7-Step Guide to Operational Excellence
Published on : Thursday 02-12-2021
Operational excellence is no longer the exception, it is the expectation from consumers.
If you were to ask a hundred different business people what operational excellence is, you’d probably get a hundred different answers. That’s because it can mean many different things depending on the business and the sector. But no matter those differences, operational excellence in general means leveraging operations to achieve business growth.
That’s a pretty broad definition. And it can be put into practice in a lot of different ways depending on the specific business and sector. That’s because true operational excellence requires constant monitoring and re-evaluation of an enterprise’s business operations; but we’ll get to that later. In this paper, we’ll provide seven practical steps that you can use in order to kickstart your operational excellence initiative, no matter your industry.
Discover & Ideate
Whether you are undertaking your first pass through operational excellence, or you have been through the cycle many times, your starting point should always be with “what is” rather than “what we thought”. Therefore, this first step starts with discovery.
Discovery can be undertaken in a number of ways using varying techniques. For example, if information is buried in systems some process mining automated discovery may be appropriate.
In other situations, the information may only exist in someone’s head, in which case tools to quickly capture and document the process can be used. Remember, in many cases you may eliminate processes or steps, so there’s no need to worry too much about accuracy – as long as people are all using the same terms in the same way.
In collecting this knowledge you should also be listening to and soliciting ideas for change; it can be amazing how many great ideas already exist in an organisation, but are rarely voiced.
These ideas will be especially interesting if your operational excellence program is working in harmony with a business transformation initiative. The goals, objectives, and customer perspectives on transformation serve as great inputs to shape discovery and ideation.
Success at this step looks like understanding how things currently are working, getting an understanding for what the people using the process or system think is not working well and why, and listening to how they might improve it. In other words, starting to get a better grasp of why things need to be done differently.
Benchmark & Validate
The organisational knowledge collected in Step 1 is valuable because it represents reality. But it is also gathered from a relatively short point of view. All too often people undertaking tasks or activities don’t have the full view of how what they do affects what others do or impacts the overall value to the business. It could also be true that numerous people who are performing the same tasks, either in different offices or geographies, have evolved their own ways of working, causing divergence in processes and inconsistencies in outcomes.
Given that you’re seeking to improve the way you work, it’s crucial to test and validate that what you’re seeing is in fact what’s really happening; for example benchmarking is an important method of systematising and assessing the findings from Step 1. Benchmarking can be addressed in several ways. In the first instance, where the process or activity is non-differentiating, you can benchmark around others in your industry in what is sometimes misleadingly called a “Best Practice” – the reality is that it means we are only as bad as everybody else! Another way you might benchmark would be to compare the way top performers work with those who perform at a lower level, ensuring that you don’t just standardise on the easiest or expert versions of the process, but leverage what your best people do, even if and when it seems illogical. The third way you should consider benchmarking is with those outside your industry but who are known to be excellent in the area you are focussing on. As an example, benchmarking airlines on customer service/ experience would probably not make sense, however if quality and engineering safety were the focus, then even a car manufacturer could find it useful.
As you identify and generate risks, opportunities, and issues, you can validate your findings and suggestions with the appropriate stakeholders, getting advance buy-in for change and ensuring that what you are about to undertake is going to be appreciated and valued. This validation phase is often neglected in many change programs, but to miss it is a costly mistake. You are enacting change on a moving target, so this step helps ensure that priorities have not changed, and that the work you are about to undertake will still be relevant. This is also a great point to set the baseline measures and understand and validate the metrics by which success will be gauged.
Evaluate & Quantify
Benchmarking and reviewing is necessary and valuable; however this can still generate lots of interesting ideas and opportunities that may not be right to focus on at this time. Fixing issues with monthly financial reporting may look like low hanging fruit and get people excited, but if the overall driver of your project or program was customer service or revenue generation, then these are the areas you need to work on. Therefore, you need to take time to evaluate potential ideas and prioritise them. In reality you will rarely have enough time to act upon as many ideas you’d like to, so making sure the best ones receive the most effort is vitally important.
Of course, prioritisation also means that you need to quantify the time, cost, and effort to implement the revised practices or processes.
Quantification combined with an understanding of the metrics from Step 2, enables us to understand how compelling our business case is. It is amazing the number of times management agrees with the importance as per Step 2, but after being presented with a business case, start walking backwards from their original thoughts. In these situations it is often useful to quantify not just the costs and benefits, but also the cost of doing nothing. Sometimes when one extrapolates the pain over time, people see the need for change differently.
Success in Step 3 looks like identified opportunities that have been validated, evaluated, and quantified with the appropriate stakeholders to confirm buy-in and ensure that what you are about to undertake is going to meet business needs.
