By Diana L. Mirakaj
Historically, operational excellence has beenassociated mainly with optimizing business processes, generally related to productionand manufacturing. Gauging its success was based predominantly on an ability tosatisfy customer demand, improve quality, and bolster overall productivity and efficiency.
Regardless of economic challenge, no enterprise wouldever encourage inefficiency. Can you imagine what the competitive landscapewould resemble if business leaders operated with no thought given to performanceor winning market share? Forget agility?survival alone would border onimpossible.
While some aspects of operational excellence have not changed over time? suchas a consistent nature of achieving the highest level of efficiency possible?thetrifecta of ?better, faster, cheaper? has broadened to encompass far morestrategic paths.
Operational excellence provides managers with a sustainable advantage by givingthem the ability to continuously improve an organization?s decision, investmentand asset performance; its service delivery; and its human resourcescapabilities. Operationally excellent enterprises possess the processes andstructures that give them the visibility, control, tools and managementpractices necessary to drive greater operational effectiveness and efficiency.In other words, operational excellence requires convergence?the art and scienceof managing business and technology as one.
But operational excellence is an easily distorted term.Business managers often use it to describe their philosophy and strategicinitiatives. Sadly, it is often little more than a set of objectives andaccompanying performance metrics.
Delivering continuous improvement in the marketplaceamong 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 isever-present, operationally excellent companies relentlessly build theircapability to tailor their business processes, architectures, standards,partnerships and human resources to continuously improve value for theircustomers.
Enterprises that achieve operational excellenceestablish formal definitions and standards for their business processes, linkthem with their strategic imperatives, and empower individuals to act in anindependent but coordinated fashion to improve the work within their span ofauthority. Being operationally excellent requires a focus on managementcapabilities to develop and propagate standards, to coordinate decision making,to optimize service delivery and to manage the workforce.
Orchestrating these capabilities?especially in therapid execution cycles required by management?requires a unification of thebusiness and technology management disciplines. In other words, convergedmanagement must become institutionalized and part of an enterprise?s culture, andmust be organized around three core characteristics: standardized work;measured performance that drives continuous improvement, which is necessary forachieving ever-greater improvements in efficiency and effectiveness; and localexecution.
StandardizedWork: Companies must define standardized component workprocesses and services that make up the company?s value activities. Thesedefinitions must be dynamic and visible through the value chain that connectsan individual activity or service to the end customer. The standards must beconstructed around the concepts of workforce management, including internal andexternal resources and suppliers.
Finally, a networked governance model combined with arepeatable and consistent decision-making capability is necessary to bring theoperation to life. Standardization is the force that enables various pieces ofthe workforce to execute independently, but in a coordinated manner.
MeasuredPerformance: Operational excellence relies on afoundational capability to measure outcomes and business value?from anend-to-end view and within each standardized work process or service component.This requires two distinct but related classes of information: operational andperformance. Operational information is the symbiotic partner of work processesand services, defining the activities and services that deliver value to thecustomer. Performance information quantifies the results of the work inbusiness value terms to which the customer can directly relate.
Operationally excellent companies have a standardizedset of architectural constructs that enable performance information to bedefined, measured and disseminated along the value flow, where it is consumedby the process, decision-maker or service provider directly responsible for?or primarilyaffected by?its performance.
LocalExecution: Local execution requires distributed and coordinatedauthority. Operationally excellent enterprises must adopt flexible anddistributed forms of governance and translate their mission and objectives intoeasily interpreted information. These firms must replace traditionalcommand-and-control approaches with mechanisms that facilitate coordinationwithin and across locales.
These mechanisms must provide individuals, groups andunits with the autonomy to improvise and act on local knowledge, whileorchestrating coherent behavior across the enterprise. Processes?the assignmentof tasks and responsibilities?must be supplemented with personalaccountability.
These three core characteristics provide the mechanismsthrough which an enterprise is able to monitor performance and make adjustmentsto maintain optimal productivity and capitalization on agility and innovationactivities. Recognition of abnormal and suboptimal workflows and productivityis critical, particularly in transitional enterprises trying to leverage theirlegacy business and revenue streams to the maximum potential, while also investingin new opportunities that will drive the next stage of their evolution.
Regardless of whether an enterprise is managing anexisting and well-established work process or developing a new product oroperation, ensuring steady and efficient operations is essential to theorganization?s overall fiscal health.
Operationally excellent companies distinguishthemselves amid the establishment of standardized workflows, well-definedperformance measures (metrics) and local execution (giving authority to executeat the point closest to the work being performed). The combination of thesefactors not only gives an enterprise greater insight into its operationalperformance efficiency, but also a greater ability to effectuate correctiveactions and initiate organizational change management to ensure that such?excellence? is sustainable.
Diana L. Mirakaj is chief marketing officer at BTMCorporation, a management solutions provider basedin Stamford, Conn., and a co-author on ThePower of Convergence. Herexperience gives her a singular perspective on the connection between businessstrategy and the value of technology. ? 2012 BTM Corporation