CEO Challenges & Priorities

1 - August 1, 2016 – v9.0
An Introduction to Operational Excellence
An Integrated Business Execution System
by Operational Excellence Consulting LLC

2 - August 1, 2016 – v9.0
Top 10 CEO Challenges & Priorities
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3 - August 1, 2016 – v9.0
Operational Excellence – A Definition
A Business Strategy: In "The Discipline of Market Leaders“ (1995), Michael
Treacy and Fred Wiersema describe three distinct value propositions or
disciplines: Product Leadership, Customer Intimacy and Operational
Excellence.
Market leaders choose to excel in delivering extraordinary levels of one of these
three value propositions, while maintaining reasonable standards in the other
disciplines.
Market leaders will not pursue a diffused business strategy
across two or even all three disciplines, but will continually focus
on their organizational design, processes, technology and
competencies to improve the one particular value discipline that
they want to provide to their Customers better than anyone else.
Organizations pursuing an Operational Excellence strategy,
strive to deliver a combination of quality, price, and ease of
purchase and service that no other organization in their market
or industry can match.

4 - August 1, 2016 – v9.0
What is Operational Excellence?
Achieving Operational Excellence requires the successful implementation of a
integrated Business Execution System that effectively and seamlessly
integrates the following four building blocks: Strategy Deployment,
Performance Management, Process Excellence, and High Performance
Work Teams.
Strategy or Policy Deployment
is the process that aligns and
links business strategy and
execution.
Performance Management is
the process that translates
strategic initiatives into
measurable objectives and
goals.
Operational Excellence can
be achieved and sustained
with the right attitude, the
right mindset, and the right
competencies.
Well designed, efficient, and
effective Management, Value
Chain, and Support Processes
are necessary to deliver world-
class results.

5 - August 1, 2016 – v9.0
Work Teams.
execution.

6 - August 1, 2016 – v9.0
Operational Excellence – Strategy Deployment
 Only 5% of the workforce understands their
company strategy.
 Only 25% of managers have incentives linked to
strategy.
 60% of organizations don’t link budgets to
strategy.
 86% of executive teams spend less than one
hour per month discussing strategy.
Source: Balanced Scorecard Collaborative
Strategy is an expression of what an organization intents to do to get from a
current state to a future state. Strategy is often expressed in terms of a vision
statement, objectives, goals, and initiatives.

8 - August 1, 2016 – v9.0
Operational Excellence – Strategy Deployment Process
Phase III – Strategic Vision Elements
Phase IV – Strategic Breakthrough Objectives
Phase II – Current State Analysis (CSA)
Phase I – Organize the Process
Phase V – Strategic Initiatives & Tactics
Phase VI – Strategy Implementation & Review

9 - August 1, 2016 – v9.0
Once you have completed the strategic grid, go back and make sure everything fits with your overall
strategy. A set of strategic grids should provide the strategic model for running the business, outlining the
specifics of the strategy. All stakeholders should be able to look at the grids and follow the flow of the
organization’s strategy.
Strategy Maps or Strategic Grids:
Strategic Focus Area: Increase Shareholder Value
Financials Revenue Growth of 20% by 2014
Customers
Acquire More Customers
Become the Price Leader
Internal
Processes
Improve Operational Efficiency
Cost Reduction
Program
Knowledge Based
System
Reduce
Non-Core Activities
Learning &
Growth
Training – Lean
Six Sigma
Program
Database Network
on Operational
Performance
Re-Align
Organization with
Core Competencies
DimensionsorPerspectives

10 - August 1, 2016 – v9.0
The Hoshin X-Matrix is a tool that visualizes an organization’s
 strategic objectives,
 strategic initiatives,
 key performance indicators,
 key projects & action items, and
 human resources requirements
in one simple matrix.
The Hoshin X-Matrix enables an organization to easily review the alignment of
its strategic objectives, strategic initiatives, key performance indicators, key
action items and human resources.
The Hoshin X-Matrix, if used properly, improves the likelihood of a successful
execution of the strategic plan.

