Six key principles making Operational Excellence work for you

With only six key principles in focus, your company can excel in satisfying your customers, optimizing costs, and improving productivity in ways that create true customer value. Operational excellence (OE) helps your company not only to improve its quality and efficiency, but also to become more cost-effective than your competitors.

operational excellence

Operational Excellence (OE) has been defined as the point when “each and every employee can see the flow of value to the customer, and fix that flow before it breaks down”. It’s that simple. But, for companies to actually be able to create that kind of excellence, a clear strategy and a lot of hard work are required.

Companies that embark on an OE journey should remember that it is a never-ending voyage. Nevertheless, there are countless examples of failed OE transformations. In some cases companies focus too much on cost competitiveness, and forget the customer. What good is an efficient factory, if the customer no longer needs the product? In other cases an excessive focus on certain tools like Lean or Six Sigma draws attention away from people and from fostering a culture of continuous improvement based on delegation and management support.

The principles to follow

In my experience there are six basic principles you should follow to make excellence work in your favour – principles that underline the whole OE exercise. They form the basis of both lasting competitive advantage and pure operational strategy.

1. Customer centricity – Customers should be at the heart of your organisation’s operational design. Existing and future customer needs should be identified, and these should drive not only current operational management processes, but also future change investments.

2. Process thinking and process management are at the core of your business. The organisational design should be aligned to the customer value chain, with clear end-to-end process ownership, and consistent language and definitions used to manage the process.

3. Flexible capability is delivered when there is a commitment to developing a multi-skilled workforce, supported by robust learning and development mechanisms and deployed effectively through flexible operations management.

4. Operational culture can be a source of competitive advantage when effort, performance and motivation are mobilized towards the achievement of strategic goals and enhanced customer experience. You should strive for consistency in acceptable behaviours across functions and teams, and all decisions should be guided by clearly articulated priorities.

5. Cost optimization – Costs should be fully understood and linked to processes, products and customers, and should be rigorously controlled. This should lead to sustainable cost reductions through an effective change portfolio and broad consideration of different strategic drivers.

And last, 6. Governance frameworks should be clear, ensuring that accountability is defined. This leads to rapid, reliable decision-making, based on evidence and made at the appropriate level in your organisation.

In my opinion, Operational Excellence should become self-evident for the whole organization. Everybody needs to “get it”, and to pay constant attention to the many details of how work is performed. Getting Operational Excellence right can be a bumpy road. Following my six principles makes your journey a lot easier.

Berndt Wickholm is a director in KPMG’s Global Strategy Group enhancing performance in Strategic and Operational areas in a wide array of industries. He has 18 years of international experience in Strategy execution and supply-chain consulting. Offline, Berndt is a foodie, spending time in the kitchen and balancing with a bit of snowboarding and golf.