Operational Excellence is the execution of the business strategy more consistently and reliably than the competition. Operational Excellence is evidenced by results. Given two companies with the same strategy, the Operationally Excellent company will have lower operational risk, lower operating costs, and increased revenues relative to its competitors, creating value for customers and shareholders. It may more simply be interpreted as "Execution Excellence." Some interpretations of this management philosophy are based on earlier continuous improvement methodologies, such as Lean Thinking, Six Sigma, OKAPI and Scientific Management. However, the focus of Operational Excellence goes beyond the traditional event-based model of improvement toward a long-term change in organizational culture. Companies in pursuit of Operational Excellence do two things significantly differently than other companies: they manage their business and operational processes systematically and invest in developing the right culture. Operational Excellence manifests itself through integrated performance across revenue, cost, and risk. It focuses on meeting customer expectation through the continuous improvement of the operational processes and the culture of the organization.
Key Components
There are two components fundamental to Operational Excellence: an integrated Management system and a culture of Operational Discipline. The first component, the IMS, consists of a framework of processes and standards that define where the company is going, identify the risks to getting there, mitigate them, manage change, and continuously improve. Having one single, integrated management system reduces overlap, redundancy, and conflict. Early adopters of this practice have been companies such as Exxon and Chevron utilizing Operations Integrity Management System and Operations Excellence Management Systems, respectively. The second component, a culture of Operational Discipline, is commonly described as doing the right thing, the right way, every time. This culture is built upon five guiding principles developed from the United States Nuclear Navy, a high reliability organization. Those principles are integrity, questioning attitude, level of knowledge, watch team backup, and formality. These values are used to identify the behaviors expected of each and every employee and how they support the organization's mission and outcomes.
The OKAPI method was created by Organizational Intelligence experts Iris Tsidon and Maya Gal. Their system incorporates the use of a methodology of SMART KPIs.
S – Specific: the more precise the KPI, the greater its value, and the more correct the focus it provides us. It is important that the KPI direct us towards what we want to achieve.
M – Measurable: a KPI is supposed to measure actions, not behavior.
A – Achievable: challenging but attainable
R – Relevant: KPIs need to be relevant to the objective we want to achieve, and contribute in a significant way to the organization's success.
T– Timely: Every assignment must be scheduled with a defined time table for completion
The OKAPI method identifies the main challenges facing companies striving for operational excellence: ;Disconnect ;Lack of progress ;Unable to change to stay competitive ;Data is too complicated to understand easily ;No coherent management plan
Flawless Execution (FLEX) Methodology
Also known as PBED the FLEX methodology is an iterative IMS designed by fighter pilots to achieve operational excellence in combat, the methodology was adapted to a business practice in 1998. Elements of the methodology are utilised in the agile manifesto commonly used by software developers. As an iterative process it values adaptation of strategy to real world influences through the practice of debriefing. Debriefing is a tool utilised by organisations to drive cultural change, specifically "Nameless and Rankless" where who are and what your position is in an organisation is irrelevant when assessing results and developing solutions:
Plan - Establish a long term strategy focused on a common purpose. A High Definition Destination then follow the six steps:
1. Set a clear, measurable and achievable team objective aligned to your HDD 2. Identify the threats and risks to achieving the objective 3. Identify the resources required to mitigate the threats 4. Apply lessons learned 5. Develop individual objectives and tasks that align to the team objective 6. Contingency plan.
Brief - Communicate the plan to the execution team
Execute - Execute the plan and focus on objectives
Debrief - Measure the result of daily execution vs the plan, conduct a root cause analysis and adapt the objectives
Philosophically individuals practising Operational Excellence within an organisation should champion simplicity over complexity. In practice this should see the self awareness exhibited around errors and mistakes in decision making be rewarded, on the basis the lesson is learned and applied, leading to continuous improvement of day to day practice and end result.
