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What is Operational Excellence [10 Core Principles]
In every business, there is always at least one area that could be improved. But
how exactly does meaningful change take place within an organization?
Sometimes it can occur through a major initiative or total upheaval within the
business. But most of the time, change happens in a much less overt way; it
happens slowly and more gradually over time. Operational excellence is an
example of this type of change.
In this guide, we will look more closely at what operational excellence is, its 10 core
principles, as well as the different methodologies you can use to implement it.
Jump to any section
What is Operational Excellence?
Operational Excellence: 10 Core Principles
Top 3 Operational Excellence Methodologies
Achieving Operational Excellence
What is Operational Excellence?
Operational excellence can simply be described as a philosophy that embraces
problem-solving and leadership as the key to continuous improvement.
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People are often unsure of how to approach the subject of operational excellence. It
is a dif�cult term to de�ne and most people either �nd the topic to be too
ambiguous or too broad to talk about.
Operational excellence, however, is not a set of activities that you perform. It’s
more of a mindset that should be present within you and your employees.
Now, you’re probably thinking, “that sounds nice in theory, but how do I translate
this into actionable steps?”
Well, we’re going to explain that in a bit. Before we get into implementing
operational excellence, you need to understand how the concept is related to
continuous improvement (https://tallyfy.com/guides/continuous-improvement/).
How can you work more effectively from home?
Tallyfy eliminates the many pains of using Word/Google docs and �owcharts to document and run your processes. It replaces static documents and �owcharts - giving you the power to automate and run your processes.
By making ourselves write down our processes and know-how on Tallyfy – we can now ensure that steps are never missed or done out of order. There’s fewer mistakes and a lot of time is saved on training.
— Len Gilbert / Digital Prism
Learn more about Tallyfy (https://tallyfy.com/)
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Operational Excellence vs Continuous Improvement
Continuous improvement is the on-going effort to improve an organization’s
processes (https://tallyfy.com/business-process), products, or services. It usually
takes place incrementally over time, rather than instantly through some
breakthrough innovation.
By pursuing continuous improvement, an organization has a greater likelihood of
continuing to maintain and build on these improvements.
However, while continuous improvement is important, it is not enough on its own.
As the organization continues to re�ne its process, product, or service, it needs a
way to continue to grow. This is where operational excellence comes in.
Operational excellence is a mindset that embraces certain principles and tools to
create sustainable improvement within an organization.
Or to put it more simply, operational excellence is achieved when every member of
an organization can see the �ow of value to the customer. Seeing it, however, isn’t
enough – they should actively try to improve both the value, as well as its delivery.
Ultimately, operational excellence is not just about reducing costs or increasing
productivity in the workplace. It’s about creating the company culture that will
allow you to produce valuable products and services for your customers and
achieve long-term sustainable growth.
Operational excellence is a journey that involves applying the right tools to the right
processes. When this happens successfully, the ideal work culture is created where
employees are provided for in a way that enables them to stay empowered and
motivated.
Operational Excellence: 10 Core Principles
Every year, the Shingo Institute of the Jon M. Huntsman School of Business gives
out an award for operational excellence called the Shingo Prize
(http://www.shingoprize.org/). This prize is based on company culture, company
results, and how well every employee demonstrates the Guiding Principles of the
Shingo Model (http://www.shingoprize.org/model). Here is a more in-depth look at
each of those ten principles…
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Principle #1: Respect Every Individual
The Shingo Model emphasizes that because everyone has worth and potential,
everyone deserves respect. However, it’s not enough to have respect for others;
you must demonstrate this respect to them as well.
One of the best ways to demonstrate respect for your employees is by involving
them in any necessary improvements to their department. This will help them feel
more empowered and motivated to contribute to the changes in a positive way.
To learn more about how to create a culture that engages every employee, from
CEO to shop-�oor staff, read our guide to Kaizen. (https://tallyfy.com/kaizen-
continuous-improvement )
Principle #2: Lead with Humility
Leaders should always exercise humility.
After all, the best improvements happen people can acknowledge their
shortcomings and look for a better solution. Humility involves a willingness to listen
and take suggestions from everyone, regardless of that person’s position or status
within the company.
Principle #3: Seek perfection
This step in the model is often met with resistance as most people are quick to
point out that perfection isn’t possible. While perfection may feel unattainable that
doesn’t mean you can’t strive for it anyway.
By setting the bar high, you create a different mindset within your organization.
