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Fiona McGuinness10-Jan-2022 09:00:047 min read

What is Operational Excellence and What Are the Principles?

No business is perfect, and even with the very best team in place, there are always areas where improvements can be made. But how do you identify these? And how can you be sure that, though not perfect, your business is at least operating about as well as it could be?

Every business wants to improve, but if you’re serious about long-term continuity and growth, you should be looking to maintain operational excellence. What do we mean by operational excellence? Find out below.

What is Operational Excellence?

Operational excellence is an approach to business management that focuses on efficiency and continuous improvement. It’s a matter of building processes that optimise functions to their fullest, so that you can better implement your strategy and pursue aspirations for growth.

On paper, operational excellence resembles continuous improvement. But while there are similarities between the two concepts, operational excellence is more focused on achieving sustainable long-term growth. In short, it’s a step beyond continuous improvement, a means of ensuring that your business continues to push forward and maintain competitiveness in a rapidly changing commercial landscape.

This definition of operational excellence may sound a little woolly and intangible, but it is something most businesses can (and should) embrace as part of their management strategy. Think of it not simply as a means of improving processes, but as a cultural shift wherein every effort is made to improve processes, workflows, and service delivery to take your operations to the next level.

The Core Principles of Operational Excellence

As with any business rubric, operational excellence has a set of guiding principles designed to help businesses implement similar techniques and practices. And while not all principles will apply to your organisation, they offer an effective jumping-off point on which to improve your business management strategy.

Typically, when we think of operational excellence and its guiding principles, we think of the Shingo model. Originating in Japan, this framework is named for Shigeo Shingo, an industrial engineer and former Toyota employee who is broadly recognised as one of the world’s leading experts on manufacturing and operational practices.

Let’s take a look at the core principles of the Shingo model, and how they influence operational excellence.

workers checking grocery shipment

  1. Respect Every Individual 

Ask any employee, at any business, what they want most from their employer, and ‘respect’ will be high on the list. The Shingo model lists respect as one of the core attributes of operational excellence, recognising that people are more likely to work harder if they feel recognised and empowered.

How do you put this into practice? Involve employees in key operational areas and welcome feedback on incoming changes. Making time for one-to-ones and individual performance reviews can also help nurture respect throughout your organisation. 

  1. Lead with Humility 

Being an effective leader isn’t just a matter of giving orders and delegating tasks. The Shingo model identifies humility as one of the primary strengths of effective leadership; it calls on leaders to listen, learn, and seek input just like any other employee. Only then can long-term improvements be realised and maintained.

Demonstrating humility has several positive side effects within a typical team hierarchy. Subordinates feel respected and motivated, making them more likely to share ideas and demonstrate creativity. Engagement is also increased, while issues are more likely to be resolved faster since employees feel more comfortable sharing problems.

  1. Seek Perfection

While perfection is subjective and impossible to ever achieve, it’s still worth pursuing. Indeed, the attribute is essential to the guiding principles of operational excellence, and central to the idea of getting in the mindset of continuous long-term improvement.

So, how do we seek perfection in a practical sense? The Shingo model advises identifying long-term solutions as opposed to temporary fixes, as well as the importance of constantly embracing new ideas, processes and technologies which simplify day-to-day work.

 

  1. Embrace Scientific Thinking

Shigeo Shingo was a man renowned for his methodical approach to problem-solving, so, naturally, scientific thinking appears within the rubric’s core list of principles. The Shingo model suggests that innovation most readily comes from repeated cycles of experimentation and learning, with new ideas born out of “systematic exploration”.

How does this work in practice? By having set systems and processes in place, it’s possible to solve problems and develop new ideas, with creative solutions springing from strategic repetition. What’s more, such an approach allows employees to explore new ideas without fear of failure, which can ultimately lead to gains in the longer term.

  1. Focus on Process

A business is only as effective as its processes, so anything you can do to improve existing workflows will bring immediate value. Shingo’s guiding principles rightly point to ineffective processes as a major stumbling block for organisations, with imperfect working practices capable of causing internal conflict and a disruption of business continuity.

A great way to think about process optimisation is to focus on improvements that can be made whenever an error occurs. Rather than blaming individual errors, how did the process contribute to the problem? And how can technology be better used to optimise processes and ensure they work for everyone? 

  1. Assure Quality at the Source

Often in business, major problems are born out of trivial issues which go undetected or ignored for long periods. Rather than waiting for problems to get worse, the Shingo model suggests tackling issues at source – ensuring that every process is delivering in line with the company’s quality and continuity targets.

How does this problem-tackling methodology work in practice? Certainly, it requires attentive personnel, but also the right software to make it easier to prevent and detect issues. For example, an ERP system is the ideal tool for preventing data duplication and input errors, with automated processes to detect and alert operators of issues as and when they occur.

colleagues having a laugh

  1. Improve Flow & Pull

“Flow & pull” may sound vague, but what it is referring to within the Shingo model is the flow of value between an organisation and its customers. The concept relates to how well a business anticipates and manages demand, ensuring a constant flow of value to the customer – creating a better overall experience.

Ideally, businesses should avoid offering products and services beyond those that customers demand. Otherwise, this “waste” can disrupt the flow and pull of your value offering and proposition. Furthermore, effective inventory and stock management are essential for answering demand in a timely manner.

  1. Think Systematically

Systematic thinking forms a key part of the Shingo model of operational excellence. Businesses should look to eliminate barriers that disrupt the flow of value, information, and ideas, taking a systematic approach to decisions and process optimisation.

Consider how the processes and relationships within a system are connected and interwoven. How can workflows, alerts, data delivery and end-user screens be simplified to ensure optimal decision-making, as well as overall efficiency?

  1. Create Constancy of Purpose

 Why does your business exist? And what are its goals, purposes, and driving forces? When you lose sight of your organisation’s direction, clarity dwindles, and so too does efficiency and the prospect of future growth.

In its core principles list, the Shingo model highlights the need for businesses to maintain a consistent sense of purpose. Because without direction, processes and actions can become misaligned, resulting in a drop in progress and innovation. Regularly reinforce the purpose of your business to staff and stakeholders, setting goals that align with the company’s overall mission.

  1. Create Value for the Customer

The Shingo model sets out a unique interpretation of value, but one which is sure to resonate with all organisations. It talks about the importance of understanding what customers want and how much they’re willing to pay for it; only then can a business deliver both effectively and efficiently.

There are, of course, lots of ways to understand what customers want, as well as their overall expectations. For example, customer insights can be gleaned from ERP and business management software, with real-time data supporting deep analysis of customer trends and requirements. Such data can then be leveraged to support sales and marketing activity, with the potential to boost revenue and value generation.

 

Wherever your business is and no matter where it’s going, Intact can offer future-fit business management solutions that can help you achieve operational excellence. To learn more about our industry-specific ERP software, visit the homepage or contact us today.

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Fiona McGuinness

I've been part of the Intact family for 16 rewarding years. After completing my Business Studies degree, I knew Marketing was a field I wanted to pursue. Prior to joining Intact, I primarily worked in the financial sector, focusing on marketing for credit unions. When I started at Intact, I handled all the marketing tasks by myself. Over time, as our team expanded, so did my role. Now, I specialise in crafting compelling content across various platforms, from blogs to video scripts. No two days are the same, and I thrive on the dynamic nature of my role. Whether it's diving into customer case studies or lead campaigns, I'm driven by the positive impact our solutions bring to businesses. In an age where AI plays a significant role, I remain a firm believer in the power of authentic content. When I'm not working, you'll find me enjoying quality time with my family, sewing, or watercolor paintings.