An Introduction to Operational Excellence

An Integrated Business Execution System

by Operational Excellence Consulting LLC

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 Top 10 CEO Challenges & Priorities

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 Operational Excellence – A Definition

A Business Strategy: In "The Discipline of Market Leaders“ (1995),

Michael Treacy and Fred Wiersema describe three distinct value
propositions or disciplines: Product Leadership, Customer Intimacy
and Operational Excellence.
Market leaders choose to excel in delivering extraordinary levels of one
of these three value propositions, while maintaining reasonable
standards in the other disciplines.
Market leaders will not pursue a diffused business
strategy across two or even all three disciplines, but will
continually focus on their organizational design,
processes, technology and competencies to improve the
one particular value discipline that they want to provide
to their Customers better than anyone else.
Organizations pursuing an Operational Excellence
strategy, strive to deliver a combination of quality,
price, and ease of purchase and service that no other
organization in their market or industry can match.
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 What is Operational Excellence?

Achieving Operational Excellence requires the successful

implementation of a integrated Business Execution System that
effectively and seamlessly integrates the following four building blocks:
Strategy Deployment, Performance Management, Process
Excellence, and High Performance Work Teams.

Operational Excellence
Strategy or Policy
can be achieved and
Deployment is the process
sustained with the right
that aligns and links
attitude, the right
business strategy and
mindset, and the right
execution.
competencies.

Well designed, efficient, Performance

and effective Management, Management is the
Value Chain, and Support process that translates
Processes are necessary to strategic initiatives into
deliver world-class results. measurable objectives
and goals.
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 What is Operational Excellence?

Achieving Operational Excellence requires the successful

implementation of a integrated Business Execution System that
effectively and seamlessly integrates the following four building blocks:
Strategy Deployment, Performance Management, Process
Excellence, and High Performance Work Teams.

Strategy or Policy
Deployment is the process
that aligns and links
business strategy and
execution.

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 Operational Excellence – Strategy Deployment

Strategy is an expression of what an organization intents to do to get

from a current state to a future state. Strategy is often expressed in
terms of a vision statement, objectives, goals, and initiatives.

 Only 5% of the workforce understands their

company strategy.
 Only 25% of managers have incentives
linked to strategy.
 60% of organizations don’t link budgets to
strategy.
 86% of executive teams spend less than
one hour per month discussing strategy.
Source: Balanced Scorecard Collaborative

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 Operational Excellence – Strategy Deployment
Process

Phase I – Organize the Process

Phase II – Current State Analysis (CSA)

Phase III – Strategic Vision Elements

Phase IV – Strategic Breakthrough

Objectives

Phase V – Strategic Initiatives & Tactics

Phase VI – Strategy Implementation &

Review

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 Operational Excellence – Strategy Deployment
Process
Strategy Maps or Strategic Grids:
Strategic Focus Area: Increase Shareholder Value
Dimensions or Perspectives

Financials Revenue Growth of 20% by 2014

Acquire More Customers

Customers
Become the Price Leader
Improve Operational Efficiency
Internal
Processes Cost Reduction Knowledge Based Reduce
Program System Non-Core
Activities
Training – Lean Database Re-Align
Learning & Network on Organization with
Six Sigma
Growth Operational Core
Program
Performance Competencies
Once you have completed the strategic grid, go back and make sure everything fits with
your overall strategy. A set of strategic grids should provide the strategic model for running
the business, outlining the specifics of the strategy. All stakeholders should be able to look
at the grids and follow the flow of the organization’s strategy.

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 Operational Excellence – Strategy Deployment
Process
The Hoshin X-Matrix is a tool that visualizes an organization’s
 strategic objectives,
 strategic initiatives,
 key performance indicators,
 key projects & action items, and
 human resources requirements
in one simple matrix.

The Hoshin X-Matrix enables an organization to easily review the

alignment of its strategic objectives, strategic initiatives, key
performance indicators, key action items and human resources.
The Hoshin X-Matrix, if used properly, improves the likelihood of a
successful execution of the strategic plan.

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 Operational Excellence – Strategy Deployment
Process
Organization’s
Tactical Projects &
Action Items
Organization’s
Human Resource
Allocation

Organization’s
Strategic
Objectives &
Goals

Organization’s
Strategic Initiatives
Organization’s Key
& Tactics
Performance
Indicator (Balanced
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 Operational Excellence – Strategy Deployment

“I sure wish I’d done a better job of

communicating with GM people. I’d do that
differently a second time around and make
sure they understand and shared my vision for
the company. Then they would know why I was
tearing the place up, taking out whole divisions, changing our whole
production structure . . . I never got this across.”

