Operational Excellence Is a Stepping Stone to Digital Transformation

Posted by Dan Miklovic on Thu, Mar 10, 2016 @ 11:01 AM

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Op_Ex-6.jpgIn my previous post I talked about why Digital Transformation is the way businesses need to think about their long term prosperity, and why silos that are causing most of them to stumble along their path towards Digital Transformation businesses need to start to break down. In this post I am going to focus on how Operational Excellence and Digital Transformation go hand-in-hand.

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In many respects, Digital Transformation is the drive towards autonomous systems with automation being the enabling technology. A long established axiom in manufacturing and in business process improvement (BPI) is “if you automate a bad process you just do bad bigger and faster.” Pursuing Digital Transformation without a focus on Operational Excellence is an exercise in futility just as much as pursuing Operational Excellence in business today without considering the need to leverage Digital Transformation.

Operational Excellence Is the Top Driver for Many Technology Investments

In most of LNS Research’s core practice areas Operational Excellence or “improving operational performance” emerges as a key driver for companies’ investment in their programs for BPI. In the APM space alone, 80% of respondents ranked it as one of the top 3 drivers for investment. LNS Research’s view is that Operational Excellence is a multidimensional approach that requires a balancing a minimum of five elements: Asset Performance Management (APM), Enterprise Quality Management (EQMS), Environment, Health & Safety (EHS), Industrial Energy Management (IEM), Internet of Things, and Manufacturing Operations Management (MOM).

In some industries, such as hi-tech consumer electronics, automotive, A&D, New Product Design and Introduction (NPDI) or Supply Chain Management (SCM), and other disciplines may be additional pillars needed to support your Operational Excellence platform. Businesses expect a return on their investments. Since Operational Excellence encapsulates so many business elements it is no wonder why management views any project that can demonstrably improve operational performance as a reasonable investment. So, when you tie Digital Transformation and Operational Excellence together you are on the way to achieving that buy-in.

Barriers to Operational Excellence Often Addressed by Digital Transformation

As our research shows Operational Excellence as a key objective, it also shows the top barriers to achieving the objective have to do with a lack of metrics or visibility into the metrics that are being measured, inaccessible data, and organizational silos/structure. Just pursuing Digital Transformation isn’t a guarantee that you can overcome these barriers. If you look at some of the enabling technologies that have driven Digital Transformation to the forefront today, Cloud, Big Data and Analytics, and Mobility you can begin to see that some of these barriers can be overcome. By moving data to the cloud and enabling mobile access to that data one of the barriers – data being hoarded can be addressed. This is not to say that technology is the silver bullet.

It is still the interaction of people-process-technology that yield the benefit. With the proper technology in place, the processes can be redesigned, and the people can be empowered provided management leads the change efforts. By adopting Big Data with associated Analytics, gaining meaningful insight about what is actually occurring can also be a step in pursuing Operational Excellence. As more and more data is available, making sense of the data is like drinking from a fire hose and new Big Data solutions can help make sense of the data in real-time.

Making the Operational Excellence – Digital Transformation Story Real

There are a number of business stories about how a company was able to leverage the pursuit of Operational Excellence to pursue Digital Transformation. One publicized by PTC’s Michael Porter in the Harvard Business Review is the story of Joy Global, a mining equipment supplier. GE’s Brilliant Trains story made sense to CSX, which has seen significant benefits from their Digital Transformation and is another example of how the pursuit of Operational Excellence led them down the Digital Transformation path. These are real industrial cases and far more relevant to manufacturers or asset intensive industries than trying to map how Uber or Airbnb reflect upon your business. Use the comments field to challenge us to help you understand how the need to pursue Operational Excellence in your business can drive your company towards Digital Transformation.

NEW Research Spotlight on strategies and recommendations for minimizing risk through a migration away from monolithic, single-plant MOM architectures through exploration of Cloud and IIoT technologies that are advancing in manufacturing today.
Manufacturing Operations Management

Tags: Big Data, Internet of Things, Digital Transformation