Operational excellence has become a cornerstone of successful business management in modern times. However, this management philosophy has its roots in the automotive industry and was pioneered by visionaries such as Shigeo Shingo, Taiichi Ohno, and W. Edwards Deming.
These pioneers developed principles as the foundation for operational excellence and helped businesses optimize their processes, resources, and people to achieve the highest efficiency, quality, and customer satisfaction possible. Over the years, various industries have adopted operational excellence and become a vital component of business success.
In this article, we will delve into the history of operational excellence and explore some examples from various industries. By examining how companies have implemented this concept, we can gain insights into how operational excellence can drive business success.
To provide context, we will include historical anecdotes, statistics, and dates where applicable to support our claims. Additionally, we will share inspiring quotes from pioneers in operational excellence, such as Shingo, Ohno, and Deming, and analyze how these quotes can be applied to modern-day industries like IT.
Overall, this article will be a valuable tool to help readers understand the principles and concepts underlying operational excellence and how it can be implemented to achieve business success.
2. Operational Excellence in Software Development
Operational excellence is applicable in software development. Many software development companies have adopted operational excellence principles to optimize their processes, resources, and people to achieve the highest efficiency, quality, and customer satisfaction possible.
Operational excellence in software development is built on the same fundamental concepts as in other industries. These concepts include continuous improvement, waste reduction, customer focus, and a culture of problem-solving.
In software development, operational excellence is often achieved through adopting Agile methodologies, DevOps practices, and Lean principles. These approaches prioritize collaboration, flexibility, and continuous value delivery to the customer.
One area where operational excellence has been successfully applied in software development is in the development of enterprise applications. Companies like IBM, Oracle, and Microsoft have adopted operational excellence principles to improve their development processes and deliver high-quality software products that meet customer needs.
Another area where operational excellence has been successfully applied in software development is in the development of mobile applications. Companies like Google, Apple, and Facebook have adopted Agile and Lean principles to optimize their development processes and deliver innovative products that meet the ever-changing demands of mobile users.
Operational excellence is a valuable management philosophy that can help software development companies achieve business excellence through continuous improvement. By adopting the key principles and implementation processes of operational excellence, software development companies can optimize their processes, resources, and people to deliver high-quality software products that meet customer needs and gain a competitive advantage in the market.
3. Principles of Operational Excellence
The following quotes embody the main concepts of Operational Excellence as we understand and use them in this series of articles.
As you will probably notice, these concepts are not always technical. Often, they present philosophical aspects as well.
3.1 Ultimate Purpose of an Organization
Kaoru Ishikawa was a Japanese engineer and quality control expert who made significant contributions to the field of quality control. He is best known for his work in developing the Ishikawa diagram, also known as the fishbone diagram, which is a tool used for root cause analysis.
In addition to his work on quality control, Ishikawa was also a proponent of the idea that the happiness of employees and other stakeholders should be the first concern of management in a company. He famously said:
Ishikawa believed that a company’s success depended on the well-being of its people, including employees, customers, and other stakeholders. He argued that companies should prioritize the happiness of these groups to ensure their long-term success.
To achieve happiness in the workplace, Ishikawa believed that companies should provide a positive work environment, fair compensation, and opportunities for personal and professional growth. He also believed that companies should strive to meet the needs and expectations of their customers, as happy customers are more likely to become repeat customers and recommend the company to others.
Many successful companies worldwide have embraced Ishikawa’s ideas on the importance of employee happiness. For example, Google is known for its employee-centric approach, including free meals, on-site gyms, and opportunities for personal and professional growth.
Kaoru Ishikawa was a pioneer in quality control who also believed in prioritizing the happiness of employees and other stakeholders in a company. His ideas on this topic have been influential in many successful companies worldwide.
That strategic impulse—to identify a higher-purpose mission that galvanizes the organization—is a common thread among the Transformation 20, a new study by Innosight of the world’s most transformative companies. Fortifying this new view, the Business Roundtable last month released a statement signed by 181 CEOs stating that serving shareholders can no longer be the main purpose of a corporation; rather, it needs to be about serving society through innovation, commitment to a healthy environment and economic opportunity for all.
— The Top 20 Business Transformations of the Last Decade, by Scott D. Anthony, Alasdair Trotter, and Evan I. Schwartz
Without a long-term altruistic goal, the organization has little or no incentive to sacrifice short-term financial goals to invest in its human assets.
3.2 Continuous Improvement
Shigeo Shingo was a Japanese industrial engineer and consultant widely considered one of the foremost experts on operational excellence and continuous improvement. He is best known for his work with Toyota, where he played a key role in developing the Toyota Production System, a lean manufacturing system that revolutionized the automotive industry.
