By Peter McInally
Google operational excellence and you’ll find a host of articles complete with definitions and benefits, but to really understand what the term means you just need to watch a tennis match. Whether it’s Roger Federer chalking up another grand slam or newcomer Emma Raducanu causing a sensation at last year’s US Open, what you’re watching is operational excellence in action – the execution of a game plan (or strategy) more effectively than the competition. The player who anticipates better, focuses better and makes fewer mistakes, wins. What is true in sport is equally true in business. If your competition can meet your customers’ expectations better that you can, and do it more efficiently, you’re always going to be in second place – if you’re lucky. And to make matters worse, there are always leaner, faster, more agile new competitors so your best today won’t be good enough tomorrow.
Making yourself better than your competition may sound glib but putting time, money and resources into operational excellence is fast becoming an existential necessity. It enables you to execute strategy more consistently and reliably than your competitors, reduce operational risk and costs, and increase productivity, revenue, and profit. You’ll be able to react to change faster and your people will be more engaged because they’ll have more intimate understanding of how they’re delivering customer value. Finally, your management team will have more time to focus on business growth because they’ll spend less time fighting fires. If you want more information about the dividends operational excellence delivers, The Institute of Operational Excellence has a nice summary, together with a selection of case studies – https://instituteopex.org/benefits-operational-excellence/.
Meeting Customer Expectations
Operational excellence isn’t just about optimizing processes to eliminate waste or reduce costs; it “focuses on meeting customer expectation through the continuous improvement of the operational processes and the culture of the organization”1 We particularly like this definition because it highlights what we believe is the most important principle from Joseph Joran’s original model for operation excellence – moving your organization from thinking about quality as something which relates to a product or service to regarding it as the sum of everything you do, measured by great customer experience. The implicit goals of customer-centricity and culture shift underline how fundamental a transformation this will be for your organization. To be successful, you’ll need insight, systemic thinking, and collaboration across and between departments and management levels.
Insights, Systematic Thinking, and Collaboration
Let’s look at insight first. When a doctor sees a new patient, they don’t attempt to treat them until they’ve diagnosed what’s wrong with them. It’s the same with planning an organizational transformation. You certainly don’t want to base your treatment plan on assumptions, you want to base it on data and as comprehensive a picture of the current state as possible. You’ll need to build the most accurate possible model of your processes, detailing each step, whether automated or manual, and that means process mining and process modelling – the organizational equivalent to x-rays, MRI scans and blood tests. You’ll analyze that model for gaps, inefficiencies and redundancies, and later you’ll use it to design your new, improved organization and to check the changes you make are having a beneficial impact.
Systemic thinking is essential when looking at something as complex as your organizations. You must look at the connected whole, not just individual parts, because changes in one area might have a disproportionate effect on another, for good or for ill (either removing a bottleneck or creating one). While problems undoubtedly exist within processes, it’s the problems that happen between processes which often have the greatest detrimental impact on an organization’s ability to deliver customer value.
Collaboration is vital at every stage. You’ll need to draw on the collective knowledge of your teams to fully understand the current state. You’ll need to work with them to develop the best ways of optimizing the future state. And most importantly, you’ll need them to embrace the mindset of continuous improvement, creating an institutional impatience with the status quo and desire to always do better – or as the Institute of Operational Excellence describes it: “Each and every employee can see the flow of value to the customer, and fix that flow before it breaks down.” You’ll need collaboration mechanisms to harness the full diversity of thought and experience within your organization and create a sense of ownership as you design, plan and execute change. You’ll also need audit trails to track everything that’s done, and a way of easily keeping documentation up to date, so you always know what’s been changed and when – in case you need to roll back or there’s an external audit.
You also need to design in the capability for continuous improvement. As we alluded to in the introduction, operational excellence isn’t a static target, not a hill you can plan your flag and then settle back in the satisfaction of a job well done. Like our tennis players, your competitive landscape is always evolving with the ever-present threat of Challenger organizations entering and disrupting your market. Barnes and Noble probably felt pretty secure as one of the world’s biggest bookstores back in 1995 when a scrappy little Internet retailer called Amazon announced itself to the world.
An operational excellence program is a significant commitment for any organization but with the right tools and support, the considerable benefits are readily achievable. The question isn’t whether you can afford to do it, it’s whether you can afford not to. And just in case you were wondering, just trying to tweak your current processes isn’t an answer. As Peter Drucker put it: “There is nothing so useless as doing efficiently that which should not be done at all.”
Next time, we’ll outline some of the ways in which BusinessOptix can help you gain insight, apply systemic thinking to your transformational challenge and enable collaboration across your organization.