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What is Operational Excellence?

In today’s economic environment, organizations are always on the lookout for ways to improve performance, become more competitive and meet growing customer expectations. Operational excellence is important to achieving all three of these business goals.

This approach to business management aims to optimize processes, maximize efficiency and create a culture of continuous improvement. Before we delve into the details of how it works, let’s first understand what “operational excellence” means and why it can make all the difference to your organization’s success.

Operational excellence definition

Operational excellence is first and foremost a state of mind. According to this management theory, a company will rely on several fundamental principles to involve employees in the quest for improvement, thereby improving the organization’s performance on all levels.

Committing to this approach means recognizing that flexibility is the key to sustainable growth and to adapting to changing markets and technologies. Continuous improvement involves scrutinizing, evaluating and optimizing every aspect of an organization.

In addition to giving organizations a competitive edge, implementing operational excellence helps managers make better decisions and helps individual employees constantly improve their performance. Organizations that excel in problem-solving and process improvement will eventually outperform their competitors and become more profitable.

Keep reading to learn about the philosophy behind operation excellence, and how implementing it can help you and your organization.

The 10 principles of operational excellence

The principles of operational excellence are based on the work of Dr. Shigeo Shingo. This management trainer developed the Shingo Model in close collaboration with Toyota executives, who adapted it to their manufacturing processes. Here are the 10 fundamental principles of operational excellence, with examples.

Respect the individual

Respect for each individual is the very foundation of operational excellence. This goes beyond mere consideration: it encompasses active listening and recognition of individual skills and contributions. When every team member feels respected and involved, you foster an environment conducive to innovation and collaboration, two key principles of operational excellence.

To put this principle into practice as a manager or leader, you must encourage active participation in meetings, publicly recognize individual employee successes and offer employees opportunities for professional development.

Lead with humility

Humble leadership means giving everyone recognition, regardless of their hierarchical level within the organization. Humble leaders are open to everyone’s ideas and acknowledge that learning is a continuous process.

Examples of humble leadership include a leader who will admit making a mistake, solicit ideas from the team and publicly acknowledge the team’s successes.

Strive for perfection

Continuous improvement is fuelled by the quest for perfection. Since perfection doesn’t exist, the idea behind this principle is to constantly raise one’s standards and push further forward. This involves continuously identifying opportunities for improvement and implementing progressive changes.

In practice, striving for perfection could involve setting up continuous improvement teams, regularly evaluating processes to identify inefficiencies, and encouraging innovation. Managers can track performance by setting up performance indicators (see below).

Adopt scientific thinking

Innovation is frequently the result of a longer process of learning and experimentation. Organizations that excel in operational excellence adopt structured methods to find solutions to problems, and try out new ideas without fear of failure.

Scientific thinking means making decisions based on facts and data rather than opinions. It encourages an experimental approach to problem solving.

To implement this principle, you can use data to make decisions, carry out pilot tests to assess the effectiveness of changes, and perform in-depth analyses before implementing solutions.

Focus on the process

If something isn’t working, rather than blaming individuals (which can have negative effects, and does not respect the first principle), always look for ways to improve the process. By focusing on processes, you will gain a more profound understanding of how work gets done.

For example, you can map processes, identify sticking points and implement measures to improve performance.

Ensure quality at the source

Good food starts with good products. Likewise, quality in organizations results from doing the job right the first time, using the right people and the right materials. Rather than fixing mistakes later, the quality-at-source approach aims to eliminate the root causes of problems from the outset.

To achieve this, managers can invest in staff training, implement upstream quality control and implement strict supplier specifications.

Place value on task completion

Every action, no matter how small, is essential to the overall success of an organization. To achieve operational excellence, place value on the completion of tasks, and recognize the impact of each individual initiative.

This step involves identifying every team member’s role in the creative process. There are numerous tools that can be used to facilitate project management and note every team member’s contribution to an organization’s success.

Adopt a systems approach

Thinking systemically means considering the organization as a whole, rather than just focusing on individual elements, and thinking about ways to improve the system as a whole. Effective organizations understand the interconnectedness of processes, and are aware that problems arise most frequently when work moves from one process to another. It is therefore crucial to understand this relationship and adopt a systems approach to optimize operations.

Managers or executives can identify all the flows in a given system. Examples include transport between warehouses and workplaces, and product export. Identify the connections between your various departments and find ways to improve them.

Communicate objectives consistently

By consistently communicating objectives, you align various members of an organization with an overall vision for the future. This allows employees to better understand some decisions, so they can feel more inclined to offer their support and contribute to achieving set goals. Overall, this creates a greater sense of belonging within the organization. Stakeholders develop greater loyalty and commitment when objectives are shared consistently.

To put this principle into practice, organize periodic meetings at both the team and organizational levels to discuss objectives, progress and adjustments. Set up visual dashboards to display goals, milestones and KPIs clearly.

Finally, align team members’ individual objectives with the company’s overall goals. This can be achieved by scheduling interviews focused on individual development, creating individual performance plans and implementing transparent communication about how individual contributions contribute to organizational goals.

Create value for customers

All companies are customer-driven. Customers determine value by expressing their needs, preferences and what they are willing to spend. Companies achieve long-term success by delivering high-quality customer experience efficiently, productively and consistently. Creating value for customers is at the heart of operational excellence, which recognizes that customer satisfaction is the key measurement of success.

