Change, fast and slow
In every business, there is always at least one area that could be improved. But how exactly does effective operational excellence and meaningful change take place within an organization? Sometimes it can occur through a major new initiative, a change of focus, or some other internal or external factor leading to upheaval within the business.
But most of the time, change happens in a much less overt way; it happens in small increments, potentially over a long period of time. Some of the most lasting and impactful changes to the way a business operates, or the environment it operates within, happen more gradually. Instead of a sudden shock, managers and employees may one day realize significant changes have occurred bit by bit. Operational excellence—leveraging operations to achieve business growth—is an example of this type of change.
Defining effective operational excellence
At its heart, effective operational excellence is a discipline which aims to balance the triad of people, process, and technology. This balancing act generates benefits to both the top and bottom lines of the business, and delightful customer experiences in the process. It is no less essential to the survival and success of organizations than the big ideas of business transformation; both must work in tandem.
Some useful guiding principles can be found in the wide variety of existing operational excellence methodologies. In the same way that every organization has its own specific cultural requirements and desired outcomes, every operational excellence methodology offers a slightly different approach to continuous, positive change.
Even a quick online search will bring up dozens of methodologies, so for the purposes of this blog we have summarized four of the most popular and successful. Then, we can examine what they have in common, and why process management is crucial to success, no matter which methodology you prefer.
Methodology #1: Lean Manufacturing
Lean manufacturing, as suggested by the name, focuses on systematically eliminating waste in a production system and on delivering value to the customer. As the concept of “waste” on its own is quite intangible, the methodology breaks it down into eight separate wastes. Every process in a production system has these eight wastes, so recognizing and reducing or eliminating them is crucial to achieving operational excellence through this method. The eight wastes of Lean are:
- Defects: Extra effort caused by rework, scrap, and incorrect information
- Overproduction: Producing in excess of what is needed for business growth
- Waiting: Wasted time waiting for the next step in a process
- Non-Utilized Talent: Under-using peoples’ talents, skills and knowledge
- Transportation: Unnecessary movement of products or materials
- Inventory: Excess products and materials not being processed
- Motion: Unnecessary movements by people (for example, an extra twist of the wrist on every item many times a day can lead to a repetitive motion injury, with resultant lost time and disability costs.)
- Excess: Excess processing might be extra steps in a process, unnecessary customization, inefficient routings, and other things not necessary or valued by the customer.
Methodology #2: Six Sigma
Six Sigma is a set of tools and techniques that are designed to improve business processes, resulting in better products or services. The goal of Six Sigma is to improve the customer experience by identifying and eliminating variation. This is achieved through the implementation of a measurement-based strategy that focusing on process improvement.
The Six Sigma DMAIC process (define, measure, analyze, improve, control) is an improvement system for existing processes falling below specification and looking for incremental improvement.
Methodology #3: Kaizen
Kaizen means “continuous improvement” in Japanese. In business, it is used to implement positive, ongoing changes in the workplace. The guiding principles of Kaizen are that a good process will lead to positive results, teamwork is crucial to success, and that any process can be improved.
Kaizen is part action plan and part philosophy. For example, your philosophy could be to develop a culture where all employees are actively engaged in improving the company. Your action plan could involve organizing events focused on improving specific areas within the company to see this philosophy through.
Methodology #4: Agile
The foci of the Agile methodology are adaptive planning, early delivery and continuous improvement, as well as being able to respond to change quickly and easily. Being Agile means developing quick reactions in order to respond to changes in the marketplace. Agile helps teams increase collaboration by adapting to what the team needs to be successful. It does this by encouraging teams to regularly show off their work and gather feedback so that they can adapt quickly. One important factor is also the focus on retrospective meetings whereby teams assess what went well, what could be improved on and next steps for further production.
Agile is frequently implemented with frameworks like Scrum and Kanban:
Scrum is a time restricted method whereby work is broken down into regular, repeatable work-cycles, normally lasting 1-4 weeks, and referred to as sprints. This method is most commonly used by engineering teams to deliver software products, but can be applied elsewhere in an organization too. The idea is the intensive sprints sharpen a team’s focus and require tight-knit collaboration, with more frequent improvements made to the product overtime.
Kanban is a priority based method, where tasks are ranked by priority and are not time-based. Kanban is best suited for small teams or teams that don’t produce features for the public or promise certain dates for releases.
Common elements of effective operational excellence
All four methods allow companies to structure their operational excellence initiatives against a certain model, and all four stress the importance of making the right changes at the right time. So how can you measure the value of a specific method against your organization’s current status quo? The answer is to examine the information you already have at your fingertips.
Continuous monitoring of end-to-end processes will provide you with insights into actual and potential waste, help you eliminate costly inefficiencies, and become truly process-oriented. Making operational excellence a priority at your organization involves documenting your processes and regularly comparing the current state with your company goals: defining, measuring, analyzing, improving, and controlling. Investing in a process mining tool will enable you to automatically mine process models from the different IT systems operating within your business (also known as the “application landscape”) giving you data on how each process is operating.
For example, SAP Signavio Process Intelligence helps modern businesses harness the hidden value in processes, with a powerful combination of process discovery, process analysis, and conformance checking. This supports a collaborative approach to process improvement, giving you game-changing insights into your business. In particular, Live Insights can help turn static process models into dynamic, responsive dashboards that inform, guide, and warn you of into potential risks and ongoing improvement opportunities, encouraging a fact-driven approach to process management.
Effective operational excellence as a process-oriented, collaborative effort
Operational excellence is a mindset that embraces certain principles and tools to create sustainable improvement within an organization. Or to put it more simply, operational excellence is achieved when every member of an organization can see the flow of value to the customer. This value-flow needs to be reflected in every process through an organization-wide, collaborative approach, with employees at all levels of a company working together proactively to achieve regular, incremental improvements. In short, operational excellence is a collaborative, team effort!
In a business environment where one customer's bad experience can lead to instant, widespread negative publicity, it is vital that this collaborative approach also extend to customer interactions and touch points. Each employee within your organization needs to clearly understand what they do and how they do it impacts on the customer experience. Even so, just building positive customer experiences alone is not enough. Organizations need to actively create experiences which not only satisfy, but delight and excite consumers, and the most direct way to achieve this is to understand the customer journey.
Engineered, consistent customer experiences, enhanced through customer journey mapping, is the ideal template for operational performance metrics. Accurate tracking of how and where customers interact with your business will enable your organization to understand customer behavior, digital channels, and context in new ways, thus creating even further opportunities to enhance the way your business works, and continuing to contribute to the virtuous cycle of effective operational excellence.
Next steps to effective operational excellence
To find out how to bring effective operational excellence to your business, the Signavio 7 Step Guide to Operational Excellence is the right starting point. The guide is intended to provide a general guide for organizations towards the goal of operational excellence, independent of allegiances to any particular methodology, although existing frameworks used within your organization could be used during relevant steps.
The guide has been structured to provide clear, actionable steps, as well as tips for process practitioners and leaders to follow. The key outcomes of each step are clearly explained, and include issues to be considered at each point along the journey. The themes running through the guide include transparency and collaboration, both essential elements to build into an optimized operating model. Download your free copy of the 7 Step Guide to Operational Excellence today!
If you’re confident in your organization's approach to operational excellence, and you'd like to see how the SAP Signavio Process Transformation Suite can take your work to the next level, sign up for your free 30-day trial today.