OpEx is more than just a buzzword. Kevin J. Duggan, Founder of the Institute for Operational Excellence, in the United States, tells LMJ how operational excellence helps putting lean and continuous improvement in context.
Roberto Priolo: What is the main purpose of the Institute for Operational Excellence?
Kevin Duggan: I like to think of it as a radio station, broadcasting what operational excellence is and what you need to do to achieve it. It ’s a knowledge centre. By offering training and publishing books, articles and white papers describing the experience of companies from different industries we strive to bring awareness of operational excellence.
Operational excellence is often perceived as an ambiguous term, a motivational buzzword even. But it’s actually a very effective methodology, and you can apply it to any operation and process.
RP: How do you define operational excellence then, and what makes it different from lean?
KD: We have a very strict definition. You have achieved operational excellence when “each and every employee can see the flow of value to the customer, and fix that flow before it breaks down.” This happens with no super vision, with no managers running around giving orders. This definition can be applied to any process: can employees see the flow of materials in the supply chain? Can accountants say that the invoicing process is flowing on time?
Operational excellence and lean are fundamentally different: in my opinion, operational excellence (which equals lean value streams done right) is a destination.
Another difference is that while lean and CI focus on productivity improvement and the removal of waste, operational excellence is after business growth. Lean is adopted based on the premise that if you get more efficient, you’ll increase sales. However, in this economy this isn’t always true. In operational excellence, increased efficiency is a by-product, not the goal.
Operational excellence is more tangible than lean and, once achieved, it will allow for managers to concentrate on sales and innovation to grow the business.
In real life, how do we know a plane flies as efficiently as it is supposed to? Through a checklist. Why don’t we do the same in our operations? Because we don’t have a design in place. Operational excellence gives you a design to build on. Once normal and abnormal flows are identified, standard work is set to correct abnormalities in what is known as a “self-healing” value stream.
RP: What would you say is the main element preventing companies from achieving operational excellence?
KD: What holds companies from moving forward is a lack of understanding of what operational excellence is. When I go to a company the first thing I ask is: “Why do you strive to create flow?” Answers range from increasing productivity to minimising cost. Each manager has a different reason for doing it. In operational excellence there is only one reason, and that is simply to see where flow stops. How much faster you are going to build a puzzle when you have the picture you are trying to put together in front of you?
RP: How has the operational excellence landscape changed over the years, and how do you see it evolve in the future?
KD: In the past years, operational excellence was the nirvana. A way to motivate people. As we progress now and into the future, more and more companies are changing their perspective: it’s not a vision any more, it’s a destination. It entails a hands on step by step process, which you can teach and apply. Every employee can contribute in every aspect of the operations. More and more companies are seeing that, and when they get it they will simply r each their destination faster.
RP: How do you achieve operational excellence?
KD: First, you teach your people through executive training that it is their idea of continuous improvement that holds them back. Everybody should understand what operational excellence is and how to achieve it. There is no space for interpretation. The “I think’s” must be taken away.
The next step is teaching managers. No more kaizens to design flow, but a prescriptive process. The reason why many companies get there in a year is because they have been given clear directions.
You don’t need to teach the tools. Workers know them from lean and six sigma, and what operational excellence does is building upon them.
In operational excellence, we use kaizen at a macro level, to say what we are going to do when the flow breaks down. What are the top five things we need to do when we find ourselves with an abnormal flow?
RP: What’s lacking from the current forms of training available to business improvement practitioners today?
KD: It is really evident. We do soft training, teaching leadership skills, kaizen, working in teams. Where are the laws of physics and aerodynamics? Where’s the technical capability? There is a huge gap in training (and in executive training): what’s missing is showing how to create a design for excellence.
RP: The recent woes of lean champion Toyota proved that no one is completely immune to set-backs. Do you see the Japanese car-maker as a good example of operational excellence?
KD: I don’t. This is a real myth. Toyota is a great company that has strived to be lean, and has done a great job at becoming lean. But with one supervisor for every seven workers, it’s still a continuous improvement environment characterised by layered management. Companies that have really achieved operational excellence have managers that don’t focus on improving efficiency. They leave it to the people on the shop floor and to the design they have provided them with, while they worry about innovation, talking to customers and ensuring the firm stays ahead of the competition.
These companies don’t measure cut costs, on time delivery, etc. Why do we even try to measure quality, lead time, or on time delivery? The answer is that some day we don’t want to measure them any more. If the system just works why do we need to measure it? It’s a completely different mindset, and the emphasis is placed on a completely different set of elements.