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An
Introduc+on to
Opera+onal Excellence
“We are what we repeatedly do.

Excellence, then, is not an act, but a habit.”

–Aristotle
Top 10 CEO Challenges & Priorities
E E 
E E 
E 
E 
Opera+onal Excellence – A Philosophy
A Philosophy: Operational Excellence is a philosophy of leadership, teamwork
and problem solving resulting in continuous improvement throughout the
organization by focusing on the needs of the customer, empowering
employees, and optimizing existing activities in the process.
Opera+onal Excellence – An Approach
A Value Stream Management Approach: Operational Excellence is when each
and every employee can see the flow of value to the customer, and fix that flow
before it breaks down.
Opera+onal Excellence – A Model
A Process Excellence Model: The Shingo Model
The Shingo model is comprised of two elements: the house and the diamond.
The house details the principles of operational excellence and the power of
balancing effort across all the dimensions.
The diamond represents the transformation process for embedding the principles
of operational excellence into the organizational culture.
Opera+onal Excellence – A “Checklist”
A “Checklist”: Oliver Wight Class A Checklist for Business Excellence
There are nine chapters describing latest prac+cal and proven best prac+ces. Implementa+on follows
the “Proven Path Methodology”.
The four priority chapters describing the processes and prac+ces that enable the whole business to
be excellent:
Ø  Strategic Planning
Ø  Managing and Leading People
Ø  Driving Business Improvement
Ø  Integrated Business Planning
These support five further chapters that address the prime processes
in most organiza+ons: Products & Services, Demand, Supply Chain, Internal
Supply, and External Sourcing.
The Oliver Wight Class A Checklist is aimed so that organiza+ons can see for
themselves what "excellence" is and what they have to do to be excellent. Its
scoring method allows organiza+ons to visualize and measure progress toward
excellence in every part of the business.
What is Opera+onal Excellence?
Various approaches, frameworks and models exist that are presented under the
term Opera+onal Excellence.
Opera+onal Excellence – A Defini+on
A Business Strategy: In "The Discipline of Market Leaders“ (1995), Michael Treacy and
Fred Wiersema describe three dis+nct value proposi+ons or disciplines: Product
Leadership, Customer InImacy and OperaIonal Excellence.
Market leaders choose to excel in delivering extraordinary levels of one of these three
value proposi+ons, 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.
Achieving Opera+onal Excellence requires the successful implementa+on of a integrated
Business ExecuIon System that effec+vely and seamlessly integrates the following four
building blocks: Strategy Deployment, Performance Management, Process Excellence,
and High Performance Work Teams.
Performance Management is
Strategy or Policy Deployment
the process that translates
is the process that aligns and
strategic initiatives into
links business strategy and Strategy Performance measurable objectives and
execution. Deployment Management goals.
Business Execu+on
System
Well designed, efficient, and
High Performance Process
Operational Excellence can effective Management, Value
Work Teams Excellence
be achieved and sustained Chain, and Support Processes
with the right attitude, the are necessary to deliver world-
right mindset, and the right class results.
competencies.

links business strategy and Strategy Performance
execution. Deployment Management
Business Execu+on
System

“People and their managers are working so hard to be sure
things are done right, that they hardly have 9me to decide
if they are doing the right things.”
Stephen R. Covey

Opera+onal Excellence –
Strategy Deployment
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.
Ø  Only 5% of the workforce understands their

company strategy.
Ø  Only 25% of managers have incen+ves
linked to strategy.
Ø  60% of organiza+ons don’t link budgets to
strategy.
Ø  86% of execu+ve teams spend less than one
hour per month discussing strategy.
Source: Balanced Scorecard Collabora=ve
Strategy Deployment Process
Phase I – Organize the Process
Phase II – Current State Analysis (CSA)
Phase III – Strategic Vision Elements
Phase IV – Strategic Breakthrough Objectives
Phase V – Strategic Initiatives & Tactics
Phase VI – Strategy Implementation & Review

Strategy Maps or Strategic Grids:
Strategic Focus Area: Increase Shareholder Value
Financials Revenue Growth of 20% by 2014

Dimensions or PerspecIves
Acquire More Customers

Customers
Become the Price Leader
Improve Opera+onal Efficiency
Internal
Processes Cost Reduc+on Knowledge Based Reduce
Program System Non-‐Core Ac+vi+es
Database Network on Re-‐Align Organiza+on

