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This guide will show you everything you need to know about operational excellence.

First, we’ll help you understand what operational excellence really is. Then we’ll show you examples of how other companies have achieved it, and how you can implement and achieve it for yourself. We’ll even guide you through the process of hiring someone who can manage operational excellence in your organization.

Sound good? Let’s dive right in.

The founder of The Institute for Operational Excellence, Kevin J. Dugan, defines operational excellence as a point where every employee can see the flow of value to the customer and fix it when the flow is interrupted or breaks down. 

In an operationally excellent organization, everyone knows their respective contribution to the flow of value to the customer. They can identify when this flow is normal or abnormal, and know how to restore any abnormality without the assistance of management. 

Because every employee is proactively responsible for their tasks, leaders of operationally excellent companies can shift their focus from managing day-to-day activities and focus on continuous innovation and other activities to increase recurring revenue. 

While many consider the Japanese engineer Dr. Shigeo Shingo (1909–1990) to be the father of operational excellence, we believe that the innovative leadership and management techniques developed by engineers and scientists since as far back as the 18th century have influenced what we know as operational excellence today. 

Operational excellence and continuous improvement do not mean the same thing. They’re also not two completely different methods. Successful companies need a bit of both methods to work. 

Continuous improvement involves making each existing process perfect by consistently adjusting them to reduce waste, improve quality, and maximize human potential. It is a never-ending journey that ensures every process is always performing at its height of efficiency. 

Continuous improvement guarantees more efficient processes, but if leaders are always concerned with fixing and improving the same processes, they will not have time to innovate and focus on other revenue-growing activities. There is no guarantee that the changes made will lead to growth or save the company if customers no longer want their product. This is where operational excellence comes in. 

To achieve business growth and continue to innovate while continuously improving, an organization must reach a state of operational excellence. 

At operational excellence, everyone in an organization knows their contribution to normal flow, can identify abnormal flow, and implement the standard methodology for correcting processes when they go wrong without management intervention. 

Operational excellence removes the need for management involvement in day-to-day activities, and permits leaders and managers to spend their time innovating and working on activities that generate top-line growth.

Operationally excellent organizations set up visual systems to depict the flow of value from the beginning of production until it reaches the customers. These visual systems communicate the time required to perform each process so that every employee can see exactly where they are in the value stream, and how the flow works. 

Operationally excellent visual systems are so simple that a visitor can look at them and tell if they are on track without asking any questions, requesting any reports, or looking at any computer printouts. 

No matter how excellent operations are, there is always a possibility for disruption. With OpEx, what matters is not whether or not the flow of value breaks down, but how employees fix this flow when it does. 

So, what do employees do when an operationally excellent flow of value breaks down? Instead of calling the supervisor, they ask, “What’s the standard procedure for fixing this?” 

Standard work is the fuel that drives operational excellence. It is the standard procedure performed by every employee when an abnormality occurs in their section of flow. Thanks to standard work, decision-making is kept to a minimum, and employees can repeat the same process every time the flow of value is disrupted.

The guiding principles of operational excellence, also known as the Shingo Guiding Principles, are the basis of building a sustainable culture of operational excellence in any organization. 

 Shingo’s ten principles serve as a foundation for anyone hoping to compete and attain market leadership through operational excellence. Each principle is grouped into either of these three categories: 

Every year, the Shingo Institute at the Jon M. Huntsman School of Business, Utah State University, offers an award for operational excellence to outstanding organizations. This award is based on company culture, company results, and how well every employee demonstrates Shingo’s ten guiding principles of operational excellence.

When employees feel respected, they give their hands, minds, and hearts to their work. The culture of respect in any organization reflects in how everyone is treated, even customers and suppliers.

From the executive level down to the employees, everyone should understand the importance of respect, and commit to treating everyone like a fellow human being with worth and potential.

2. Lead with humility 

Leaders who acknowledge when they are wrong and abandon bias and prejudice to pursue a better way of doing things will see their team members start to develop this same attribute. If every leader is willing to seek input and listen to constructive criticism, team members will feel respected and freely give their creative abilities.

3. Seek perfection 

Although perfection may never be achieved, actively striving for it in every process will create a mindset and culture of continuous improvement. Every employee should have the “it can always be better” mindset. 