To do this, ask for regular customer feedback to identify what’s working and what needs improvement. Always keep an eye on market changes and evolving customer needs, so that you can adapt your offer. Show that customer satisfaction is your priority across all channels, and be certain to implement efficient customer service.

What are the benefits of operational excellence?

The benefits of operational excellence are numerous.. Organizations that decide to embrace these 10 vital principles will be able to:

  • Maximize workflow
  • Reduce operational risks
  • Standardize work and results
  • Empower all stakeholders
  • Improve organizational performance.

Operational excellence makes it possible to deliver greater added value to your customers and increase productivity, while reducing costs through systems optimization.

Operational excellence: methodologies

While striving for operational excellence, companies will likely encounter difficulties and find it necessary to learn to manage change. While in the process of continuous improvement, there are several methodologies organizations can turn to:

Lean manufacturing

Lean Manufacturing is a methodology focused on eliminating waste in all processes. It aims to maximize customer value while minimizing resource consumption. Be careful not to confuse lean management and lean manufacturing, which can be differentiated by several key nuances, as explained in our article on this topic.

Six Sigma

Six Sigma is a proven quality management methodology designed to improve process performance by identifying and eliminating the causes of defects and errors. It is based on a statistical approach to measuring and improving process capability.

Kaizen

Kaizen, often translated as “positive change”, is a Japanese philosophy and methodology that emphasizes continuous improvement. Rather than a radical approach, Kaizen encourages progressive, incremental changes in all aspects of an organization, aimed at optimizing processes and fostering a culture of continuous improvement.

How to achieve operational excellence

Operational excellence can be achieved with a methodical approach that involves the active participation of every player within an organization. Here are the key steps to achieving operational excellence:

Assess the situation

Before implementing any changes, it’s crucial to fully understand your organization’s current situation. This includes analyzing existing processes, identifying strengths and weaknesses, and understanding current challenges. A thorough assessment makes it possible to prioritize improvements so that you can put energy into making changes that will have the biggest impact and greatest payoff.

Set goals

It is vital to establish a clear vision before implementing an organization-wide change. Once this is in place, set broad goals and specific operational KPIs so you can continuously assess your performance and evaluate your level of success.

Your goals must be aligned with your organization’s overall vision. They must directly help solve the problems identified during the assessment. SMART objectives (Specific, Measurable, Achievable, Relevant and Time-Bound) provide clear direction.

Get involved with your employees

Employee involvement is essential to operational excellence. For example, involve team members in decision-making processes and change implementation. Their operational expertise and knowledge of day-to-day processes are valuable assets. Encourage open dialogue and confirm that everyone feels involved in the improvement process. Remember, operational excellence is an ongoing process rather than a one-off action.

Think continuous improvement

To create a culture of operational excellence, everyone involved must commit to being constantly ready for change. Continuous Improvement, ongoing communication and the mobilization of employees are vital to keeping an organization ahead of its competitors and continually growing.

Continuous improvement is at the heart of operational excellence. Adopt a mindset that integrates process optimization into daily routines. Encourage employees to constantly seek opportunities for improvement in day-to-day tasks and within the organization’s wider processes.

Establish key performance indicators

Failure to measure progress and success can compromise your efforts to make effective changes. Meaningful KPIs reflect your organization’s vision, objectives and goals and make it easy for employees to track what’s being done. They also keep employees motivated to continue improving, as they see efforts translating into concrete results.

KPIs must be in line with pre-determined operational excellence objectives and provide measurable data on process efficiency. Monitor these indicators regularly to assess performance and make adjustments as needed.

Industries that use the operational excellence continuous improvement methodology

The quest for operational excellence is not only applicable to business. It is used effectively in:

  • Manufacturing: Companies such as Motorola and BAE Systems have implemented continuous improvement strategies to increase efficiency, minimize downtime and reduce waste.
  • Information Technology (IT): In IT, operational excellence contributes to efficient project management, streamlined development processes and greater customer satisfaction.
  • Construction: Operational excellence translates into more efficient project management, improved coordination on worksites and a higher commitment to worker safety.
  • Financial services: In financial services, operational excellence aims to improve transaction efficiency, reduce errors and reinforce regulatory compliance.
  • Logistics and supply chain: Operational excellence leads to more efficient inventory management, optimized delivery routes and reduced lead times.
  • Energy and environment: In the energy sector, operational excellence aims to maximize the efficiency of production facilities, reduce emissions and promote sustainable practices.
  • Public sector: Operational excellence aims to improve customer service quality and optimize key processes. The goal is not to improve economic gains, but to provide better services to the user.

Achieve operational excellence with GCM Consultants

Operational excellence is a state of mind that can be cultivated within any organization. By adopting best practices in all your processes, you can embark on a path of continuous improvement. Applying the principles or operational excellences reduces risk, improves customer satisfaction, and gives an organization a competitive edge.

We care about what your organization needs most. GCM offers a full range of flexible, customized services, grounded in a strong connection with you, your team and your particular needs. Our main focus is on providing custom solutions!

Our operational excellence consultants are ready to help you integrate key changes to your operations. Contact us for a needs assessment and take the first step towards positive transformation today.