11 - August 1, 2016 – v9.0
7. …
x 6. Initiate RFQ Process for Customer Service x x
x x 5. Implement reliability program for new products x x x x
x x 4. Establish LSS Black Belt project for return drivers x x x x
x 3. Establish & train order-to-cash process team x
x 2. Identify Lean Six Sigma consulting company x x
x 1. Define Lean Six Sigma Program x x x
QualityManager
SystemTestManager
SystemsEngineeringManager
CustomerSupportManager
…
x $15M in annualized cost savings in 2012 x x x x x
x Order-to-Cash cycle time reduction of 25% x x
x DSO reduction from 90 days to 45 days x x
x x Return Rate reduction from 15% to less than 8% x x x
…
Rev: <Rev#> Revised: <Date> Author: <Name> Status: Draft - Not Released
4.…
3.ImproveNetPromoterScoreto+50%
2.ReduceDSOfrom90daystolessthan45
days
1.ReduceOperatingCostsby15%
1.ImplementaLeanSixSigmaProgram
2.Map&streamlineorder-to-cashprocess
Resource Planning
Operational Excellence Consulting Strategy Deployment Matrix 2012
3.ResolveTOP3productreturndrivers
4.Improveproductverificationandvalidation
5.OutsourceCustomerServicefunction
6.…
Measures & Targets
Action Items
StrategicInitiatives
StrategicObjectives
Measures & Targets
Action Items
StrategicInitiatives
StrategicObjectives
Organization’s
Strategic
Objectives &
Goals
Organization’s Key
Performance Indicator
(Balanced Scorecard)
Organization’s
Strategic Initiatives &
Tactics
Organization’s Tactical
Projects & Action
Items
Organization’s Human
Resource Allocation

12 - August 1, 2016 – v9.0
Operational Excellence – Strategy Deployment
“I sure wish I’d done a better job of
communicating with GM people. I’d do that
differently a second time around and make
sure they understand and shared my vision for
the company. Then they would know why I was
tearing the place up, taking out whole divisions, changing our whole
production structure . . . I never got this across.”
Roger Smith, CEO of General Motors (1981 - 1990)

13 - August 1, 2016 – v9.0
Strategy Planning & Deployment – Resources
Ackoff, R.L. – A Concept of Corporate Planning (New York, New York: Wiley,
1970)
Colletti, Joseph F. – A Field Guide to Focused Planning: Hoshin Kanri - American
Style (The Woodledge Group, 1995)
Cowley, Michael and Domb, Ellen – Beyond Strategic Vision: Effective Corporate
Action with Hoshin Planning (Burlington, Massachusetts: Butterworth-
Heinemann, 1997)
Kaplan, R.S. and Norton, D.P. – Strategy Maps: Converting intangible Assets into
tangible Outcomes (Cambridge, Massachusetts: Harvard Business School
Publishing Corporation, 2004)
Mintzberg, Henry; Lampel, Joseph B.; Ghoshal, Sumantra and Quinn, James B.
– The Strategy Process: Concept, Context, Cases (London, UK: Prentice-Hall
Inc., 2002)
Treacy, Michael and Wiersema, Fred - The Discipline of Market Leaders: Choose
Your Customers, Narrow Your Focus, Dominate Your Market (New York, New
York: HarperCollins Publishers, 1995)

14 - August 1, 2016 – v9.0
Work Teams.
execution.
goals.

15 - August 1, 2016 – v9.0
Operational Excellence – Performance Management
“Balanced Scorecards tell you the knowledge, skills and systems that
your employees will need (learning and growth) to innovate and build
the right strategic capabilities and efficiencies (internal processes) that
deliver specific value to the market (customer) which will eventually lead
to higher shareholder value (financial).”
“Having Trouble with Your Strategy? Then Map It.”
by Robert S. Kaplan and David P. Norton - Harvard Business Review

16 - August 1, 2016 – v9.0
“Tell me how you will measure me, and then I will tell
you how I will behave. If you measure me in an illogical
way, don’t complain about illogical behavior.”
Eli Goldratt – “The Goal”

17 - August 1, 2016 – v9.0
Benefits of developing & deploying Balanced Scorecards in an
organization include:
 Help the management team focus on the execution of their business
strategy
 Focus and align an organization towards common goals and objectives
 Enable an organization to understand the relationship between measures
and performance
 Improve communication of organizational priorities across an organization
 Help employees to understand and focus on organizational priorities and
realize relevant results
 Reduce the number of metrics to the few vital key performance indicators
 Strengthen and formalizing the project selection process to focus on key
capabilities and enablers

18 - August 1, 2016 – v9.0
Operational Excellence – Performance Management Process
Phase I - Strategic Foundation
Step 1: Strategic Alignment
Step 2: Key Strategic Focus Areas & Objectives
Step 3: Strategic Grid & Model
Phase II - Three Critical Components
Step 4: Key Performance Indicators
Step 5: Goals & Targets
Step 6: Initiatives & Programs
Phase III – Deployment Process
Step 7: Integrate
Step 8: Cascade
Step 9: Manage
Balanced Scorecard Development & Deployment Process