4. Embrace scientific thinking 

Without repeated cycles of experimentation, continuous learning, and failure, innovation and improvement will never happen. Develop a culture of exploring new ideas and consistently refining your team’s understanding of reality.

5. Focus on process

The American statistician Dr. W. Edwards Deming postulated that 85% of quality problems are in the processes and not people. And before he died, he admitted he was wrong and said it was 96%.

All outcomes are the consequence of a process. To improve quality, you need to change how the work gets done. When something goes wrong, don’t be quick to blame the people in charge—check the process.

6. Assure quality at the source 

When an error is detected, it should be corrected at the source. Perfect quality will only be achieved when every element of the process is made right at its source.

7. Improve flow and pull 

Maximize value for customers by supplying it in response to demand in an uninterrupted flow. While trying not to interrupt flow, you mustn’t oversupply to avoid waste.

8. Think systemically

Think systemically when you’re trying to optimize the whole operation. You must first understand the interconnectedness of every person and process to make better decisions and improvements. 

9. Create constancy of purpose 

Every employee should have an unwavering awareness and understanding of why the organization exists, where it is going, and how it will get there. This way, they can take risks with more confidence, and innovate and align all their actions to pursue one purpose.

10. Create value for the customer

To the customer, value is getting what they want, when they want it. If you fail to deliver this effectively, your organization will have a short lifespan.

Operational excellence allows management to plan, innovate, and focus on business growth instead of spending time putting out business fires.

Team members feel more responsible for their part of the process and are more likely to develop new ways to solve problems and improve processes.

2. Problems are detected earlier. 

Because visual systems are used to depict flow of value from the beginning of production until value reaches the customers, every employee can see exactly where they are in the value stream. If anything is out of place or late, they’re able to correct the problem at its source and restore the flow to its original state.

3. Operations are lean, predictable, and scalable.

Operational excellence demands that processes are efficiently carried out and are as consistent as possible. This predictability allows for better planning and expansion.

4. Customers are kept happy. 

When processes are operationally excellent, you will meet the demands of customers when they want it without creating any waste. Management will also have time to carry out market research to find more ways to create value for the customers, whether by improving an existing product or creating a new one.

Over the years, various industries have utilized operational excellence either directly or indirectly to build lean, predictable, and scalable processes that allow them to stay relevant and ahead of the competition.

Companies like Toyota, Motorola, Amazon, Apple, Disney, Tesla, Fastcap, and GE have been praised for the different ways they have utilized operational excellence to stay ahead of the competition.

OpEx concepts like continuous innovation, flawless service, providing a fun working environment for employees, and creating a culture where everyone is constantly aware of the company’s purpose can be used by any industry to attain market leadership.

Many manufacturing companies use operational excellence to reduce the amount of waste produced and make process flow more constant and predictable. 

In 1950, Toyota Motor Company was struggling to avoid bankruptcy after the Second World War. They were producing only 2,685 cars per year while their major competitor, Ford Motor Company, produced 7,000 cars per day. They turned to engineers Shigeo Shingo and Taiichi Ohno, who created a lean manufacturing system to manufacture more cars with fewer machines, people, space, time, and energy. 

Since then, Toyota has become one of the largest, most profitable automobile manufacturing companies. 

Founded in Michigan in 1966, Jabil is the world’s third-largest electronic manufacturing services provider with a fiscal 2016 revenue of $18.4 billion and 180,000 dedicated employees. 

In this case study by BTOES insights, Jeff Porada, global director of Lean Six Sigma at Jabil, explains how by engaging leadership with operational excellence through strategic alignment and visual management, they have survived over 50 years of business—profitably and with a vision for another 50 years.

Porada explains that the way to survive and remain relevant in a competitive industry is by driving a system of continuous transformation. He also stated that principles and not tools lead high-performance organizations. Instead, tools are used to help strengthen and encourage adaptability and resilience. 

Operationally excellent IT companies focus on continuously improving processes and culture. 

Wipro delivers IT services, business and technology consulting, IT outsourcing, and system integration services and solutions globally. 

In May 2007, Wipro was contracted by Order Entry to help solve their inability to fulfill orders on time. This problem was causing customers to lose trust in Open Entry and impacted the flow of revenue. 

Wipro improved the operational excellence of Order Entry’s order management system by: 

This project won Wipro the Business Transformation & Operational Excellence Award for Best Project in Customer Experience.

