Operational Excellence – What it is and Ways to Build the Best Operational Excellence Strategy

What is Operational Excellence?

Operational excellence or Ops Excellence or OpEx may be defined as an approach to business management that emphasizes continuous improvement across all aspects of the business and within all business processes. The operational excellence strategy aims at creating a culture where management and employees are invested in business outcomes and empowered to implement change. 

Operational excellence begins with a culture shift that is typically driven by the management. When a culture of operational excellence is practiced, employees and leaders are dedicated to creating a quality product and also providing great customer experiences. Businesses that implement an operational excellence strategy clearly define leadership and workforce roles, and how they work together to improve operations. 

What does operational excellence mean to your organization? Operational excellence is essentially a business philosophy that focuses on continuous improvement and optimization of business processes and systems to achieve better results. Overall excellence leads to next level performance, because all business operations are in order. 

“The first rule of any technology used in a business is that automation applied to an efficient operation will magnify the efficiency. The second is that automation applied to an inefficient operation will magnify the inefficiency.” – Bill Gates

Operational excellence ensures that all operations are executed efficiently, so that any improvement initiative magnifies its efficiency. Companies that have trained their employees to achieve operational excellence, have teams where every person knows their role and the importance of individual contributions. Operational excellence also means that the manager is able to focus on big-picture operations instead of the day-to-day tasks for which employees are responsible. This means that profit and efficiency are at their highest levels at both ends. 

Operational Excellence versus Continuous Improvement

Operational excellence and continuous improvement may sound as though they mean the same thing. Although the focus of both continuous improvement and operational excellence is improving business outcomes, they take a different approach towards process improvement. Continuous improvement may be considered as a component of operational excellence. 

The immediate and discrete changes that are needed to keep the business competitive are taken care of by continuous improvement. 

Continuous improvement initiatives regularly evaluate processes, workflows, and ongoing projects, which provides teams a better understanding of why something that might have worked at one time no longer delivers the desired result. Business goals and customer expectations evolve over time, and internal processes need to be modified to keep up with these changes. When businesses do not update their processes, a gap sets in between what the process does and what it is expected to do. 

Operational excellence on the other hand is a broader strategy that focuses on long-term growth, and impacts company culture. The focus of operational excellence is to build sustainable solutions. 

Process Excellence vs Operational Excellence

Another interesting comparison is that of operational excellence and process excellence. While both these disciplines aim to produce excellence, they differ in their scope. Process excellence is focused on a single process or workflow. Narrowing the focus on a single process or workflow makes it easier to delve deeper into a single area of work, and then solve issues within that area. Operational excellence has a broader scope that covers all process excellence initiatives and also considers the relationship between different processes to get a holistic view of business performance. 

For example, the finance team may have an overarching goal of attaining operational excellence across the department. Part of this effort includes tasking the managers of other departments such as, procurement, accounts payable, expense reimbursement, to optimize their individual department processes. Once each process is optimized, an operational excellence perspective considers how these processes impact one another, how data is stored and shared between them, and whether or not there are instances of duplicate work or wastage. The process gaps can be addressed and data silos can be dissolved with Ops excellence. 

Another set of terms that are often mistaken to mean the same are business excellence and operational excellence. As with the previously discussed terms, the tactic and goals are the same, the area of focus is different. Business excellence is more about how the business develops its operations strategy. The relationship with competitors and how successfully it achieves its targets are the other focus areas of business excellence. Any efforts or high-level decisions that impact a business’s position in the market, such as, how to manage stock, how and where to advertise, or how to define the brand, come under the purview of business excellence. 

Need for Operational Excellence

Why should a business strive for operational excellence? Striving for operational excellence helps businesses stay competitive by delivering the most value to its customers. When redundant tasks are eliminated from a process, the resources that are released can be channeled back to the customers as additional value, which ultimately improves the customer experience. Striving for operational excellence impacts almost every industry, because it focuses on improving processes and systems. 

Let us understand the need for operational excellence with this example. Let us assume that a company is taking the first step towards operational excellence by embracing the lean operations model. The lean operations management eliminates overproduction of products, frequent employee downtime, and consistent inventory excess. With this operational excellence strategy, companies can benefit from waste elimination, reduction of operating expense, and growth of profit. 

Other benefits of operations excellence include – 

• Improved team collaboration
• Better value to the customer and enhanced interactions and service
• A more empowered and productive workforce
• Better and open communication between organizational goals

As per Treacy and Wiersema, the market-leading companies excel in one of the three disciplines – operational excellence, customer intimacy, and product leadership. Companies aspiring to make a mark in the market can narrow their focus to a single value discipline. Operational excellence is important because it is one of the 3 competitive levers each business has to pull, and it could be the key differentiator for the business. 

