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"

Process Mapping: Part 2.

In an earlier post, I had outlined how to construct a simple flowchart. In this post, let us see how can add more detail and enhance this flowchart using different techniques like SIPOC (six sigma), value stream mapping (lean), swim lane etc.

Swim lane diagrams: This is an extension of flowcharts and includes additional details like

• Actors: The people, groups, teams, etc, who are performing the steps identified within the process.
• Phases: These might reflect the phases of the project, different areas of the project, or any secondary set of key elements that the process flow needs to traverse to successfully complete this process.

Some times, these are also called cross functional flowcharts. This method of allows you to quickly and easily plot and follow processes and, in particular, the handoffs between processes, departments and teams and identify inefficiencies easily.
For example, if you look at the image shown, the flow chart is extended with additional information (phases are distinctly listed in the columns and the actors are listed in the rows).



SIPOC diagrams: This is an extension of flowcharts and clearly indicates the suppliers, input, process, output and customers. In some cases, the process can be shown not only in a simple flowchart but also using swim lanes. SIPOC depiction of the process is very useful because it clearly identifies who supplies the information, which organization is impacted by the process and who generates the output and what the deliverables are.



Value stream mapping: This is an extension of flow charts & swim lanes and clearly identifies management and information systems that support the basic process. This methodology started as part of LEAN manufacturing with an emphasis on reducing wastes within manufacturing, but the benefits of using this across all business processes are valuable. The primary goal of this depiction is to clearly identify value added and non value added tasks performed in order to minimize wastes. It clearly outlines all tasks tasks, cycle time for each of the tasks so that the reviewer/management can identify how the process can be improved.



"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"

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"

Debate: Six Sigma vs. Innovation

I recently came across an article on business week about the debate over if six sigma stifles innovation.

The key takeaways for me from this article was
(1) Six Sigma is designed to inject more efficiency and productivity into a company's systems
(2) Disruptive innovation is going to be more entrepreneurial.
(3) smart companies separate the efforts at innovation from ongoing efforts at continuous improvement
(4) if managed properly, Six Sigma and innovation can go hand in hand

This got me thinking about my past experience, when I played an active role in facilitating product development and worked very closely with engineering. We had established processes for products which were in beta or production life cycle stage. Process adherence was essential as the tools and systems were shipped to customers when they reached this level of maturity.

By impeding new product introduction with rules did increase cycle times and caused endless frustration. So we came up with a solution, to allow engineering more freedom and flexibility in creating parts and bill of material structure with minimal requirements. We did ensure that certain checks and balances were in place so as to ensure proper procurement using revision control. Fast track changes with minimal approval cycles were also of great value.

In an organizational development activity, we studied profiles of leaders and managers. A similar issue was raised about leadership without management.

We should allow flexibility to encourage an entrepreneurial spirit with minimal guidelines!

"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"

Process Improvement Methodologies.

From my research into methodologies I have found that the two most popular methods are (1) PDCA and (2) DMAIC.

PDCA ("Plan-Do-Check-Act") is an iterative four-step problem-solving process typically used in business process improvement. PDCA was made popular by Dr. W. Edwards Deming, who is considered by many to be the father of modern quality control;
Plan – What are you going to do?
Do – Based on analysis, decide on solution.
Check – Verify the solution worked.
Act – Standardize and decide on next PDCA step.
When you are done with PDCA, you do it again. Or, in other words, you are never done because you must practice continuous quality improvements.

DMAIC ("Define-Measure-Analyze-Improve-Control")is a five step process involving the following steps. DMAIC is one of the two key method used in Six Sigma (business management strategy, initially implemented by Motorola).
Define high-level project goals and the current process.
Measure key aspects of the current process and collect relevant data.
Analyze the data to verify cause-and-effect relationships. Determine what the relationships are, and attempt to ensure that all factors have been considered.
Improve or optimize the process based upon data analysis using techniques like Design of experiments.
Control to ensure that any deviations from target are corrected before they result in defects.

PDCA and DMAIC are very similar, but have some differences. PDCA emphasizes more the need to repeat the steps, while DMAIC adds the Control step lacking in PDCA.

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"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"