Operational excellence in healthcare is focused on empowering staff to deliver safe and reliable care, improving processes to use resources more efficiently, eliminating mistakes and unnecessary procedures, and improving health outcomes. 

SickKids in Toronto is one of the world’s leading children’s hospitals. They began their operational excellence journey in 2012 with a successful multi-year continuous improvement program. 

To achieve operational excellence, SickKids had a dedicated team of five full-time staff, mainly with industrial engineering backgrounds, whose job was to empower staff to:

This team offered training in Daily Continuous Improvement Programme and process improvement at the yellow and green belt level. 

“Organizations can only achieve true excellence when their employees are legitimately empowered. Implementing a lean management system is one powerful way to maximize the engagement of employees in organizational success.” —Jeff Mainland, executive VP, SickKids

Because of how technical construction work can be, operational excellence in real estate is usually focused on documenting and streamlining processes to ensure a high level of efficiency. 

MonteVista Homes builds quality, energy-efficient new homes in Oregon. Before operational excellence, they suffered major setbacks caused by ineffective business process documentation. 

In an interview with SweetProcess, Luke Pickerill, president of MonteVista homes, said:

“We employ about 75 to 100 individual trade partners to get these homes built. Each trade partner may have anywhere between one to 40 employees. The most challenging part is the operational organizational side of it. As one trade gets ahead of schedule or is late, that can affect all other buildings simultaneously.” 

Since deciding to try a more operationally excellent model using SweetProcess, MonteVista Homes has overcome its challenges with inconsistent processes. They’re now able to document processes in a secure and easily accessible way and onboard new employees and contractors in only a few hours. Plus, management can finally focus their attention on finding new ways to satisfy the customer and grow revenue.

Mudd Advertising is a top advertising agency in the United States, specializing in the automotive industry. For over 30 years, Mudd has worked directly with dealers across the U.S., servicing no fewer than 3,000 accounts annually.

In this interview, Dave Meindl, senior advisor of digital technology and performance at Mudd, told us that his greatest challenge was that Mudd seemed to have no existing system in place. Processes were disorganized and undocumented. He said: 

“They had no system for keeping track of how things were done. I’m assuming it just sort of happened by word of mouth or something. As soon as I got there and saw that there was no way to keep track of these processes, I immediately said we needed to solve this problem; otherwise, there’s going to be complete chaos.”

After working with SweetProcess to create more excellent operations, Meindl was able to: 

You can learn more about SweetProcess or claim your 14-day free trial without any initial commitment—not even a credit card.

This chapter will discuss the steps involved in implementing a successful operational excellence strategy in your organization. 

To successfully implement an operational excellence strategy in your organization, there are five things we suggest you put in place before anything else.

1. An honest assessment of where you are

You need to first know where you are before deciding where you want to go and how you’ll get there. Megan Burns, regional managing director at InSource Solutions, suggests that the best way to do this is by assessing your organization’s maturity level in four key areas: 

2. Clear vision, goals, and objectives 

When implementing company-wide change, it helps to start with a clear vision. This vision can be product-focused, growth-focused, market share-focused, etc. It must be consistently communicated to every leader and employee so that team members can take risks, make decisions, and align their efforts toward achieving the same goals. 

3. A supportive and engaged team 

It’s easier to get the time and resources required to implement a company-wide OpEx strategy when everyone is on board. From the executive level to the lowest level employees, everyone should be educated on the benefits of operational excellence for themselves and the entire organization. 

4. Commit to continuous improvement

Developing a culture of operational excellence will require a commitment from every team member to be consistently open to change. Employees should always be ready to give up their old way of doing things for better ones.

5. The right metrics

Not being able to measure progress can be detrimental to your OpEx journey. It helps to have meaningful KPIs that align with your company’s vision, goals, and objectives. With this in place, employees can track results and stay encouraged to keep improving, knowing that their efforts bring visible results for the company. 

Achieving operational excellence is far from easy, and hitting your operational excellence goals will require a strong commitment from every leader and employee in your organization. 

To make it easier for everyone to come on board with your OpEx goals, it helps to align them as much as possible with your already existing business vision and strategy. 

To do this, we suggest that you answer these six questions before setting your operational excellence goals.

OpEx goals can be divided into three broad categories:

As implied, financial goals are focused on money coming in and going out. 

