What makes Operational Excellence an elusive target? There are several reasons, but we will start with the most basic – the lack of a clear definition of Operational Effectiveness. Harvard Business School professor Michael Porter defines it as any number of policies and procedures that enable an organization to:
- Better Utilize its resources
- Better implement its processes
- Achieve its organizational mission and goals
Another source divides an organizational approach to Operational Effectiveness into four components:
- Leading and controlling its functional performance
- Measuring and improving its processes
- Leveraging and automating its processes
- Continuously improving performance
One other source defines Operational Excellence as performing competitive activities better than other organizations can perform them. Certainly this would imply a continuous improvement attitude by an organization.
Professor Porter states that Operational Effectiveness in itself will not allow an organization to be successful. He maintains, that it is Operational Effectiveness coupled with a Strategy that enables success.
Organizations must be able to understand the difference between operational effectiveness and strategy. As Professor Porter stated both are essential, but they are different. Operational effectiveness focuses on the continual improvement of business processes. Operational effectiveness is the proper place for process change, flexibility, and the continuous effort to achieve best practice processes. In contrast, the organizational strategy is the place for making business tradeoffs and eliminating silos between the organization’s business components. ISO-55000 calls this “Alignment” or line of sight. Strategy involves the continual search for ways to improve organizational competitiveness.
However, we will consider strategy in a later blog. Since our focus is on Operational Excellence, Let’s reduce the above Operational Effectiveness definitions to 4 key points:
- Clear Understanding and communication of the organization’s Mission/ Vision
- Best in Class Resource Utilization focused on the Mission/ Vision
- Proper performance measurements to insure the organization is achieving the “Best”
- Developing and Maintaining a Continuous Improvement Culture
With these points in mind, our blog series will cover the above four points in an attempt to help companies understand and implement Operational Efficiency. We will begin next with Mission/ Vision. Stay tuned…