What is Operational Excellence [10 Core Principles] (2023)

In every company there is always at least one area that can be improved. But how exactly does significant change occur within an organization?

It can sometimes occur through atolle Initiativeor total turnaround within the company. But mostly change happens in amuch less open way; it happens slowly and gradually over time. Operational excellence is an example of this type of change.

In this guide, we take a closer look at what operational excellence is10 basic principles, as well asdifferent methodsYou can use it to implement it.

What is operational excellence?

Operational excellence can be simply described as aPhilosophythat includes problem solving and leadership as the key to continuous improvement.

Often one is not sure how to approach the topic of Operational Excellence. It is adifficult termdefine and most people find the subject veryambiguousorLargotalk about it.

Operational excellence, on the other hand, doesnot a set of activities that you perform. is another onementalitythat must be present in you and your employees.

Now you're probably thinking, "That sounds goodin theory, but how do I translate that into actionable steps?”

Well, let's explainbald. Before we delve into implementing operational excellence, you need to understand how the concept relates to itcontinuous improvement.

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Operational Excellence x Continuous Improvement

Continuous improvement is the continuous effort to improve an organization's performanceComplain, products or services. usually occursgradually over time,rather than immediately through a revolutionary innovation.

By striving for continuous improvement, an organization is more likely to continue to maintain and develop those improvements.

While continuous improvement is important, it alone is not enough. As the organization continues to refine its process, product, or service, it must do soa way to keep growing. This is where operational excellence comes into play.

Operational ExcellenceIt is a mindset that encompasses specific principles and tools for creating sustainable improvements within an organization.

Or to put it in simple terms: operational excellence is achieved when all members of an organization can see itCustomer value stream. However, seeing it is not enough - they must actively seek to improveboth the value and the delivery.

Ultimately, operational excellence is not just about reducing costs or increasing productivity in the workplace. It's about creating the corporate culture that enables you to produce and achieve valuable products and services for your customerslong-term sustainable growth.

Operational excellence is a journey that involves applying the right tools to the right processes. If this succeeds, the ideal work culture is created in which employees are cared for in such a way that they can stayempoweredemotivated.

Operational Excellence: 10 Core Principles

Each year, the Shingo Institute at the Jon M. Huntsman School of Business presents an Operational Excellence Award calledShingo price. This award is based on the company's culture, company results and the way each employee implements the guiding principles ofo Modelo Shingo.Here's a closer look at each of these ten principles...

Principle #1: Respect each individual

The Shingo model emphasizes that everyone deserves respect because everyone has value and potential. However, it is not enough to respect others; You must show that respect to them as well.

One of the best ways to show respect to your employees is thisinvolve them in necessary improvementsto your department. This will help them feel more empowered and motivated to contribute to change in a positive way.

To learn more about creating a culture that includes all employees, from the CEO to the production department, read our guideKaizen.

Principle #2: Lead with humility

Leaders must always exercise humility.

After all, the best improvements happen, people are able to recognize their shortcomings and start looking for a better solution. Humility means being willing to listen and accept suggestions from everyone, regardless of that person's position or status within the organization.

Principle #3: Strive for perfection

This step of the model is often met with resistance as most are quick to point out that perfection is not possible. While perfection may seem unattainable, that doesn't mean you can't.strive for itDespite it.

By raising the bar, you create a different mindset within your organization. If you encounter a problem, try itlook for long-term solutionsand always trysimplify your workwithout affecting the quality of the result.

Principle #4: Adopt scientific thinking

The innovation comes fromconstant experimentation and learning.

Principle #5: Focus on the process

When something goes wrong, there is a tendency to want to blame others. In many cases, however, the problem lies in the process, not in the person. That's because evengreat employeescannot consistently achieve optimal results with abad process.

When an error occurs, instead of immediately pointing the finger at the people involved, assess where in the process the error occurred. Once you've done that, you can try making adjustmentsachieve the results you want.

Principle #6: Ensure quality at source

High quality can only be achieved onceevery part of the processit's done right. It can be helpful to organize workspaces so that potential problems are immediately visible. If an error occurs, stop working immediately to fix the error before proceeding.

Principle #7: Flow and Pull Value

The goal of every organization is to offer maximum added value to its customers. Because of this, organizations need to ensure that the process andworkfloware continuous because interrupts arisewaste and inefficiency.

It's also important to evaluate customer requirements to ensure your organization is only meeting those requirements and not creating more than necessary.

Principle #8: Think systematically

In a system there are many different interconnected parts that work together. It's important to understand the relationship between each of these parts as it will help you make better decisions. Avoid a narrow view of your organization and remove barriers that impede the flow of ideas and information.

Principle #9: Create consistency of purpose

Employees should be informed about the goals and mission statement of the organizationday one. However, this should not only stop after the first day. You must continue to emphasize these goals and principles every day.

Every employee must have oneunshakable certaintywhy the organization exists, where it is going and how it will get there. Knowing this helps them to align their own actions and goals with those of the company.

Principle #10: Create value for the customer

In order to create value for the customer, it is necessary to understandwhat the customer needs. Value is simply what that person is willing to pay.

Businesses must continue to work on understanding the needs and expectations of their customers. An organization that does not deliver customer benefits is not sustainable in the long run.

The 3 most important operational excellence methods

ThroughOperational Excellence, an organization can improvecorporate culture and performance, which leads tolong-term sustainable growth.

Organizations should consider looking beyond the traditional one-time event and aiming for long-term system change.

