Operational Excellence – in 2020 and after.

With this article we would like to shine a light on the concept of Operational Excellence – aiming to zoom into competences shared by people whom have been successful in Operational Excellence contexts.

In the year 2020, companies will yield competitive advantage from Operational Excellence more than ever, given the opportunities digital technologies unlock for better quality, lower cost and faster delivery across the entire value chain. From design to engineering, from procurement to sales and from manufacturing to logistics – all plants, operations, processes and even human assets are sought to be(come) a better version of themselves. OpEx drives (cost) effectiveness, reliability and safety and therefore automatically affects profitability; even unlocks opportunities for business growth. Yet, if truly successful, OpEx is more of a journey, rather than a destination. It is – or it should be – an ongoing process, driven by a culture and mindset that continuously strives to implement principles of improvement.

The hurdles.

There are various constrains that arise when implementing an OpEx program. Unfortunately, even in this age, many of these constraints come from the lack of data or a proper data management system. Daily processes, tasks and operational habitats go by “how we always did it” rather than being backed up by data of any kind. An organization must be able to measure its operations. Without a proper IT back bone, an understandable data management system as well as a generally accepted believe in the opportunities that arise from leveraging data into valuable insights, every OpEx program is doomed to fail in its execution. Due to the proliferation of data and information available by increased digitalization within the wider ecosystems of partners, suppliers and customers, another challenge arises considering data interpretation and data-driven decision making. Data-driven decision making requires alignment at a wide range of stakeholders such as product development, procurement, supply chain, production system design, manufacturing and sales teams – breaking trough silo’s and moving away from gut-feeling and statements based on ballpark estimations. Besides, as we emphasized before, OpEx should be an ongoing process. Organizations should not work to one state of Operational Excellence, for the simply reason there never will be one until technologies stop to develop and opportunities for improvements stop to arise. Digitalization opens up a whole new dimension in many operational activities and can even lead to a paradigm shift.

The solution.

To overcome these challenges, the best way forward is creating an Operational Excellence program that is linked to the general business strategy. Assuming the presence of a well-defined business strategy, an OpEx program is as successful as its execution path. And a strong execution path includes two key elements. On one side it needs a set of well-defined KPIs and metrics that yield data about all different stages of the value chain. Data that allows you to understand the effect of every stage in the value chain on revenues and profit streams, operating costs and operational risks. Using the data to applying techniques such as the Monte Carlo Simulation will improve decision making under uncertainty. The Monte Carlo Simulation uses all data to projects possible outcome values when a change is made in the process. This allows stakeholders to assess the impact of risks posed by a change. It also allows managers to estimate the relevance of any given change to the business strategy.

On the other hand, an execution path needs a mature Operational Excellence leader. A strong OpEx leader fosters an open communication and faster decision-making, turning initiatives into an organization-wide program that harvests the willingness to implement new technologies and initiatives. A successful change management program will embrace the numbers and confront stakeholder, triggering people to challenge their own actions and maintaining overview of the entire program.

The concept of “Operational Excellence” is best seen as a journey, rather than a destination.

VINCENT VAN DEN ENDE Industry Specialist at Batenborch International.

Yet, as we emphasized before, the concept of “Operational Excellence” is best seen as a journey, rather than a destination. It is vital to keep up with new trends and competitive landscape, to ensure the correct operational activities for future business models. In turn, this future vision will provide perspective and urgency within the organization to continuously invest in change and improvement.

Competences.

Setting up a program for OpEx and involving stakeholders throughout the organization requires developed Planning & Organization skills. The ability to plan timely intervention and total scope, ensuring stakeholder’s motivation and maintaining the drive to work efficiently. As there’s not defined end-date for such a program, continuous improvement should be translated to well defined milestones and critical time-paths.

The success and profitability depend largely on the speed of adoption. Harnessing a certain level of agility hence becomes crucial. This includes the ability to quickly adapt to opportunities that are identified – we call that Strategic Agility. It is an important trait that should be redundantly available at the formal and informal leaders of an organization.

Eventually, planning and agility should be combined with a bottom-line Drive for Results. Teams must be able to identify opportunities quickly and pursue it vigorously. Once one result is made, the next one is already up ahead. Teams with a continuous hunger for results can keep walking the path of Operational Excellence.

To support you in assessing these competences during interview or evaluation processes, we have developed some easy to use tools including example areas to explore and example questions to ask regarding considering the competence Planning & Organizing, Strategic Agility and Drive for Results.

Download OpEx Competence Cards