19 - August 1, 2016 – v9.0
FINANCIALS
How do you want to look to your shareholders? -
Indicators focus on whether your strategic and
operational plan contributes to your top-line,
bottom-line and/or market share.
CUSTOMERS
How do you want to look to your Customers? -
Indicators focus on the specific measures that
matter the most to your Customers.
INTERNAL BUSINESS PROCESSES
At which internal processes and capabilities do
you want to excel? - Indicators focus on internal
operations that enable Customer satisfaction,
growth and profitability.
LEARNING AND GROWTH
What skills and competencies do you need to
implement your strategic and operational plan? -
Indicators focus on your organization’s ability to
innovate, improve and execute.
Objectives Indicators Targets Projects
Vision
&
Strategy

20 - August 1, 2016 – v9.0
Strategic Focus Area: Increase Shareholder Value
Financials Revenue Growth of 20% by 2014
Customers
Acquire More Customers
Become the Price Leader
“Internal”
Processes
Improve Operational Efficiency
Cost Reduction
Program
Knowledge Based
System
Reduce
Non-Core Activities
Learning &
Growth
Training – Lean
Six Sigma
Program
Database Network
on Operational
Performance
Re-Align
Organization with
Core Competencies
For each objective on your strategic grids, you need at least one performance indicator.
Can you have an objective without a performance indicator? Yes, it is possible, but not
having a measurement makes it difficult to manage the objective. It’s best to revisit this
objective and ask the question: Why is this an objective?
DimensionsorPerspectives

21 - August 1, 2016 – v9.0
From: January 2010
ORGANIZATION: TBD Until: December 2010
Current Month: TBD 2010
KPI
KPI Name
(Unit)
KPI First Name
Champion Last Name
10 STRETCH
9
8
7 GOAL
6
5
4
3 BASE
2
1
0 ZERO
WEIGHT 0
2010 TOTAL SCORE
JANUARY
FEBRUARY
MARCH
APRIL
MAY
JUNE
JULY
AUGUST
SEPTEMBER
OCTOBER
NOVEMBER
DECEMBER
CURRENT SCORE 3 4 7 2 3 5 6 9
Stretch 2010 1000
Goal 2010 700
Base 2009 300
Actual 0
ORGANIZATION
OPERATIONAL EXCELLENCE BALANCED SCORECARD
FINANCIALS CUSTOMERS PROCESSES
RESULTS
1 2
5 7
4
12
11
8
9
3
6
10
For each strategic objective on your strategic grid, you
need at least one performance indicator. Can you have
an objective without a performance indicator? Yes, it is
possible, but not having a measurement makes it difficult
to manage the objective. It’s best to revisit this objective
and ask the question: Why is this an objective?

22 - August 1, 2016 – v9.0
Performance Management – Resources
Chang, Richard Y., and Morgan, Mark W. – Performance Scorecards: Measuring
the Right Things in the Real World (New York, New York: John Wiley Sons Inc.,
2000)
Kaplan, R.S. and Norton, D.P. – Putting the Balanced Scorecard to Work (Harvard
Business Review, September/October 1993)
Kaplan, R.S. and Norton, D.P. – The Balanced Scorecard (Cambridge,
Massachusetts: Harvard Business School Press, 1996)
Kaplan, R.S. and Norton, D.P. – Balanced Scorecard: Translating Strategy into
Action (Cambridge, Massachusetts: Harvard Business School Press, 1996)
Kaplan, R.S. and Norton, D.P. – Using the Balanced Scorecard as a Strategic
Management System (Harvard Business Review, January/February 1996)
Keebler, James S. et.al. – Keeping Score: Measuring the Business Value of
Logistics in the Supply Chain (Oak Brook, Illinois: Council of Logistics
Management, 1999)

23 - August 1, 2016 – v9.0
Work Teams.
execution.
goals.
class results.

