What is Operational Excellence?

The definition of Operational Excellence according to Institute for Operational Excellence (iOPEX) is:

“Each and every employee can see the flow of value to the customer, and fix that flow before it breaks down.”

The definition may be simple, but it implies that everyone knows what value is and the importance of maintaining the normal flow of value along the process, and is capable of fixing abnormalities affecting the flow without assistance of management.

 

“Self-Healing” Process

To achieve flow, the process must be designed to work at the rate of customer demand using the value stream mapping, and must be installed with visual controls to aid employees see the flow and determine whether the process is running normal or abnormal. In short, the process is “self-healing.” Whenever there is problem in the process, the employees immediately detect it and fix it in real-time.

Steven Spear, in his book, “The High Velocity Edge How Market Leaders Leverage Operational Excellence to Beat the Competition,” identifies four capabilities of high-velocity organizations, namely:

  1. Specifying design to capture existing knowledge and building in tests to reveal problems
  2. Swarming and solving problems to build new knowledge
  3. Sharing knowledge throughout the organization
  4. Leading by developing capabilities 1, 2, and 3

Spear emphasized that a perfect process cannot be designed initially, but rather it is achieved  by continuous improvement, innovation, and adaptation. The initial process design captures the best known methods, and is specified in standard work available to employees. The standard work, aside from detailing who, what, when, where, and how the tasks will be done, also specifies detection tests and mechanisms when something abnormal occurs in the process. When a problem occurs, employees immediately detect it, contain it to prevent it from spreading, analyze the root cause, preserve the learning by updating the standard work, and spread the new learning to the rest of the organization. Management must continue to practice and enhance the capabilities in the gemba to sustain them.

These four capabilities are what an operationally excellent organization must possess in order to achieve “self-healing” process, which is the means to achieve the end objective, the business growth.

 

Structure and Dynamics of Operationally Excellence Organizations

Organizational Excellence can be achieved when the organizational structure is process-oriented rather than functional oriented. This means that functions are integrated along the value stream working on the same organizational objectives. They have a common definition of value, with each function contributing the expected value to the flow along the value stream.

Fig. 1 Process Approach vs. “Silo” Approach 

As functions work in a single value stream, every member is committed to constant experimenting and learning in the work they do. Instead of fire-fighting and doing temporary workarounds, the employees are disciplined to perform a scientific approach known as Plan-Do-Check-Act (PDCA), by knowing and understanding the standard work (Plan), performing it (Do), checking for and detecting problems (Check), analyzing root cause, and finding and implementing solutions (Act). When the PDCA activity is finalized, the standard work is updated (Plan) a new PDCA cycle of improvement and standardization starts again.

 

Fig. 2 PDCA Diagram 

 

Fig. 3 PDCA repeated indefinitely

 

Business Growth is the Objective of Operational Excellence

When the process achieves unimpeded flow, there would be less fire-fighting and workaround, and the management would be more focused on growing the business and work on activities such as meeting with new customers, interfacing with new clients, developing new products, and breaking into emerging markets.

When the process is delivering an unimpeded flow of value, the organization will achieve improvements in terms of the following key metrics:

  1. Enhanced on-time delivery
  2. More inventory turns
  3. Shorter lead times
  4. Increased productivity
  5. Better product/service quality

The true impact of Operational Excellence is in achieving remarkable business results in a short amount of time.

 

References:

Spear, Steven J. The High Velocity Edge How Market Leaders Leverage Operational Excellence to Beat the Competition. 2009, McGraw Hill.

https://instituteopex.org/site/resources/what_is_operational_excellence#definition

https://instituteopex.org/site/resources/what_are_the_benefits_of_opex

https://instituteopex.org/site/resources/how_do_i_achieve_opex

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