Setting your business apart from the competition isn’t always about differentiation; sometimes it’s simply about better execution. In a globalized, highly competitive market, even minor operational improvements can translate into major wins for your company, especially when compounded over time.
A 10-year study published in the Harvard Business Review shows businesses committed to Operational Excellence are more profitable, more productive and grow faster over time. This means Operational Excellence can provide a meaningful competitive edge.
Operational Excellence, Defined
Operational Excellence is a business mindset and culture focused on reducing risk, complexity and cost while improving process safety, sustainability and productivity.
At its core, Operational Excellence is about continuous improvements in efficiency. In practice, this requires both a top-down and bottom-up commitment to excellence. Leadership and management must provide a clear vision of value and a strategic framework to guide improvement while front-line employees must have the discipline to act in alignment with the organization’s strategic vision.
Core Principles of Operational Excellence
There are many different interpretations of Operational Excellence, though all focus on streamlining the flow of value to a customer through continuous improvements at all levels of an organization.
One popular methodology used by the Shingo Institute at Utah State University, named for Shigeo Shingo, a Japanese industrial engineer who documented the Toyota Production System, uses 10 guiding principles for Operational Excellence:
- Respect every individual
- Lead with humility
- Seek perfection
- Embrace scientific thinking
- Focus on process
- Ensure quality at the source
- Improve flow and pull
- Think systematically
- Create constancy of purpose
- Create value for the customer
The Shingo Institute awards a prize to organizations for accomplishing business improvements along these 10 core principles.
Another popular method established by the Institute for Operational Excellence emphasizes the flow of value to the customer. It defines the core principles of Operational Excellence as:
- Design lean value streams
- Make lean value streams flow
- Make flow visual for employees
- Create standard work for flow
- Make abnormal flow visual
- Create standard work for abnormal flow
- Allow employees in the flow to improve the flow
- Perform offense (growth) activities
Many businesses also choose to use popular tools like Lean, Six Sigma, Total Quality Management or Kaizen to help follow the principles of Operational Excellence.
Key Takeaway
Change, especially continuous change, isn’t easy. A study conducted by IBM shows 60% of change efforts fall short of their goals. Research from McKinsey & Co. is even less promising, indicating just 26% of organizational transformation efforts are successful.
The good news is technology is making it easier. Sphera has seen Digital Transformation help companies improve prioritization and planning, develop key performance indicators and metrics, and deliver predictive insights to fuel future improvement efforts. By being able to keep your people safe, your products sustainable and your operations productive through Operational Excellence software and consulting services designed to provide an integrated view of risk management, companies can achieve Operational Excellence.