Roger Smith, CEO of General Motors (1981 - 1990)

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 Strategy Planning & Deployment Training Module

To learn more about effective strategy planning and

deployment based on Hoshin Kanri and Strategy Maps, please
review our Strategy Planning & Deployment Process Training Module.
The Strategy Planning and Deployment Training Module
v7.0 includes:
1. MS PowerPoint Presentation including 100 slides covering our
Strategy Planning and Deployment Process using Strategy
Maps and Hoshin Kanri, including Introduction to Strategy
Planning, Organizing the Process, Current State Analysis (CSA),
Strategic Vision Elements, Strategic Breakthrough Objectives,
Strategy Maps, Strategic Initiatives and Tactics, Strategy
Deployment Matrix, and Strategy Implementation and Review.
2. MS Excel Templates for Annual Planning, Criticality Analysis,
Force Field Analysis, Radar Gap Analysis Chart, Strategy Grid
Alignment Matrix, Strategy Grid Correlation Matrix, Project
Selection Matrix, Bowling Chart, and Strategy Implementation
Review Table.
3. MS Word Current State Analysis (CSA) Questionnaire
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4. MS Excel Hoshin Kanri Strategy Deployment X-Matrix
 What is Operational Excellence?

Achieving Operational Excellence requires the successful

implementation of a integrated Business Execution System that
effectively and seamlessly integrates the following four building blocks:
Strategy Deployment, Performance Management, Process
Excellence, and High Performance Work Teams.

Strategy or Policy
Deployment is the process
that aligns and links
business strategy and
execution.

Performance
Management is the
process that translates
strategic initiatives into
measurable objectives
and goals.
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 Operational Excellence – Performance
Management

“Balanced Scorecards tell you the knowledge, skills and systems that
your employees will need (learning and growth) to innovate and build
the right strategic capabilities and efficiencies (internal processes) that
deliver specific value to the market (customer) which will eventually lead
to higher shareholder value (financial).”

“Having Trouble with Your Strategy? Then Map It.”

by Robert S. Kaplan and David P. Norton - Harvard Business
Review

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 “Tell me how you will measure me, and then I will
tell you how I will behave. If you measure me in
an illogical way, don’t complain about illogical
behavior.”
Eli Goldratt – “The Goal”

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 Operational Excellence – Performance
Management

Benefits of developing & deploying Balanced Scorecards in an

organization include:
 Help the management team focus on the execution of their
business strategy
 Focus and align an organization towards common goals and
objectives
 Enable an organization to understand the relationship between
measures and performance
 Improve communication of organizational priorities across an
organization
 Help employees to understand and focus on organizational
priorities and realize relevant results
 Reduce the number of metrics to the few vital key performance
indicators
 Strengthen and formalizing the project selection process to focus
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– v10.0
 Operational Excellence – Performance Management
Process

Phase I - Strategic Foundation

Step 1: Strategic Alignment
Step 2: Key Strategic Focus Areas & Objectives
Step 3: Strategic Grid & Model

Phase II - Three Critical

Components
Step 4: Key Performance Indicators
Step 5: Goals & Targets
Step 6: Initiatives & Programs

Phase III – Deployment Process

Step 7: Integrate
Step 8: Cascade
Step 9: Manage

Balanced Scorecard Development & Deployment Process

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 Operational Excellence – Performance Management

Vision
Vision
&&
Strategy
Strategy

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 Operational Excellence – Performance Management

Strategic Focus Area: Increase Shareholder Value

Dimensions or Perspectives

Financials Revenue Growth of 20% by 2014

Acquire More Customers

Customers
Become the Price Leader
Improve Operational Efficiency
“Internal”
Processes Cost Reduction Knowledge Based Reduce
Program System Non-Core
Activities
Training – Lean Database Re-Align
Learning & Network on Organization with
Six Sigma
Growth Operational Core
Program
Performance Competencies
For each objective on your strategic grids, you need at least one performance indicator.
Can you have an objective without a performance indicator? Yes, it is possible, but not
having a measurement makes it difficult to manage the objective. It’s best to revisit this
objective and ask the question: Why is this an objective?

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 Operational Excellence – Performance Management

1 2
3
4
5 7

12
For9 each strategic objective on your strategic
grid, you need at least one performance
indicator. Can you have an objective without a
performance indicator? Yes, it is possible, but not
having a measurement 10 makes it difficult to
manage the objective. It’s best to revisit this
objective and ask the question: Why is this an 11
objective?
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 Balanced Scorecard Deployment Training Module

To learn more about effective performance management based

on the Balanced Scorecard Methodology, please review our
Balanced Scorecard Deployment Training Module.
The Balanced Scorecard Deployment Training Module
v9.0 includes:
1. MS PowerPoint Presentation including 90 slides covering
Balanced Scorecard History & Benefits, Four Dimensions of a
Balanced Scorecard, Balanced Scorecard Development &
Deployment Process, Balanced Scorecard Deployment
Challenges & Resolution Strategies, Balanced Scorecard
Template & Detailed Instructions, and Project Evaluation &
Selection Matrix.
2. MS Excel Balanced Scorecard Template and Example
3. MS Word Workshop Agenda & Evaluation Sheet for a
Balanced Scorecard Development Workshop
4. MS Excel Project Evaluation & Selection Matrix to ensure
alignment of Operational Excellence, Lean Management, and
Six Sigma projects to the Balanced Scorecard
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 What is Operational Excellence?