When confronted with a problem, try to look for long-term solutions and always
try to simplify your work without compromising the quality of the outcome.
Principle #4: Embrace Scienti�c Thinking
Innovation comes from constant experimentation and learning.
Hence, it’s always useful to know what works and what doesn’t. By systematically
exploring new ideas you can encourage employees to do the same without fear of
failure.
Principle #5: Focus on the Process
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When things go wrong, there is a tendency to want to blame other people. In a lot
of cases, however, problem is rooted in the process, not the person. This is because
even great employees can’t consistently produce ideal results with a bad process.
When a mistake occurs, rather than immediately pointing �ngers at the employees
involved, assess what part of the process the error occurred in. Once you have
done this you can make adjustments to try to achieve the results you want.
Principle #6: Assure Quality at the Source
High quality can only be achieved once every part of the process is done correctly.
It can be helpful to organize work areas in a way that will allow potential problems
to become visible right away. When a mistake does occur, stop working
immediately to correct the mistake before continuing.
Principle #7: Flow and Pull Value
The object of every organization is to provide maximum value to its customers.
Because of this, organizations should ensure that the process and work�ow
(https://tallyfy.com/what-is-a-work�ow/) are continuous because interruptions
create waste and inef�ciencies.
It is also important to evaluate customer demands to ensure that your organization
is only meeting those demands and not creating more than what is necessary.
Principle #8: Think Systematically
In a system, there are many different interconnected parts that work together. It is
important to understand the relationship between each of these parts because it
will help you make better decisions. You should avoid taking on a narrow vision of
your organization and get rid of any barriers that interrupt the �ow of ideas and
information.
Principle #9: Create Constancy of Purpose
Employees should be informed of the goals and mission statement of the
organization from day one. This shouldn’t just stop after day one, however. You
should continue to emphasize these goals and principles every day going forward.
Every employee should have an unwavering certainty of why the organization
exists, where it’s going, and how it will get there. Knowing this will help them align
their own actions and goals with those of the company.
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Principle #10: Create Value for the Customer
To create value for the customer you have to understand what the customer
needs. The value is simply what that person is willing to pay for.
Organizations must continue to work to understand the needs and expectations of
their customers. An organization that stops delivering value to the customer is not
sustainable over time.
Top 3 Operational Excellence Methodologies
Through operational excellence, an organization can improve its company culture
and performance, which leads to long-term sustainable growth.
Businesses should consider looking past the traditional one-time event and move
toward a more long-term system for change.
Over the years, numerous methodologies have been introduced to the mainstream
business culture as a method of achieving operational excellence. We will look
more 3 of the most popular ones below…
Methodology #1: Lean Manufacturing
Lean manufacturing focuses on systematically eliminating waste in a production
system.
It teaches that the only thing a business should focus on is that which adds value.
Lean also teaches that every process has some sort of bottleneck and that
focusing all your improvement efforts on that bottleneck is the quickest path to
success.
The key principles of lean manufacturing focus on improving the quality of
products and services, eliminating anything that doesn’t add value, and reducing
overall costs.
Traditional lean manufacturing identi�es seven areas of waste which are commonly
referred to as the “seven deadly wastes (https://tallyfy.com/7-wastes-lean/).”
Speci�cally, these are…
Overproduction: Overproduction happens when employees produce something
before it is actually needed. This is one of the worst forms of waste because it
leads to excessive inventory and often masks underlying problems.
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Waiting: When employees are left waiting for the next step in production no value
is being added. It can be very eye-opening to examine each step from the
beginning to the end and then evaluate how much time is actually being spent
adding value and how much time is spent waiting.
Transport: Transport is waste caused by unnecessary movement of uncompleted
or �nished products.
Motion: This step refers to all movement that doesn’t add any value to the product
and is usually caused by poor work standards.
Over-processing: This happens when more time is spent on processing than is
necessary to produce what the customer needs. It is also one of the hardest wastes
to get rid of.
Inventory: This type of waste occurs when the supply exceeds what the actual
demands are.
Defects: Defects are mistakes that will either need to be �xed or the process will
have to start over entirely. In manufacturing, this usually looks like a part that either
has to be scrapped or completely remade.
Methodology #2: Six Sigma
Six Sigma (https://tallyfy.com/what-is-six-sigma/) is a set of tools
(https://tallyfy.com/six-sigma-tools/) and techniques that are designed to improve
business processes which will result in a better product or service. The goal of Six
Sigma is to improve the customer experience (https://tallyfy.com/customer-
experience/) by identifying and eliminating variation.
