Imagine the last time you went on vacation or a business trip to another city or country. You had a reservation for a rental car, and when you arrived at your destination airport and went to the rental car desk, you saw a lot of people waiting to be assisted. However, this did not bother you because you are a platinum customer and you had a reservation. So, you went straight to the rental display board, looking to find your name and the car assigned to you, but your name was not there. You then went into the office, hoping to speak with a customer care representative for platinum members, but the office was closed for the night. You called the customer care phone number, but it was busy and, when you eventually connected, the representative said your name was not on the list. This meant that you had to join the line that already was backed up with waiting customers. When you were finally attended to by the customer care representative for the (nonplatinum) customers, she informed you that no rental car was available because they ran out of cars.
You had a reservation. You are a platinum member. You had a difficult and bad experience. Operationally, the situation was far from excellent.
What went wrong?
What Is Operational Excellence?
Operational excellence is the execution of a business strategy in a consistent and reliable manner, with lower operational risk and operating costs and increased revenues relative to competition.
Put simply, it is:
- Better, cheaper and faster execution
- Better in product or service quality, processes, user experience, and value—better in everything that is relevant and important
- Cheaper to operate, process and purchase for customers
- Faster in service, response, process and delivery
Operational excellence is highly needed in today’s rapidly changing business models and technology-driven world, which requires organizations to undertake end-to-end business transformation. Operational excellence can be viewed as execution excellence.
Key Principles of Operational Excellence
Author Marvin Wurtzel developed a list of 7 operational excellence key principles:1
- Strategy—Leadership creates the vision and values and distills them into strategic focus and direction.
- Metrics—Balanced scorecards (BSCs) and strategic planning tools cascade down through an organization.
- Culture—Staff members understand the strategy and are accountable for the results.
- Processes—The organization has an integrated business process architecture.
- Methodology—The Agile and Scrum methodologies are natural complements to the operational excellence.
- Project management—In accordance with the Project Management Body of Knowledge PMBOK Guide,2 discipline and rigor are applied to projects.
- Tools—Tools for solution delivery, problem solving and continuous process improvement are embraced.
Reasons for Failure
Research has shown that 70% of organizational operational excellence initiatives fail.3 Why? Here are some of the common causes for failure:
- Poor leadership/leadership mindset
- Unclear or inconsistent leadership
- Poor or ineffective communication
- Powerless staff/workforce
- Poor organizational culture
- Poor or ineffective business process(es)
- Perception of operational excellence effort as a one-off initiative
- Poor environment of continuous improvement
- Implementation of the operational excellence initiative/effort from the top down, without bottom-up feedback
- Lack of alignment with organizational goals and strategy
- Leaders focusing too much effort on waste elimination or the idea of continuously improving instead of encouraging the workforce to focus on the big picture and achieve the goal of seamless delivery of value
- Conferment of improvement efforts within silos so the whole organization does not benefit
- Poor performance management
- Lack of appetite for adaptation
Using the COBIT 2019 Framework to Achieve Operational Excellence
COBIT® is a framework for the governance and management of enterprise information and technology aimed at the whole enterprise (figure 1).
Figure 1—COBIT Core Model
Source: ISACA®, COBIT® 2019 Framework: Introduction and Methodology, USA, 2018
COBIT®2019 clearly distinguishes between governance and management objectives. In alignment with International Organization for Standardization (ISO)/International Electrotechnical Commission (IEC) 38500, COBIT 2019 presents governance objectives in terms of evaluating, directing and monitoring and management objectives as planning, building, running and monitoring activities to achieve enterprise objectives. It is worth mentioning that COBIT is a guide, so it is not necessary to implement COBIT as a whole. Instead, it should be adopted and adapted to develop a fit-for-purpose governance and management of information and technology (I&T) solution.
The steps for using COBIT to pursue operational excellence are:
- Define focus area—Operational excellence
- Define design factor(s)—Enterprise goals, enterprise strategy, enterprise size, threat landscape, technology adoption strategy, role of IT, IT implementation methods and sourcing models for IT.
Figure 2—COBIT 2019 Design Factors
Source: ISACA®, COBIT® 2019 Framework: Introduction and Methodology, USA, 2018
1. Cascade goals—Apply cascading goals to support enterprise goals. These goals also support the prioritization of management objectives based on the prioritization of enterprise goals.
Figure 3—COBIT 2019 Goals Cascade
Source: ISACA®, COBIT® 2019 Framework: Introduction and Methodology, USA, 2018
For example:
- Stakeholder Drivers and Needs include customer-centric/satisfaction, faster service/product delivery, better quality of service/product, increased revenues, which cascade to
- Enterprise Goal(s) which include customer-oriented service culture, optimization of internal business process functionality, achieving operational excellence of service/product, managing business risk, which cascade to
- Alignment Goal(s) which include realized benefits from operational excellence initiatives, delivery of products/services in line with business requirements, competent and motivated staff with mutual understanding of technology and business, which cascade to
- Governance and Management Objectives, including Evaluate, Direct and Monitor (EDM) EDM01, EDM02, Align, Plan and Organize (APO) APO01, APO05, Build, Acquire and Implement (BAI) BAI01, Deliver, Service and Support (DSS) DSS01, Monitor, Evaluate and Assess (MEA) MEA01, etc.