Research by the Harvard Business Review found that companies with peak operational excellence have 25% higher growth and 75% higher productivity. When businesses operate with excellence, several aspects of the business are impacted – 

Agility

One of the main focus areas of operational excellence is adapting to evolving markets. So, it brings flexibility and adaptability into business operations. Markets are constantly changing, customer expectations are changing, and new innovations are introduced by the minute – businesses need to be agile to keep up with all these changes. With an operational excellence plan in place, you have a naturally correcting mechanism that ensures that customer’s needs are met and the business continues to grow. 

Strategic advantage

When you practice operational excellence, the company leadership is freed from involvement in low-level problems and managing daily operations. Senior executives can now drive operational excellence to deliver new products to the market and pursue greater revenue opportunities. An operational excellence strategy enables the leadership to focus on the big picture rather than fighting fires. They can proactively fend off threats and keep the business growing. 

Improved efficiency

The value streams that operations efficiency methods create help businesses achieve efficient operations that eliminate waste. Also these value streams enable teams to deliver highest value to customers at the best possible price and highest quality. Higher the efficiency, greater is the profitability for the business. 

Empowered workforce

Implementing operational excellence empowers employees to solve problems independently and creates a strong organizational culture that helps attract and retain staff. In such an environment, team members are more willing to consider new ideas and are motivated to bring suggestions to the leadership. Process improvements brought about by implementing an operational excellence model bring new business opportunities to the table. 

Steady growth

Operational excellence relies on using standardized processes and continually improving them. The operational excellence plan provides a template for running your business. This template can be easily transferred to new locations or teams facilitating uniform growth across the organization. Once every aspect of operations is standardized and optimized, training new employees becomes easy. 

Principles of Operational Excellence

Operational excellence traces its roots to the Shingo Model – an approach to business that emphasizes quality at the source, delivering value to its customers, and a zero inventory supply chain and a complete understanding of the workplace at every level. The Shingo Model was created by Dr. Shigeo Shingo – a business leader who published 18 books on his philosophy and collaborated with Toyota executives to implement this operational excellence model in their manufacturing methods. The core principles of operational excellence can be categorized as cultural enablers, continuous improvement, and enterprise alignment. 

The 10 Shingo Guiding Principles of Operational Excellence are as follows- 

1. Respect every individual – When employees feel respected and valued by the organization, they are more likely to give more. Respect and importance seeks to draw the best from individual contributors. 
2. Leading with humility – Unilaterally made decisions are not successful in drawing respect and involvement from employees. To lead with humility, companies must implement a management system where leaders seek inputs and buy-in from stakeholders at all levels. 
3. Seek perfection – This principle is derived from the adage, “ You have to believe it to achieve it.”. By seeking ways to continuously improve, you pave ways for new thoughts and innovation. 
4. Embrace scientific thinking – This principle is much more than being data-driven, it creates a culture where employees have the freedom to experiment and try out operational excellence ideas based on observations and data. 
5. Focus on process – When something goes wrong, try to look for ways the process can be improved instead of blaming people. 
6. Assure quality at the source – Similar to how good food is made from good ingredients, assuring quality in business relies on doing work right the first time. The right people and the right components are a must for assuring quality at the source. 
7. Improve the flow and pull – Providing value to the customer means having products that they demand when they need them. This is exemplified in lean supply chains. 
8. Create constancy of purpose – A key component of operational excellence is communication of goals, purpose, and commitment to the customer, and the why behind the company. 
9. Think systemically – Rather than focusing on individual players or departments for improvement, think of ways to improve the entire system. 
10. Create value for the customer – All businesses are about the customer, so business operations must reflect the value customers hold and should be provided. 

Examples of Operational Excellence

Operational excellence examples can help us understand operational excellence better. Achieving operational excellence may seem intimidating, but it can definitely be done. The following examples of operational excellence can guide you towards implementing it in your company. 

1. Amazon fulfillment centers

The e-commerce giant, Amazon is known for delivering its products in a timely fashion backed by a quick fulfillment process. The scale at which Amazon fulfillment centers operate can be unmanageable without the right operational excellence strategy. Amazon fulfillment centers are fully optimized and equipped with advanced technology and algorithms that enable streamlined order processing and rapid delivery. 

2. Toyota production lines

By far, the most popular and well-known example of operational excellence is the Toyota production system or TPS. This Lean manufacturing system focuses on a culture of continuous improvement and waste reduction. This system emphasizes on eliminating overproduction, waiting times, excess inventory, and defects. 

3. Starbucks’ Standardization

The uniform training meted out to all employees at Starbucks is one of the operational excellence strategy examples that focuses on standardization. This standardization of training across Starbucks outlets is the main reason for its global success. By standardizing the training, they are able to deliver products efficiently while maintaining consistent quality across the customer base. 

