Today’s employees are searching for their purpose. Furthermore, the increased adoption of technology, evolving consumer behaviors and expectations, and changing societal priorities are pushing organizations to look into starting operational excellence initiatives.
A Gartner survey found that 31 percent of organizations’ marketing budgets are allocated toward operational excellence. The same survey shows that organizations with a strong pursuit of OpEx were 43 percent more likely to exceed their operational performance goals.
Operational excellence is an approach that requires organizations to find ways to improve their business processes and systems continuously. The “excellence” in operational excellence can also refer to finding ways to minimize waste or errors, improving employee productivity, constant improvement of business processes, and building better experiences for both employees and customers.
Successful implementation of an OpEx model hinges on creating a system that integrates seamlessly with these four building blocks, according to Operational Excellence Consulting:
When done well, OpEx enables organizations to outpace the competition, embrace a more impactful shift in their culture and perspectives, keep employees engaged, and drive organizational agility.
Operational excellence lets your organization deliver more value to your clients. That’s because you’re taking steps to minimize or eliminate redundancies and waste of resources, which you can then allocate to improving your products or services. This also allows you to provide unparalleled customer experiences.
With OpEx, you empower your employees by giving them the resources they need to solve problems. Having empowered and engaged employees helps create a strong foundation for a healthier organizational culture, which plays a crucial role in attracting and retaining staff.
Lastly, OpEx is vital for organizational growth. Because you’re leveraging standardized processes and continuously optimizing them, you now have a template that you can use to run your business, regardless of whether you’re changing locations or expanding your operations.
OpEx enables your organization to optimize its scalability. That’s because your C-level executives, managers, and key decision-makers can focus on finding ways to grow your organization, such as attracting new customers and nurturing relationships with existing clients.
OpEx streamlines your processes and makes them repeatable. You can use these optimized processes to chart your expansion plans or modify your strategies to align with changing market conditions or consumer demands.
Optimized growth can also mean linking disconnected processes using technology to make decisions from a more holistic perspective. According to McKinsey's Ferran Pujol in an episode of McKinsey Talks Operations, doing so enables organizations to broaden the scope of their decisions, making them likely to generate a more significant impact.
OpEx puts an emphasis on respecting employees and empowering them to work toward a similar goal. They’ll be equipped with the knowledge and skills needed to complete their tasks, solve problems, and help you achieve your organizational goals.
Because OpEx makes your processes more efficient, you can lower common operational risks, such as operating costs, while improving your organization’s revenues and bolstering your business strategy.
With OpEx, you can clearly define the roles within your organization, which promotes greater transparency and accountability. This also helps you set expectations and evaluate each employee’s performance more effectively.
The benefits you gain through OpEx can vary, depending on your business type or the industry you’re in. Some additional benefits of OpEx may include:
According to Coffey Testing CEO Dawn Watt, there are five pillars of operational excellence. They are as follows:
According to Watt, before implementing OpEx initiatives, you must first understand your organization’s purpose, who your target audiences and competitors are, and what you’re looking to solve with your products or services. Once you’ve identified your purpose, you’ll get a more solid grasp of how you can improve it and achieve excellence.
Most organizations tend to have a diverse team, with people bringing different capabilities to the table. While diversity in an organization is certainly advantageous, this can lead to different outcomes, depending on who you’re giving resources to, notes Watt. She recommends that you keep your structures basic and free of jargon to reduce the risk of miscommunication.
People are the most important part of any successful OpEx initiative. To ensure that everyone is working toward achieving the same goal, your organization must treat all employees fairly. You also need to ensure that all employees clearly understand their roles and responsibilities and provide resources for ongoing staff development.
According to the BPM Institute's Marvin Wurtzel, this pillar can be broken down into seven areas in which organizations can excel. These are:
Tools are essential for executing your OpEx initiatives. Given the sheer number of tools for OpEx available today, Wurtzel recommends that you go with four main ones to narrow down your options. These are:
OpEx isn’t a perfect solution to business growth. It does come with its fair share of challenges. We’re sharing some of the common challenges faced by organizations planning to implement OpEx initiatives.
When planning to shift to a new model, organization leaders may encounter resistance from employees who are apprehensive about this change. In some cases, you may be up against key figures or stakeholders who are wary of OpEx initiatives simply because they differ from your other successful practices or models.
Overcoming pre-existing beliefs within an organization can be difficult. To combat this, you must secure buy-in from your organization’s key personnel. Through clear and effective communication, your audience can understand what you’re trying to do and encourage them to give their feedback or become active participants in implementing your OpEx initiatives.
Organizational silos pave the way for fractured operations. Each team or department will likely have their own goals and objectives. This can prevent you from gaining a more holistic view of your organization and your needs.
Operational excellence is based on several key principles, which we’ll discuss in more detail below.
Through OpEx, organizations can foster an environment that promotes innovative thinking and experimentation, as well as constant learning and adaptation in all aspects of their organization.
With OpEx, organizations can define and monitor clear performance metrics, allowing them to effectively monitor their progress, address bottlenecks, and assess the impact of their OpEx initiatives.
OpEx fosters teamwork, creativity, and a drive to exceed benchmarks or expectations. Through OpEx, organizations focus on quality, efficiency, and continuous improvement.
OpEx is all about optimizing business processes and systems. With streamlined and optimized operations, it’s now relatively easier for organizations to identify areas that need improvement, reduce or eliminate waste in the production process, and focus on delivering value-added experiences.
With OpEx, the customer is at the core of everything your organization does. This means that your processes, products, and other activities are designed to ensure customer satisfaction or exceed their expectations.
