Successful Operational Excellence programs are critical to the ongoing success at many of the world's best companies. Whether it is driving year-over-year cost reductions, setting new standards for world-class quality, satisfying ever more demanding customers or being at the forefront of product design and innovation, companies look to their ongoing improvement programs to continually deliver the goods. So why do so many companies struggle with such a crucial, well known and seemingly simple concept?
We recently met with a senior executive who was responsible for corporate operational excellence at a major and very sophisticated industrial manufacturing company. They have many plants, some that have adopted operational excellence and are achieving amazing results. Other plants continue to struggle with only marginal results. What did this executive think was the difference? His answer surprised us. In his opinion, most senior leadership from vice presidents to plant managers simply do not know what to do on a day-to-day basis to drive their Operational Excellence programs. They understand the concepts, support them and even cheerlead. They hire Six Sigma trainers, engage consultants to facilitate kaizens, hand out books and more. His question to us, "What more should they do?"
To find out, we initiated a study to see if there are consistent, executive-level actions that definitively separate companies with successful operational excellence programs from those that are not successful. Our first challenge was to develop clear and simple definition of success. We chose "meaningful contribution to the company's competitive position and bottom line improvement" as our definition. Using this definition, a company could be comprised of 100 percent Six Sigma black belts, value stream map every element of the business and conduct kaizens on everything, but they are only successful in our definition if these actions positively impact competitiveness and the bottom line.
Our second challenge was to determine how to conduct the study. Since we wanted to learn what works across a broad sample of companies, we spoke with executives at our clients and at other companies in a wide range of industries including:
- Industrial Equipment & Heavy Machinery
- Aerospace & Defense
- High-Tech & Electronics
- Food & Beverage
- Consumer Goods
Using a combination of discussions and questionnaires to gather the information, we asked multiple choice and open ended questions, with over 40 companies participating at some level in the study.
Does an Operational Excellence program really matter?
We found that it does. Fully 55 percent of the companies in our study reported that their operational improvement program drove significant benefits either all or some of the time.
Figure 1: Successful operational improvement programs produce tangible results that are sustained over time and that contribute to overall competitiveness.
It also validated our executive's comments and what we have observed in our experiences — companies that can regularly and reliably count on meaningful success from their Operational Excellence programs are comparatively rare, only 11 percent.
Is there something that these relatively few consistently successful companies do that distinguishes them from their less successful counterparts?