In the current era of business, uncertainty seems to be the norm. Despite leaders pushing for a leaner and more agile organizational structure, most companies are slow in transforming. Challenges appear at every turn, from persistent hiring shortages to supply chain concerns and fluctuating customer demand. Amidst this intricate backdrop, the concept of “What Is Operational Excellence” stands out as a potential guiding light, offering a pathway to navigate these challenges and secure a robust foundation for success.
Part of the problem arises when organizations fail to track processes or key performance indicators, creating a divide between the strategic objectives needed to be achieved and the execution.
A study by Procesowcy found that while 69% of the firms surveyed reported having established processes, only 4% reported monitoring and controlling them. Thus, adopting Operational Excellence is critical to reducing costs and creating a resilient, adaptable organization.
Operational Excellence is the philosophy of understanding the importance of continuously improving the organization’s operations. Operational Excellence is a constant endeavour involving numerous techniques and practices that can help sustainably improve key performance metrics. Operational Excellence is often confused with continuous improvement. The two are different. While continuous improvement is an ongoing effort to improve an organization’s systems, operational Excellence is achieved by integrating the passion for enhanced efficiency into the organization’s culture, making it the new normal.
Operational Excellence is not limited to productivity improvement or cost reduction, instead involves enhancing the work culture and building high-value products and services to ensure the long-term sustainable growth of the organization. When companies aim to achieve operational Excellence, develop efficient systems with built-in agility to help them pivot and address challenges as soon as they arise, keeping everything sailing smoothly.
Let’s look at several advantages of the Operational Excellence framework.
Operational Excellence enables the company to reduce the time & resource allocation required to achieve its goals. The operational excellence approach is data-driven, with a constant eye on measurement and assessment; this enables the company to improve efficiency and resource allocation and, over time, save money and boost the margins & profits for the organization.
Operational Excellence helps companies streamline processes, systems, and tools adding efficiency to their operations, resulting in increased production capacity and opportunity to explore business expansion. Operational Excellence also helps systemize employee training, customer interaction, and product development, resulting in better customer engagement & experience. Large companies like McDonald’s or Starbucks strive for operational Excellence by using the same processes across various locations, enabling them to deliver a consistent and replicable experience enabling growth & scalability.
Striving for Operational Excellence enables employees to identify and solve problems quickly. When employees proactively work to fix problems, the product team can focus on new product/ service development rather than maintaining or fixing the existing products/services.
Empowering employees is fundamental to operational Excellence. Empowered employees are more likely to exhibit more ownership; experience increased job satisfaction leading to increased productivity. Operational Excellence also helps free employee time to focus on honing their core competencies and acquiring new skills. In addition, employees also have more bandwidth to focus on activities that drive value, driving up customer satisfaction. Especially crucial in industries such as retail and hospitality, which can boost the top and bottom lines.
Operational Excellence helps business leaders identify a treasure trove of data available from Warehouses, Factories, and stores. When companies strive for operational Excellence, the data from the operations become more accessible. Better utilizing data helps drive decisions that can help create value over the long term.
Operational Excellence enables managers to delegate better and solve problems, freeing up their time to work on the long-term growth prospects of the business. With a lesser need to address day-to-day issues, Managers can focus on other aspects of the company, such as gathering market intelligence, fine-tuning marketing, Product enhancements and new product ideas.
The pandemic has shown that companies can face unprecedented challenges despite being prepared. A survey showed that nearly 78% of all businesses were impacted directly (lockdowns) or indirectly (supply chain challenges, lower demand) by the pandemic, forcing them to act in both proactive and reactive ways. There are countless examples of businesses reinventing themselves to meet the challenges, but just as many companies went out of business. While the pandemic’s impact has almost subsided, it has left a strong sense of uncertainty in its wake, making operational Excellence imperative. Operational Excellence enables companies to redesign their operations & supply chains to protect their business against potential shocks and disruptive events. Businesses that pursue operational Excellence are better equipped to minimize disruptions.
As operational Excellence helps organizations cut costs, improve the quality of their products and services, and streamline processes, yielding higher profits. A study by the Economist Intelligence Unit found that operational excellence initiatives undertaken by an organization, such as boosting efficiency, understanding big data, and making internal communications transparent, can result in higher profits.
The current operating environment remains challenging and dynamic, forcing firms to adapt to constant change. Operational Excellence is a framework that can adopt to be proactive rather than reactive, crucially enabling them to tackle the ever-evolving business environment. Creating a state of operational Excellence also has other benefits, including enhancing the employee & customer experience, reducing costs, streamlining processes, and future-proofing the organization.