Examples of financial goals: 

Operational goals are focused on improving productivity and the general quality of processes. 

Examples of operational goals:

Cultural goals are targeted at improving your employees’ capabilities and commitment to achieving operational excellence.

Examples of cultural goals:

Metrics and KPIs take goal setting a step further. While implementing your OpEx strategy, having the right metrics will help you track and evaluate your progress over time, make sense of data, and arrive at meaningful conclusions. 

Measuring your operational excellence metrics will save you time, effort, and resources spent on non-value-added work. You will be able to identify where your team is succeeding, where you need to increase your effort, and what parts of the process need to be adjusted, changed, or completely removed.

Here are five examples of metrics and KPIs you can pay attention to on your OpEx journey: 

Consistently measuring customer satisfaction will help you identify process gaps and lapses within the organization. It will also help you prioritize the different functions that require attention and focus on solving the most urgent ones first.

Examples of KPIs for measuring customer satisfaction: 

Highly engaged teams show a 21% greater profitability. Measuring culture and employee satisfaction KPIs will help you improve performance faster by revealing the most important areas to your employees.

Examples of KPIs for measuring culture and employee satisfaction:

Productivity is a versatile metric. You can select your KPIs based on the business goals you’re trying to achieve for the time period by deciding the numerator and denominator for the output per unit (productivity). If revenue exceeds sales and marketing expenses, you’re on the right track. 

Examples of KPIs for measuring productivity:

Finance is arguably the best indicator of business health. Paying attention to it can help you pinpoint operational inefficiencies, reduce unpleasant surprises, and decide strategic initiatives for pricing, investments, and sales efforts.

Examples of KPIs for measuring financial metrics: 

The quality of the product or service you offer is a great indicator of whether your processes are improving or not. 

Examples of KPIs for measuring quality:

The three operational excellence methodologies discussed in this section are Lean manufacturing, Kaizen, and Six Sigma.

Lean manufacturing focuses on the systematic identification and elimination of waste in every process. Companies that implement the lean methodology center their attention on only the steps that add value in the process and try to eliminate as many steps that don’t. 

The goal is to reduce cost by producing more units with fewer materials.

The key principles of lean manufacturing focus on improving the quality of products and services, eliminating anything that doesn’t add value, and reducing overall costs.

The Lean manufacturing methodology identifies seven sources of waste: 

1. Mistakes 

 These are errors that need to be corrected or eliminated for the process to run smoothly. These errors often lead to defective products, which results in waste. 

2. Overproduction

Overproduction occurs when employees produce items before they are needed. 

3. Over-processing 

 This occurs when there are more steps involved in a process than needed. The time that could have been spent on more value-added work is wasted. 

4. Transportation 

 Transportation becomes wasteful when it involves unnecessary movement of materials or finished products.

5. Motion

 This source of waste is similar to transportation, except that it has more to do with the unnecessary movement of equipment or people. 

6. Inventory 

 This occurs when supply is not met by demand. Excess products may end up becoming waste.

7. Waiting

 Employees waiting unnecessarily long periods for feedback or instructions from management contribute to wasted time.

Six Sigma is a systematic method of process improvement that focuses on improving quality and customer experience by reducing variation in production. Companies that implement the Six Sigma methodology do not produce at quality levels below 3.4 defects per million opportunities (DPMO).  

Six Sigma was developed in 1986 by Bill Smith, a senior engineer and scientist at Motorola, and is now popular among many Fortune 500 companies. Fifty percent of Fortune 500 companies today are said to have implemented Six Sigma to some degree. 

The Six Sigma methodology of reducing defects and variation is implemented using Deming’s DMAIC framework. DMAIC is an acronym for define, measure, analyze, improve, and control. 

The word Kaizen is Japanese for “continuous improvement.” This methodology focuses on small, frequent, and consistent improvements to the existing work processes by every member of the organization, from the executive level to the lowest-level employee. 

It can improve quality, cost, delivery, management, safety, and just about any other aspect of the business.

The Kaizen methodology teaches that small changes applied consistently will compound over time to produce big results. It also encourages innovation and teamwork by encouraging every employee to participate in the process of continuous improvement.

Unlike some other operational excellence methodologies, the Kaizen methodology focuses more on improving culture than using or introducing tools. It can also be implemented alongside other methodologies like Six Sigma and 5S.

