In every business, there is always at least one area that could be improved. But how exactly does meaningful change take place within an organization?
Sometimes it can occur through a major initiative or total upheaval within the business. But most of the time, change happens in a much less overt way; it happens slowly and more gradually over time. Operational excellence is an example of this type of change.
In this guide, we will look more closely at what operational excellence is, its 10 core principles, as well as the different methodologies you can use to implement it.
Jump to any section
Operational excellence can simply be described as a philosophy that embraces problem-solving and leadership as the key to continuous improvement.
People are often unsure of how to approach the subject of operational excellence. It is a difficult term to define and most people either find the topic to be too ambiguous or too broad to talk about.
Operational excellence, however, is not a set of activities that you perform. It’s more of a mindset that should be present within you and your employees.
Now, you’re probably thinking, “that sounds nice in theory, but how do I translate this into actionable steps?”
Well, we’re going to explain that in a bit. Before we get into implementing operational excellence, you need to understand how the concept is related to continuous improvement.
Tallyfy helps you document and automate tasks between co-workers and clients
Click here to learn about TallyfyContinuous improvement is the on-going effort to improve an organization’s processes, products, or services. It usually takes place incrementally over time, rather than instantly through some breakthrough innovation.
By pursuing continuous improvement, an organization has a greater likelihood of continuing to maintain and build on these improvements.
However, while continuous improvement is important, it is not enough on its own. As the organization continues to refine its process, product, or service, it needs a way to continue to grow. This is where operational excellence comes in.
Operational excellence is a mindset that embraces certain principles and tools to create sustainable improvement within an organization.
Or to put it more simply, operational excellence is achieved when every member of an organization can see the flow of value to the customer. Seeing it, however, isn’t enough – they should actively try to improve both the value, as well as its delivery.
Ultimately, operational excellence is not just about reducing costs or increasing productivity in the workplace. It’s about creating the company culture that will allow you to produce valuable products and services for your customers and achieve long-term sustainable growth.
Operational excellence is a journey that involves applying the right tools to the right processes. When this happens successfully, the ideal work culture is created where employees are provided for in a way that enables them to stay empowered and motivated.
Every year, the Shingo Institute of the Jon M. Huntsman School of Business gives out an award for operational excellence called the Shingo Prize. This prize is based on company culture, company results, and how well every employee demonstrates the Guiding Principles of the Shingo Model. Here is a more in-depth look at each of those ten principles…
The Shingo Model emphasizes that because everyone has worth and potential, everyone deserves respect. However, it’s not enough to have respect for others; you must demonstrate this respect to them as well.
One of the best ways to demonstrate respect for your employees is by involving them in any necessary improvements to their department. This will help them feel more empowered and motivated to contribute to the changes in a positive way.
To learn more about how to create a culture that engages every employee, from CEO to shop-floor staff, read our guide to Kaizen.
Leaders should always exercise humility.
After all, the best improvements happen people can acknowledge their shortcomings and look for a better solution. Humility involves a willingness to listen and take suggestions from everyone, regardless of that person’s position or status within the company.
This step in the model is often met with resistance as most people are quick to point out that perfection isn’t possible. While perfection may feel unattainable that doesn’t mean you can’t strive for it anyway.
By setting the bar high, you create a different mindset within your organization. When confronted with a problem, try to look for long-term solutions and always try to simplify your work without compromising the quality of the outcome.
Innovation comes from constant experimentation and learning.
Hence, it’s always useful to know what works and what doesn’t. By systematically exploring new ideas you can encourage employees to do the same without fear of failure.
When things go wrong, there is a tendency to want to blame other people. In a lot of cases, however, problem is rooted in the process, not the person. This is because even great employees can’t consistently produce ideal results with a bad process.
When a mistake occurs, rather than immediately pointing fingers at the employees involved, assess what part of the process the error occurred in. Once you have done this you can make adjustments to try to achieve the results you want.