Over the years,numerous methodswere introduced into mainstream corporate culture as a method for achieving operational excellence. We'll look at 3 more of the most popular ones below...

Methodik Nr. 1: Lean Manufacturing

Lean manufacturing focuses on the systematic elimination of waste in a production system.

It teaches that the only thing a business should focus on is whatadded value. Lean also teaches that every process has some kind ofThe neckand that focusing all of your improvement efforts on this bottleneck is the fastest route to success.

The key principles of lean manufacturing focus onImproving the quality of products and services, eliminate anything that doesn't add value, and reduce overall costs.

Conventional Lean Manufacturing identifies seven waste areas, commonly referred to as “seven deadly wastes." Specifically, it is about ...

overproduction: Overproduction occurs when employees produce something before it is actually needed. This is one of the worst forms of waste, as it creates excess inventory and often masks underlying issues.

Wait: When employees wait for the next production step, there is no added value. It can be very insightful to look at each step from start to finish and then assess how much time is actually being spent creating value versus how much time is being spent waiting.

Transport: Transportation is waste caused by the unnecessary movement of incomplete or finished products.

Movement:This step refers to any movement that does not add value to the product and is usually caused by poor labor standards.

Revision:This happens when more time is spent processing than is necessary to produce what the customer requires. It is also one of the most difficult types of waste to dispose of.
Invent:This type of waste occurs when supply exceeds actual demand.
Defects:Defects are errors that need to be fixed or the process has to start over. In manufacturing, this often looks like a part that needs to be scrapped or completely rebuilt.

Methodik Nr. 2: Six Sigma

Six Sigmais a set ofTooland techniques designed to improve business processes that result in a better product or service. The purpose of Six Sigma is to improvecustomer experienceIdentify and eliminate discrepancies.

More than 50 percentof all Fortune 500 companies have implemented Six Sigma to some degree. Six Sigma has been proven to help Fortune 500 companies save over $427 billion over the past 20 years.

A Six Sigma company produces no more than 3.4 defects per million opportunities. Anything that does not meet the customer's expectations is considered a defect. This happens primarily through the implementationDMAIC.

DMAIC is an acronym that stands for Define, Measure, Analyze, Improve and Control. Here's a more detailed breakdown of each step in this process and how it helps build Six Sigma companies:

Define:In this first step, you simply define the problem, because without knowing what the problem is, you really can't solve it. Once you have defined the problem, you can start creating a plan and assessing your available resources.
Measure:Now that you understand the problem, you need to measure all your available data and take a good look at your current process. What works well and what needs improvement?
Analyse:After you measure your data, you can analyze your results and get to the root of the problem.
Improvement:After analyzing your data, think about possible solutions. Implement these solutions on a small scale to test the results and make necessary changes.
Check:Once you've implemented your new process, you need to find a way to maintain that process. Continuous improvement is important to ensure your process remains effective.

Methodology #3: Kaizen

Kaizen means "continuous improvement' in Japanese and in business, is used to implement continuous positive change in the workplace.

The guiding principles of Kaizen are that a good process leads to positive results, teamwork is critical to success and that every process can be improved.

Organizations implement Kaizen to help them create a culture of continuous improvement. Employees will work together to achieve continuous improvement in the workplace.

Kaizen teaches that small changes, when applied consistently, accumulate over time and lead to big results. The methodology does not necessarily encourage only small changes; Kaizen focuses on the participation of all employees to bring about real change.

Kaizen emphasizes the importance of continuous improvement and that it is not enough to make a change once and expect it to stick. You always have to make improvements. Many companies have used Kaizen to increase employee productivity, reduce costs and improve the customer experience.

Achieve operational excellence

Operational excellence is the ultimate goal of any organization that strives for continuous improvement. Blueprints and tools are a useful starting point, but alone are not enough to create lasting change.

People often think that buying outdated BPM software is a great answer to keep it running smoothly. Nothing is further from the truth.

The "old BPM" software is tired and broken. It never worked for enterprise users. Here's why:

Users are now making their own decisions about purchasing software. The old BPM was bought by your IT department, who generally didn't care about the user experience - as long as it was made by a big/boring company.
Cloud tools are now free for anyone to try anytime. With Old BPM, you had to call sales and wait 50 questions just to take a look and finally decide it sucked.
People want to share workflows with customers. With Old BPM you got stuck trying to automate just the internal processes. His customers would be very frightened and run away from him for miles.
People expect to integrate cloud tools without IT. With Old BPM, engineers had to write code to perform simple integration. This has now become a drag-and-drop service.
People expect to work on the phone. That means huge, clunky flowcharts are dead in Old BPM — because they can't fit on your phone screen — and just define "the perfect process."
People are fed up with flowcharts. The old BPM was about the High Priest telling you how a process could/will be done and you would obey. Now – modern workers and teams are paid to work together.
People expect all the benefits of the cloud. Old BPM was never born in the cloud and never designed for the cloud. And that leads to many missed opportunities.
Businesses of all sizes need process management — and they never had it. Because old BPM was so expensive and complicated, only large companies could afford it. The rest of us were left out.
People are excited about AI but don't know where to start. With Old BPM, you don't stand a chance of using AI without an army of engineers. With cloud-based systems like Tallyfy, it's a breeze to use any AI to run amazing automations for photos, voice, video, and more.

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Sustainable change can only happen when the principles of operational excellence are understood and deeply rooted in an organization's culture.

Therefore, make sure that both management and employees of the company understand and adhere to the basic principles of operational excellence.