4. Southwest Airlines

The US-based Southwest Airlines is a highly preferred airline service provider owing to its operational excellence strategy. Their unique operational model has allowed them to maintain high levels of customer satisfaction while maintaining profitability. 

5. Walmart’s supply chain

Walmart is one of the biggest retailers across the globe with a fully optimized supply chain. The supply chain at Walmart is a great example of operational excellence. The fully optimized supply chain can maintain product volumes high, costs low, and quality at a level that continuously satisfies their customer base. 

6. Jabil

A US-based company that figures in the top 3 electronics manufacturing businesses in the world. They have been in business for over 5 decades and are on track to stay profitable and successful for the next 5 decades. Their focus on operational excellence is driven by their leadership teams where responsibilities are strategically aligned with a clear vision from management. The primary belief at Jabil is that in order to stay competitive and profitable, a business needs to constantly transform itself. They forge ahead with a vision towards profit-inducing principles, not just tools. 

7. Wipro

Wipro is an India-based tech giant that has achieved operational excellence by continuously improving its processes as well as workplace culture. At Wipro, they offer not only IT services, but consulting, outsourcing, and system integration services as well. They know that concentrating on the entire customer experience as well as offering a cost base within average margins, is the way to customer loyalty and steady flow of revenue. 

8. Monte Vista Homes

This is a construction and real-estate company that has implemented ops excellence to overcome roadblocks in its operations. Construction work requires numerous processes that need to be streamlined for efficiency as well as documented for safety and training. This is a highly technical work that is incredibly routine, but can also fall off the rail when protocols are not followed. Monte Vista homes faced issues in its operations due to lack of proper documentation and streamlined processes. Once they started using a process mapping software, they were able to streamline the documentation process. Standardization and streamlining of processes allowed them to easily access documents and processes, which in turn allowed them to bring on new employees and train them quickly. 

Operational Excellence Methodologies

You can achieve process excellence through numerous methodologies. There is no one-size-fits-all approach on operational excellence. The methodology you choose needs to align with your individual business needs, goals, and size of the organization. Let us look at some of the popular Ops excellence methodologies. 

Lean manufacturing

This is a systematic approach that focuses on eliminating waste in the production system. Lean methodology is based on the principle that everything you do in business must focus on adding value to the customer. The main focus of Lean methodology is to improve its products and services to remain competitive. And this can be achieved only when all processes provide added value. While practicing this methodology, a process or its parts that fail should be eliminated. If you want to embrace the Lean model, you need to reduce waste by making more with less. Waste comes in many forms, including, mistakes, overprocessing, transportation, overproduction, and wait time. 

Six Sigma

The Six Sigma methodology can be defined as a set of tools, technology, and methods that aim to improve business processes. The end result is an improved product or service. The goal of Six Sigma methodology is to identify and eliminate variation in processes, which results in improved customer experience and added value. The 5 principles that define this methodology are- 

• Focus on the customer
• Identify the problem
• Get rid of waste
• Implement the process
• Create a culture of change and flexibility

Kaizen

The name “Kaizen” is derived from the Japanese term that translates to “change for better”. In business, the Kaizen philosophy can be related to continuous improvement. The emphasis in this methodology is on teamwork. The belief is that positive business transformation can only occur if teams work together proactively, taking responsibility for their areas. Only by working together can an organization grow. This methodology also teaches that even small changes, when applied continuously can grow into a driving force over time and produce excellent results. 

Believers in this method trust small, continuous changes bring about big results in time. Workplaces that have employed Kaizen, have teams that are innovative and empowered to effect real and lasting change. 

Kanban

This methodology works best in manufacturing. Kanban is a visualization technique that involves displaying production and inventory information in visible areas to flag off over or under production, production disruptions, and lack of inventory. The ultimate goal of Kanban is to produce only according to customer demand, so that there is no waste and over or under production is avoided. 

5-S System

This methodology is derived from Japanese works Seiri, Seiton, Seiktsu, Seisu, and Shitsuke. They translate to organize, tidiness, standardize, cleanliness, and sustain. The 5-S system aims to transform the workplace, making it safer, cleaner, and organized, in order to improve quality of work and productivity. The end result is a safer and a more efficient workplace where employees want to spend their time. 

Ways to Achieve Operational Excellence

Implementing operational excellence can be a daunting task, without the right tools and methodologies. The first step is to choose the right methodology to implement operations excellence in your organization. The choice of the methodology must be based on organizational size, and scope and type of business operations. We have discussed the theoretical aspects of operational excellence, let us now dive into the practical aspect of achieving it. 

Develop and communicate your vision

First, you need an operational excellence plan that outlines which processes are working fine and which require changes or improvement. It is important to check the morale in each team first and measure its productivity. You also need to keep a tab on customer satisfaction to check if your products or services are delivering value to the customer. Once all the information has been acquired, you can set up a framework that your business can follow and come up with a clear vision of how you wish to achieve your objectives. The leadership can communicate the vision to all employees to ensure that they are on the same page. Success of operational excellence is possible only when all stakeholders are onboard with respect to the changes and improvements. 

