How to achieve and sustain operational excellence in the digital age
In today’s digital world, forward-thinking executives are increasingly viewing operational excellence as a key driver of top-line growth and no longer as just a tool for incremental process improvements at an operational level. They understand that operational excellence (OpEx) project teams and processes are best placed to create disciplined frameworks to gain a competitive advantage. As a result, they’re starting to align operational excellence teams at the strategic, value creation and customer experience levels to enable end-to-end business transformation.
Find out more about what operational excellence is; how to achieve it and measure its success; the benefits of a digital operational excellence strategy; and more below.
What is operational excellence?
Operational excellence is the organizational ability to respond to change with agility. It is achieved when an organization embeds a company-wide, people-driven, customer-focused and problem-solving culture of continuous improvement (CI). A successful digital transformation empowers operational excellence as it enables functional integration for greater transparency, efficiency and collaboration, ensuring continual business growth.
Why is operational excellence important?
Operational excellence helps organizations improve their business performance and profitability by increasing workplace efficiency, decision intelligence and end-to-end supply chain management and investment.
It provides the focus that managers and their teams need to consistently deliver their products or services to the customer on time, at the right price and with minimal effort.
Research by Harvard Business Review states that organizations operating at peak operational excellence enjoy 25% higher growth and 75% higher productivity than their less developed peers.
Operational excellence offers organizations a big competitive advantage. But it doesn’t require grand gestures. Striving for small, incremental improvements can deliver large impacts. It keeps a company on track with its customers, consistently meeting (and even exceeding) their needs with products and services they want.
Discover more about how operational excellence applies to your organization:
Components of operational excellence
Operational excellence is achieved through a culture of continuous improvement. To achieve sustainability, organizations need to promote positive change within a holistic environment, a collaborative workforce, and a committed leadership and management system.
Operational excellence framework
An operational excellence framework provides direction for how an organization executes strategy, manages performance, and instills process excellence and a high-performance culture. It therefore helps a business grow and adapt to change with agility.
Digitalized operational excellence strategy
An organization can only embed a culture of integrated, continuous improvement through successful digital transformation. A digitalized company has the mindset and tools to respond to change with agility, and thus achieve operational excellence.
Operational excellence implementation
The secret to a successful operational excellence implementation strategy lies in the initial stages of its execution. Here are 7 core principles of operational excellence to help manufacturing and supply chain operational environments translate great concepts into results-driven methodology and actions.
Operational excellence system
A world-class operational excellence system builds a unified workforce that demonstrates curiosity, commitment and collaboration in all it does. By adopting a system that displays the 9 key features described in the blog below, organizations can harness the benefits of people development for sustainable and world-class success.
Loss and waste analysis
Operational excellence requires efficient production. By conducting a loss and waste analysis, organizations are able to identify and address areas of inefficiency. The results of the analysis direct the strategic implementation of best practices to improve production and profitability.
What are the key components of operational excellence?
Operational excellence can be broken down into 3 key components: Creating a holistic, integrated environment with strong customer focus; a collaborative workforce built on knowledge-sharing, training and teamwork; and committed leaders who demonstrate their commitment to the pursuit of operational excellence among all employees.
How do you achieve operational excellence?
The pursuit of operational excellence begins with a vision of the organization’s future. To align this vision and help uncover potential divisions and differences among the entire leadership, discuss the following seven areas with them:
|1.||Customer satisfaction||What specific customer satisfaction improvement action items need to be initiated immediately?|
|2.||Value flow design||What measurable results and KPIs must be achieved and when?|
|3.||Breaking down goals||What specific business process improvements will we achieve over the next six months (or 12 months, 18 months, 24 months)?|
|4.||Understanding success||In what three areas have we achieved breakthrough business results?|
|5.||Immediate actions||What five immediate actions are required to initiate, invigorate or enhance our operational performance?|
|6.||Measuring operational improvements||Do we have clear, time-phased, measurable objectives for operational performance improvement, and is accountability clear?|
|7.||Understanding skills gaps||What outside consulting assistance is needed to assist our organization to achieve business goals more speedily?|
By determining where it wants to go and outlining its short- and long-term goals, an organization can then develop its unique continuous improvement action plan.
To achieve meaningful business improvement, it is crucial to ensure all functions within your organization are on the same page and working toward the same goals.
While an immediate, easy consensus is unlikely, the process of thinking, discussing and reaching a conclusion is, in itself, a good learning experience and a major advance toward an essential singleness of purpose and vision for the entire team. After successfully working out solutions to the preceding questions, the management team should have a common, agreed-upon operational direction.
This business strategy acts as a roadmap that carefully and clearly segments the company’s transformative journey into sensible steps.
Read more about how to achieve operational excellence.
What are the benefits of operational excellence?
