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State of Readiness
Operational Excellence as Precursor to Becoming a High-Performance Organization
By Joseph F. Paris Jr.
Greenleaf Book Group PressCopyright © 2017 Joseph F. Paris Jr.
All rights reserved.
WHAT IS OPERATIONAL EXCELLENCE?
"Desire is the key to motivation, but it's the determination and commitment to unrelenting pursuit of your goal — a commitment to excellence — that will enable you to attain the success you seek."
— Mario Andretti
Operational excellence is a term you've probably heard a thousand times. There are centers for excellence and even prizes and certifications awarded for various forms and manifestations of it. But what does it mean?
Let's start by differentiating operations from operational.Operations refers to processes, whereas operational deals with systems — even entire enterprises. Accordingly, there must be a difference between excellence in operations, or process excellence, and operational excellence. Simply put, excellence in operations is efficiency, doing things right, but operational excellence is effectiveness, doing the right things.
For instance, when the United States Navy determines that a carrier group is operational, it means the carrier group, as an entity, is in a state of readiness to fulfill its intended purpose. And all of the nearly infinite number of individual processes that determine how the operations of the group are conducted are optimized and configured into systems that govern how the carrier group performs. When that state of readiness is achieved, the carrier group acts as a high-performance organization.
Let's look at another example.
In the early days of the Great Depression, one of the most ambitious builds in modern history started in Midtown Manhattan — the Empire State Building. At the time, and for some time afterward, it was the tallest building in the world. Excavation of the site started on January 22, 1930, and the ribbon-cutting ceremony took place on May 1, 1931. From start to finish, it took only one year, three months, and nine days — 464 days in all to build the 2,248,355 square feet of floor space.
Even more impressive is that all of this was accomplished with 1930s technology and infrastructure, when there was little in the way of automation and a lot of manual labor. There were no highways, only waterways and steam rail. Yet the materials came from Bethlehem and Pittsburgh (one hundred and four hundred miles away respectively), and all the limestone block for the edifice came from Indiana (eight hundred miles away).
Compare this with the construction of the Freedom Tower, which replaced the World Trade Center. After all of the legal and financial hurdles were overcome, construction started on June 23, 2006, with excavation of the foundation. The tower finally opened on November 3, 2014 — a full 2,690 days later — with 3,501,274 square feet of floor space.
The floor space of the Freedom Tower was only one and a half times that of the Empire State Building, and it took almost six times as long to build. With all our technological advances in the prior seventy-five years, how did it take so much longer?
When I think about the story of the Empire State Building — all of the companies and workers involved in the project, the supply chain and the coordination required, the logistics necessary, the clarity of purpose held by all those involved — I think about operational excellence.
Let's examine one more.
During World War II, at peak production in 1943, the United States produced 1,238 Liberty ships (over 3 per day), 16,005 landing vessels (44 per day), 9,393 four-engine bombers (26 per day), 21,743 single-engine fighters (60 per day), and 29,497 tanks (80 per day). And we mustn't forget the supply chain and logistics necessary to support this level of production.
The industrial world of the twenty-first century certainly outproduces what it did in the 1940s, but that is not what I find remarkable. We should be outproducing ourselves eighty years later. What I find remarkable is the pace of improvement in production over a very compressed period of time during the 1940s. The GDP of the United States doubled in three years (from 1940 to 1943; 33 percent per year on average). Compare that pace with what we consider healthy growth today (2–3 percent). Whatever inefficiencies might have existed were overcome by effectiveness — a key competitive factor of operational excellence.
When I think about the rapid scaling and transformation of industry in the United States in the 1940s — the reduction in time from thinking about the product to its being manufactured, the supply chains and logistics necessary for the raw materials to be manufactured and for the final product to get to the field, and all of the people involved, all working in concert — I think about operational excellence.
The motivation driving the Empire State Building was commercial, and the motivation driving the industrialization in the early 1940s was certainly national, but that only demonstrates that operational excellence — achieving a state of readiness and being a high-performance organization — transcends the source of motivation.
So what is operational excellence, and why is it important? If I were to stub my toe on it, what would it look like? We need to fully understand the term before we can pursue it as a strategy. I propose the following definition:
Operational Excellence is a state of readiness attained as the efforts throughout the enterprise reach a state of alignment for pursuing its strategies — where the corporate culture is committed to the continuous and deliberate improvement of company performance AND the circumstances of those who work there — and is a precursor to becoming a high-performance organization.
When a company reaches a state of readiness, it attains a situational awareness and command of its capabilities — the ability to see and anticipate opportunities and threats. Along with it comes the ability to react in a meaningful and expeditious manner to any such challenges that may present themselves — keeping in mind this awareness will never be perfect and will need to be perpetually refined. As Mike Tyson famously said, "Everyone has a plan, until they get punched in the mouth." That is to say, even though you are talented, trained, professional, and on the offensive pursuing your plan, the business that is better prepared to identify and engage an unforeseen challenge more quickly than its competition has a strategic and tactical advantage.