24 - August 1, 2016 – v9.0
Operational Excellence – Process Excellence
Systematic & Team-Based
Problem Solving
Process Development,
Improvement & Management
Lean Management
5. Pursuit
Perfection
2. Map Value
Stream
3. Create
Flow
4. Establish
Pull
1. Define
ValueLean
Principles
Six Sigma Methodology
BPI 7 8 D

25 - August 1, 2016 – v9.0
Process
Excellence
Lean = Efficiency
is about reducing the lead time of
a process or value stream.
Six Sigma = Effectiveness
is about reducing the variation in a
process or value stream.
CIAM
Project Management
D

26 - August 1, 2016 – v9.0
Process Input:
Strategic and Annual Operating
Plan (Objectives, Goals, Initiatives)
Process Output:
Exceeding the Plan
• Clarify big picture using
strategic & operating
plan
• Prioritize projects
based on impact,
value, resources,
timing
• Select key projects
with leadership buy-in
• Check accountability -
business and personal
Select the
Right
Projects
Select and
Train the
Right People
• Ensure the right
leadership and
ownership
• Select the right team
leader & team
• Develop a training
plan
• Dedicate time for
training & application
• Ensure the right
support resources
are available
Develop and
Implement
Improvement
Plans
• Utilize the right
improvement
methodology for
the right project
Manage for
Excellence in
Execution
• Stay focused
• Frequently review
progress and remove
barriers
• Check real business
impact
• Continuously
communicate
progress
• Link to performance
management and
R&R
Sustain the
Gains
• Implement effective
control plans
• Conduct regular
training focused on the
process
• Review the system
effectiveness at least
quarterly
• Continually identify and
launch new projects
based on strategic &
operating plan

27 - August 1, 2016 – v9.0
Balanced Scorecard Project Selection Matrix
KPI#1
KPI#2
KPI#3
KPI#4
KPI#5
KPI#6
KPI#7
KPI#8
Weights 20 10 15 10 5 20 10 10 100 50 30 20 100 70 30 100
Project Definition
1 Project #1 10 0 5 0 0 3 0 0 3.4 5 0 5 3.5 0 5 1.5
2 Project #2 0 3 0 5 0 0 0 0 0.8 0 5 0 1.5 3 0 2.1
3 Project #3 5 5 10 10 3 3 8 8 6.4 3 8 5 4.9 5 8 5.9
4 Project #4 0 0 10 5 0 0 5 0 2.5 0 0 10 2.0 3 3 3.0
5 Project #5 5 10 0 0 1 0 0 3 2.4 10 5 3 7.1 3 5 3.6
Ranking 0 = none Not Started
3 = low On Track
5 = medium At Risk
8= high Behind Schedule
10= very high
CORRELATION MATRIX
MANAGEMENTRISK
TOTALRISK
PROJECTSTATUS
CAPITALRESOURCES
DURATIONOFPROJECT
TOTALEFFORT
TECHNICALRISK
EFFORT RISK
PEOPLERESOURCES
IMPACT
FINANCIALS
CUSTOMERS
PROCESSES
LEARNING&
GROWTH
TOTALIMPACT
Linking Performance Management
& Process Excellence through
focused Project Selection

28 - August 1, 2016 – v9.0
10
9
8
7
6
5
4
3
2
1
0
0 1 2 3 4 5 6 7 8 9 10
EFFORT
IMPACT
Size of the Ball = Size of the Risk
1
2
3
4 5
Linking Performance Management
& Process Excellence through
focused Project Selection

29 - August 1, 2016 – v9.0
State of Michigan Department of Management and Budget (DMB)
Coordinator Kathe Carter:
"Our management team evaluates potential new programs/initiatives by seeing
how they fit in with our strategy. In the past we would continue stacking new
projects on everyone's plates, but now if it doesn't fit with our strategy we
don't do it." Just as important for the DMB is that "whenever a new project or
initiative is proposed, our people ask 'how does this fit in with our strategy map
/scorecard?' They feel that this connection attaches a higher level of
importance to the initiative."

30 - August 1, 2016 – v9.0
Process Excellence – Resources
Ballé, Michael and Ballé, Freddy - Lead with Respect - A Novel of Lean Practice
(Cambridge, Massachusetts: The Lean Enterprise Institute, 2014)
George, Mark O. – The Lean Six Sigma Guide to Doing More with Less
(Hoboken, New Jersey: John Wiley & Sons, Inc., 2010)
Harry, Mikel and Schroeder, Richard – Six Sigma: The Breakthrough
Management Strategy Revolutionizing the World’s Top Corporations (New York ,
New York: Random House, Inc., 2000)George, Mark O. - The Lean Six Sigma
Guide to Doing More with Less (Hoboken, New Jersey: John Wiley & Sons, Inc.,
2010)
Martin, Karen and Osterling, Mike - Value Stream Mapping: How to visualize
Work and align Leadership for Organizational Transformation (New York, New
York: McGraw Hill Education, 2014)
Rother, Mike and Shook, John - Learning to See - Value-Stream Mapping to
create Value and eliminate Muda (Cambridge, Massachusetts: Lean Enterprise
Institute, 2009)

31 - August 1, 2016 – v9.0
Work Teams.
execution.
goals.
Operational Excellence can
be achieved and sustained
with the right attitude, the
right mindset, and the right
competencies.
class results.

