A 5-step action plan to transform your operational excellence framework
An operational excellence framework provides direction for how an organization executes strategy, manages performance, and instills process excellence and a company-wide culture of high performance. In doing so, it enables businesses to grow, adapt to change with agility and resilience, and gain a competitive advantage. This blog outlines five steps to transforming your operational excellence framework.
Executive leaders should view operational excellence as a strategic weapon that enables business to flourish, and provides organizational resilience by planning for significant industry changes such as digital transformation and the unpredictable global economic environment.
That requires leaders to refine their operational excellence framework by rethinking their end-to-end business processes and continuous improvement (CI) methodologies, identifying gaps and opportunities, building capabilities, and sustaining a CI strategy.
Why an operational framework of excellence is key to business sustainability
The drivers of change in operational excellence (OpEx) need to be considered and built into your business’ operational framework to ensure future sustainability. The 2021/2022 research report The Global State of Operational Excellence: Critical Challenges & Future Trends by Proqis cites the following as key drivers pushing change in operational excellence:
- The threat of new competition — maintaining a competitive advantage requires businesses to be agile and flexible
- Changing customer demands — customers want all the friction taken out of their customer journey. Executive leaders and senior management need to be aware that their decisions now on customer experience will have great consequence
- The impact of digitalization — companies are trying to keep up with modern technologies that are being introduced so quickly that companies need a methodology to integrate them correctly and the right organizational culture to leverage their potential
- Need to reduce cost — organizations are facing corporate-driven targets in cost and working capital reduction to offset declining revenue
The report concludes that changing and improving the company culture is the key challenge and the single most crucial factor of success for an operational excellence program. Only people can make the different processes and parts work well together. They need to understand and buy into the company’s continuous improvement strategy. An effective operational excellence framework design will help put the right systems and processes in place to reinforce the right set of behaviors and build a CI culture.
Transforming your operational excellence framework
The journey to excellence typically begins with an initial step change improvement, followed by continuous incremental advances. The implementation journey itself runs through a change management process which consists of the following five steps:
Build the business case for functional operational excellence
Any change management process starts with why. The key drivers of change mentioned above are obvious reasons why you need operational excellence and, more specifically, why you need to transform your operational excellence framework. Being aware of the challenges and opportunities in your industry is the first step in the transformation process.
To ensure you are building sustainable advantage across your end-to-end value chain, develop an integrative improvement capability. Integrative improvement takes a holistic operational view to integrate all functions and systems across the value chain to embed excellence in the very fiber of the business. Improvements are integrated across systems, processes and people so that the change is transformational and enduring.
This integrative approach breaks down functional silos – the organization is primarily designed around customers and products, not functions. This ensures that both functional improvement requirements and the improvement methodology used are on a common platform, and executed in concert with one another.
Understand the impact of the key drivers of change
Once you are aware of the key drivers of change mentioned above, you will need to understand their likely impact when incorporating them in your operational excellence framework.
For example, how will modern technologies such as artificial intelligence (AI), cloud computing and even blockchain influence your business? Which technologies should you incorporate and why? When is the right time to introduce these technologies? How will these technologies impact your employees? How will you identify which skills are lacking, and how will you ensure your employees become digitally skilled and able to leverage the relevant technologies?
Such an operational readiness framework will help you fuse your business vision and transformational strategy with continuous improvement methodologies, tools and techniques.
Integrate sustainability into the vision, strategy and objectives
Sustainable implementation requires that continuous improvement tools and methodologies integrate into an operating system and are bound by clear management principles within a complete business excellence framework.
A large-scale transformation is difficult to do without a suitable operating system. In modern manufacturing and supply chain organizations, a digital operating system represents the next generation of corporate production systems that harmonizes lean and continuous improvement principles with smart manufacturing to drive change across the end-to-end value chain.
In addition to adopting the right operating system, a continuous improvement strategy that embraces the kaizen business philosophy – ongoing, small-scale incremental improvements – is particularly useful during a challenging transformation as it keeps all employees engaged in the transition process, and working together toward a sustainable outcome.
Manage risks and build stakeholder value
The devastating impact of the COVID-19 pandemic has highlighted the importance of managing risk to minimize disruption and increase overall resilience. A resilient organization with a well-developed operational risk framework – and the capabilities to support it – will have a competitive advantage and be better prepared for economic recoveries, particularly in a highly volatile operating environment.
Organizations that succeed in creating a proactive risk culture and operational agility can use their strength to optimize the flow of value through an operational excellence culture.
Develop competencies and support culture change
Operational excellence is a holistic culture change where all employees are empowered with the right tools and training to innovate and make positive changes. Integrate skills development and improve the way work is performed throughout your organization by building the required skills at leadership, operational and production floor level.
Actively embrace and support the culture change. Drive the operational excellence program by demonstrating the necessary mindset in your daily actions and behaviors. Establish a daily management system (DMS), collaborate with employees, encourage cross-functional participation in improvement programs, build confidence by providing coaching where needed, and recognize and reward achievements. When employees feel supported, they are more supportive of the organizational changes.
Competitive advantage can only be gained by transforming your business from end to end, function by function and process by process. Following the five steps to transforming your operational excellence framework discussed above will give you the edge on your competitors, improve your operational resilience through times of disruption and uncertainty, and ultimately drive greater profitability to your business.
What is business excellence?
Business excellence describes how organizations should optimize management systems and processes to improve efficiency, become more competitive and increase its overall value streams to maximize business performance and drive greater results for stakeholders.
Operational agility vs strategic agility – what’s the difference?
Operational agility refers to an organization’s ability to capitalize on new opportunities, and refine and improve its operations and processes. Strategic agility describes its ability to adapt its business according to evolving market conditions.