Operational excellence frameworks are designed to help you transform your organization, continuously improve, and guide you through your OpEx journey. The three OpEx frameworks discussed in this section will help you: 

DMAIC is an acronym for define, measure, analyze, improve, and control. It is a data-driven OpEx framework of Six Sigma to identify the root cause of problems and develop ways to continuously improve existing processes. 

Examples of activities under Define:

Developing a project charter: This is a document referred to during the project. It is adjusted as team members learn more as the project progresses. It documents:

Further steps may include:

This phase will help you separate what you think is happening from what’s actually happening. It takes out all human bias and allows only data to do the talking. 

Examples of activities under measure 

Examples of activities under analyze

Examples of OpEx data analysis tools:

Examples of activities under improve:

This framework is designed to help you identify the causes of recurring problems in your organization and develop a plan to solve them. Problems that aren’t resolved at their source will always resurface and may even become worse. 

In every process, the root cause is the core issue. It is the highest-level cause that triggers the cause-and-effect reaction that ultimately leads to the problem.

Approaches to root cause analysis:

Events and causal factor analysis

This approach uses data gathered methodically to establish a timeline for the activities leading up to the accident or problem. It is mostly used for major, single-event problems like refinery explosions.

Change analysis 

This approach focuses on analyzing the changes made in people, equipment, technology, etc., to determine what may have contributed to the problem.

Barrier analysis 

This approach focuses on analyzing the controls that are already in place to detect a problem or prevent one from occurring. 

Management oversight and risk tree analysis 

This approach makes use of a tree diagram to figure out what occurred and understand why it happened. 

A tree diagram is a new management planning tool that depicts the hierarchy of tasks and subtasks needed to complete an objective. It starts with one item that branches into two or more, with each branch developing two or more branches of its own, and so on. 

Example of a tree diagram:

Kepner-Tregoe problem-solving and decision-making 

This approach provides four distinct phases for resolving problems:

This framework is a strategic planning process designed to help you implement new goals and policies in your organization. The Hoshin Kanri framework will help you achieve two things:

A successful operational excellence implementation plan typically involves seven phases: 

Tasks under organize include: 

Tasks under assess and document include: 

Tasks under identifying improvements include: 

Tasks under goal setting include:

Tasks under execute include: 

Tasks under evaluate impact include: 

Tasks under consolidate include: 

What would you like to achieve with operational excellence? What process problems would you like to solve? 

Before anything else, you should first outline everything you want to achieve with operational excellence, from broad goals to specific KPIs.

After defining your goals, choose a methodology that helps you achieve them as efficiently as possible.

It helps to get the support of senior management as early as possible to get the resources you need for your OpEx plan.

The sooner you get employees on board, the better. 

Because your employees are the ones working on the processes, they’re the ones who experience the problems every day, and they’re also the ones who will implement your OpEx strategy. It helps to include them in the conversation as soon as possible to give you real-time insight into the problems they face, and share ideas on how they think it can be made better.

Communication is the key to achieving operational excellence. Communication starts when you share your OpEx goals, objectives, and KPIs with the leaders and employees, and continues as you go on. Consistently providing feedback on the progress made will help everyone in your organization stay motivated and aware of their roles throughout the process.

To encourage employees to stay motivated, it helps to regularly recognize and reward staff who show exceptional support.

Operational excellence isn’t something that you can achieve and decide to move on. For it to be sustained, it requires continuous improvement, communication, and workforce engagement.

SweetProcess is a tool that helps you attain operational excellence by allowing you to document processes, procedures, and tasks in one place, so you can stay focused on growing your business. 

With SweetProcess, you can: 

According to a global survey carried out in 2015 by McKinsey & Company, only 26% of company executives succeeded at effecting transformative changes like operational excellence in their organizations. 

In this chapter, we’ll address the five most common mistakes made by executives who failed at developing a culture of operational excellence in their organizations. We’ll also take a look at the four solutions suggested by McKinsey to help company execs implement transformative change more effectively.

Operational excellence starts from company culture, and changing culture can be difficult. To successfully build a culture of innovation and continuous improvement in any organization, everybody from the executive level to the lowest-level employee must understand the vision and commit to doing their best to make it happen. 

Most organizations fail very early in their operational excellence journey because they don’t address the negative culture and values of the employees and replace them with new ones.