The benefits of operational excellence include greater process and resource efficiency, reduced costs, improved quality standards, greater collaboration, accountability, collaborative leadership, a healthy and united performance culture, greater employee satisfaction and improved supplier partnerships.
A maturity-based and integrated CI approach to operational excellence enables manufacturers to benefit from a number of improvements that optimizes their competitiveness, profitability and reputation.
How do you measure the success of operational excellence?
The success of an operational excellence program is most commonly measured in terms of delighted customers, improved processes and reduced costs (although these metrics may vary slightly according to industry).
An integrated, continuous improvement strategy is consistently looking for ways to improve processes and optimize workflow through simplification and automation and thus, reduce costs through enhanced efficiencies. Reduced costs can cover a range of financial indicators that include operating costs, cost per activity and margins.
However, all that depends on an organization’s ability as a whole to delight their customers. Satisfied customers who return for more business and who help grow the company are the greatest indicator of an organization achieving operational excellence. For that to happen, the people engaging with customers need to be supported by a robust CI culture and strong leadership role models. A people-driven, customer-focused, digitalized and integrated continuous improvement strategy is the ticket to sustainable success.
What are examples of operational excellence?
|Operational excellence examples include:|
|Engaged, accountable frontline employees that understand the flow of value|
|A culture of continuous process improvement|
|Collaborative leadership and lean management encouraging integration|
|Human resources development based on training and knowledge-sharing|
|Create value based on customers’ needs|
|Improved process visibility enabling better decisions|
|Efficient supply chain, operational and process management|
|Faster lead times|
Why do you need to take a maturity-based approach to operational excellence?
A maturity-based approach to improve operational excellence ensures that the organization pursues CI initiatives that are relevant to its specific needs and implemented at the right pace. First and foremost, an organization needs to understand its existing baseline capabilities. In other words, it needs to identify its strengths and weaknesses with regard to aspects such as digitalization, internal and external processes, and people development.
Only by understanding its current gaps in maturity can an organization improve itself.
An analysis of its current maturity levels gives an organization the data it needs to design an appropriate CI strategy that guides implementation seamlessly and executes sustainable improvement initiatives logically.
How does operational excellence relate to digital transformation?
Digital transformation helps organizations achieve operational excellence in the workplace by providing the tools to design and build smarter factories and lean manufacturing systems in order to develop innovative products, materials and solutions.
Manufacturing companies are becoming more complex and globally distributed, accelerating the need for increased innovation, collaboration and visibility. Manufacturers therefore face unprecedented challenges as these global economic forces drive competition and open opportunities in new markets.
Digital operational excellence helps these organizations become more efficient, flexible and collaborative to keep up with rapidly changing demands. By improving operational visibility and getting the right information to the right people at the right time in an integrated format organizations can improve overall decision-making and be more competitive in a global manufacturing environment.
Fundamentally, an incremental, maturity-based approach to operational excellence prepares the organization to adopt and adapt new technologies at the correct pace. This approach empowers organizations to conduct their transformations through a 5-stage journey of performance improvement. By stage 5, organizational maturity supports an integrated continuous improvement strategy. Operational excellence is realized in boosted productivity, reduced inefficiencies and increased revenue.
How do you get everyone committed to operational excellence?
An organization will only achieve sustainable operational excellence if all its employees – including its leaders – are involved and committed to delivering positive change. Here are some guidelines to get an entire company working together in pursuit of operational excellence.
|1.||Share the CI vision||The organization’s integrated, continuous improvement strategy needs to be included in every meeting agenda. Leaders and their teams must be thinking and discussing it in daily meetings to keep energy focused and people committed.|
|2.||Listen to people||Adjusting to change is not easy. Leaders and their teams need to feel confident about their abilities to contribute to the organization’s CI vision. Reassurance comes through regular communication that highlights progress, understands people’s concerns and addresses any issues without delay.|
|3.||Help employees upskill||Training programs that provide the knowledge and skills to support an integrated, CI strategy are key to successful and sustainable implementation. Investing in people’s capabilities helps improve their confidence, which encourages new behaviors and positive change.|
|4.||Encourage accountability||By giving people ownership, organizations benefit from a mature and proactive workforce. Their direct involvement in CI initiatives gives them a front row seat when the results come in, which perpetuates a positive cycle of enthusiasm, innovation and inclusion.|
|5.||Reward results-driven positive change||To sustain energy levels and commitment, organizations need to ensure that employee successes are lauded and rewarded. Acknowledgement is key to establishing a motivated workforce keen to achieve.|
|6.||Lead the CI culture||An integrated, CI culture is only possible if all levels of an organization are actively involved in its success. Organizational leaders plays a vital role, encouraging positive change through their own actions and mindsets. A committed leadership is achieved by breaking down functional silos, allocating work sequentially and driving digitalization.|