What do Apple, Dell, P&G, RIM, and Amazon, the five champions of operational excellence according to Gartner’s 2011 rankings, all have in common? These companies do not approach the issue as an isolated department-by-department problem. Flexibility, interoperability, and value chain networks contribute to their profitability and guarantees they stay ahead of their competitors.
Companies that achieve operational excellence have the ability to adapt to changing consumer demands, new entrants into the market, crises, etc.
According to Jim Collins and Morten Hansen, leaders that successfully guide their companies towards operational excellence leave nothing to chance. The authors found that companies that performed 10 times better than their industry averages over a 15-year period all demonstrate unfailing discipline in regards to operational processes. In particular, those leaders focus on:
1. Adaptability: operational excellence depends first and foremost on a company’s ability to adapt the value creation process to changing business environments.
2. Interoperability: Enhancing performance department by department is inadequate. Managers must promote collaboration among functions, encouraging units to work together to reach common goals.
3. Value chains: When it comes to operational excellence, the companies that truly excel do not manage a simple value chain but rather networks that include suppliers, consumers, and competitors.
Facing deficits of tens of millions of euros, Rossignol decided in 2010 to repatriate part of its ski manufacturing processes to France in order to increase the flexibility of its production chain. Two years later, the group started reporting renewed profits and announced a 10 million-euro investment plan to further improve operations.
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Operational excellence: Pushing the limits of efficiency
Business Digest no. March 2012.
A synthesis of several publications, accompanied by a case on Rossignol, February 2012.