The efforts throughout the enterprise — from the vendor's vendor to the customer's customer, every calorie expended and every bit of treasure invested, from inception through execution and even after action, all activities from all resources and assets in any capacity — must be dedicated to these endeavors.
The business needs to practice transparency and communicate its ambitions and vision of the future in a clear and concise manner so that all of this energy, efforts, and available assets reach a state of alignment — a unity of purpose and action throughout the enterprise — for pursuing its strategies.
There should demonstrably exist — through its effective leadership, stewardship, mentorship, and followership — an ethos throughout the enterprise where the corporate culture is committed and everyone is unreservedly devoted to the effort.
When the highest level of alignment and commitment is achieved, the enterprise is prepared for action and for the continuous — meaning never-ending — engagements it needs to perform to become and remain best in class. But the enterprise is not only continuously moving, it is also moving in an intentional, calculated, engineered, and deliberate manner with not only a sense of purpose but purpose itself. Operational excellence can only be achieved by design and implemented in an engineered manner — not by accident or coincidence.
The improvement of company performance simply means to improve profit in a sustainable manner — the bottom line, EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization), shareholder value, and whatever metric you might use to measure performance. There are many ways to facilitate increased profits, but make no mistake, businesses exist to make profits, and their improvement efforts must yield greater profits. And not just by engaging in the pursuit of short-term opportunities but also by keeping an eye on the long term, so the viability of the enterprise is ensured for the ages.
The efforts to improve company performance should ensure the company is always innovative and competitively positioned in its value proposition to its present and future customers to drive both short- and long-term value. These efforts include the following (but by no means should this list be considered exhaustive):
=> Being the innovation company — the company that creates demand and marketplaces and not a company that just satisfies a preexisting need
=> Aligning the company's offerings to the desires of the marketplace and ensuring the messaging and sales efforts are effective
=> Making sure the finance and equity structure are optimal for supporting the strategies of the company
=> Validating the efficiency and effectiveness of the supply chain
=> Considering all other influences, including those involving operations, such as Lean Six Sigma (LSS), the Theory of Constraints (ToC), Total Quality Management (TQM), Enterprise Resource Planning (ERP), and the entire alphabet soup of management methodologies — yes, even flow
In addition to improvements in company performance, the circumstances of those who work there, who are instrumental in making the company successful, must be equally considered. I don't necessarily mean pay or compensation, because it's been my experience that what is important varies with each individual. Most people will not leave a company over a 5 or 10 percent increase in pay, but they will leave if they feel disenchanted, disrespected, detached, undervalued, or have no potential for personal or professional growth. They want a sense of pride in ownership. They want their lives to be more joyous, and they want to look at their job as a means to that joy. Company leaders who understand this will reap great rewards, both professionally and personally.
It is a colossal mistake for companies to believe they can improve company performance just by heaping more and more on the backs of their employees. It's unsustainable, and a breaking point will eventually be reached. You need to set the company's pace for a marathon, not a sprint, and there needs to be enough energy in reserve for a kick when it is needed.
All of this is a precursor to becoming a high-performance organization, which is the ultimate goal. Your company cannot become a high-performance organization without alignment, commitment, and effort — a lot of effort — or without improvements in performance and in the lives of the people who work there, or with a culture that is not committed to achieving a state of readiness. Your company cannot become a high-performance organization without operational excellence.
Becoming a high-performance organization is the ultimate goal — a business that is best in its class and is more innovative and successful than its competitors in areas such as strategy development and execution. It should be an efficient and effective organization with clear roles and accountability, delivering superior customer service and maintaining the best vendor relationships, utilizing and maintaining its assets so they reliably produce more, and consistently and sustainably generating more profits.
This is a never-ending race without a finish line.
MISSING THE POINT
Defining operational excellence as continuous improvement and Lean Six Sigma is like defining a vehicle as an automobile: The latter of each is a subset of the former but does not represent the entire meaning of the term. Over the past few years, I have increasingly seen a great many organizations (companies and in academia) and professionals (practitioners and consultants) attempt to hijack the term operational excellence in an effort to rebrand the disciplines of Lean Six Sigma or continuous improvement. Admittedly, some programs do try to build a differentiator by sprinkling some soft skills, such as leadership or culture change, into their program. But this is merely window dressing and not what operational excellence is truly all about.
Take, for instance, the advertisements I receive for conferences that supposedly address operational excellence. Although the conferences appear to offer considerable value for those interested in Lean Six Sigma and continuous improvement, they fall very short of anything resembling what I would argue is operational excellence. If you were to look at the abstracts for the talks, each has an emphasis on some tool of Lean Six Sigma, but almost none of them speak to a business's efforts outside of production, supply chain, and delivery. Why not just title the conference "Lean Six Sigma" or "Continuous Improvement" or even "Process Excellence"? Would anyone notice the difference?
I have recently seen conferences on operational excellence within functional smokestacks of the business — such as in customer service, sales, or human resources — and some that are industry specific (almost always with a focus on production alone), such as those for oil and gas, insurance, and so on.
But where are the conferences that address a business as a single system, involving multiple dimensions of an enterprise's efforts? Certainly, I often see C-level speakers at these conferences (often because they are sponsors of the event). But might this lack of strategy discussion be why I rarely see C-level delegates in the audience and, instead, usually find mid-level managers?
In a Google search for operational excellence, there is a dearth of significant detail prior to 2002, and what exists is very thin. In 2002, the American Society for Quality (ASQ) published an article entitled "How to Achieve Operational Excellence," and the keywords included business plans, commitment, communication, continuous quality improvement, performance objectives, cost management, goals, and quality management. It is interesting that there was no mention of Lean Six Sigma or any of its associated buzzwords. It's as though ASQ knew operational excellence was different than Lean Six Sigma.
In 2003, the United States Coast Guard (USCG) initiated an operational excellence program in which the criteria was to "provide Coast Guard Auxiliary boat crews with a challenging opportunity to highlight their proficiency and skills, foster teamwork, and encourage fellowship among operational members." To the USCG, operational excellence was all about performing as a team with an exceptional level of proficiency in completing the tasks necessary to result in mission success. In my opinion, this program embraces the spirit of operational .
In November of 2003, the Economist Intelligence Unit (a sister division of The Economist magazine) published a report commissioned by Celerant Consulting called "Strategy Execution: Achieving Operational Excellence." It surveyed 276 executives in North America, with 50 percent of the respondents being from the C-suite across various industries.
The interesting thing about this analysis is that its intent was to measure the importance and impact of operational excellence, but nowhere does it state what operational excellence might be. It's obvious from reading the questions that there was a spin for leveraging technology as some means of achieving operational excellence. However, the only clear description was that top performing companies have "more committed management, make better and more frequent use of performance data and management mechanisms, and have stronger communication channels to link senior management with frontline employees."
I read that and couldn't help but think, Duh — no kidding. But again, there was no clear definition of operational excellence and no clear connection with Lean Six Sigma.
By far, one of the more interesting position papers I came across was a paper from DuPont from 2005 entitled, "Delivering Operational Excellence to the Global Market: A DuPont Integrated Systems Approach." It's a fairly detailed document, but after reading it a few times, I came away feeling it was disconnected and incomplete.
Excerpted from State of Readiness by Joseph F. Paris Jr.. Copyright © 2017 Joseph F. Paris Jr.. Excerpted by permission of Greenleaf Book Group Press.
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Table of Contents
Part 1 Operational Excellence 5
1 What Is Operational Excellence? 7
2 Continuous Improvement: The TPS, Lean, and Six Sigma 25
3 Reality or Myth? 41
4 The Stone Age Didn't End Because They Ran Out of Stones 65
5 Survival of the Fittest 77
Part 2 Leading Change 85
6 A Culture of Leadership Is Essential 89
7 Real Leaders Never Say "Burning Platform" 103
8 The Need for Six Honest Serving Men 113
9 Decisions, Decisions 121
10 Culture and Customs Matter 145
11 The Art of Persuasion 153
Part 3 Preparing for Change 167
12 Assessments: The Rally Point of the Journey 169
13 Guerilla Transformation: Change an Insurgency into a Movement 177
14 Changing a Want to a Need 191
15 Stewardship 201
16 What Is the Best Training for Your Team? 211
17 Lessons from Mt. Stupid 231
18 Turning a Vision into Reality 245
Part 4 Strategy Execution 261
19 The Art of Business 263
20 The Operational Excellence Enterprise Readiness Model 279
21 Changing an Initiative into a Global Program 315
22 It's a Marathon, Not a Sprint 333
23 A State of Readiness 341
About the Author 377
What People are Saying About This
"Whether you're a C-Suite executive or an operations manager, State of Readiness is a great way to help determine if your company is ready to face the new business climate that lies ahead."
"This is next-level thinking. Joseph Paris has taken operational excellence to a new level, and leaders who are serious about competitive advantage need to do more than smart manufacturing; create a State of Readiness in your company."
"State of Readiness is a must-read for any serious continuous improvement professional involved in the deployment of operational excellence! Joseph Paris provides a template and roadmap for organizations to evolve beyond the traditional emphasis on processes to an emphasis on systems thinking."
"Want your company to be a high achiever, nimble enough to handle new opportunities or threats? State of Readiness will help climb to the top."
"State of Readiness creates a path to understanding what is necessary to become a high-performance organization. You got the right things right, Mr. Paris. In the end, as Shakespeare put it, 'The readiness is all.'"