Continuous improvement is about consistently finding more efficient ways to perform tasks. 

In their journey to operational excellence, most organizations jump right into finding ways to improve their processes. But after some time, people get carried away and move on to other things. Continuous improvement is not sustained, and the previous improvements become the new normal. As a result, employees do not develop a culture of problem-solving and being responsible for their contribution to the flow of value. 

From concerns about migrating data from one platform to another, to employees not being willing to give up their old way of doing things for better ones, changes in techniques and technology can pose a huge problem when implementing operational excellence. 

Operational excellence requires resources and serious commitment. When every leader understands the importance of OpEx and commits to making it work, it’s easier to create and sustain transformative change in any organization. Also, if every leader is onboard, it’ll be easier to allocate the adequate resources (people, time, space, money, tools, etc.) required to implement change. 

Most companies begin their operational excellence journey by creating a small team of people whose main focus is to innovate and find new ways to improve processes. With this approach, changes are easy to implement because there aren’t many people or departments involved. Hence, less time and resources are required. 

The results of this approach are often short-lived. Because only a few employees are allowed to participate in transformative change, the values and culture of other employees remain the same. 

A more holistic end-to-end approach is required to ensure that the new culture is spread across different departments. This will require more time and resources to train employees, but the result is a more sustainable and operationally excellent culture.

The following four suggestions for overcoming operational excellence challenges were made by McKinsey & Company after their global survey of organizational transformations. Twenty-six percent of respondents succeeded in implementing company-wide transformations and sustained improvements. After asking the successful companies about the actions that contributed most to their success, McKinsey found that the following four actions correlate much more with success than others.

Communicating progress and success to the different employees and departments while implementing company-wide change was seen to have a direct correlation with success.

McKinsey found that respondents who communicated openly with their teams were eight times as likely to report a successful transformation as those who said this communication did not happen.

It also helped when senior managers communicated a change story to keep employees aligned around the same goals.

McKinsey also found that teams of employees that begin their days discussing the previous day’s results and the current day’s work were twice as likely to succeed.

Transformations are 5.3 times more likely to be successful when senior leaders model the changes they’re asking employees to make in their day-to-day activities.

When implementing operational excellence, it is beneficial for managers to spend less time planning to implement change and more time with employees. Spend time with them and model the kind of culture, habits, and values you’re trying to help them cultivate. 

Keep people who are resistant to change out of leadership and influencer roles. When undergoing company-wide transformation, senior managers should allocate accountability roles to high performers and active supporters of the changes and innovations being made. 

McKinsey found that teams are 2.7 times more likely to succeed at implementing change when a high-performing employee or manager is assigned the role of “initiative leader.” They also found that these teams were 3.9 times even more likely to succeed when these initiative leaders were given clearly defined metrics and held accountable for contributions to the transformation. 

To keep your employees from backsliding into their old ways, ensure that they continue to participate in activities that help them connect strategy to daily work. Keep challenging them to deliver value more efficiently to customers, contribute their best ability, and discover better ways to perform tasks.

In McKinsey’s survey, 40% of respondents said they wish they had spent more time thinking about how their organizations would continue to improve. McKinsey reported that organizations that plan for continuous improvement after a transformation were more likely to succeed. 

To successfully implement operational excellence in your organization, it helps to have a few team members with significant experience in at least one operational excellence methodology. The goal is to make operational excellence principles a part of the company culture. 

In most organizations, executives prefer to hire an operational excellence facilitator (also called an operational excellence manager or director) to lead the change. 

This chapter will discuss the different qualifications, competencies, and responsibilities of an operational excellence manager.

(Interested in a general guide to hiring?)

An operational excellence manager in your organization should have: 

Here is a selection of recommended blogs, books and even a slideshow presentation to complement your research.

Institute of Operational Excellence is the leading educational center guiding transformations through a range of resources designed to help businesses achieve operational excellence.

BTOES Insights is the content portal for business transformation and operational excellence opinions, reports, and news.

All About Lean shares different aspects of lean manufacturing and lean administration with a strong focus on practicability. 

Kevin Meyer is co-founder of Gemba Academy, a company that provides over 1,500 online lean and Six Sigma training videos to over 2,000 organizations worldwide. On this blog, Meyer shares his OpEx expert opinions and thought pieces.

This blog shares lessons learned by experts along their lean journey in the quest for the true north.

