Putting the Excellence in Operations
By Diana L. Mirakaj
Historically, operational excellence has been associated mainly with optimizing business processes, generally related to production and manufacturing. Gauging its success was based predominantly on an ability to satisfy customer demand, improve quality, and bolster overall productivity and efficiency.
Regardless of economic challenge, no enterprise would
ever encourage inefficiency. Can you imagine what the competitive landscape
would resemble if business leaders operated with no thought given to performance
or winning market share? Forget agility—survival alone would border on
While some aspects of operational excellence have not changed over time— such as a consistent nature of achieving the highest level of efficiency possible—the trifecta of “better, faster, cheaper” has broadened to encompass far more strategic paths.
Operational excellence provides managers with a sustainable advantage by giving them the ability to continuously improve an organization’s decision, investment and asset performance; its service delivery; and its human resources capabilities. Operationally excellent enterprises possess the processes and structures that give them the visibility, control, tools and management practices necessary to drive greater operational effectiveness and efficiency. In other words, operational excellence requires convergence—the art and science of managing business and technology as one.
But operational excellence is an easily distorted term. Business managers often use it to describe their philosophy and strategic initiatives. Sadly, it is often little more than a set of objectives and accompanying performance metrics.
Delivering continuous improvement in the marketplace among competitors and customers requires enterprises to identify, understand, and create the capabilities, behaviors, and focuses necessary for repeatable, continuous and measurable operational improvement. Recognizing that change is ever-present, operationally excellent companies relentlessly build their capability to tailor their business processes, architectures, standards, partnerships and human resources to continuously improve value for their customers.
Enterprises that achieve operational excellence establish formal definitions and standards for their business processes, link them with their strategic imperatives, and empower individuals to act in an independent but coordinated fashion to improve the work within their span of authority. Being operationally excellent requires a focus on management capabilities to develop and propagate standards, to coordinate decision making, to optimize service delivery and to manage the workforce.
Three Core Characteristics
Orchestrating these capabilities—especially in the rapid execution cycles required by management—requires a unification of the business and technology management disciplines. In other words, converged management must become institutionalized and part of an enterprise’s culture, and must be organized around three core characteristics: standardized work; measured performance that drives continuous improvement, which is necessary for achieving ever-greater improvements in efficiency and effectiveness; and local execution.
Standardized Work: Companies must define standardized component work processes and services that make up the company’s value activities. These definitions must be dynamic and visible through the value chain that connects an individual activity or service to the end customer. The standards must be constructed around the concepts of workforce management, including internal and external resources and suppliers.
Finally, a networked governance model combined with a repeatable and consistent decision-making capability is necessary to bring the operation to life. Standardization is the force that enables various pieces of the workforce to execute independently, but in a coordinated manner.
Measured Performance: Operational excellence relies on a foundational capability to measure outcomes and business value—from an end-to-end view and within each standardized work process or service component. This requires two distinct but related classes of information: operational and performance. Operational information is the symbiotic partner of work processes and services, defining the activities and services that deliver value to the customer. Performance information quantifies the results of the work in business value terms to which the customer can directly relate.
Operationally excellent companies have a standardized set of architectural constructs that enable performance information to be defined, measured and disseminated along the value flow, where it is consumed by the process, decision-maker or service provider directly responsible for—or primarily affected by—its performance.
Local Execution: Local execution requires distributed and coordinated authority. Operationally excellent enterprises must adopt flexible and distributed forms of governance and translate their mission and objectives into easily interpreted information. These firms must replace traditional command-and-control approaches with mechanisms that facilitate coordination within and across locales.
These mechanisms must provide individuals, groups and units with the autonomy to improvise and act on local knowledge, while orchestrating coherent behavior across the enterprise. Processes—the assignment of tasks and responsibilities—must be supplemented with personal accountability.
These three core characteristics provide the mechanisms through which an enterprise is able to monitor performance and make adjustments to maintain optimal productivity and capitalization on agility and innovation activities. Recognition of abnormal and suboptimal workflows and productivity is critical, particularly in transitional enterprises trying to leverage their legacy business and revenue streams to the maximum potential, while also investing in new opportunities that will drive the next stage of their evolution.
Regardless of whether an enterprise is managing an existing and well-established work process or developing a new product or operation, ensuring steady and efficient operations is essential to the organization’s overall fiscal health.
Operationally excellent companies distinguish
themselves amid the establishment of standardized workflows, well-defined
performance measures (metrics) and local execution (giving authority to execute
at the point closest to the work being performed). The combination of these
factors not only gives an enterprise greater insight into its operational
performance efficiency, but also a greater ability to effectuate corrective
actions and initiate organizational change management to ensure that such
“excellence” is sustainable.
Diana L. Mirakaj is chief marketing officer at BTM Corporation, a management solutions provider based in Stamford, Conn., and a co-author on The Power of Convergence. Her experience gives her a singular perspective on the connection between business strategy and the value of technology. © 2012 BTM Corporation