PEX Guide: What is operational excellence?

This guide explains what true operational excellence means for organizations and explores which methodologies and technologies they should adopt for successful business outcomes

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Alice Clochet
04/08/2021

What is operational excellence guide

By understanding and optimizing their processes, organizations working toward operational excellence will be able to improve efficiency, cut internal costs and improve customer experience. Even in challenging times, operational excellence can help businesses deliver strategic objectives and manage growth.

This PEX Network guide explains what operational excellence is and how to achieve it through methodologies and technologies available on the market. It features real-life stories and recommendations from experts at organizations the likes of LEGO, Coca-Cola European Partners, USAA and Hitachi Vantara.

graph view on operational excellence and business transformation program

Source: The PEX Report 2021: Global state of process excellence

How does operational excellence benefit businesses?

An organization achieving operational excellence operates as efficiently as possible due to optimized businesses processes, full visibility on end-to-end processes across departments and divisions and a company culture that supports continuous improvement and process changes.

Brenton Harder, head of automation at Fiserv explains: “Companies with operational excellence know where they are excellent because they have the right measures and pulse points and they know whether they are improving or not. They have visibility through their data of the way they work.”

A PEX Network article from a few years ago set out to define the difference between process excellence and operational excellence, both often thought interchangeable. It concluded with the notion that “the two terms depend on the individual, the company they represent and what activities they choose to engage in under these banners”.

“OPEX is about the journey that you are working with the business to go on, which means you have to have an understanding of the whole business holistically.”

Peter Evans. director of service and performance management for shared services at LEGO

Main methodologies for achieving operational excellence

There are several methodologies available for organizations who want to focus on understanding and optimize their internal business processes. The ones proposed below have proven effective for businesses worldwide over the years.

Process failure mode effects analysis

To identify and evaluate potential failures of a process and work toward operational excellence, organizations can use the process failure mode effects analysis (PFMEA). It is a structured analytical tool that can be used by a whole business, business unit or cross-functional team to help establish the impact of a process failure, and identify and prioritize actions to reduce risks.

PFMEA is a living document that should be created before the process of production and maintained throughout the lifecycle of a product.

Lean Six Sigma

Lean

The Lean methodology is a philosophical way of working solely focused on removing waste within a process to achieve process and operational excellence. Its only goal is the removal of anything that does not add value for the end customer, with the value being any action or process that a customer would be willing to pay for.

The seven wastes of Lean, originally developed by Toyota chief engineer Taiichi Ohno, are as follows: overproduction, unnecessary transportation, excessive inventory, excessive motion, defects, over-processing and waiting. Although not part of Toyota’s original list, an eighth waste exists within organizations, non-utilized talent. All together, the eight waste of Lean make up the acronym DOWNTIME.


Hear more from Schneider Electric's Kristen Workman on lean office transformation and switching departments:


Six Sigma

Six Sigma is a customer-centric methodology that focuses on reducing the extent of variations that exist in processes through data analysis. Any process output that does not meet customer specifications is seen as a defect and will be removed through one of two approaches: define, measure, analyze, improve and control (DMAIC) or define, measure, analyze, design and verify (DMADV).

Lean Six Sigma

Put together for the first time in 1986 by staff at Motorola, Lean Six Sigma is a proven method for businesses to optimize processes. It has 12 essential concepts and tools including Takt time, Kanban pull system that help organizations improve their internal processes.

Business process management (BPM)

Business process management (BPM) is an evolving management discipline that has been around for more than 30 years. It allows organizations to analyze and map out internal business end-to-end processes with the view to understand them and find opportunities for improvement. The practice can involve the execution, control, modelling, measurement and optimization of business activity flows and oftentimes can help organizations discover opportunities for process automation.

“At the end of the day, what BPM does is formalize business requirements, including implementing any potential technologies, reengineering processes and facilitating change management.”

Giovanni Angeli, senior manager BPM, IT strategic business solutions at Coca-Cola European Partners

Change management

Although not a methodology in itself, change management is an important tool in the world of operational excellence. As organizations transform, change internal processes and implement new technologies, it is crucial to constantly communicate the changes, train employees and receive feedback from across the organization to measure the adoption success.

There are several key steps to successful change management: determining the aspect of the business that needs improvement; ensuring cross-organizational buy-in; planning, readiness and data management; implementing change; reviewing efforts by implementing continuous change.

