What is operational excellence?

As usual I will start by quoting the definition from Wikipedia, “Operational Excellence is a philosophy of leadership, teamwork and problem solving resulting in continuous improvement throughout the organization by focusing on the needs of the customer, empowering employees, and optimizing existing activities in the process.”

If you read through the definition, you can clearly identify the key tenets: leadership, continuous improvement, focus on customer, and optimizing current processes. Simply put, operational excellence is executing in an efficient and effective manner across the value chain with a focus on delivering value to customers.

The Operational Excellence program provides a framework to understand why and how performance needs to improve. The road to achieving operational excellence is by identifying value chain business processes, identifying strengths/weaknesses of them (based on key measurements and benchmarks) and redesigning these processes to align with corporate / strategic goals and ensure that organizations, resources and assets are utilized in the best possible manner.

When you pore through the reference material on operational excellence, you will see terms/phrases like “on par with industry”, “best in class”, “world class”. There are differences in all these phrases, if you choose to embark on operational excellence, focus first to meet/exceed your competition’s performance and then become the best of your peers and then become the best among organizations outside of your industry and region.

Each and every industry and organization/business unit within each company can create and run their operational excellence program. In most cases, value chain processes span across multiple organizations, so the focus should be on process execution (related to handoffs) and ensure the best use of assets and resources across the enterprise. Automation and business process re-engineering have great potential so does streamlining / integrating data and business system like ERP, CRM etc.

"Disclaimer: The views and opinions expressed here are my own only and in no way represent the views, positions or opinions - expressed or implied - of my employer (present and past) "
"Please post your comments - Swati Ranganathan"

Organized Information is the Next Moonshot?

I came across a very well written article on organized information!

Kudos to the author on succinctly writing about the value of organized information!

An excerpt from the article “Today's challenge is not having more information; it's devising a less-resource intensive way to collect it and an efficient way to filter and disseminate it.”

It is not what you know; it is how well and how quickly you can use what you know!

"Disclaimer: The views and opinions expressed here are my own only and in no way represent the views, positions or opinions - expressed or implied - of my employer (present and past) "
"Please post your comments - Swati Ranganathan"

The 10 Questions Every Change Agent Must Answer

I came across this blog entry, from Harvard Business School. I highly recommend reading the article and going through each and every one of the questions to see whether you are on the right track!
It's time to do — and get — something different. Here, then, are ten questions that leaders must ask of themselves and their organizations —
1. Do you see opportunities the competition doesn't see?
2. Do you have new ideas about where to look for new ideas?
3. Are you the most of anything?
4. If your company went out of business tomorrow, who would miss you and why?
5. Have you figured out how your organization's history can help to shape its future?
6. Can your customers live without you?
7. Do you treat different customers differently?
8. Are you getting the best contributions from the most people?
9. Are you consistent in your commitment to change?
10. Are you learning as fast as the world is changing?

"Disclaimer: The views and opinions expressed here are my own only and in no way represent the views, positions or opinions - expressed or implied - of my employer (present and past) "
"Please post your comments - Swati Ranganathan"

Key Performance Indicators

Key Performance Indicators (KPI) are metrics used to help an organization define and evaluate how successful it is, typically in terms of making progress towards its long-term organizational goals.

KPI’s can be specified by answering the question, "What is really important to stakeholders?”. KPI’s evaluate business data against business goals and display current status by using easy-to-understand graphical indicators. For example, a KPI can use traffic light icons to indicate that customer satisfaction is exceeding, meeting, or failing to meet goals.

KPI’s are quantifiable measurements, agreed to beforehand, that reflect the critical success factors of an organization.

They will differ depending on the organization. A business may have as one of its Key Performance Indicators the percentage of its income that comes from return customers. A school may focus its Key Performance Indicators on graduation rates of its students. A Customer Service Department’s Key Performance Indicators could be percentage of customer calls answered in the first minute. A Key Performance Indicator for a social service organization might be number of clients assisted during the year.

Guidelines: refer to the posting Metrics

Categorization of indicators
KPIs can be summarized into the following sub-categories:
Quantitative indicators which can be presented as a number.
Practical indicators that interface with existing company processes.
Directional indicators specifying whether an organization is getting better or not.
Actionable indicators are sufficiently in an organization's control to effect change.
Financial indicators used in performance measurement

Are KPI’s and metrics interchangeable?
The term "metric" is generic. It is typically used to mean just about any sort of measurement applied to gauge a particular business process or activity. KPI’s are metrics, too, but they are "key" metrics. KPI’s are meant to gauge progress toward vital, strategic objectives usually defined by upper management, as opposed to the more generic metric used to measure a more mundane (i.e., less strategic) process. The goal is to foster greater visibility, better execution of strategy, faster reaction to opportunities and threats, and improved collaboration and coordination across key business operations

In previous posts, I had outlined SWOT analysis and setting strategy based on the analysis. KPI’s provide a way of measuring progress towards accomplishing the goals set by the strategy. In this post, I have outlined the definition and details regarding KPI’s and in upcoming posts, I will discuss performance management and evolution of balanced scorecards.

"Disclaimer: The views and opinions expressed here are my own only and in no way represent the views, positions or opinions - expressed or implied - of my employer (present and past) "
"Please post your comments - Swati Ranganathan"

SWOT Strategy

In a previous blog entry, I had described how to go about SWOT analysis. Now that you have completed the analysis and created a matrix of your Strengths, Weakness, Opportunities and Threats, let us discuss how you can construct a strategy to address your findings.

You will have to match each component with one another. For example, match the internal strengths with external opportunities and list the resulting Strengths / Opportunities strategies in the matrix chart. This will result in four strategy types, which are:

S-O strategies pursue opportunities that match the company’s strengths. These are the best strategies to employ, but many firms are not in a position to do so. Companies will generally pursue one or several of the other three strategies first to be able to apply Strengths-Opportunities strategies.