Achieving Operational Excellence requires the successful

implementation of a integrated Business Execution System that
effectively and seamlessly integrates the following four building blocks:
Strategy Deployment, Performance Management, Process
Excellence, and High Performance Work Teams.

Strategy or Policy
Deployment is the process
that aligns and links
business strategy and
execution.

Well designed, efficient, Performance

and effective Management, Management is the
Value Chain, and Support process that translates
Processes are necessary to strategic initiatives into
deliver world-class results. measurable objectives
and goals.
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 Operational Excellence – Process Excellence

BPI 8D
7

Process Development, Systematic & Team-

Improvement & Based Problem Solving
Management
5. Pursuit
Perfection
1. Define
4. Establish
Pull
Lean Value
Principles

3. Create 2. Map Value

Flow Stream

Lean Management Six Sigma

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Methodology
 Operational Excellence – Process Excellence

Project
Management
D M A I C

Lean = Efficiency Six Sigma = Effectiveness

is about reducing the lead is about reducing the
time of a process or value variation in a process or
stream. value stream.

Process
Excellence

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 Operational Excellence – Process Excellence

Process Input:
Strategic and Annual Process Output:
Operating Plan (Objectives, Exceeding the Plan
Goals, Initiatives)
Select and Develop and
Select the Manage for
Train the Implement Sustain the
Right Excellence in
Right Improvement Execution
Gains
Projects Plans
People

•• Clarify
Clarify big
big picture
picture •• Ensure
Ensure the
the right
right •• Utilize
Utilize the
the right
right •• Stay
Stay focused
focused •• Implement
Implement effective
effective
using
using strategic &
strategic & leadership
leadership andand improvement
improvement •• Frequently
Frequently review
review control plans
control plans
operating
operating plan
plan ownership
ownership methodology
methodology for for progress
progress and
and remove
remove •• Conduct
Conduct regular
regular
•• Prioritize
Prioritize projects
projects •• Select
Select the
the right
right team
team the right project
the right project barriers
barriers training
training focused on
focused on the
the
based
based on on impact,
impact, leader
leader && team
team •• Check
Check real
real business
business process
process
value, resources,
value, resources, •• Develop
Develop aa training
training impact
impact •• Review
Review thethe system
system
timing
timing plan
plan •• Continuously effectiveness
effectiveness at at least
least
Continuously
•• Select
Select key
key projects
projects •• Dedicate
Dedicate time
time for
for communicate
communicate quarterly
quarterly
with
with leadership
leadership buy-in
buy-in training &
training & progress
progress •• Continually
Continually identify
identify and
and
•• Check
Check accountability
accountability -- application
application •• Link
Link to
to performance
performance launch
launch new
new projects
projects
business
business andand personal
personal •• Ensure
Ensure the
the right
right management
management and and based
based onon strategic
strategic & &
support
support resources
resources R&R
R&R operating plan
operating plan
are
are available
available

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 Operational Excellence – Process Excellence

Linking Performance Management

& Process Excellence through
focused Project Selection

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 Operational Excellence – Process Excellence

Linking Performance Management

& Process Excellence through
focused Project Selection

1
4 5
2

Size of the Ball = Size of the Risk

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 Operational Excellence – Process Excellence

State of Michigan Department of Management and Budget

(DMB)

Coordinator Kathe Carter:

"Our management team evaluates potential new programs/initiatives

by seeing how they fit in with our strategy. In the past we would
continue stacking new projects on everyone's plates, but now
if it doesn't fit with our strategy we don't do it." Just as
important for the DMB is that "whenever a new project or initiative is
proposed, our people ask 'how does this fit in with our strategy
map /scorecard?' They feel that this connection attaches a higher
level of importance to the initiative."

