In today’s marketplace, many leading companies are focused on building a model of Operational Excellence to help align a company’s strategic objectives with the leadership, business process and technology capabilities they have invested in.
Initiatives around Operational Excellence have been internally focused on building a culture of continuous improvement and improving manufacturing processes with Lean techniques. However, as companies face an increasingly global environment where customers, manufacturing, product development and logistics are distributed across a complex demand-supplier network, it is important the definition of Operational Excellence extend beyond the traditional definition.
One trend we have been tracking at LNS Research is the adoption of enterprise quality management software (EQMS) by leading companies. Our research has shown that, for successful software implantations, it is important to avoid deploying software in a vacuum; rather, it is best to build it into an established model for Operational Excellence.
To start, it is important to understand how we view Operational Excellence and how it builds into a company’s overall corporate strategy. LNS Research promotes the idea that a model of Operational Excellence should help to align strategic objectives and metrics, with people, process and technology capabilities — all of which should be supported by fact-based research. This concept is graphically represented in the accompanying chart.
Let’s look at what a model of Operational Excellence looks like when it specifically builds in quality management.
Strategic objectives: Most companies today are primarily focused on revenue growth and they attempt to grow revenues in many different ways: launching new products, entering new markets and increasing production capacity, to name just a few. Quality can play a supporting role in many of these areas. High quality products, to a large degree, can determine the success of a company with new products or markets. Improved quality is also often the quickest way to improve production capacity.
Metrics: Clearly it is important to have a good handle on traditional financial metrics like revenue growth, return on assets, cost of goods sold and more. However it is perhaps even more important to understand the operational metrics and the role quality can play in performance. These metrics often include the cost of quality, on time and complete shipments, production efficiency, successful new product introductions and more.
People: Quality should be an executive priority and the organization should move towards a culture of continuous improvement. Far too often grass roots efforts start out with a lot of momentum but if the executives don’t believe in it the trend is more often than not for the initiative to lose steam and not have a truly enterprise wide benefit.
Process: Begin to harmonize disparate systems and business process into a standardized and flexible framework for creating operational excellence and building quality into the business. Many times there are just too many systems and they are often disjointed and difficult to maintain. By streamlining the IT environment and focusing on business process, quality can begin to become a strategic objective that is intelligently built into business processes.
Technology: Support changing culture and business process with enterprise quality management software that centrally manages core quality capabilities. With the executive sponsorship, culture and business process pieces in place, it is time to start moving on to software. EQMS should be designed to centrally manage quality and compliance across the business.
In upcoming research, we will test our hypothesis and see if world class manufacturers are truly building models of Operational Excellence in the way described above. If you would like to participate or learn more, please visit us at www.lnsresearch.com.
Matt Littlefield, firstname.lastname@example.org, is President and Principal Analyst, LNS Research, a consultancy based in Brookline, Mass.