2. Prioritize governance and management objectives—Select applicable governance and management objectives from the 40 governance and management objectives. For example, an organization may select one or more of the governance objectives (EDM01, EDM02) and a selection of applicable management objectives, such as APO01, APO05; BAI01; DSS01, DSS02; MEA01, etc.
3. Capture value—To satisfy governance and management objectives after prioritization, value must be captured from the components of the governance system: processes; organizational structures; principles, policies and frameworks; information; culture, ethics and behavior; people, skills and competencies; and services, infrastructure and application (figure 4). For example:
- Culture, ethics and behavior deals with mindsets and people practices. To achieve operational excellence, an organization must instill a culture of operational discipline that strives to do the right thing, the right way, every time.
- Processes need to be prioritized to ensure that business processes are streamlined and repeatable.
- People, skills and competencies mean that leadership must create an environment that attracts the best people, cultivates staff growth, training, and supports team members.
- Organizational structure means leadership must make sure that organizational structure aids rather than hinders improvement efforts of operational excellence.
Figure 4—Components of the Governance System
Source: ISACA®, COBIT® 2019 Framework: Introduction and Methodology, USA, 2018
Some of the components of the governance system speak directly to factors that must be addressed to avoid a failed initiative. For example, culture, ethics and behavior directly connect with organizational culture (i.e., poor or weak organizational culture—one lacking in direction or one whose values and beliefs are not strongly and widely shared within the organization—can lead to the failure to achieve operational excellence; people, skills and competencies connect with employees’ skill sets when it comes to operational excellence (i.e., powerless/incompetent staff/workforce can lead to operational excellence failure); and processes connect directly with business processes, practices or activities for operational excellence (i.e., poor or ineffective business process[es] lead to operational excellence failure).
4. Design a Tailored Governance System—Apply the governance system design workflow (figure 5).
Figure 5—Governance System Design Workflow
Source: ISACA®, COBIT® 2019 Design Guide: Designing an Information and Technology Governance Solution, USA, 2018
5. Implement the Tailored Governance System—Adopt the implementation approach, ensuring everybody in the organization is on board.
6. Continuous Improvement—“The destination of operational excellence is when every employee sees and fixes customer value flow without management intervention.” 4
A fundamental requirement of continuous improvement is metrics, also known as key performance indicators (KPIs). These should be examined periodically, such as every quarter for better performance than the previous quarter or every year for better performance than the previous year.
The following are some questions organizations may ask at this step:
- Why do we practice continuous improvement?
- What is the best way to improve?
- How do we know where to improve?
- Why do we strive to create flow?
- What causes the death of flow?
- What would the organization look like if it did everything right?
- What would the supply chain look like if it did everything right?
- Where will the continuous improvement journey take the organization?
Benefits of Operational Excellence
An organization that achieves operational excellence has lower costs, higher revenues, less risk and more satisfied customers than its competitors. Some of the common benefits of operational excellence include:
- Efficiency in processes and use of resources
- Cost reduction or containment
- Engaged, stable workforce
- Cohesive management
- Strong shareholder value
- High-quality standards
- Beneficial partnerships with suppliers
Conclusion
To achieve operational excellence, organizations must have:
- Effective and efficient processes to deliver value
- Tools and techniques for design, control and improvement
- Mindset and behaviors by which everyone wants to and can be operationally excellent
- Enterprisewide alignment of strategies, priorities, policies and decisions.
Using COBIT 2019 helps organization achieve value streams, that is, value creation, value capture and value delivery.
Operational excellence is an ongoing process and not a one-time initiative. With the right and consistent leadership and leadership mindset, effective and regular communication, competent and empowered workforce, and periodic performance management, the organization places itself on the path to high performance and operational excellence.
Oluwaseyi Ojo, Ph.D., COBIT 5 Certified Assessor, ITBMC
Is an experienced business leader and security architect with a focus on governance, quality, risk management, compliance and deep competencies in cybersecurity management, business security architecture, enterprise architecture, enterprise risk management, IT governance, project management, business continuity management, network security, cloud security, solution architecture, cyberthreat intelligence, information security and assurance. He has been leading transformation initiatives in several organizations since 2003. He can be reached at sameoj@gmail.com or www.linkedin.com/in/sameoj/.
Endnotes
1 Wurtzel, M.; “The Five Essentials of Operational Excellence,” BPMInstitute.org
2 Project Management Institute, Project Management Body of Knowledge PMBOK Guide, 6th Editition, USA, 2017
3 McKinsey & Company, “How To Beat the Transformation Odds,” 1 April 2015
4 Duggan, K.; Design for Operational Excellence, McGraw-Hill Education, USA, 2011