OpEx helps organizations leverage data and use it to gain valuable insights to make more strategic plans, optimize resource allocation, and make more informed business decisions.
When implementing OpEx initiatives, there’s a focus on investing in improving your employees’ skills through training and development and finding solutions to keep them engaged.
Continuous improvement is a component of OpEx that focuses on sustained growth and progress. It requires organizations to regularly assess their business processes and offerings to identify growth opportunities. Meanwhile, OpEx is an approach that has a broader scope that covers your entire organization. It focuses on aligning your processes and systems to make them more efficient, reduce waste, and provide more value to customers.
Aside from the Shingo Model, three other popular methodologies for implementing OpEx exist. These are:
This systematic method focuses on continuously working toward reducing or eliminating waste from the manufacturing process.
Six Sigma refers to methodologies and tools that organizations use to enhance their processes, improve the quality and efficiency of their business processes, and reduce errors.
The Kaizen approach is focused on minimizing waste, improving teamwork and productivity, and striving for sustained organizational improvement.
Toyota started implementing lean manufacturing principles, which helped them uncover benefits such as:
In the healthcare industry, OpEx can enable organizations to provide better customer experiences by reducing wait times and improving how they track patient outcomes.
OpEx in retail leverages digital tools and processes to boost efficiency, reduce operational costs, and provide more valuable services to customers.
Operational excellence in the financial services field can help organizations manage risks more proactively, provide more effective services, and meet changing customer expectations.
Organizations that implement OpEx can have a more holistic approach to how they optimize their processes, according to a McKinsey report. Moreover, OpEx can help make their production systems more stable.
Other notable examples of OpEx in different industries include:
By implementing a lean production system, McDonald’s was able to significantly reduce its food waste by as much as 25 percent.
Through Walmart’s just-in-time inventory system, it was able to reduce its inventory costs by minimizing its inventory size.
Amazon’s automated warehouse system has helped the eCommerce giant reduce its customer order processing time by up to 25 percent and speed up its identification and inventory storage by up to 75 percent.
While it’s likely that organizations will still follow process fundamentals, experts predict that advanced technology will augment these fundamentals. This combination will help organizations bolster their capabilities, allowing them to implement customer-centric transformations. Furthermore, according to a recent Alcatel-Lucent Enterprise report, senior management leaders are prioritizing the adoption of innovative technologies to augment their organizational capabilities, equip them to overcome new challenges and achieve desired OpEx results.
In the coming years, organizations looking to implement OpEx initiatives will also likely focus on sustainability and social responsibility initiatives. This means that they’ll be working toward developing operations and processes with more sustainable impacts and will optimize these to ensure that new objectives, such as addressing issues on resource consumption and working conditions, are addressed.
By implementing a digital Lean approach, organizations can reduce operational costs by up to 30%. Lean digital is the practice of using digital tools to optimize your business processes and minimize the risk of offering products or services that are defective or substandard. Lean digital takes traditional Lean methodologies further by adding a technology component, such as collecting data and utilizing it to provide customers with personalized offerings.
Agile OpEx is a modern strategy that blends the principles of Agile, a methodology usually applied in project management and software development projects, with OpEx methodologies to enable organizations to continuously improve their processes while adapting to rapidly changing business environments. This new methodology is vital in today’s dynamic business landscape, given that organizations should be able to quickly adapt to changes in customer needs, market conditions, and new technologies.
Digital transformation and OpEx go hand in hand. Today’s CIOs are leveraging technology to achieve operational excellence. More than just embracing groundbreaking technologies to enable digital transformations and OpEx, CEOs play a key role in pushing the adoption of operational excellence initiatives within their organizations. Aside from these, you can use the tools below to implement and maintain sustainable organizational improvement.
A 2022 Gartner survey reveals that 80% of executives think that automation can be applied to various business decisions. As the use of automation continues to grow, organizations are stepping up and redefining the way they use technologies like artificial intelligence within the context of their automation strategies.
Automation reduces or eliminates the need for organizations to perform manual or repetitive tasks. Some business automation tools and methods you can use for OpEx include:
IT automation enhances organizational efficiency and enables optimization to accelerate digital transformation. Using IT automation tools reduces the need to interact with IT systems manually, allows you to gain real-time insights, and lets you provide customers with better experiences.
Seamless integrations enable organizations to gain a competitive advantage over other companies. Integration tools to facilitate OpEx include API management, application integration, and enterprise messaging.
Kissflow can help you achieve operational excellence by bridging the gap between your IT department and other teams. As a low-code platform, Kissflow doesn’t require organizations to use up a lot of resources for implementation and usage. Moreover, through solutions built using Kissflow, you’re empowering your teams to build custom solutions for their problems. This, in turn, allows you to respond more quickly to any issues that arise and foster a culture of innovation and creativity within your organization.
“Companies that follow operational excellence principles to guide technology adoption, as opposed to prioritizing by impact and visibility, achieve more impact,” according to Ferran Pujol, a McKinsey partner in the Santiago office, during an episode of McKinsey Talks Operations.
The path to adopting operational excellence is an arduous one. It requires careful planning, reevaluating your strategies, and shifting your organization’s perspectives and culture. You’ll also need to reassess your principles and tailor them to align with the core principles of operational excellence, which include data-driven decision-making, continuous learning, and employee empowerment.
However, while challenging, embracing operational excellence allows you to optimize your business processes and workflows, transform your organization into a lean one, and pave the way for long-term sustainable growth while maintaining your competitive advantage.