counterproductive. Find ways to fix the process or system.)
Assure quality at the source: Much like good food is made with good ingredients, assuring quality in business relies on doing work right the first time, using the right people with the right tools/resources.
Improve flow and pull: Providing value to the customer means having the products/services/information/resources they demand when they need them.
Think systemically: Instead of focusing on individual players or departments for improvement, think of ways to improve the entire system.
Create constancy of purpose: Communication of goals, purpose, commitment to the customer and the “why” behind the business are key to operational excellence.
Create value for the customer: Ultimately, all businesses are all about the customer, so operations should reflect the value customers hold. Provide value to your customer/clientele/stakeholders.
Building and incorporating an operational excellence-based culture.
Operational excellence also requires a critical look at your business culture – your operations and the ways you manage your employees. According to Business Transformation & Operational Excellence “Companies in pursuit of operational excellence do two things differently than other companies: they manage their business and operational processes systematically and they invest in developing the right culture.”
Undergoing a cultural transformation process in pursuit of excellence may require a mindset change toward a pursuit of zero loss. What does this mean? In a typical business using traditional management approaches, employees spend about 60% of their time putting out fires or solving daily unforeseen problems. A zero-loss approach means you get your team to transform that 60% of “lost” time focused on unforeseen activities and instead spend that time focused on process improvement.
So, now that we know culture is a critical aspect of driving operational excellence, we can boil this blog down to 4 important elements for you to focus on when implementing and sustaining a culture of operational excellence: people, products/services, processes, and technology.
These 4 elements, when integrated in a systemic way, form a solid foundation of operational excellence. If any of these elements fail or are neglected, your business will likely return to conventional management – also known as “putting out fires”.
If there are great people and effective processes, but no technology – then there will likely be inefficiency and higher operating costs.
If you have good technology and processes, but unskilled workers – then you’ll experience turnover and loss in productivity.
Technology matched with skilled people, but no well-defined processes – results in errors and a sense of daily chaos.
Good technology, skilled workers, and defined processes seem great, but without product or service innovation – your business won’t reach new markets, grow revenue, learn, or add value to your brand.
So, now that you understand the meaning of operational excellence, you have some tactics to implement, and you know the 4 main elements – you can begin your journey to building and sustaining a culture of operational excellence. Your culture and focused path will take you to that shiny goal post you have for your business. When you achieve operational excellence, your company will function harmoniously, your team will become empowered and committed to company goals, and teams will improve performance, drive results, and create further engagement. You’ll build momentum for excellence!
Are you interested in learning more? Do you think you’re ready to work toward operational excellence? Then reach out to Hera Associates. Our team of experts is here for you. There is nothing we’d value more than walking side-by-side with you on this exciting journey toward operational excellence.
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