Operational excellence enables an enterprise and its leadership to continuously improve all areas of performance, including decision-making, ongoing investment, profitability, customer and partner services and human resources capabilities. Operationally excellent enterprises possess the processes and structures--or the intangible assets--that give them the visibility, control, tools, and management practices necessary to drive greater operational effectiveness and efficiency.
Consider the following three examples:
Operational excellence had its genesis in manufacturing dating back to the pre-Industrial Revolution. In his 1776 magnum opus, The Wealth of Nations, economist and philosopher Adam Smith was among the first great thinkers to define this now widely used concept. Smith famously described a small pin factory where 10 workers, each specializing in a different aspect of the job, could produce over 48,000 pins a day. Left to make a pin on his own, each of these workers might not have manufactured a single one in a day, and certainly not more than 20. The division of labor immensely increased the productivity of each worker. Its still true today that assigning different roles and responsibilities across an enterprise enables scale, lowers costs and leads to greater operational efficiencies.
Delivering continuous improvement in the marketplace among competitors and customers requires enterprises to identify, understand and create the capabilities, behaviors and focuses necessary for repeatable, continuous and measurable operational improvement.
Roadmap for Operational Excellence Journey
Being operationally excellent requires a focus on management capabilities to develop and promulgate standards, coordinate decision-making, optimize service delivery and to manage the workforce. Orchestrating these capabilities requires a unification of cross-functional management disciplines. These capabilities can be organized around the following core characteristics:
1. Visualize Key Operational Processes. Identify the key operational processes, including those that create value, growth or innovation as well as those that consume the most resources, time and assets. Develop visual operating models that show linkages both inside the enterprise as well as outside, to customers, suppliers and partners.
2. Design Workflow and Predefined Responses. Model the workflow for each key process, identifying the actions, resources and workers required for each step. Then define a standard response to handle large variations in workflow volume outputs or inputs.
3. Develop Metrics and Gauges. Establish measures for normal workflow and develop systems or methods that report workflow volume outside the normal ranges. Ensure that workflow reports are received by the stakeholders responsible for each operation.
4. Operate Functionally, Measure Systemically. The functional operating manager responsible for workflow, using the predefined responses, operates the workflow by making any changes necessary to adapt to changing volume, inputs or outputs. Functional managers interact with upstream and downstream operating mangers to ensure optimal end-to-end performance.
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The Anatomy Of Operational Excellence