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 Process Excellence Training Modules

To learn more about the different Process Excellence Methodologies,

please review our Lean Management, Six Sigma Methodology,
Business Process Improvement, and 8D Problem Solving Process
Training Modules.
The COMPLETE LEAN MANAGEMENT Training Module Library
v5.0 includes the latest version of all seven currently publicly
available Lean Management training modules with over 650
PowerPoint slides and many additional templates, worksheets, and
forms to support your organization's Lean Management initiative.
The COMPLETE SIX SIGMA METHODOLOGY Training Module
Library v3.0 includes the latest version of all six currently publicly
available Six Sigma training modules with over 700 PowerPoint slides
and many additional templates, worksheets, and forms to support your
organization's Six Sigma initiative.
The Business Process Improvement (BPI 7) Methodology
Training Module v2.0 includes a MS PowerPoint Presentation
including 127 slides, as well as additional worksheets and templates,
covering our Business Process Improvement Methodology (BPI 7).
The 8D (Disciplines) Problem Solving Process Training Module
v8.0 includes a MS PowerPoint Presentation including 206 slides
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v10.0 Global 8D Problem Solving Process & Tools, a Case Study,
and 7 Workshop Exercises.
 What is Operational Excellence?

Achieving Operational Excellence requires the successful

implementation of a integrated Business Execution System that
effectively and seamlessly integrates the following four building blocks:
Strategy Deployment, Performance Management, Process
Excellence, and High Performance Work Teams.

Operational Excellence
Strategy or Policy
can be achieved and
Deployment is the process
sustained with the right
that aligns and links
attitude, the right
business strategy and
mindset, and the right
execution.
competencies.

Well designed, efficient, Performance

and effective Management, Management is the
Value Chain, and Support process that translates
Processes are necessary to strategic initiatives into
deliver world-class results. measurable objectives
and goals.
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 “The rate at which organizations learn may
soon become the only sustainable source
of competitive advantage.”
Peter Senge

“The thing I have learned at IBM is that

culture is everything.”
Louis V. Gerstner, Jr.

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 Operational Excellence – High Performance Work
Teams

Operational Excellence can and can only be achieved and sustained

with the right attitude, the right mindset, and the right competencies.

Empowerment = f (Authority, Resources, Information, Accountability)

Empowerment = 0,
if Authority or Resources or Information or Accountability = 0

Selected Employee Ongoing Employee High Performance

Input Taskforces Work Teams

The
Low Empowerment High
Continuum

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 Operational Excellence – High Performance Work
Teams

In their book Gung Ho ! – Turn on the People in any

Organization, Ken Blanchard and Sheldon Bowles
describe three distinctive phase of transforming a
traditional organization to an organization based on
high performance work team.

Spirit of the Squirrel Way of the Beaver Gift of the Goose

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 Operational Excellence – High Performance Work
Teams

Spirit of the Squirrel

WORTHWHILE WORK
1. Knowing we make the world a better place.
2. Everyone works toward a shared goal.
3. Values guide plans, decisions, and actions.

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 Operational Excellence – High Performance Work
Teams

Way of the Beaver

IN CONTROL OF ACHIEVING THE GOAL

1. A playing field with clearly marked
territory.
2. Thoughts, feelings, needs, and dreams
are respected, listened to, and acted
upon.
3. Able but challenging.
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 Operational Excellence – High Performance Work
Teams

Gift of the Goose

CHEERING OTHERS ON
1. Active or passive, congratulations must be
TRUE.
2. No score, no game, and cheer the progress.
3. E = m · c2 – Enthusiasm equals mission
times cash and congratulations.
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 Operational Excellence – High Performance Work
Teams
While an organization transitions from a more traditional “top-
down” organization to an organization build around high
performance work teams, the role of a supervisor or manager
changes to the role of a leader and coach, with six distinctive
capabilities.
Coach
Living Barrier
Example Buster

Leader ≠ Manager

Result Business
Catalyst Analyzer
Facilitator

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 What is Operational Excellence?

Achieving Operational Excellence requires the successful

implementation of a integrated Business Execution System that
effectively and seamlessly integrates the following four building blocks:
Strategy Deployment, Performance Management, Process
Excellence, and High Performance Work Teams.
Operational Excellence can Strategy or Policy
be achieved and sustained Deployment is the process
with the right attitude, the that aligns and links
right mindset, and the right business strategy and
competencies. execution.

Well designed, efficient,

and effective Management, Performance Management is
Value Chain, and Support the process that translates
Processes are necessary to strategic initiatives into
deliver world-class results. measurable objectives and
goals.

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 About Operational Excellence Consulting LLC

“In the global and competitive environment of today

and tomorrow, organizations must rethink and reshape
their approach to execution in order to stay
competitive. Operational Excellence is the strategic
initiative under which this process can take shape.”

We work with our clients, primarily smaller and medium-sized manu-

facturing and service organizations, hands-on and side-by-side to
achieve their strategic and operational goals and objectives through the
innovative application of Operational Excellence principles, methods, and
tools.
Email: [email protected]
Phone: +1 (888) 372 – 8705
Website: www.oec-us.com

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