Shingo’s contributions to operational excellence and continuous improvement include the development of several key concepts, including mistake-proofing (also known as poka-yoke), quick changeover (SMED), and the single-minute exchange of die (SMED).
Shingo believed that by reducing the time it takes to switch production, companies could significantly improve their efficiency and responsiveness to customer demand.
Shingo’s contributions to operational excellence and continuous improvement have been widely recognized and implemented across many industries, not just manufacturing. His work has profoundly impacted how companies think about process improvement and has helped many organizations achieve significant improvements in quality, efficiency, and customer satisfaction.
Shingo’s legacy is one of innovation, creativity, and a deep commitment to continuous improvement. His ideas and principles continue to inspire organizations worldwide to pursue operational excellence and strive for ever-greater levels of performance and success.
3.3 Seeing for Yourself
Taiichi Ohno was a Japanese engineer and businessman widely regarded as the father of the Toyota Production System (TPS) and the originator of its key concepts. He was born in Dalian, China, in 1912 and joined the Toyota Motor Corporation in 1943.
Ohno’s contributions to operational excellence and continuous improvement include:
Overall, Ohno’s contributions to operational excellence and continuous improvement have significantly impacted the manufacturing industry and beyond. His ideas and concepts continue to be studied and implemented by companies worldwide in various industries.
3.4 Root Cause Analysis
The quote, “Repeat ‘why’ five times about every matter”, is attributed to Taiichi Ohno (the idea was originally developed by Sakichi Toyoda, the founder of Toyota Industries Corporation) and is often used in root-cause analysis.
Root-cause analysis is a problem-solving technique used to identify an issue’s underlying cause or causes rather than just addressing its symptoms. It is an essential tool in operational excellence as it helps organizations identify and eliminate the sources of problems and improve their processes.
The idea behind repeating ‘why’ five times is to drill down to the root cause of a problem by asking ‘why’ repeatedly. By doing this, the analyst can uncover an issue’s underlying cause and identify improvement opportunities. This approach helps prevent organizations from addressing only the symptoms of a problem rather than its root cause, which can lead to ineffective solutions.
For example, suppose a production line in a manufacturing plant breaks down, causing delays and increased costs. Instead of fixing the immediate issue, the root-cause analysis would involve asking “why” five times to get to the underlying cause. The first “why” might reveal a component’s failure, causing the line to stop. The second “why” might uncover the component’s improper maintenance. The third “why” might show that maintenance schedules were not being followed due to a lack of resources. The fourth “why” could reveal that resources were diverted to other projects, leaving maintenance neglected. The fifth “why” could uncover inadequate planning and communication between departments, causing the misallocation of resources.
By repeating “why” five times, the root cause of the problem was identified as inadequate planning and communication between departments. By addressing this issue, the manufacturing plant could prevent similar problems from occurring in the future and improve its overall operational excellence.
3.5 Eliminating Non-Value-Adding Effort or Waste
Shigeo Shingo was a renowned Japanese industrial engineer and one of the pioneers of the Toyota Production System (TPS), the basis for lean manufacturing. Shingo is widely recognized for his contributions to operational excellence and waste elimination.
Shingo believed that waste elimination was critical to achieving operational excellence and that all processes should be designed to add value to the customer. The quote, “When you buy bananas, all you want is the fruit, not the skin, but you have to pay for the skin also. It is a waste. And you, the customer, should not have to pay for the waste,” highlights Shingo’s philosophy of waste elimination.
Shingo’s approach to waste elimination was based on “muda,” which refers to any activity that consumes resources but does not add value to the customer. Shingo identified seven types of waste in manufacturing: overproduction, waiting, transportation, processing, motion, inventory, and defects.
Shingo developed several tools and techniques to eliminate waste, including the Single Minute Exchange of Die (SMED) method, which aims to reduce changeover time in production processes. Shingo also developed the “poka-yoke” concept, which refers to mistake-proofing techniques that prevent errors from occurring in the first place.
Shingo’s contributions to operational excellence and waste elimination have significantly impacted the manufacturing industry. His philosophy of designing processes to add value to the customer and eliminate waste has become a cornerstone of lean manufacturing and operational excellence.
Process Engineering: Essential Concepts from Lean, Agile, and Toyota for Effective Software Development Processes
3.6 Support From Leadership
Joseph M. Juran was a renowned management consultant and an expert in quality control. Born in 1904 in Romania, he later moved to the United States and obtained a degree in electrical engineering. Juran is considered one of the pioneers of quality control and is known for his contributions to the development of Total Quality Management (TQM).
Juran believed quality control should be integral to an organization’s overall management system. He developed the concept of a “quality trilogy,” which consists of quality planning, quality control, and quality improvement. He also emphasized the importance of leadership support in successful quality initiatives.