Watch how the market forced an OPEX program to be a cultural change in the trading division at European energy company Vattenfall:

As Martin Rowlson, global head of process excellence at Uber explained in PEX Network’s Change Report 2020, “change management has consistent challenges. It’s all about telling a compelling story with data, to articulate the change that you’re trying to make, to ensure that it scales across an organization”.

Download PEX Network's 2021 change management report

Learn why human-centric strategies are key for managing change and navigating uncertainty, with insights from experts at Rolls-Royce, USAA and Comidor.

Main technologies to achieve operational excellence

Business process management software

While BPM is a methodology primarily, some software can support the practice. Three types of BPM platforms are available on the market and can help speed up application development, business processes remodeling and digitization.

A basic BPM platform is a controlled repository of an organization’s standard operating procedures and documentation. Going further, a BPM suite features a structure providing a holistic view of all processes and an understanding of the interdependencies between all departments involved. An intelligent BPM suite will allow BPM teams to design a new process and simulate it to understand its impact on an organization.

Robotic process automation (RPA)

Robotic process automation (RPA) is a technology that use software robots to imitate human execution of a business process. It is primarily used for manual repetitive tasks that are prone to error, such as manual data input, or ones that take time away from other tasks that might bring value to the business.


Find out how BMI Group successfully implemented a RPA approach:


There are two types of bots available on the market, programmable and intelligent bots. Programmable bots work within set parameters, rules and instructions, often involving mapping out every step of a process. Intelligent bots, supplemented by artificial intelligence (AI) can analyze data to learn how employees perform a process and undergo it itself.


Discover how GM Financial implemented a unique approach to RPA:


Process mining

Process mining is a software that gives organizations an overview of business processes by collecting data on them. This data is then turned into business intelligence and actionable insights on ways to improve processes and work toward operational excellence.

In an interview conducted with PEX Network in early 2021, Nina van Krimpen, business process consultant at chemicals company LyondellBasell, shared her definition of the technology: “Process mining provides end-to-end process transparency and visibility, helping organizations compare what they think is happening within their business with what is actually happening.”


Learn more on how to convert data into actionable insights in this podcast with Vartul Mittal, digital transformation leader at Barclays and technology council member at Forbes:


Process mining only focuses on systems that produce logs. This is where process discovery can help as it is a software that collects data on all employee behavior anonymously on systems not covered by process mining, such as Excel sheets.

Wil van der Aalst process mining

Source: PEX Network

Intelligent automation

Organizations mature in their RPA journey can look to take the intelligent automation (IA) approach to support the operational excellence journey. Combining BPM, RPA, process mining, data analytics, AI and machine learning, IA allows organizations to observe, analyze and map out internal business processes.


Hear about how Volvo innovates products through the application of machine learning and AI:


Process mining will give visibility over process steps, BPM methodology will inform on how best to optimize them, and data collected on processes by a RPA bot can be analyzed by AI to make informed decisions.


Learn how Shell utilizes advanced analytics to generate meaningful data:


“Organizations need to orchestrate the technologies brought in so they can be executed to resolve issues, otherwise time and money are wasted.”

Laxmikant Pukale, director of intelligent automation at USAA

Hyperautomation

Going further than intelligent automation in organizations’ RPA journey, hyperautomation is the orchestration of all intelligent automation technologies that have learned to be autonomous to decide which processes are best to automate.

Hyperautomation provides enhanced visibility of business processes, full business overview with advanced real-time analytics and control of the entire automation lifecycle. It can result in the creation of a digital twin, to allow organizations to simulate any changes on processes and simulate the results of those changes.

Low-code

A low-code approach to these technologies enables organizations to develop and implement apps fast without requiring coding experts to do so. Although it is not a new concept in the process excellence world, the market has seen a resurgence of uptake as a result of the pandemic and is fast expanding: it is expected to grow from $5.6bn in 2018 to $52.3bn by 2024.

Three key facts about low-code

Discover why low-code is transforming app development in many industries across the globe.

Operational excellence in action

Over the years, PEX Network has had the opportunity to gather operational excellence success stories in a wide range of industries including financial services, healthcare and retail.