High quality can only be achieved once every part of the process is done correctly. It can be helpful to organize work areas in a way that will allow potential problems to become visible right away. When a mistake does occur, stop working immediately to correct the mistake before continuing.
The object of every organization is to provide maximum value to its customers. Because of this, organizations should ensure that the process and workflow are continuous because interruptions create waste and inefficiencies.
It is also important to evaluate customer demands to ensure that your organization is only meeting those demands and not creating more than what is necessary.
In a system, there are many different interconnected parts that work together. It is important to understand the relationship between each of these parts because it will help you make better decisions. You should avoid taking on a narrow vision of your organization and get rid of any barriers that interrupt the flow of ideas and information.
Employees should be informed of the goals and mission statement of the organization from day one. This shouldn’t just stop after day one, however. You should continue to emphasize these goals and principles every day going forward.
Every employee should have an unwavering certainty of why the organization exists, where it’s going, and how it will get there. Knowing this will help them align their own actions and goals with those of the company.
To create value for the customer you have to understand what the customer needs. The value is simply what that person is willing to pay for.
Organizations must continue to work to understand the needs and expectations of their customers. An organization that stops delivering value to the customer is not sustainable over time.
Through operational excellence, an organization can improve its company culture and performance, which leads to long-term sustainable growth.
Businesses should consider looking past the traditional one-time event and move toward a more long-term system for change.
Over the years, numerous methodologies have been introduced to the mainstream business culture as a method of achieving operational excellence. We will look more 3 of the most popular ones below…
Lean manufacturing focuses on systematically eliminating waste in a production system.
It teaches that the only thing a business should focus on is that which adds value. Lean also teaches that every process has some sort of bottleneck and that focusing all your improvement efforts on that bottleneck is the quickest path to success.
The key principles of lean manufacturing focus on improving the quality of products and services, eliminating anything that doesn’t add value, and reducing overall costs.
Traditional lean manufacturing identifies seven areas of waste which are commonly referred to as the “seven deadly wastes.” Specifically, these are…
Six Sigma is a set of tools and techniques that are designed to improve business processes which will result in a better product or service. The goal of Six Sigma is to improve the customer experience by identifying and eliminating variation.
Over 50 percent of all Fortune 500 companies have implemented Six Sigma to some degree. It has been shown that Six Sigma has helped Fortune 500 companies save over $427 billion over the past 20 years.
A Six Sigma business will produce no more than 3.4 defects for every million opportunities. A defect is defined as anything that fails to meet the customer’s expectations. It does this primarily by implementing DMAIC.
DMAIC is an acronym that stands for define, measure, analysis, improvement, and control. Here is a closer look at each step in this process and how it helps to build Six Sigma businesses:
Kaizen means “continuous improvement” in Japanese and in business, it used to implement positive, ongoing changes in the workplace.
The guiding principles of Kaizen are that a good process will lead to positive results, teamwork is crucial to success, and that any process can be improved.
Organizations implement kaizen to help them create a culture of continuous improvement. Employees will work together to achieve ongoing workplace improvements.
Kaizen teaches that when applied consistently, small changes will compound over time and produce big results. The methodology does not necessarily encourage only making small changes, though; kaizen focuses on the participation of all employees to effect real change.
Kaizen stresses the importance of continuous improvement and that it is not enough to make a change once and hope it sticks. You must continue to make improvements repeatedly. Many businesses have used Kaizen to help them increase employee productivity, cut costs, and improve the customer experience.
Operational excellence is the ultimate goal of all organizations striving for continuous improvement. Projects and tools are a useful place to start but on their own, they are not enough to create lasting change.
People often think that buying legacy BPM software is a great answer to running operations well. Nothing could be further from the truth.
“Old BPM” software is tired and broken. It never worked for business users. Here’s why:
Lasting change can only happen when the principles of operational excellence are understood and deeply rooted in the culture of an organization.
So, make sure that both the management and the company employees understand & follow the core principles of operational excellence.
Auto-document and track workflows with other people in real-time