Transform Your Business With The Ultimate Guide to Operational Excellence

Companies often overlook operational excellence when developing a business strategy in the 21st century. They forget to understand its role in increasing the company’s flexibility to adapt and thrive in change.

Here, we’ll understand in detail the meaning of operational excellence and its importance in today’s business environment.

What is Operational Excellence (OpEx)? 

Operational excellence is a strategic business approach focusing on delivering products or services to customers at competitive prices with minimal inconvenience. It also helps organizations reduce their overhead cost, increase efficiency, and stay at the top of the competition. Additionally, it also concentrates on keeping the employees motivated and empowered. 

The three pillars of OpEx are:  

• Building efficient processes 
• Systematic management of operations  
• A positive culture that focuses on customers’ needs and empowers the workforce 

Key takeaway:  

1. OpEx starts with a cultural shift where businesses focus on offering a quality product that enhances the customer experience.  
2. Operational excellence is based on the concept of value. That means the main aim of the concept is to understand the customer’s point of view and use it to add value to products.  

Also Read: What is Operations Management and Why it’s Important

Core Principles of Operational Excellence 

Operational excellence is based on the Shingo Model. The Shingo model is a principle-based approach to changing the organizational culture. Well, in the latter half, you will learn more about the Shingo model in detail. Moving on, OpEx shares the same core principles as the Shingo model. It includes principles like scientific thinking, focus on processes, and systematic thinking. Here are the top five core principles of operational excellence:  

Create Value for Customers

Businesses thrive because of the customers. Therefore, business operations must reflect the value customers hold in an organization. Moreover, every strategic business decision should focus on creating customer value. 

Systematic Thinking

Operational excellence’s main focus is to improve a company’s overall operation. By thinking systematically, companies can improve the whole organizational system.  

Scientific Thinking

Companies that are more data-driven are expected to sustain in a dynamic business environment. Therefore, with scientific thinking, companies can create a work culture that values and implements data-based decisions.  

Focus on Improvement

Companies practicing OpEx focus on improving from mistakes and not the reasons for failure.  

Respect Every Individual

Companies practicing operational excellence take steps to ensure that their workforce feels respected and valued. They follow transparent communication and give employees equal opportunity to express their views. 

Also Read: Learn How to Motivate People to Become Leaders: A Guide for Successful Leadership Development

Benefits Of Operational Excellence

Organizations practicing this form of excellence increase their revenue, market position, and employee satisfaction. So, it’s safe to say that operational excellence yields tangible results. Here are some other benefits of OpEx:  

• Cost reduction  
• Positive return for shareholders  
• An engaged and happy workforce 
• A strong relationship with suppliers 
• Optimum utilization of resources  
• Increased efficiency and agility in business processes  

Why Operational Excellence Is Important

As mentioned earlier, this form of excellence helps a company edge over its competitors. But how does OpEx manage to do that? Well, it helps companies succeed by impacting the key characteristics of the organization, namely:  

Agility

Operational excellence increases the agility of the organization. It makes companies capable of adjusting to market changes, shifting customer tastes, and technological advancements.  

Efficiency

When companies practice OpEx, they achieve efficiency in operations. You can deliver value to the customers, enhance user experience, and give the best price in the market. This collectively helps in increasing the organization’s profit.  

Workforce

Empowering the workforce can help in increasing overall organizational productivity. Moreover, it can create an organizational culture that values employee opinion.  

Growth

Companies practicing OpEx believe in continuous improvement. They think that operational excellence is a continuous process that every organization must do to grow in its field.  

Operational Excellence Models: Two Prevalent Models to Know 

Models help businesses manage their performance, elevate their culture, and motivate their employees. These models are frameworks that help companies practice operational excellence effectively. Below are two popular models that you can’t miss:  

1# Baldrige Excellence Framework  

Baldrige excellence framework lays out the roadmap to improve an organization’s performance. Using this model, organizations can assess themselves and identify the areas that need improvement.  

2# Total Quality Management (TQM)  

Total quality management is an OpEx model that concentrates on the workforce and customers. It makes the workforce and customers an active part of the operational excellence strategy. TQM uses insights and opinions to make changes in products, services, or processes.  

How to Achieve Operational Excellence? 

Before looking at ways to achieve operational excellence in your organization, let’s understand some concepts associated with practicing operational excellence in companies.  

1. Operational Excellence Goals

As you have seen, there are many reasons why a company practices OpEx. For instance, new companies can practice operational excellence to increase their authority in a market. Some examples of operational excellence goals: 

• High customer satisfaction  
• Higher productivity  
• Improved employee engagement  
• Higher sales  
• Stronger cash flow 

2. Operational Excellence (OpEx) Metrics 

Companies practicing OpEx need to associate a metric with each goal. This helps in tracking success and evaluating the performance of an OpEx strategy over time. 

Operational excellence metrics determine the value derived from every operational initiative.  Some of the common metrics include capacity, effectiveness, quality, profitability, value, and productivity. 