Learning & Training – Lean Six
Opera+onal with Core
Growth Sigma Program
Performance Competencies
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.
The Hoshin X-‐Matrix is a tool that visualizes an
organiza+on’s
Ø  strategic objec+ves,
Ø  strategic ini+a+ves,
Ø  key performance indicators,
Ø  key projects & ac+on items, and
Ø  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.
Organization’s Tactical Operational Excellence Consulting Strategy Deployment Matrix 2012
Projects & Action Rev: <Rev#> Revised: <Date> Author: <Name> Status: Draft - Not Released
Items
7. … Organization’s Human
x 6. Initiate RFQ Process for Customer Service x x
x x 5. Implement reliability program for new products x x Resource
x x Allocation
x x 4. Establish LSS Black Belt project for return drivers x x x x
x 3. Establish & train order-to-cash process team x
x 2. Identify Lean Six Sigma consulting company x x
x 1. Define Lean Six Sigma Program x x x
Organization’s Resource Planning
2. Reduce DSO from 90 days to less than 45
4. Improve product verification and validation

Action Items
2. Map & streamline order-to-cash process

Strategic
1. Implement a Lean Six Sigma Program

3. Improve Net Promoter Score to +50%
5. Outsource Customer Service function

3. Resolve TOP 3 product return drivers
Objectives &
Strategic Objectives
1. Reduce Operating Costs by 15%
Strategic Initiatives
Goals
Systems Engineering Manager

Customer Support Manager
System Test Manager
Quality Manager
Measures & Targets
days
4. …
6. …
…
x $15M in annualized cost savings in 2012 x x x x x
x Order-to-Cash cycle time reduction of 25% x x
x DSO reduction from 90 days to 45 days x x
x x Return Rate reduction from 15% to less than 8%
…
x x x
Organization’s
Strategic Initiatives &
Organization’s Key Tactics
Performance Indicator
(Balanced Scorecard)
Strategy Deployment
“I sure wish I’d done a be1er 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 stCDctDre . . . I never got this across.”

Roger Smith, CEO of General Motors (1981 - 1990)
Strategy Planning & Deployment –
Resources
Ackoff, R.L. – A Concept of Corporate Planning (New York, New York: Wiley, 1970)
Collem, Joseph F. – A Field Guide to Focused Planning: Hoshin Kanri -‐ American Style
(The Woodledge Group, 1995)
Cowley, Michael and Domb, Ellen – Beyond Strategic Vision: Effec=ve Corporate Ac=on
with Hoshin Planning (Burlington, Massachuseos: Buoerworth-‐Heinemann, 1997)
Treacy, Michael and Wiersema, Fred -‐ The Discipline of Market Leaders: Choose Your
Customers, Narrow Your Focus, Dominate Your Market (New York, New York:
HarperCollins Publishers, 1995)

To learn more about our proven OperaIonal Excellence Strategy Planning &
Deployment SoluIon, review our “OperaIonal Excellence Strategy Planning and
Deployment Training Module”.
Business Execu+on
System

“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 GoldraR – “The Goal”
Performance Management
“Balanced Scorecards tell you the knowledge, skills and systems that
your employees will need (lear:ing and g;owth) to innovate and build
the right st;ategic capabilities and efficiencies (inter:al processes) that
deliver specific value to the market (customer) which will eventAally 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
Benefits of developing & deploying Balanced Scorecards in an organiza+on
include:
Ø  Help the management team focus on the execution of their business
strategy
Ø  Focus and align an organization towards common goals and objectives
Ø  Enable an organization to understand the relationship between measures
and performance
Ø  Improve communication of organizational priorities across an organization
Ø  Help employees to understand and focus on organizational priorities and
realize relevant results
Ø  Reduce the number of metrics to the few vital key performance indicators
Ø  Strengthen and formalizing the project selection process to focus on key
capabilities and enablers
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.
Objectives Indicators Targets Projects
CUSTOMERS INTERNAL BUSINESS PROCESSES

How do you want to look to your Customers? - At which internal processes and capabilities do
Indicators focus on the specific measures that Vision you want to excel? - Indicators focus on internal
matter the most to your Customers. operations that enable Customer satisfaction,
& growth and profitability.
Strategy Objectives Indicators Targets Projects
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.
Performance Management Process
Phase I -‐ Strategic FoundaIon
Step 1: Strategic Alignment
Step 2: Key Strategic Focus Areas & Objec+ves
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

Strategic Focus Area: Increase Shareholder Value
Financials Revenue Growth of 20% by 2014

Dimensions or PerspecIves
Acquire More Customers

Customers
Become the Price Leader
Improve Opera+onal Efficiency
“Internal”
Processes Cost Reduc+on Knowledge Based Reduce
Program System Non-‐Core Ac+vi+es
Database Network on Re-‐Align Organiza+on

Learning & Training – Lean Six
Opera+onal with Core
Growth Sigma Program
Performance 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?
OPERATIONAL EXCELLENCE BALANCED SCORECARD
From: January 2010

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

Goal 2010
Base 2009
700
300
11
Actual 0
Performance Management – Resources
Chang, Richard Y., and Morgan, Mark W. – Performance Scorecards: Measuring
the Right Things in the Real World (New York, New York: John Wiley Sons Inc.,
2000)
Kaplan, R.S. and Norton, D.P. – The Balanced Scorecard (Cambridge,
Massachusetts: Harvard Business School Press, 1996)
Kaplan, R.S. and Norton, D.P. – Putting the Balanced Scorecard to Work (Harvard
Business Review, September/October 1993)
Kaplan, R.S. and Norton, D.P. – Balanced Scorecard: Translating Strategy into
Action (Cambridge, Massachusetts: Harvard Business School Press, 1996)
To learn more about our proven OperaIonal Excellence Balanced Scorecard SoluIon,
review our “OperaIonal Excellence Balanced Scorecard Deployment Training Module”.
Business Execu+on
System
High Performance Process effective Management, Value
Chain, and Support Processes
are necessary to deliver world-
class results.
Process Excellence
Process Input: Process Output:
Strategic and Annual Operating Exceeding the Plan
Plan (Objectives, Goals, Initiatives)
Develop and
Select the Select and Manage for
Implement Sustain the
Right Train the Excellence in
Improvement Gains
Projects Right People Execution
Plans
•  Clarify big picture using •  Ensure the right •  Utilize the right •  Stay focused •  Implement effective
strategic & operating leadership and improvement •  Frequently review control plans
plan ownership methodology for progress and remove •  Conduct regular
•  Prioritize projects •  Select the right team the right project barriers training focused on the
based on impact, leader & team •  Check real business process
value, resources, •  Develop a training impact •  Review the system
timing plan •  Continuously effectiveness at least
•  Select key projects •  Dedicate time for communicate quarterly
with leadership buy-in training & application progress •  Continually identify and
•  Check accountability - •  Ensure the right •  Link to performance launch new projects
business and personal support resources management and based on strategic &
are available R&R operating plan
Process Excellence
IMPACT EFFORT RISK
CUSTOMERS
LEARNING &
PROCESSES
FINANCIALS
GROWTH
Balanced Scorecard Project Selection Matrix
DURATION OF PROJECT
CAPITAL RESOURCES
PEOPLE RESOURCES
PROJECT STATUS
MANAGEMENT RISK
TECHNICAL RISK
TOTAL EFFORT
TOTAL IMPACT
TOTAL RISK
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 CORRELATION MATRIX
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
Process Excellence
10
6 3
IMPACT
3
1
2
4 5
1
2
0
0 1 2 3 4 5 6 7 8 9 10
EFFORT
Size of the Ball = Size of the Risk
Process Excellence
State of Michigan Department of Management and Budget (DMB)
Coordinator Kathe Carter:
"Our management team evaluates poten=al new programs/ini=a=ves by seeing how
they fit in with our strategy. In the past we would con9nue 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 ini=a=ve is proposed, our
people ask 'how does this fit in with our strategy map /scorecard?' They feel that this
connec=on a]aches a higher level of importance to the ini=a=ve."
Process Excellence
BPI 7 8 D
Process Development, SystemaIc, ScienIfic &

Improvement & Management Disciplined Problem Solving
5. Pursuit
Perfection
1. Define
4. Establish
Pull Lean Value
Principles
3. Create 2. Map Value

Flow Stream
Lean Methodology Six Sigma Methodology

Process Excellence
Project Management
D M A I C
Lean Six Sigma

is about creating flow and is about understanding and
identifying & eliminating waste in eliminating variation in a process
a process or value stream. or value stream.
Process
Excellence
Process Excellence – Resources
Breyfogle, Forrest W. III – Implementing Six Sigma: Smarter Solutions Using
Statistical Methods (New York, New York: John Wiley & Sons Inc., 1999)
George, Mark O. - The Lean Six Sigma Guide to Doing More with Less
(Hoboken, New Jersey: John Wiley & Sons, Inc., 2010)
Ohno, Taiichi - Toyota Production System (New York, New York: Productivity
Press, 1988)
Rother, Mike and Shook, John - Learning to See - Value-Stream Mapping to
create Value and eliminate Muda (Cambridge, Massachusetts: Lean Enterprise
Institute, 2009)
Womack, James P. and Jones, Daniel T. - Lean Thinking (Free Press, 2003)
To learn more about our proven Operational Excellence Process Excellence

Solutions, review our various “Operational Excellence Process Management,
Lean Management, Six Sigma Methodology & 8D Problem Solving Training
Module”.
Business Execu+on
System
Operational Excellence can High Performance Process effective Management, Value
be achieved and sustained Work Teams Excellence
competencies.
“The rate at which organiza9ons learn may soon become
the only sustainable source of compe99ve advantage.”
Peter Senge

“The thing I have learned at IBM is that culture is

everything.”
Louis V. Gerstner, Jr.
High Performance Work Teams
Opera+onal Excellence can and can only be achieved and sustained with the right
amtude, the right mindset, and the right competencies.

Empowerment = f (Authority, Resources, Informa+on, Accountability)

Empowerment = 0,
if Authority or Resources or Informa+on or Accountability = 0

Selected Employee Ongoing Employee High Performance
Input Taskforces Work Teams

The Empowerment
Low High
ConInuum
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

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.
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.
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.
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.
Coach
Living Barrier
Example Buster
Leader ≠ Supervisor
Result Business
Catalyst Analyzer
Facilitator
High Performance Work Teams –
Resources
Blanchard, Ken and Bowles, Sheldon – Gung Ho ! – Turn on the People in any
Organization (New York, New York: William Morrow and Company, Inc. 1998)
Fisher, Kimball – Leading Self-Directed Work Teams (New York, New York:
McGraw-Hill, 2000)
Business Execu+on
System
Operational Excellence can High Performance Process effective Management, Value
be achieved and sustained Work Teams Excellence
competencies.
The House of Opera+onal Excellence
"The House of Opera+onal Excellence" provides a high-‐level framework for an integrated Business
Execu+on System for Opera+onal Excellence organiza+ons.
“Perfection is not aFainable, but if we chase perfection we
can catch excellence.”
Vince Lombardi

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An

“We are what we repeatedly do.

Market leaders will not pursue a diffused business strategy

Strategy or Policy Deployment

High Performance Process

Stephen R. Covey

Ø Only 5% of the workforce understands their

Phase II – Current State Analysis (CSA)

Phase III – Strategic Vision Elements

Phase IV – Strategic Breakthrough Objectives

Phase V – Strategic Initiatives & Tactics

Phase VI – Strategy Implementation & Review

Financials Revenue Growth of 20% by 2014

Acquire More Customers

Database Network on Re-­‐Align Organiza+on

in one simple matrix.

4. Improve product verification and validation

2. Map & streamline order-to-cash process

1. Implement a Lean Six Sigma Program

5. Outsource Customer Service function

Systems Engineering Manager

“I sure wish I’d done a be1er job of

High Performance Process

CUSTOMERS INTERNAL BUSINESS PROCESSES

LEARNING AND GROWTH

Phase II - Three Critical Components

Phase III – Deployment Process

Balanced Scorecard Development & Deployment Process

Financials Revenue Growth of 20% by 2014

Acquire More Customers

Database Network on Re-­‐Align Organiza+on

From: January 2010

ques+on: Why is this an objec+ve? Stretch 2010 1000

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

Coordinator Kathe Carter:

Process Development, SystemaIc, ScienIﬁc &

3. Create 2. Map Value

Lean Methodology Six Sigma Methodology

Lean Six Sigma

To learn more about our proven Operational Excellence Process Excellence

“The thing I have learned at IBM is that culture is

Empowerment = f (Authority, Resources, Informa+on, Accountability)

Spirit of the Squirrel Way of the Beaver Gift of the Goose

Spirit of the Squirrel

Way of the Beaver

IN CONTROL OF ACHIEVING THE GOAL

Gift of the Goose

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Ø  Only 5% of the workforce understands their

Database Network on Re-‐Align Organiza+on

Database Network on Re-‐Align Organiza+on