In "The Discipline of Market Leaders," Michael Treacy and Fred Wiersema describe three distinct value propositions an organization can choose to compete in their market or industry:
The core of the book is based on five years of research by the Treacy and Wiersema into companies, including Wal-Mart, Dell, Southwest Airlines, Home Depot, Intel, and Sony. Market leaders choose to excel in delivering extraordinary levels of one of these three value propositions, while maintaining reasonable standards in the other disciplines. So, what exactly is Operational Excellence?
Operational Excellence is a well established management philosophy. It is a philosophy of leadership, teamwork, and problem solving, resulting in continuous improvement throughout the organization by focusing on the needs of the customer, empowering employees, and optimizing existing activities in the process.
There are many approaches, frameworks, and models that have been presented under the term Operational Excellence. It is also closely related to other continuous improvement methodologies, such as Lean Manufacturing and Six Sigma.
To achieve and build Operational Excellence requires the successful implementation of an integrated Business Execution System that effectively and seamlessly integrates the following 4 building blocks:
Let's delve briefly into each of these components.
Strategy or Policy Deployment is the process that aligns and links business strategy and execution. The (Hoshin) Strategy Deployment Process follows a 6 phase approach:
There are many tools and frameworks assist in the Strategy Deployment process, such as Strategy Maps, Strategic Grids, and Hoshin X-Matrix.
Performance Management is the process that translates strategic initiatives into measurable objectives and goals. A powerful tool for Performance Management used in Operational Excellence is the Balanced Scorecard (BSC) framework, developed by Dr. Robert Kaplan and Dr. David Norton. BSC is used extensively in business and industry, government, and nonprofit organizations worldwide to align business activities to the vision and strategy of the organization, improve internal and external communications, and monitor organization performance against strategic goals.
There are numerous benefits to developing and deploying Balanced Scorecards in an organization. These benefits include:
Well designed, efficient, and effective Management, Value Chain, and Support Processes are necessary to deliver world-class results. On a high level, to attain Process Excellence, follow this 5-phase approach:
There are numerous frameworks and tools for achieving Process Excellence, including full a suite of Lean Six Sigma methodology tools. Examples include BPI (Business Process Improvement) 7, 8D (8 Disciplines) Problem Solving, DMAIC (Define-Measure-Analyze-Improve-Control), and so forth.
Operational Excellence can be achieved and sustained with the right attitude, the right mindset, and the right competencies. In the "Empowerment Continuum," the high performance team has the highest level of empowerment. This requires the team to have sufficiency across the areas of authority, resources, information, accountability.
While an organization transitions from a more traditional top-down organization to an organization build around high performance work teams, the role of a supervisor or manager changes to the role of a leader and coach, with six distinctive capabilities: living example, coach, barrier buster, result catalyst, facilitator, and business analyzer.
The pursuit of Operational Excellence generates numerous business benefits. Here are several of the most impactful ways Operational Excellence can drive effiencies, savings, and other benefits to your organization:
This article provides a very rudimentary introduction to Operational Excellence. To develop a more in depth understanding, we suggest downloading a free copy of the 48-slide Introduction to Operational Excellence presentation and consulting the business training guides below.