This book was written by Michael Treacy and Fred Wiersema in 1995. It discusses the three business strategies companies can use to compete and ultimately position themselves as market leaders. It is based on five years of research by the authors into companies such as Walmart, Dell, Southwest Airlines, Cott, Airborne Express, Atlantic Richfield, Home Depot, Intel, and Sony.

Kevin J. Duggan wrote this book. It defines why companies embark upon continuous improvement—and the true answer is not to improve efficiency, quality, or eliminate waste! The reason is to achieve operational excellence. 

John S. Mitchel wrote this book. It provides the foundation and tools essential for an enterprise to develop a culture of operational excellence.

This book was written by Jeffrey K. Liker and James K. Franz. It builds upon the international bestselling Toyota Way series of books by Liker. It looks critically at lean deployments and identifies the root causes of why most of them fail.

Jacob Stoller wrote this book. It documents deep insights from interviews with some of the best-known, lean-practicing CEOs. It shows how to implement lean in virtually every type of company and facet of an organization.

Functional excellence and operational excellence do not mean the same thing. 

While operational excellence is focused on optimizing processes and making employees more responsible for their contribution to the flow of value, functional excellence is about demonstrating a depth of knowledge and skill in a technical or functional area.

A functionally excellent employee is always aware of advances and the current thinking in their field. They are happy to accept and integrate new technology to help them perform their tasks more effectively. 

Some characteristics of functionally excellent employees include: 

For directors and executives: 

The Shingo Prize is an award given to organizations worldwide by the Shingo Institute, a program of the Jon M. Huntsman School of Business at Utah State University in Logan, Utah.  

The Shingo Prize is based on a complete assessment of an organization’s culture and how well it drives world-class results.

To be selected as a recipient of this award, organizations must “challenge” or apply for it by submitting an achievement report that provides data about recent business improvements and accomplishments. Shingo Institute examiners will then visit the organization for an onsite assessment.

The following three qualities determine whether or not an organization will qualify for a Shingo Prize: 

Okapi is one of the methods for achieving operational excellence. It was developed by Iris Tsidon and Maya Gal of Okapi, a platform for improving organizational management. The Okapi method helps organizations lower costs while boosting production using SMART key performance indicators. 

Flawless execution methodology (FLEX), also popularly known as the PBED methodology (PBED meaning plan, brief, execute, and debrief), was adopted by businesses in 1998. Fighter pilots initially developed it to achieve operational excellence in combat.

The FLEX methodology involves creating an execution plan for achieving operational excellence and constantly adapting the details of this plan to fit changing influences in the real world. 

It starts with creating a plan (P), briefing your team about this plan (B), executing this plan to the best of your ability (E), and debriefing your team based on the measured results from your execution strategy while making relevant suggestions to improve this strategy (D).

Value-added work refers to the steps in a process that add value and are essential in the eyes of the customer. 

Example: A student hires a painter to paint his room. One hour after the painter arrives, he realizes that he doesn’t have all the tools required to finish this job. He spends two hours commuting from his customer’s room to his workshop to get his tools. The painter returns and finishes his job in an hour. 

In this example, the time spent by the painter getting his tools does not count as valuable to the customer. The only work that the customer considers valuable is the time spent painting the room. 

The concept of value-added work can be applied to various service-oriented businesses. To apply it to yours, simply follow these steps: 

Step 1: List out all the steps involved in performing a service.

Step 2: Determine the steps that add value to the customer and those that don’t. 

Step 3: Try to take out as many of the steps that don’t add value to the customer where possible. 

Step 4: Calculate your value-added ratio and try to get it to at least 20–40%.

Value-added ratio = Value added time/total time 

In typical processes, the value-added ratio is only about 5–20%, which means 80–95% of the process doesn’t add value to the customer. You may never be able to get rid of all the non-value-added time but try as much as you can to move yours to about 20–40%.

Suppose you’re ready to create more operationally excellent processes, develop a culture of teamwork and continuous improvement, and position your organization for future success. 

In that case, we’d like to help you get started.

We have created an operational excellence implementation plan to help jumpstart your OpEx journey. 

You can also claim a free 14-day trial for SweetProcess. This tool helps you attain operational excellence by allowing you to document processes, procedures, and tasks in one place so you can stay focused on growing your business. 

With SweetProcess, you can: