OpEx-Intro-to-Operational-Excellence-v10.pptx

1 - July 20, 2022 – v10.0
An Introduction to Operational Excellence
An Integrated Business Execution System
by Operational Excellence Consulting LLC

2 - July 20, 2022 – v10.0
Top 10 CEO Challenges & Priorities
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3 - July 20, 2022 – v10.0
Operational Excellence – A Definition
A Business Strategy: In "The Discipline of Market Leaders“ (1995), Michael
Treacy and Fred Wiersema describe three distinct value propositions or
disciplines: Product Leadership, Customer Intimacy and Operational
Excellence.
Market leaders choose to excel in delivering extraordinary levels of one of these
three value propositions, while maintaining reasonable standards in the other
disciplines.
Market leaders will not pursue a diffused business strategy
across two or even all three disciplines, but will continually focus
on their organizational design, processes, technology and
competencies to improve the one particular value discipline that
they want to provide to their Customers better than anyone else.
Organizations pursuing an Operational Excellence strategy,
strive to deliver a combination of quality, price, and ease of
purchase and service that no other organization in their market
or industry can match.

4 - July 20, 2022 – v10.0
What is Operational Excellence?
Achieving Operational Excellence requires the successful implementation of an
integrated Business Execution System that effectively and seamlessly
integrates the following four building blocks: Strategy Deployment,
Performance Management, Process Excellence, and High Performance
Work Teams.
Strategy or Policy Deployment
is the process that aligns and
links business strategy and
execution.
Performance Management is
the process that translates
strategic initiatives into
measurable objectives and
goals.
Operational Excellence can
be achieved and sustained
with the right attitude, the
right mindset, and the right
competencies.
Well designed, efficient, and
effective Management, Value
Chain, and Support Processes
are necessary to deliver world-
class results.

5 - July 20, 2022 – v10.0
Achieving Operational Excellence requires the successful implementation of a
Work Teams.
execution.

6 - July 20, 2022 – v10.0
Operational Excellence – Strategy Planning and Deployment
 Only 5% of the workforce understands their
company strategy.
 Only 25% of managers have incentives linked to
strategy.
 60% of organizations don’t link budgets to
strategy.
 86% of executive teams spend less than one
hour per month discussing strategy.
Source: Balanced Scorecard Collaborative
Strategy is an expression of what an organization intents to do to get from a
current state to a future state. Strategy is often expressed in terms of a vision
statement, objectives, goals, and initiatives.

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Lack of a proper strategy is a serious problem that can result in ad hoc improvements that
don't contribute to the organization’s overall needs.
 Non-Strategy #1: ‘The Wall Placard Strategy’
 Some organizations will go to great lengths to create great Vision and Mission statements,
but then their planning stops there.
 Non-Strategy #2: ‘The Stratospheric Strategy’
 These strategies start in the clouds and they never come down, making them extremely
difficult to make actionable. The result will usually be some nice slick-looking verbiage for
the organization’s website and annual reports.
 Non-Strategy #3: ‘The KPI Strategy’
 When asked to present their strategies, some organizations excitedly pull out a beautiful
PowerPoint slide that states their goals in terms of a metric. Examples are ‘double revenue
in three years’ or ‘achieve 20% margin by 2013’. This is not a strategy.
 Non-Strategy #4: ‘The Govern-less Strategy’
 Some strategies are actually quite well constructed, but they miss one crucial element: a
governance process. A strategy is worthless unless it has a clear process on who will lead
the reviews, what specifically will be covered and what the frequency will be.

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Strategic Planning ought to contain two elements:
1. Strategic Thinking, where managers synthesize their strategic vision,
using intuition and creativity. The outcome is “an integrated
perspective of the organization, a … vision of direction.”.
2. Conversion of the vision into actionable steps; “realization” of the
vision.
One of the important purposes of strategic planning is to find productive
and high-leverage directions in which to stretch the organization.
Source: Mintzberg 1994

9 - July 20, 2022 – v10.0
Phase III – Strategic Vision Elements
Phase IV – Strategic Breakthrough Objectives
Phase II – Current State Analysis (CSA)
Phase I – Organize the Process
Phase V – Strategic Initiatives & Tactics
Phase VI – Strategy Implementation & Review

10 - July 20, 2022 – v10.0
Once you have completed the strategic grid, go back and make sure everything fits with your overall
strategy. A set of strategic grids should provide the strategic model for running the business, outlining the
specifics of the strategy. All stakeholders should be able to look at the grids and follow the flow of the
organization’s strategy.
Strategy Maps or Strategic Grids:
Strategic Focus Area: Increase Shareholder Value
Financials Revenue Growth of 20% by 2014
Customers
Acquire More Customers
Become the Price Leader
Internal
Processes
Improve Operational Efficiency
Cost Reduction
Program
Knowledge Based
System
Reduce
Non-Core Activities
Learning &
Growth
Training – Lean
Six Sigma
Program
Database Network
on Operational
Performance
Re-Align
Organization with
Core Competencies
Dimensions
or
Perspectives

11 - July 20, 2022 – v10.0
The Hoshin X-Matrix is a tool that visualizes an organization’s
 strategic objectives,
 strategic initiatives,
 key performance indicators,
 key projects & action items, and
 human resources requirements
in one simple matrix.
The Hoshin X-Matrix enables an organization to easily review the alignment of
its strategic objectives, strategic initiatives, key performance indicators, key
action items and human resources.
The Hoshin X-Matrix, if used properly, improves the likelihood of a successful
execution of the strategic plan.
●
○
●
○
Primary Responsibility
Secondary Responsibility
Primary Relationship
Secondary Relationship
Resource Planning
Policy Deployment Hoshin X - Matrix 2019 - Level 1
Rev: 1.0 Revised: ___ / ___ / ______ Author: ___________________ Status: Draft - Not Released

12 - July 20, 2022 – v10.0
Organization’s
3-5 Year
Breakthrough
Goals &
Objectives
Organization’s Key
Performance Indicator
(Balanced Scorecard)
Organization’s
Strategic
Initiatives &
Tactics
Organization’s
Annual Strategic
Goals & Objectives
Organization’s Human
Resource Allocation

13 - July 20, 2022 – v10.0
“I sure wish I’d done a better job of
communicating with GM people. I’d do that
differently a second time around and make
sure they understand and shared my vision for
the company. Then they would know why I was
tearing the place up, taking out whole divisions, changing our whole
production structure . . . I never got this across.”
Roger Smith, CEO of General Motors (1981 - 1990)

14 - July 20, 2022 – v10.0
Strategic Initiatives
Strategic Initiatives
Annual Strategic
Objectives
Strategic Objectives
Catchball
Catchball

15 - July 20, 2022 – v10.0
Strategy Planning & Deployment Training Module
To learn more about effective strategy planning and deployment based
on Hoshin Kanri and Strategy Maps, please review our Strategy
Planning & Deployment Process Training Module.
The Strategy Planning and Deployment Training Module includes:
1. MS PowerPoint Presentation covering our Strategy Planning and Deployment
Process using Strategy Maps and Hoshin Kanri, including Introduction to Strategy
Planning, Organizing the Process, Current State Analysis (CSA), Strategic Vision
Elements, Strategic Breakthrough Objectives, Strategy Maps, Strategic Initiatives
and Tactics, Strategy Deployment Matrix, and Strategy Implementation and
Review.
2. MS Excel Templates for Annual Planning, Criticality Analysis, Force Field
Analysis, Radar Gap Analysis Chart, Strategy Grid Alignment Matrix, Strategy
Grid Correlation Matrix, Project Selection Matrix, Bowling Chart, and Strategy
Implementation Review Table.
3. MS Word Current State Analysis (CSA) Questionnaire
4. MS Excel Hoshin Kanri Strategy Deployment X-Matrix Template

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Work Teams.
execution.
goals.

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Operational Excellence – Performance Management
“Balanced Scorecards tell you the knowledge, skills and systems that
your employees will need (learning and growth) to innovate and build
the right strategic capabilities and efficiencies (internal processes) that
deliver specific value to the market (customer) which will eventually lead
to higher shareholder value (financial).”
“Having Trouble with Your Strategy? Then Map It.”
by Robert S. Kaplan and David P. Norton - Harvard Business Review

18 - July 20, 2022 – v10.0
“Tell me how you will measure me, and then I will tell
you how I will behave. If you measure me in an illogical
way, don’t complain about illogical behavior.”
Eli Goldratt – “The Goal”

19 - July 20, 2022 – v10.0
Benefits of developing & deploying Balanced Scorecards in an
organization include:
 Help the management team focus on the execution of their business
strategy
 Focus and align an organization towards common goals and objectives
 Enable an organization to understand the relationship between measures
and performance
 Improve communication of organizational priorities across an organization
 Help employees to understand and focus on organizational priorities and
realize relevant results
 Reduce the number of metrics to the few vital key performance indicators
 Strengthen and formalizing the project selection process to focus on key
capabilities and enablers

20 - July 20, 2022 – v10.0
Operational Excellence – Performance Management Process
Phase I - Strategic Foundation
Step 1: Strategic Alignment
Step 2: Key Strategic Focus Areas & Objectives
Step 3: Strategic Grid & Model
Phase II - Three Critical Components
Step 4: Key Performance Indicators
Step 5: Goals & Targets
Step 6: Initiatives & Programs
Phase III – Deployment Process
Step 7: Integrate
Step 8: Cascade
Step 9: Manage
Balanced Scorecard Development & Deployment Process

21 - July 20, 2022 – v10.0
FINANCIALS
How do you want to look to your shareholders? -
Indicators focus on whether your strategic and
operational plan contributes to your top-line,
bottom-line and/or market share.
CUSTOMERS
How do you want to look to your Customers? -
Indicators focus on the specific measures that
matter the most to your Customers.
INTERNAL BUSINESS PROCESSES
At which internal processes and capabilities do
you want to excel? - Indicators focus on internal
operations that enable Customer satisfaction,
growth and profitability.
LEARNING AND GROWTH
What skills and competencies do you need to
implement your strategic and operational plan? -
Indicators focus on your organization’s ability to
innovate, improve and execute.
Objectives Indicators Targets Projects
Vision
&
Strategy

22 - July 20, 2022 – v10.0
Strategic Focus Area: Increase Shareholder Value
Financials Revenue Growth of 20% by 2014
Customers
Acquire More Customers
Become the Price Leader
“Internal”
Processes
Improve Operational Efficiency
Cost Reduction
Program
Knowledge Based
System
Reduce
Non-Core Activities
Learning &
Growth
Training – Lean
Six Sigma
Program
Database Network
on Operational
Performance
Re-Align
Organization with
Core Competencies
For each objective on your strategic grids, you need at least one performance indicator.
Can you have an objective without a performance indicator? Yes, it is possible, but not
having a measurement makes it difficult to manage the objective. It’s best to revisit this
objective and ask the question: Why is this an objective?
Dimensions
or
Perspectives

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From: January 2010
ORGANIZATION: TBD Until: December 2010
Current Month: TBD 2010
KPI
KPI Name
(Unit)
KPI First Name
Champion Last Name
10 STRETCH
9
8
7 GOAL
6
5
4
3 BASE
2
1
0 ZERO
WEIGHT 0
2010 TOTAL SCORE
JANUARY
FEBRUARY
MARCH
APRIL
MAY
JUNE
JULY
AUGUST
SEPTEMBER
OCTOBER
NOVEMBER
DECEMBER
CURRENT SCORE 3 4 7 2 3 5 6 9
Stretch 2010 1000
Goal 2010 700
Base 2009 300
Actual 0
ORGANIZATION
OPERATIONAL EXCELLENCE BALANCED SCORECARD
FINANCIALS CUSTOMERS PROCESSES
RESULTS
1 2
5 7
4
12
11
8
9
3
6
10
For each strategic objective on your strategic grid, you
need at least one performance indicator. Can you have
an objective without a performance indicator? Yes, it is
possible, but not having a measurement makes it difficult
to manage the objective. It’s best to revisit this objective
and ask the question: Why is this an objective?

24 - July 20, 2022 – v10.0
•
Performance Indicators vary according to the Organizational Level.
Task 1 Task 2 Task 3 Task 4 Task 5
Process
Outcome
Customer
M4 M4 M3
M3
M2
M1
M1 – Organizational Level – Executive Scorecard Indicator
M2 – Process or Functional Level – VP/Director Scorecard Indicator
M3 – Sub-Process or Departmental Level – Manager Scorecard Indicator
M4 – Task or Activity Level – Work Group Scorecard Indicator

25 - July 20, 2022 – v10.0
Organization’s
Customer Satisfaction measured
through the Net Promoter Score
Order Management
Customer Satisfaction
measured through Order
Confirmation Lead Time
Customer Service
measured through First
Call Resolution
Production
measured through Order
Fulfillment Lead Time
Purchasing
Performance measured
through Material
Replenishment Lead Time
Sales & Marketing
Performance measured
through 90-Days
Forecast Accuracy

26 - July 20, 2022 – v10.0
Balanced Scorecard Deployment Training Module
To learn more about effective performance management based on the
Balanced Scorecard Methodology, please review our Balanced
Scorecard Deployment Training Module.
The Balanced Scorecard Deployment Training Module includes:
1. MS PowerPoint Presentation covering Balanced Scorecard History & Benefits,
Four Dimensions of a Balanced Scorecard, Balanced Scorecard Development &
Deployment Process, Balanced Scorecard Deployment Challenges & Resolution
Strategies, Balanced Scorecard Template & Detailed Instructions, and Project
Evaluation & Selection Matrix.
2. MS Excel Balanced Scorecard Template and Example
3. MS Word Workshop Agenda & Evaluation Sheet for a Balanced Scorecard
Development Workshop
4. MS Excel Project Evaluation & Selection Matrix to ensure alignment of
Operational Excellence, Lean Management, and Six Sigma projects to the
Balanced Scorecard

27 - July 20, 2022 – v10.0
Work Teams.
execution.
goals.
class results.

28 - July 20, 2022 – v10.0
Operational Excellence – Process Excellence
Process Development,
Improvement & Management
Lean Management
5. Pursuit
Perfection
2. Map Value
Stream
3. Create
Flow
4. Establish
Pull
1. Define
Value
Lean
Principles
Six Sigma Methodology
BPI 7
Systematic & Team-Based
Problem Solving
A3 or 8D

29 - July 20, 2022 – v10.0
Function A Function B Function C
Input
Output
4. Everyone knows only his/her own
function's activities and tasks. As a
result, they make changes which
focus on the function, not on the
overall process performance
3. The function's borders
act as barriers and slow the
overall process, as work is stored at
the entry and exit points to each
function
1. There is no
complete
description of
the end-to-end process.
2. Functions start to make
documents
of their own sub-processes
for their own
purposes.

30 - July 20, 2022 – v10.0
Output
Input
A1 B2
B1 C1
A3 B4
B3
A2 C2
B6 B5
C3 A4
Function A Function B Function C
- Competence A
development
- Training
- Resource pool
- Superior relations
- Competence B
development
- Training
- Resource pool
- Competence C
development
- Training
- Resource pool
 Functions become competence centers - supplying
competence and resources to the processes
Sub-Process #1
Sub-Process #2
Sub-Process #3

31 - July 20, 2022 – v10.0
1
• Establish the Team
2
• Describe the Problem
3
• Develop Interim Containment Actions
4
• Define and Verify Root Causes and Escape Points
5
• Choose and Verify Permanent Corrective Actions
6
• Implement and Validate Permanent Corrective Actions
7
• Prevent Recurrence
8
• Recognize Team and Individual Contributions

32 - July 20, 2022 – v10.0
Background
Current Conditions
Goals & Targets
Root Cause Analysis
Countermeasures
Implementation
Follow Up
1
2
3
4
5
6
7

33 - July 20, 2022 – v10.0
Process
Excellence
Lean = Efficiency
is about reducing the lead time of
a process or value stream.
Six Sigma = Effectiveness
is about reducing the variation in a
process or value stream.
C
I
A
M
Project Management
D

34 - July 20, 2022 – v10.0
Process Input:
Strategic and Annual Operating
Plan (Objectives, Goals, Initiatives)
Process Output:
Exceeding the Plan
• Clarify big picture using
strategic & operating
plan
• Prioritize projects
based on impact,
value, resources,
timing
• Select key projects
with leadership buy-in
• Check accountability -
business and personal
Select the
Right
Projects
Select and
Train the
Right People
• Ensure the right
leadership and
ownership
• Select the right team
leader & team
• Develop a training
plan
• Dedicate time for
training & application
• Ensure the right
support resources
are available
Develop and
Implement
Improvement
Plans
• Utilize the right
improvement
methodology for
the right project
Manage for
Excellence in
Execution
• Stay focused
• Frequently review
progress and remove
barriers
• Check real business
impact
• Continuously
communicate
progress
• Link to performance
management and
R&R
Sustain the
Gains
• Implement effective
control plans
• Conduct regular
training focused on the
process
• Review the system
effectiveness at least
quarterly
• Continually identify and
launch new projects
based on strategic &
operating plan

35 - July 20, 2022 – v10.0
Balanced Scorecard Project Selection Matrix
KPI
#1
KPI
#2
KPI
#3
KPI
#4
KPI
#5
KPI
#6
KPI
#7
KPI
#8
Weights 20 10 15 10 5 20 10 10 100 50 30 20 100 70 30 100
Project Definition
1 Project #1 10 0 5 0 0 3 0 0 3.4 5 0 5 3.5 0 5 1.5
2 Project #2 0 3 0 5 0 0 0 0 0.8 0 5 0 1.5 3 0 2.1
3 Project #3 5 5 10 10 3 3 8 8 6.4 3 8 5 4.9 5 8 5.9
4 Project #4 0 0 10 5 0 0 5 0 2.5 0 0 10 2.0 3 3 3.0
5 Project #5 5 10 0 0 1 0 0 3 2.4 10 5 3 7.1 3 5 3.6
Ranking 0 = none Not Started
3 = low On Track
5 = medium At Risk
8= high Behind Schedule
10= very high
CORRELATION MATRIX
MANAGEMENT
RISK
TOTAL
RISK
PROJECT
STATUS
CAPITAL
RESOURCES
DURATION
OF
PROJECT
TOTAL
EFFORT
TECHNICAL
RISK
EFFORT RISK
PEOPLE
RESOURCES
IMPACT
FINANCIALS
CUSTOMERS
PROCESSES
LEARNING
&
GROWTH
TOTAL
IMPACT
Linking Performance Management
& Process Excellence through
focused Project Selection

36 - July 20, 2022 – v10.0
10
9
8
7
6
5
4
3
2
1
0
0 1 2 3 4 5 6 7 8 9 10
EFFORT
IMPACT
Size of the Ball = Size of the Risk
1
2
3
4 5
Linking Performance Management
& Process Excellence through
focused Project Selection

37 - July 20, 2022 – v10.0
State of Michigan Department of Management and Budget (DMB)
Coordinator Kathe Carter:
"Our management team evaluates potential new programs/initiatives by seeing
how they fit in with our strategy. In the past we would continue stacking new
projects on everyone's plates, but now if it doesn't fit with our strategy we
don't do it." Just as important for the DMB is that "whenever a new project or
initiative is proposed, our people ask 'how does this fit in with our strategy map
/scorecard?' They feel that this connection attaches a higher level of
importance to the initiative."

38 - July 20, 2022 – v10.0
Process Excellence Training Modules
To learn more about the different Process Excellence Methodologies, please review
our Lean Management, Six Sigma Methodology, Business Process Improvement, and
8D Problem Solving Process Training Modules.
The COMPLETE LEAN MANAGEMENT Training Module Library includes the latest version of
all seven currently publicly available Lean Management training modules with over 900
PowerPoint slides and many additional templates, worksheets, and forms to support your
organization's Lean Management initiative.
The COMPLETE SIX SIGMA METHODOLOGY Training Module Library includes the latest
version of all six currently publicly available Six Sigma training modules with over 700 PowerPoint
slides and many additional templates, worksheets, and forms to support your organization's Six
Sigma initiative.
The Business Process Improvement (BPI 7) Methodology Training Module includes a MS
PowerPoint Presentation, as well as additional worksheets and templates, covering our Business
Process Improvement Methodology (BPI 7).
The 8D (Disciplines) Problem Solving Process Training Module includes a MS PowerPoint
Presentation covering the Global 8D Problem Solving Process & Tools, a Case Study, and 7
Workshop Exercises.
The A3 Problem Solving Process Training Module includes a MS PowerPoint Presentation
covering the A3 Problem Solving Process & Tools, a Case Study, and 7 Workshop Exercises.

39 - July 20, 2022 – v10.0
Work Teams.
execution.
goals.
Operational Excellence can
be achieved and sustained
with the right attitude, the
right mindset, and the right
competencies.
class results.

40 - July 20, 2022 – v10.0
“The rate at which organizations learn may soon
become the only sustainable source of competitive
advantage.”
Peter Senge
“The thing I have learned at IBM is that culture is
everything.”
Louis V. Gerstner, Jr.

41 - July 20, 2022 – v10.0
Operational Excellence – High Performance Work Teams
*
High Performance Work Teams = E 3
E
=
Educate
E
=
Empower
E
=
Engage
*

42 - July 20, 2022 – v10.0
Proportion of highly engaged
employees experiencing this:
Proportion of low or no engagement
employees experiencing this:
They view their job as important
to the company
They are able to do their best
every day
They have opportunities to learn
and grow
Their manager cares about them
Someone has talked about their
progress
Someone encourages their
development
98%
99%
98%
98%
92%
97%
22%
53%
13%
20%
13%
10%

43 - July 20, 2022 – v10.0
Operational Excellence can and can only be achieved and sustained with the
right attitude, the right mindset, and the right competencies.
Empowerment = f (Authority, Resources, Information, Accountability)
The Empowerment
Continuum
Selected Employee
Input
Ongoing Employee
Taskforces
High Performance
Work Teams
Empowerment = 0,
if Authority or Resources or Information or Accountability = 0

44 - July 20, 2022 – v10.0
In their book Gung Ho ! – Turn on the People in any
Organization, Ken Blanchard and Sheldon Bowles describe
three distinctive phase of transforming a traditional
organization to an organization based on high performance
work team.
Spirit of the Squirrel Way of the Beaver Gift of the Goose

45 - July 20, 2022 – v10.0
Spirit of the Squirrel
WORTHWHILE WORK
1. Knowing we make the world a better place.
2. Everyone works toward a shared goal.
3. Values guide plans, decisions, and actions.

46 - July 20, 2022 – v10.0
Way of the Beaver
IN CONTROL OF ACHIEVING THE GOAL
1. A playing field with clearly marked territory.
2. Thoughts, feelings, needs, and dreams are
respected, listened to, and acted upon.
3. Able but challenging.

47 - July 20, 2022 – v10.0
Gift of the Goose
CHEERING OTHERS ON
1. Active or passive, congratulations must be TRUE.
2. No score, no game, and cheer the progress.
3. E = m · c2 – Enthusiasm equals mission times
cash and congratulations.

48 - July 20, 2022 – v10.0
While an organization transitions from a more traditional “top-down”
organization to an organization build around high performance work
teams, the role of a supervisor or manager changes to the role of a leader
and coach, with six distinctive capabilities.
Leader ≠ Manager
Coach
Facilitator
Result
Catalyst
Living
Example
Business
Analyzer
Barrier
Buster

49 - July 20, 2022 – v10.0
Work Teams.
Strategy or Policy Deployment is
the process that aligns and links
business strategy and execution.
Performance Management is the
process that translates strategic
initiatives into measurable
objectives and goals.
Operational Excellence can be
achieved and sustained with the
right attitude, the right mindset,
and the right competencies.
class results.

50 - July 20, 2022 – v10.0
About Operational Excellence Consulting LLC
“In the global and competitive environment of today
and tomorrow, organizations must rethink and reshape
their approach to execution in order to stay
competitive. Operational Excellence is the strategic
initiative under which this process can take shape.”
We work with our clients, primarily smaller and medium-sized manu-
facturing and service organizations, hands-on and side-by-side to achieve
their strategic and operational goals and objectives through the innovative
application of Operational Excellence principles, methods, and tools.
Email: info@oec-us.com
Phone: +1 (888) 372 – 8705
Website: www.oec-us.com

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