Operational Excellence – an insight
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This is a challenging concept to cover in a simple definition - it goes beyond the level of a methodology, as it became a culture in itself.
Simply put, the operational excellence is an organizational culture on how a company can achieve and sustain great results on the long term, in the free market
As a methodology, it has been a construction over time, with contributions starting from Adam Smith and the ideas of the division of labor, Frederick Taylor and the scientific workflows to increase efficiency, Henry Ford with the conveyor assembly line, Taichi Ohno and Shigeo Shingo with Toyota Production System as the base for lean methodology, Bill Smith and the complementary method of Six Sigma developed in Motorola company to improve quality and customer experience by systematically reducing variation. All this before and more recently recognising and including the People (with all the aspects) as the main cultural contributor to excellence. This construction carries on, as nowadays it reached high level of utilization of Industry 4.0 and digitization on top of the traditional tools, aiming to scaling up quickly and precisely as to maximizing the customer experience.
Therefore, we can say that Operational Excellence is in the same time the culture and the strategy of a company having all employees fully commited, autonomous and pro-active in systematically searching and implementing opportunities to increase the customer value at their level.
So, why Operational Excellence?
Is is less visible, but what companies like Toyota, Disney, GE, Amazon, Apple or Tesla have in common is actually their commitment and execution of Operational Excellence strategies. Most visible about these companies is the fact that they are highly influencial in the market, their sites are great places to work, build, promote and sell the products, up to level of being an inspiration for young people. When it comes to their products, they are a pride for the customers, given the high quality and the amazing user experience they bring along.
From a pragmatic point of view, if we consider the SixSigma approach alone, it had a cumulated saving impact within Fortune 500 companies - out of each 50% declare that they apply this methodology - of more than half a trillion$ over the last 30 years, providing a consistent annual saving of 2% of the total revenue.
Even when a company is in a good shape - relying on solid P&L results, making record profits and having operations looking smoothly, it should still strive to have an agile and efficient staff and processes that are proactively pursuing growth.
The ultimate benefit is that growth might all be funded from savings generated by their Operational Excellence.
Along with this long-term sustainability, a company reaching Operational Excellence will get short-term, though equally important advantages: lower accidents rate, higher skills, motivated and engaged people, less defects, lower down-time, increased utilisation rate, higher quality and competitive pricing, time availability for the management team to focus on strategy, increased resilience in the economic cycles and crisis.
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