Choose the right tools

The choice of the tools for implementing operational intelligence can have a huge impact on its success. Operational excellence requires measurement and reporting. It also requires a tool that can streamline processes to eliminate waste. You’ll also need to manage current workflows to ensure that there aren’t any disruptions while changes are implemented. That said, using the right workflow management tool is a must. Cflow is a no code workflow automation tool that can eliminate redundancies in your operations. You can create automated workflows for any type of business process by simply dragging and dropping visual elements. The reporting and analytics feature in Cflow lets you keep a tab of all the processes from the centralized dashboard. 

Focus on teamwork 

Operational excellence is based on teamwork. Empowering your employees with the right tool will keep them motivated and productive. They also feel valued when mundane tasks are taken care of by the tool and they get to work on tasks that add value. Involving all stakeholders in the planning and implementation phases enables them to react whenever they notice abnormal flow in the process. Modify the organizational culture so that all employees are involved in the operational excellence implementation. The best collaborations occur where everyone feels they are seen and heard. When you give the respect your team deserves and expects, you’ll be repaid with loyalty, innovative ideas, and high productivity. 

Create repeatable processes

Repeatable processes hold the key to achieving operational excellence. Duplicating success and streaming processes is a breeze when you create repeatable processes. The best way to drive significant improvement is to automate your workflow. And what better tool can you ask for when you have Cflow. Cflow allows you to design custom processes that meet your business requirements and maintain productivity throughout the workforce. 

Embrace failure

In an ideal world, there is no place for failure in a business. But, in reality, failures have some valuable lessons to teach. Especially with operational excellence, embracing failure is the cornerstone. Failures allow you to see which improvements work for your business. When you make a mistake, you can learn from it and avoid it in future. Failures also encourage employees to think innovatively and develop new and fresh ideas. It fosters an environment of respect, motivation, and productivity throughout the company. 

Industries that can Leverage Operational Excellence

Operational excellence can benefit any industry and business model. However, there are certain industries that can leverage operational excellence to the maximum extent. 

Manufacturing

Operational excellence has become a standard in this industry. Companies like Motorola and BAE systems have employed an operational excellence strategy to enhance productivity and decrease waste and downtime significantly.

Healthcare

With its core focus on customer experience, operational excellence helps healthcare providers reduce wait times, track patient outcomes more efficiently, and improve patient portals. 

IT

Using the core principles of Ops excellence equips IT teams with ways to minimize development rework and improve workflow efficiency in a competitive environment. 

Construction

Operational excellence can help construction companies ensure worker safety, efficient workforce management, and cost-effective sourcing of materials. 

Why use Cflow? 

Workflow automation is one of the most effective use cases of operational excellence. It cuts out redundancies and streamlines the entire process workflow. Cflow is an AI-based platform that can automate process workflows for operational efficiency. The no code visual workflow builder in Cflow can be used by citizen developers comfortably to create workflows. Here are 5 compelling reasons why Cflow is the right choice for operational excellence implementation. 

• Customizable workflow templates that save users valuable time to create workflows from scratch.
• Reports and analytics that provide deep insights on all processes in real time.
• Document management accentuated with features like OCR, KANBAN, and Fuzzy Search for efficient management of documents. 
• Flexibility that allows users to approve requests on the fly. 
• Integration via API for seamless integration with 1000+ third-party apps. 

Conclusion

Building a sustainable business requires the leadership to look beyond process efficiencies and maximizing ROI. You need a robust operational excellence strategy that creates a culture of operational excellence within the organization. Successful implementation of operational excellence requires the right workflow tools that can streamline operations and eliminate redundancies. An AI-based workflow automation tool like Cflow can be the game changer in your operations excellence plan. Implementing the operations excellence strategy can be effectively done with a feature-rich tool like Cflow. Ready to explore Cflow? Sign up for the free trial today.

FAQs

1. What is operational excellence?

Operational excellence can be considered as a way of thinking that includes specific ideas and methods for building an excellent workplace culture. 

2. What is DMAIC?

DMAIC is a data-driven quality strategy that is used to improve processes. It is an important part of the Six Sigma methodology, but it can also be applied as a stand-alone technique for quality improvement or as part of other process improvement projects like Lean methodology. 

3. How does Lean management benefit businesses?

For starters, the Lean methodology lowers operational costs, increases profits, and eliminates waste. This methodology also improves cooperation and helps build a productive workforce. 

4. How is operational excellence measured?

There are several ways to measure operational excellence. Some of the parameters that can be used to measure operational excellence are process efficiency, employee satisfaction and engagement levels, tangible cost reductions, timeliness and accuracy of deliveries, and people development metrics.