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What Is Operational Excellence?

operational_excellencePerfection is not attainable, but if we chase perfection we can catch excellence. – Vince Lombardi

In “The Discipline of Market Leaders – Choose your Customers, Narrow your Focus, Dominate your Market,” Michael Treacy and Fred Wiersema describe three distinct value propositions or disciplines an organization can choose to compete in their market or industry–Operational Excellence, Product Leadership, and Customer Intimacy.

Market leaders choose to excel in delivering extraordinary levels of one of these three value propositions, while maintaining competitive standards in the other disciplines.

Based on Treacy’s and Wiersema’s findings, market leaders will not pursue a diffused business strategy across two or even all three disciplines, but will continually focus on their organizational design, processes, technology, and competencies to improve the one particular value discipline that they want to provide to their Customers better than anyone else.

Organizations pursuing an Operational Excellence differentiation strategy are able to deliver a combination of quality, price, and ease of purchase and service that no other organization in their market or industry can match.

Achieving Operational Excellence requires the successful implementation of a Business Execution System that effectively and seamlessly integrates the following four building blocks: Strategy Deployment, Performance Management, Process Excellence, and High Performance Work Teams.

First, Operational Excellence organizations follow a well defined Strategy and Operational Planning & Deployment Process that ensures collaboration and alignment among the different parts of the organization and effectively links strategic and operational objectives, initiatives and execution. Strategy Mapping and Hoshin Planning provide this systematic and collaborative planning, execution, and review process.

Second, Operational Excellence organizations are able to translate strategic or operational objectives and initiatives into measurable success indicators and ensure alignment among the different levels and parts of the organization.

The Balanced Scorecard Methodology provides a Performance Management framework to ensure alignment of an organization towards common objectives and goals.

Third, Operational Excellence organizations are process-centered organizations that have well designed, efficient, and effective management, value chain, and support processes to deliver best-in-class products and services consistently.

Process Excellence concepts, methods and tools, including Six Sigma Methodology, Lean Management Methodology, 8D Problem Solving Process, and Business Process Improvement, are core competences and utilized at all levels of the organization.

You can learn more about Operational Excellence from the author’s training guides available on Flevy, including a free-of-charge presentation, An Introduction to Operational Excellence.

Fourth, Operational Excellence can only be achieved and sustained with the right attitude, the right mindset, and the right competencies. Operational Excellence organizations continuously strive to increase the engagement and empowerment of their employees through strong values, guiding principles, leadership development, coaching, and continuous competence development.

About Frank Adler

Frank Adler co-founded Operational Excellence Consulting (OEC) in 2009 to follow his passion for Operational Excellence and to be able to work with individuals and organizations that share this passion. He has over 20 years of international executive leadership experience in General Management, multi-site Operations & Supply Chain Management, Quality & Customer Support Management, and Operational Excellence & Lean Six Sigma. View more of OEC's materials on Flevy here, including training guides and free downloads.

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  • Matthijs R. Colenbrander

    … 🙂 …

  • http://www.ellesmereport.ca ELLESMERE PORT

    Excellent article. Of particular interest in Process Excellence as so many firm fail to properly embrace this and without the discipline inherent in processes it makes it difficult to ensure that all the effort expended in all other areas will yield maximum results.

  • Frank

    Thank you, Ellesmere, for your comment. I agree that too many Process Excellence initiatives fall short of their expectations due to the fact that organizations do not fully understand that Process Excellence without the other three building blocks of Operational Excellence will seldom yield to relevant and sustainable results.

  • Charles Intrieri

    In my opinion, Lean initiatives should be a big part of Operational Excellence. Successful Lean implementations start with a company cultural transformation lead by the Leadership of the company. Why do you need a culture change? Lean is a new way of doing business. Slapping in Lean tools, like 5S, Kanban. Kaizen or Lean Six Sigma without changing the culture creates a façade in a company..

    • Jim Spriggs

      I would venture that the efficacy of Lean is only applicable to today’s strategy and conditions. All too frequently, companies that require flexibility and agility to respond to changing circumstances, whether competitive- or customer-led, have found that while they were Lean, they were too Lean, and unable to respond in time. This is where operational strategy is king, looking at what is needed to meet the business strategy and business circumstances ahead, with a heavy dose of risk management thrown in.

  • Jim Spriggs

    Operational Excellence, I find, refers to doing the best for today, which is not necessarily the best for tomorrow. While there are gains to be made in performance, in EBITDA and so on by achieving operational excellence, the big step change in performance is only achievable through operational innovation, then focussing on operational excellence.

    • Frank

      Jim, I believe that Operational Excellence and Innovation are not mutually exclusive. Quite the contrary. First, an organization can not expect to execute their strategic plans and their day-to-day business better than everyone else in their industry without innovation. Second, organizations that are true and profitable innovators in their industries, e.g. Apple and Amazon, are also focusing on excellence in execution.

      • Ganesh

        Would go with Frank , innovation always play vital role in establishing any product or services , afterall clients are always looking for something better than what is now with them, so an innovation on track is the best source to operational excellence. More precisely we need to work out differently to establish our product or services to gain market share.

  • Frank

    I hope you have a chance to look at our 15 currently available Operational Excellence training modules here on Flevy.

  • Lamie

    Hello ;
    This is a great post – so clearly and easy to follow and yes I am holding out for the shark’s too.Thanks for the ton and tangible and attainable help. All your hard work is appreciated.Yes I am agree with your point Achieving Operational Excellence requires the successful implementation of a Business Execution System.

    But i have question to ask that what is the main difference between operational excellence and process excellence.

    • Frank

      Dear Lamie,

      thank you for your kind feedback.

      Let me answer your question. Based on our model, Process Excellence is one of the 4 Building Blocks of Operational Excellence. To many organizations believe that deploying Process Excellence methodologies like Six Sigma, Lean Management or Problem Solving is sufficient to achieve Operational Excellence. However, these methodologies need to be linked and need to support an organization’s Strategy Deployment activities, and enable an organization to accomplish its strategic and operational goals. Process Excellence is the execution aspect of an Operational Excellence initiative.

      Hope this answers your questions and add some clarity to our “Introduction to Operational Excellence” initiative.

      https://uploads.disquscdn.com/images/0dcacfdb41edad1fcdada259d1bf32d14e90c360129b658759c883b3433a300e.png You can read more about our Operational Excellence Model on our website.

  • Cal Stevens

    I enjoyed the information. Thanks for sharing!

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