What is "Operational Excellence"?

I’ve been reading recently about “Operational Excellence”. Interesting concept with a dramatic name, but no-one seems too sure about what it actually is. Various definitions are out there, but no-one seems to have really nailed it. So what is “Operational Excellence”?

One thing about having been around for a while is that you get to live through the gestation of a concept such as “Operational Excellence”. I started my career in improvement technology when TQC (do you remember TQC?) was the buzz word (buzz phrase?). Then there was TQM. Then there were the various national (including Australian) Quality Awards. Somewhere in there ISO9001 was born. Then there was Six Sigma, then Lean, then Lean Six Sigma. Now we have Operational Excellence. You might argue that all of these various concepts are actually different in detail, but there’s no point splitting hairs. They’re all about improvement technology.

The one commonly themed, still developing, model is ISO9001. I guess I’m a bit of a fan for ISO9001. There is no other improvement technology model that has been developing consistently since 1987 (one could argue even before this). There is no other model which has so many industry experts from so many countries and so many widely varying vocational groupings working continuously to improve it. I’ve seen all this as a member of Standards Committee QR-8, which provides Australasian input to the development of ISO9001. People might say that because it has to be relevant to every vocation in every country in the world the requirements of ISO9001 are necessarily too generalised to really show the way to improvement. However, that’s precisely the point. Rather than following someone else’s “how to” book, each business has to work out what’s right for them. Believe me, that focus has been planned. The intent of ISO9001 is not to tie businesses to a rule book, butto liberate businesses to be the best they can be. But if we look at ISO9001 we’ll see that it doesn’t attempt to get involved with financial management, or even marketing management. ISO9001 is focussed on best guaranteeing customer outcomes. So, what has all this to do with “Operational Excellence”.

Let’s take the concept apart. “Operational” excellence is not about financial excellence, nor is it about marketing excellence. The “operational” side of a business is the part where customer-focussed outcomes are generated. Achieving excellence in this side of the business is not focussed on income streams or even on generating profit. Nay sayers will highlight the operationally excellent businesses that have gone out of business. I’m sorry guys, you’re missing the point. Operational excellence, developed (it will take time) and used the right way, will leave a business best placed for profitability, but it won’t guarantee the outcome. Without the right products and market focus, and good financial management, the business will be at risk. On the other hand, the concept of “Excellence” is fairly straightforward. It means to be best in class, in this context the best a business can be.

I hope that you’re seeing the parallel between ISO9001 compliance, used and managed as it’s meant to be used and managed, and Operational Excellence. Any lesser (long term) outcome of ISO9001 compliance than operational excellence is not properly utilising the intent of ISO9001. I’m sure that there are executives of many ISO9001 certified companies who would scoff at this concept. They get audited by their certifier every 6 months and they think that the audit has been a success if their ISO9001 certification has been allowed to continue until the next audit. I’m sorry guys, you’re missing the point (my repetition of this phrase is intentional!). Also, (once again paralleling what I say above regarding operational excellence) ISO9001 compliance, developed (it will take time) and used the right way, will leave a business best placed for profitability, but it won’t guarantee the outcome. Without the right products and market focus, and good financial management, the business will be at risk.

My guess is that you’ll see the term “Operational Excellence” thrown around quite a bit in the next few years (until the next catch-phrase takes hold). Now, at least, you’ll know what it means. I hope also that you’re a bit clearer on what the intent of ISO9001 compliance is, and its’ link to the concept of operational excellence, and frankly how the whole lot fits together.