Operational excellence

Operational excellence is one of the value strategies according to Treacy and Wiersema. They argue that an organisation must master all 3 disciplines, but must be distinctive in one of these aspects. These are:

• Operational excellence
• Product leadership (product innovation)
• Customer intimacy

What is operational excellence?

Operational excellence is the conviction of an organisation to focus on efficiency, stream lined operations and Supply Chain Management. Operational excellence was seen as a way of selling products or services at the lowest possible price, but this concept is now broadened. These days the focus is more on being reliable, development of products or services and realising and delivering the tight products against a competitive price. In short, Operational Excellence works two-fold:

• Costs (efficient and effective)
• Revenue (effective and efficient)

The focus is on the customer

Within the process of operational excellence, the focus is on the customer. To add value for the customer, the right product needs to be delivered, on time and at the right price. Most organisations that focus on creating value for its customers are more successful in operational excellence than organisations that focus on cost reduction. This happens because the organisations that focus on cost reduction, often lose sight of their customers.

Operational excellence and Lean Six Sigma

Operational excellence is not a method, but a mindset and conviction. To realise this mindset and conviction, organisations chose methodologies to achieve this. Lean Six Sigma is a popular methodology which supports this. This offers organisations a structured way of continuous improvement. By focussing on what is really important to the customer and reducing defects. This reduces the amount of process steps (Lean) and makes the outcome of processes more predictable (Six Sigma).