What is Operational Excellence?

21st May 2024

by Colin Claverie

You want your business to be excellent – always.

For that to happen, there are a lot of moving parts. From website banners and buttons to ease your clients into check-out or signing up for demos, to warehouse distribution and shift management, there are many places where dropping the ball has repercussions later on.

Avoiding these repercussions and making sure everything is running well or being improved upon, is achieving operational excellence.

What is operational excellence?

Operational excellence is a philosophy that focuses on problem-solving for constant, continuous improvement.

We’ve talked about the importance of constant process improvement for your business in the past. It helps you both adjust to changing times and the availability of new tools. You can grow as a business whilst avoiding losing out on more revenue.

Operational excellence has continuous improvement as a goal, but it’s focus is on helping everyone in your organisation see and understand how their job provides value to your clients.

Over time, this results in more efficient business processes and a better working culture. It is a lot easier for your company to run when everyone is clear on what everyone else is or should be doing, when, and why, for your customers.

It can also help you track how the cash you are being paid is reflected in the daily tasks, work and output of your employees.

An example of how operational excellence may play out in your company is digital transformation: the need to level up your operations to meet the demands of the 21st century. This can be anything from setting up a presence and store online to digitizing part of your warehouse processes with new equipment or software.

Adopting new technology is great and will usually help you and your employees save time and make everything run more efficiently, resulting in improvement for your business processes and revenue.

Benefits of operational excellence

As we just mentioned, one benefit of operational excellence is improving process efficiency.

Streamlined business processes are good for your own employees and for your customers. It means everything is happening at optimal speed. There is less time wasted on unnecessary tasks and less friction between employees. And your customers simply have a better, less complicated experience with your company.

This is in large part because your employees are more productive. With the goal of working for the client as the focus and a clear process with defined steps and responsibilities, you will note an increase in productivity throughout your company.

You will therefore achieve higher return on investments (ROI) and high profit margins. After all, if your ship is running well, quotas can be met more consistently and effectively. Either through new technology or training or finding bottlenecks in business processes and dealing with them accordingly, operational excellence historically results in high profits for companies.

A large part of the reason for this is that it leads to a reduction in waste. Waste in business refers to time, money, and inventory, that is being lost due to a bottleneck or misstep somewhere in your process.

For example: instead of spending more time and money sourcing materials for manufacturing from far away, you may be able to come up with a solution closer to home. You just hadn’t had time to consider this until you sat down with the goal of operational excellence and your processes in hand.

And finally, because you are reducing waste and time, you can start focusing on bigger initiatives thanks to operational excellence.

You can trust that your process is being followed by your employees, and they can do so independently. They no longer require a manager to be constantly helping them, if the processes are clear and the technology is up-to-speed.

Imagine how much time you gain back to focus on product improvement or additional services you can offer to clients as a business owner looking to expand. Continuous improvement is therefore constantly a focus of your company, allowing you to grow steadily and successfully thanks to the operational excellence philosophy.

How do I achieve operational excellence?

Having understood why you want to achieve operational excellence, it is now time to learn how to do so. There are five basic principles for operational excellence:

• Eliminate waste (time or cost) and any variation from the standardised processes
• Optimise all process flow and output based on customer needs
• Always involve and empower employees, so they can also understand that it is customer-driven
• A bottom-up approach so that each time you analyse your processes from details to bird’s eye view to find where you can improve

“Everyone in your company should be focused on operational excellence and bringing value to your customer, so everyone in your company should be able to understand your processes.”

Colin Claverie

Product Owner – Spark, Netcall

And there are at least three methodologies you can follow to achieve the above five requirements:

Lean manufacturing

We’ve mentioned it elsewhere in our blog about process improvement methodology, but the main purpose of lean manufacturing is to eliminate all waste in your production by focusing on process tasks that add value.

The goal is to avoid or fix all the bottlenecks in your business processes that may be causing waste. This leads to an improvement in the quality of your product or service as a company whilst reducing costs.

Lean manufacturing traditionally identifies the areas where you can find waste in your process as the Seven Wastes:

• Transportation – any transport that does not add any particular value to your product should be removed from the process, and alternative options found.
• Inventory – this refers to unprocessed inventory that is sitting in storage, which itself will also cost you.
• Motion – actual actions taken by either humans or machines that can be minimized. Anything from smaller distances to utilizing more machinery, and also taking good care of your workers and equipment.
• Waiting – minimize any type of waiting that takes place throughout your business process as much as possible. Whether it is sending an invoice, shipping a product, or a confirmation email – it needs to be as short as possible.
• Overproduction – this leads to the unprocessed inventory mentioned previously, and the time and costs of making it are never going to return to you.
• Over-processing – any value added that does not actually help the customer in any way. This includes anything from aesthetic choices that are not reflected in the final product to overly long meetings to discuss the product. Both are time and money that do not add value and that will not be returned via customer payment.
• Defects – avoid as much as possible with a streamlined process, anything that requires re-doing any part of your process for customer satisfaction. By the time you have to redo things, you have almost certainly lost that customer entirely.

Six Sigma

The second common methodology utilized to achieve operational excellence is Six Sigma. The goal here is to strive for perfection as much as possible, to arrive at the highest level of customer satisfaction through the elimination of variation.

The two principal approaches are known by their acronyms: DMAIC and DMADV. The latter is used when the situation is dire and requires a complete overhaul of the processes, so it will not be covered in this article.

DMAIC, typically used to improve an existing product or service in the manufacturing stage, stands for:

• Define – state the problem, for example, customers are complaining about shipping times.
• Measure – with the above issue in mind, you take a look at your data and existing processes to find what works and what does not.
• Analyse – having measured the above, you can analyse where the issue lies. Following the shipping issue from the Define step, you can come to the realization that your current business cannot take on the burden of shipping.
• Improve – having found the issue, you now come up with solutions and implement them on a smaller scale at first. An example could be utilizing a third-party courier for shipping to ensure speedier arrival times for your customers.
• Control – you test your solution and adjust accordingly. You try out different third-party couriers until you find the one that works best for your needs and budget. And you keep an eye on it to ensure you’re constantly improving.

Kaizen

The third methodology is kaizen, which means continuous improvement in Japanese. Its purpose is to constantly implement positive changes to workplace processes, as these will lead to positive results.

It also has a strong emphasis on teamwork, as employees work together to achieve success via constant, small changes that over time result in operational excellence. All employees must participate for it to truly work, and the change must absolutely be a constant. It is not enough to simply change one part and move on.

The role of Liberty Spark and process mapping in operational excellence

We’ve been talking a lot about processes and evaluating your processes as part of the steps to achieving operational excellence. The way to analyse and review your processes is to visualise them with a process map.

It is thanks to these maps that business leaders are able to find the bottlenecks and spots to continuously improve as an organisation. Without mapping the process, you do not know what is happening when, where, how, why, or by whom. Process maps answer these questions and are absolutely crucial when the time comes to evaluate your operational level as a business.

Liberty Spark is our process improvement solution which takes process mapping into the digital age. Our cloud-based software is collaborative and easily understood by all. Unlike other tools which rely on dizzying diagrams or complicated notation, at Spark our goal is simplicity in your process maps.

We’d love to help you achieve operational excellence via process improvement – you simply need to get in touch.