Juran’s quote, “…every successful quality revolution has included the participation of upper management. We know of no exceptions,” emphasizes the importance of leadership support in quality initiatives. Upper management support is crucial for the success of any quality revolution, and Juran believed that quality initiatives would not be sustainable without their involvement.
Juran’s contributions to quality control were significant, and he received numerous awards and honours for his work, including the National Medal of Technology and Innovation in 1988. His ideas and concepts continue influencing the quality control and management field today.
The Role of Emotional Intelligence In Modern Organizations– An Ingredient or Byproduct of Great Leadership?
3.7 Change and Resistance to Change
W. Edwards Deming was an American engineer, statistician, and management consultant who made significant contributions to the field of quality control. He believed that quality is not just the responsibility of one department but a joint effort of everyone in the organization. His famous quote, “Two basic rules of life are: 1) Change is inevitable. 2) Everybody resists change”, emphasizes the need for organizations to embrace change to improve and succeed.
Deming developed a philosophy for management that focused on the importance of continuous improvement, quality control, and the involvement of all employees in the improvement process. He believed that management should focus on improving the system rather than blaming employees for defects, and he advocated for using statistical methods in quality control.
Deming’s ideas on quality control significantly impacted Japanese industry after World War II. His teachings were embraced by Japanese companies such as Toyota, and Deming became known as the “father of the Japanese post-war economic miracle.” His work helped to revolutionize the manufacturing industry and inspired a new approach to quality control and continuous improvement known as Total Quality Management (TQM). Today, Deming’s teachings influence quality control and business management worldwide.
Cultural Transformations and Resistance to Change: Understanding the Risks to Your Organization’s Growth
4. Operational Excellence Examples
4.1 Toyota Production System (TPS)
The Toyota Production System is a lean manufacturing approach focusing on minimizing waste, improving quality, and maximizing value. Toyota implemented this system in the 1950s, and it has become a standard for operational excellence in manufacturing industries. The TPS emphasizes the principles of continuous improvement, respect for people, and just-in-time production.
4.2 GE Work-Out
GE Work-Out is a process improvement methodology developed by General Electric. It aims to identify and eliminate inefficiencies in business processes, improve communication, and empower employees. GE Work-Out involves a series of structured meetings where cross-functional teams discuss and analyze business issues and develop action plans to address them.
4.3 Starbucks Lean Thinking
Starbucks’ Lean Thinking is an operational excellence approach used in the service industry. It involves identifying and eliminating waste in business processes to improve quality and customer experience. Starbucks implemented this approach by streamlining its supply chain, reducing the time it takes to make a cup of coffee, and enhancing customer service.
4.4 Walmart Supply Chain Management
Walmart is known for its efficient supply chain management system, one of the best operational excellence examples in retail. Walmart uses advanced technology and data analytics to manage its supply chain, optimize inventory, and reduce costs. This approach has helped Walmart maintain its competitive advantage and offer customers affordable prices.
4.5 Amazon Fulfillment Center Operations
Amazon’s fulfilment centre operations are a prime example of operational excellence in e-commerce. Amazon uses advanced technology, such as robotics and automation, to optimize its fulfilment processes, reduce delivery times, and improve customer experience. Amazon’s operational excellence approach has enabled it to become the world’s largest online retailer.
5. Final Words
Operational excellence is a powerful concept that can help companies achieve business success by optimising processes, resources, and people. By adopting operational excellence practices, companies can improve efficiency, quality and customer satisfaction, reduce costs and waste, and gain a competitive advantage. From the Toyota Production System to Amazon’s fulfilment centre operations, many operational excellence examples across various industries demonstrate the power of this approach.
However, implementing operational excellence is difficult, and companies must overcome several challenges to succeed. Resistance to change, lack of leadership support, insufficient resources, and poor communication are some common obstacles that companies may face. To overcome these challenges, companies must define clear goals and objectives, analyze their current processes, identify improvement opportunities, develop action plans, implement changes, and monitor and evaluate results.
In conclusion, operational excellence is a valuable management philosophy that can help companies achieve business excellence through continuous improvement. By learning from these operational excellence examples and applying the key principles and implementation processes, companies can optimize their processes, resources, and people to achieve the highest efficiency, quality, and customer satisfaction possible.
6. Further Reading
- The Toyota Way — Jeffrey K. Liker
- Organisational Culture and Leadership — Edgar Schein
- Six Frames for Thinking About Information — Edgar de Bono
- Book Review: The Ten Commandments of Lean Six Sigma — A Guide for Practitioners
- Book Review: The Six Sigma Way — How GE, Motorola, and Other Top Companies are Honing Their Performance — Peter Pande, Robert Neuman, Roland Cavanagh