W-O strategies overcome weaknesses to pursue opportunities. Your job is to match internal weaknesses with external opportunities and list the resulting Weaknesses-Opportunities strategies

S-T strategies identify ways that the firm can use its strengths to reduce its vulnerability to external threats. Your job is to match internal strengths with external threats and list the resulting Strengths-Threats Strategies

W-T strategies establish a defensive plan to prevent the firm’s weaknesses from making it susceptible to external threats. Your job is to match the internal weaknesses with external threats and record the resulting Weaknesses-Threats Strategies

Here are some examples on the type of strategies based on SWOT analysi:

Strength-Opportunity Strategies
Expand
Increase advertising
Develop new products
Diversify

Strength-Threat Strategies
Diversify
Acquire competitor
Expand
Re-engineer

Weakness-Opportunity Strategies
Joint venture
Acquire competitor
Expand

Weakness-Threat Strategies
Divest
Retrench
Restructure

"Disclaimer: The views and opinions expressed here are my own only and in no way represent the views, positions or opinions - expressed or implied - of my employer (present and past) "
"Please post your comments - Swati Ranganathan"

Pareto Analysis

Pareto charts provide a tool for visualizing the Pareto principle, which states that a small set of problems (the "vital few") affecting a common outcome tend to occur much more frequently than the remainder (the "useful many"). A Pareto chart can be used to decide which subset of problems should be solved first, or which problems deserve the most attention.

The Pareto principle (also known as the 80-20 rule, the law of the vital few, and the principle of factor sparsity) states that, for many events, roughly 80% of the effects come from 20% of the causes. Vilfredo Pareto observed that 80% of the land in Italy was owned by 20% of the population.

This principle can be applied to quality improvement to the extent that a great majority of problems (80%) are produced by a few key causes (20%). If we correct these few key causes, we will have a greater probability of success. It is the basis for the Pareto diagram, one of the key tools used in total quality control and Six Sigma.

Step by step process:
1 List all elements of interest
2 Measure the elements, using same unit of measurement for each element.
3 Order the elements according to their measure
4 Calculate the percentage for each element out of the total measurement
5 Accumulate the percentage from top to bottom to equal 100%.
6 Create a bar and line graph, line representing cumulative percentage.
7 Work on the most important element first.



"Disclaimer: The views and opinions expressed here are my own only and in no way represent the views, positions or opinions - expressed or implied - of my employer (present and past) "
"Please post your comments - Swati Ranganathan"

SWOT Analysis

SWOT Analysis is a methodology used to evaluate the Strengths, Weaknesses, Opportunities, and Threats involved in a project or in a business venture. It involves identifying the internal and external factors that are favorable and unfavorable to achieving success.

Successful businesses and individuals build on their strengths, correct their weaknesses and protect against internal vulnerabilities and external threats. They can monitor overall business environment and quickly identify and exploit new opportunities faster than competitors.

SWOT analysis can be used for all sorts of decision-making, and the SWOT template enables proactive thinking, rather than relying on habitual or instinctive reactions.

SW – Strengths & Weakness are influenced by internal factors – the strengths and weaknesses of the organization or individual. These are competences and resources that the organization or individual possesses and that are under their control.

OT - Opportunities & Threats are influenced by external factors that an organization or individual faces from trends and changes in their environment. These external factors are not under the control or influence of the organization or individual

How do I go about it?

(1) Start with an objective

(2) Now/Present: identify your strengths and weakness,

a. Strengths

i. What are your advantages?
ii. What do you do well?

b. Weaknesses

i. What could you improve?
ii. What do you do badly?
iii. What should you avoid?

(3) Future/What might be?: identify potential opportunities and threats

a. Opportunities

i. Where are the good opportunities in front of you?
ii. What are the interesting trends you are aware of?

b. Threats

i. What obstacles do you face?
ii. What is your competition doing?
iii. Is changing technology threatening your position?
iv. Could any of your weaknesses seriously threaten your potential?

(4) Develop a plan of action to

a. maximize strengths to turn them into opportunities,

b. maintain and leverage strengths

c. convert weakness into strengths, create a remedial action plan to improve

d. counter or minimize threats, if not threats will turn into weakness

"Disclaimer: The views and opinions expressed here are my own only and in no way represent the views, positions or opinions - expressed or implied - of my employer (present and past) "
"Please post your comments - Swati Ranganathan"

Metrics: Effectivess Versus Efficiency

Before you go through improving processes, try and understand how the process is working today.

How do you know if the process is working? Try and get to know how the process is measured and analyzed. What are the metrics? Are these metrics related to Effectiveness or are they related to Efficiency?

Are they these the same? No

Effectiveness means that the job was done correctly. Whereas, efficiency means that the job was accomplished on time.

Another way to look at it...you hire a data entry person who has to enter data into multiple spreadsheets/data systems. How do you know if this person is working properly and is doing the job you hired them for?

(1) Did you have to correct the data? If yes how many times did you do so? Effectiveness.
(2) Did the person complete the activity within the time allocated? Efficiency.

Each and every process should ideally have measurement of effectiveness and efficiency. If these metrics don’t exist; Work with management, key stakeholders, process owners and the worker bees to define these.

Don’t stop here, having measurements/metrics doesn't mean everyone will adhere to these. In order to ensure adherence to standards, you will need a governance/accountability system.

"Disclaimer: The views and opinions expressed here are my own only and in no way represent the views, positions or opinions - expressed or implied - of my employer (present and past) "
"Please post your comments - Swati Ranganathan"