Simplify & Standardise
Having worked out what you’re going to change and why, many organisations jump straight in and start to create new processes or automate existing ones. However, sometimes this just results in delivering the wrong things faster! Instead, the first implementation stage in improving the way you work, is to consider how to simplify the work by asking if there are steps and activities that you don’t actually need to do – classic waste elimination.
Once you have identified your preferred processes and practices and simplified them as appropriate, you can now consider standardisation. It is important to be aware of geographical and cultural differences when doing so. Often we see organisations trying to impose a standard process across all regions despite potential legal and regulatory differences. If this could be an issue to you, then consider abstracting. Often you can have a global standard process, e.g., order to cash, but then have local procedures to operate it, thus getting both standardisation and localisation.
Generate & Automate
Having worked out which parts of your organisation, processes, and practices to focus your improvement efforts on, you can now think about streamlining the work. Often this will include some sort of workflow or process automation. If the previous steps have been undertaken using appropriate tools then it is possible that some of the processes can simply be exported and automated. However, there are caveats to doing this.
For more complex processes, it is quite common for people to consider automating them in a BPMS tool, however typically this automation will only address 70% of the cases going through the automated system. Many will then look at using a less sophisticated workflow system to assist people in dealing with the other 30%, but again life is more complex and in the end 10% of those cases may wind up being handled manually.
This challenge illustrates the value of decoupling analysis from your implementation tool. Analysis from automation vendors typically only addresses the parts they automate, removing the transparency across the entire process, or from processes enacted across multiple systems.
In some cases, you will not be able to use simple push-button type automation. Instead, you may need to get custom systems built or want processes supported by non-automation systems. Traditionally, a business analyst would get involved at this point and start working on requirements. However, that process takes too long, costs too much, and often misses the target. Many organisations now find that using process documentation as a requirement is more effective. Certainly, there will be an additional level of detail required by systems administrators, but having them work in the same environment and sharing the same data closes the gap between business and IT and decreases the risk of miscommunication.
This approach to requirements has been proven to be very effective, and indeed there are organisations that suggest it was only after they switched to process-based thinking that they were able to bring requirements under control.
Lastly, when thinking about automation, don’t assume that everything needs to be heavily specified, planned, and implemented. In some cases if you provide staff with simple and easy to use workflow tools, they will create the systems they need to improve productivity by themselves.
Share & Govern
Simplifying, standardising, and automating are all useful steps to take, but only if people know about it! Many times great new ideas, processes, or systems fail to deliver the expected results, because the people who needed to know about them, didn’t. It’s not just about information sharing, it’s also about staying in compliance with current regulations. There are processes in place for good reason, usually so that your company remains in compliance in order to avoid risk of penalties and fines, but employees can’t adhere to regulations if they don’t know how to complete work in a way which supports this.
People are not machines – if you want people to act in a prescribed manner, they need to understand why they are being asked to do an activity a certain way, and also to be involved in the decision making process. As a part of your overall operational excellence initiative you should consider how you will push accurate information to people in a way they can easily access and consume.
By ensuring that the right information is available to the right people at the right time, it is possible to deploy practical governance. How often have you heard, “It wasn’t my fault, I didn’t know we did it that way,” or “Nobody told me things changed”! In an increasingly regulated economy, you need to be sure that certain things are known by all, the risks understood, and that as an organisation you have taken all reasonable steps to remain compliant – and documented these procedures for any audits.
From an operational excellence perspective, governance is not just about regulation and compliance, it is also about consistency. Creating great experiences while serving your customers requires consistency of delivery and performance.
Monitor & Measure
Improvement and excellence projects are only effective when they deliver the expected results. To this end, you need to ensure that while you may implement new metrics for measuring results, you retain some of the old measures, too. It is when you compare the results of now vs. then that you can see the differences. Beware not to retain all of the old metrics as many will no longer be relevant.
You also need to ensure that you have appropriate monitoring mechanisms in place. Frequently, success occurs only when people see that management is watching. As management’s attention wanders, people go back to the old ways of working.
It is worth adding customer-related metrics in this step, as ultimately, operational excellence in today’s world is all about delivering the goods or services customers want, when they need it, where they need it, and at a price they are willing to pay. In some cases, this may mean your process or operational costs go up and not down, which makes sense if you are suffering from lost deals or customer attrition. In these cases, measure financial success not by reduced costs but instead by increased revenues or profits.
Success in this step can be thought of as “Maintaining the Gains”.
These seven steps are meant to serve as a practical guide for any operational excellence initiative. Although they’re broad, they’re applicable to every industry and sector because you can adapt the principles to fit the needs specific to your current situation.
Operational excellence is no longer the exception, it’s the expectation from consumers. To remain competitive in your market, you need to take a considered and intentional look at your business and make changes where appropriate. These seven steps will set you on the right path to achieving operational excellence.