Over 50 percent (http://asq.org/public/six-sigma-training/asqsigma.pdf) of all
Fortune 500 companies have implemented Six Sigma to some degree. It has been
shown that Six Sigma has helped Fortune 500 companies save over $427 billion
over the past 20 years.
A Six Sigma business will produce no more than 3.4 defects for every million
opportunities. A defect is de�ned as anything that fails to meet the customer’s
expectations. It does this primarily by implementing DMAIC
(https://tallyfy.com/what-is-dmaic/).
DMAIC is an acronym that stands for de�ne, measure, analysis, improvement, and
control. Here is a closer look at each step in this process and how it helps to build
Six Sigma businesses:
De�ne: In this �rst step, you will simply de�ne the problem because without
knowing what the problem is, you really can’t �x it. Once you have de�ned the
problem you can begin creating a plan and evaluating your available resources.
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Measure: Now that you understand the problem, you need to measure all of your
available data and look closely at your current process. What is working well and
what needs to be improved?
Analysis: Once you have measured your data, you can analyze your �ndings and
get to the root of the problem.
Improvement: After you analyze your data, begin coming up with possible
solutions. Implement these solutions on a small scale to test the results so you can
make any necessary changes.
Control: Once you have implemented your new process you need to �nd a way to
maintain that process. Continuous improvement is important to ensure that your
process stays effective.
Methodology #3: Kaizen
Kaizen means “continuous improvement” in Japanese and in business, it used to
implement positive, ongoing changes in the workplace.
The guiding principles of Kaizen are that a good process will lead to positive
results, teamwork is crucial to success, and that any process can be improved.
Organizations implement kaizen to help them create a culture of continuous
improvement. Employees will work together to achieve ongoing workplace
improvements.
Kaizen teaches that when applied consistently, small changes will compound over
time and produce big results. The methodology does not necessarily encourage
only making small changes, though; kaizen focuses on the participation of all
employees to effect real change.
Kaizen stresses the importance of continuous improvement and that it is not
enough to make a change once and hope it sticks. You must continue to make
improvements repeatedly. Many businesses have used Kaizen to help them
increase employee productivity, cut costs, and improve the customer experience.
Achieving Operational Excellence
Operational excellence is the ultimate goal of all organizations striving for
continuous improvement. Projects and tools are a useful place to start but on their
own, they are not enough to create lasting change.
People often think that buying legacy BPM software is a great answer to running
operations well. Nothing could be further from the truth.
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“Old BPM” software is tired and broken. It never worked for business users. Here’s
why:
Users are now deciding to buy software themselves. Old BPM was bought by
your IT department, who didn’t generally care about user experience – as long as it
was made by a large/boring company.
Cloud tools are now free to try by anyone, anytime. With Old BPM you had to call
sales and wait for 50 questions just to look at it and �nally decide it sucks.
People want to share work�ows with clients. With Old BPM you were stuck with
trying to automate internal processes only. Your clients would be very scared and
run a mile from it.
People expect to integrate cloud tools without IT. With Old BPM you had get
engineers to write code to make a simple integration. That’s now become a drag-
and-drop service.
People expect to work on phones. This means giant, clunky �owcharts in Old
BPM are dead – because they don’t �t on your phone’s screen – and only de�ne
“the perfect process”.
People are tired of �owcharts. Old BPM was all about the high priest telling you
how a process can/will be done, and you would obey. Now – modern workers and
teams are paid to collaborate.
People expect all the bene�ts of the cloud. Old BPM was never cloud-born and
was never designed for the cloud. And that creates a massive bunch of missed
opportunities.
Companies of all sizes need process management – and never had it. Since Old
BPM was so expensive and complicated, only large companies could afford it. The
rest of us were left out.
People are excited about AI – but confused about where to begin. With Old BPM
you have zero chance of using AI without an army of engineers. With cloud-born
systems like Tallyfy – it’s childs’ play to use any AI you like to run amazing
automations for photos, voice, video and more.
The above reasons are why we built Tallyfy (https://tallyfy.com) – the only software
that anyone can understand in 60 seconds. Start your journey in operational
excellence by picking a platform people will really love.
Lasting change can only happen when the principles of operational excellence are
understood and deeply rooted in the culture of an organization.
So, make sure that both the management and the company employees understand
& follow the core principles of operational excellence.
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