How PSCU focuses on Lean

At US-based credit union service organization PSCU, the focus to achieve operational excellence has been primarily on lean internal development. The business has launched on a grassroots campaign by teaching Lean Six Sigma to front line employees and its center of excellence (CPE) has developed a belt training program starting with yellow belt, both in person and virtually.

The CPE consisting of certified black belts and master lack belts focuses on cross-functional organization-wide initiatives where lean techniques and process maturity assessments are encouraged.

PSCU operational excellence Lean

Source: PEX Network

How Hitachi Vantara drives process excellence in a merger

Following the merger of Hitachi Vantara and Hitachi Consulting in January 2020, Dr. Tobias S. Witte, director of the global project management and business process excellence at the organization has the objective to bring people, systems and processes onto the same page. His main goal is to define standard processes through a BPM program and streamline the connected IT environment.

To reach this objective, he has three main focuses. Firstly, the merge of IT systems to create an ideal, scalable IT environment. Secondly, to capture process synergies between the former separate companies to increase the organization’s efficiency. Thirdly, to combine the two offerings of the former two separate companies and combine them to cross-sell, solve clients’ business challenges and drive profitability.

“We are currently trying to achieve business process excellence through the understanding, optimization and automation of processes together with the governance structure we created.”

Dr. Tobias S. Witte, director of the global project management and business process excellence at Hitachi Vantara

How the Covid-19 pandemic drove the need for process automation at LiveNation

At global music management and promotion LiveNation, the requirement to put in a tool and a process to ensure GDPR compliance led its BPM team to find opportunities in process automation. This resulted in the development of an internal RPA team halfway through 2020 who looked into processes best suited for automation.

The company’s refund process in particular had to be automated out of necessity due to huge demand on its operational functions. Before being automated, the process involved one ticket at a time being refunded by a human worker working in a call center via a legacy system.

How RPA reduced a process’s time length from 40 hours to 40 seconds at the Vested Group

As a NetSuite solution user and provider, the Vested Group specializes in consulting, implementation, support and development of a full range of NetSuite products. Every six months, NetSuite has a new product release and all customers are required to test and validate that all functions work prior to going live; failure to do so could mean increased risk and potential downtime.

Understanding which functions to check used to take a minimum of 40 hours per release per customer to complete, often resulting in organizations not fully testing their software, which increased the risk of a new feature not working. After implementing RPA, the Vested Group reduced the checking time down to 40 seconds, dramatically saving labor time and decreasing risk for both them and their clients.

Vested Group RPA

Read more about operational excellence

Interviews

How to drive innovation and belonging in your organization through a focus on compassionate leadership, an interview with Anu Pujji, principal operational excellence at Amazon and Jen Croneberger, founder of The HUMAN Leadership Institute – PEX Network, November 2020

Why continuous improvement is a facilitator to organizational transformation with Vikram Mehta, head of continuous improvement at Maersk – Alice Clochet, September 2020

“Remote working will only increase the need for continuous improvement”, says Gerard Poolman, manager, Shell – Alice Clochet, August 2020

Articles

The changing landscape of process excellence – Andrew Spanyi, December 2020

Why low-code platforms could be the new normal – Vivek Kumar, July 2020

OPEX in Oil and Gas Live 2020: Transforming to survive – Adam Jeffs, July 2020

Podcasts

How customer demands are shaping the future of automation – PEX Network, June 2020

Florida Hospital Innovation Lab’s Karen Tilstra on the process to innovation – PEX Network, March 2020

Getting the most out of AI and RPA in financial management – Seth Adler, November 2019

Free online events

PEX Live: Digital process automation: Digital Process Automation and Low-Code 2021, 27-29 April 2021

OPEX Week Spring Live, 25-26 May 2021

PEX Live: Procure-to-Pay, 8-9 June 2021

PEX Live: OPEX in Financial Services APAC, 15-17 June 2021

PEX Live: RPA & IA 2021, 22-24 June 2021

PEX Live: OPEX in Financial Services, 20-21 July 2021

PEX Live: Change Management & Culture Change for Business Transformation, 27-28 July 2021

PEX Live: BPM 2021, 21-22 September 2021

PEX Live: OPEX APAC 2021, 12-13 October 2021

Operational Excellence Week Canada Online, 19-20 October 2021

OPEX Exchange Europe 2021, 1-2 December 2021

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