3. Operational Excellence Key Performance Indicators (KPIs)

Key performance indicators or KPIs help companies determine the performance of OpEx strategies. You can measure the performance of the excellence program by creating a dashboard that consists of meaningful metrics. Some of the common KPIs are:  

• Customer satisfaction  

• Productivity  
• Quality  
• Sales efficiency  
• Work culture  

Also Read: What is the Purpose of Leadership, and How Can it Help Your Organisation? | Emeritus India

How to Achieve Operational Excellence in an Organization

There are four ways in which organizations can achieve excellence. Here, we discuss them in detail.  

1. Shingo Model

The Shingo model is designed to achieve organizational excellence. The model helps companies understand the importance of OpExe by giving them a roadmap on how to achieve it.

This model has some core principles that every organization must follow. Some of the core principles of the Shingo model are: 

• Lead with humility  
• Try to achieve perfection  
• Think pragmatically  
• Create value for the customer   

2. Lean Management Model

Businesses use the lean management model to reduce wastage and deliver customer value. It is a systematic method designed to keep productivity constant. The key concepts involved in lean management are:  

1. Value stream includes tasks, actions, and workflow required to complete the manufacturing process.  
2. Flow indicates the relationship and momentum between the elements of the value stream.  
3. Pull is the ability to create exactly what the customer wants and provide it when they want.  
4. Transparency ensures that everyone in the organization is aware of all the activities being carried on.   

3. Kaizen

Kaizen is a Japanese word that means ‘changing for the better’. Thus, it is used when the organization is focused on continuous improvement. Kaizen supports teamwork and taking responsibility to lead increment improvement in the company. Here is the core principle of this OpEx method: 

1. The first step is to understand the customer to create a product or experience that adds value.  
2. Eliminate waste to reduce costs and increase efficiency.  
3. Be transparent with your team members. Let them know every detail. This will help them believe they are important to the organization and add value to the operational processes.  

4. Six Sigma  

Six Sigma is one of the most popular methods to achieve operational excellence. It focuses on minimizing defects in the processes using a set of methodologies, tools, and techniques. The primary six sigma methodology is abbreviated as DMAIC- define, measure, analyze, improve, and control. This five-step methodology breaks down problems and tries to solve them segment by segment.  

The Top 3 Best Practices for Achieving Operational Excellence

Achieving OpEx is a time-taking process. Businesses don’t achieve success overnight. Therefore, companies need to be resilient and adopt these best practices in their daily routine to ensure success.  

1. Choose the right methodology– There are different methodologies that you choose from. Make a decision based on your type of business.  
2. Outline your goals– It’s important to determine your OpEx goals before developing a strategy. It helps in tracking and measuring the success of a business excellence program.  
3. Include employees in the operational excellence program- It’s important to include your workforce in the OpEx program because they are responsible for executing the OpEx strategies in the organization. Additionally, they will also track and monitor the success of the program.  

Industries using Operational Excellence 

Operational excellence can benefit any industry or line of business. Understanding that many companies have started practicing operation excellence. Here, we closely look at industries practicing OpEx.  

1# Manufacturing  

Many manufacturing companies use a lean management approach to achieve OpEx. Employing lean management systems has helped manufacturers improve flow in different processes, track and fix production errors at a nascent stage, and optimize production systems.  

2# Information Technology  

IT companies use agile and scrum methodologies to achieve OpEx. These techniques ensure that the workforce can adapt to the changing needs of the market.  

Additionally, these methodologies give IT teams a way to improve workflow efficiency in today’s business environment.  

3# Marketing  

Marketing firms can use operational excellence to understand the likes and dislikes of their target customers. Operational excellence introduces data-driven management, which can be used to track the performance of marketing efforts. It can also be used to establish benchmarks, evaluate effectiveness, and identify improvements.  

4# Banking  

Practicing operational excellence in the banking sector has helped financial institutions to develop more efficient processes and make the best use of technology. Some of the benefits of operational excellence in banking are a low cost-to-income ratio, fraud detection, and less customer waiting time.  

5# Healthcare 

OpEx is used in healthcare to enhance the customer experience. It helps health professionals reduce wait time, improve patient experience, and track patient outcomes without the hassle.  

By now, you must have understood that OpEx is a never-ending process. It helps businesses adapt to the dynamic market condition using agile, scrum, and lean methodologies. These modern methodologies increase companies’ preparedness for changes and help them adapt to changes faster

Go Beyond Basis With Emeritus Leadership Course

Are you a leader or someone transitioning into a leadership position? Take a leadership certificate course to understand the basics of operational excellence and other related strategies that can help in the smooth operation of an organization.  

Emeritus has partnered with renowned institutes like IIM, IIT, and ISB to offer certificate courses to enhance your leadership skills. The programs are designed for fresh graduates, mid-senior professionals, and senior professionals who want to nurture their leadership skills to advance their businesses.