32 - August 1, 2016 – v9.0
“The rate at which organizations learn may soon
become the only sustainable source of competitive
advantage.”
Peter Senge
“The thing I have learned at IBM is that culture is
everything.”
Louis V. Gerstner, Jr.

33 - August 1, 2016 – v9.0
Operational Excellence can and can only be achieved and sustained with the
right attitude, the right mindset, and the right competencies.
Empowerment = f (Authority, Resources, Information, Accountability)
Low High
The Empowerment
Continuum
Selected Employee
Input
Ongoing Employee
Taskforces
High Performance
Work Teams
Operational Excellence – High Performance Work Teams
Empowerment = 0,
if Authority or Resources or Information or Accountability = 0

34 - August 1, 2016 – v9.0
In their book Gung Ho ! – Turn on the People in any
Organization, Ken Blanchard and Sheldon Bowles describe
three distinctive phase of transforming a traditional
organization to an organization based on high performance
work team.
Spirit of the Squirrel Way of the Beaver Gift of the Goose

35 - August 1, 2016 – v9.0
Spirit of the Squirrel
WORTHWHILE WORK
1. Knowing we make the world a better place.
2. Everyone works toward a shared goal.
3. Values guide plans, decisions, and actions.

36 - August 1, 2016 – v9.0
Way of the Beaver
IN CONTROL OF ACHIEVING THE GOAL
1. A playing field with clearly marked territory.
2. Thoughts, feelings, needs, and dreams are
respected, listened to, and acted upon.
3. Able but challenging.

37 - August 1, 2016 – v9.0
Gift of the Goose
CHEERING OTHERS ON
1. Active or passive, congratulations must be TRUE.
2. No score, no game, and cheer the progress.
3. E = m · c2 – Enthusiasm equals mission times
cash and congratulations.

38 - August 1, 2016 – v9.0
While an organization transitions from a more traditional “top-down”
organization to an organization build around high performance work
teams, the role of a supervisor or manager changes to the role of a leader
and coach, with six distinctive capabilities.
Leader ≠ Manager
Coach
Facilitator
Result
Catalyst
Living
Example
Business
Analyzer
Barrier
Buster

39 - August 1, 2016 – v9.0
High Performance Work Teams – Resources
Arussy, Lior - Excellence Every Day: Make the Daily Choice - Inspire Your
Employees and Amaze Your Customers (Medford, New Jersey: Information
Today Inc., 2008)
Blanchard, Ken and Bowles, Sheldon – Gung Ho ! – Turn on the People in any
Organization (New York, New York: William Morrow and Company, Inc. 1998)
Canfield, Jack, Hansen Mark V. and Hewitt, Les - The Power of Focus
(Deerfield Beach, Florida: Health Communications Inc., 2000)
Cobb, Charles G - From Quality to Business Excellence: A Systems Approach
to Management (Milwaukee, Wisconsin: ASQ Quality Press, 2003)
Fisher, Kimball – Leading Self-Directed Work Teams (New York, New York:
McGraw-Hill, 2000)
Spong, David E. and Collard, Debbie J. - The Making of a World-Class
Organization (Milwaukee, Wisconsin: ASQ Quality Press, 2009)

40 - August 1, 2016 – v9.0
Work Teams.
Strategy or Policy Deployment is
the process that aligns and links
business strategy and execution.
Performance Management is the
process that translates strategic
initiatives into measurable
objectives and goals.
Operational Excellence can be
achieved and sustained with the
right attitude, the right mindset,
and the right competencies.
class results.

41 - August 1, 2016 – v9.0
Why Working with Us.
“In the global and competitive environment of today
and tomorrow, organizations must rethink and reshape
their approach to execution in order to stay
competitive. Operational Excellence is the strategic
initiative under which this process can take shape.”
We work with our clients, primarily smaller and medium-sized manu-
facturing and service organizations, hands-on and side-by-side to achieve
their strategic and operational goals and objectives through the innovative
application of Operational Excellence principles, methods, and tools.
Email: info@oec-us.com
Phone: +1 (888) 372 – 8705
Website: www.oec-us.com

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