Defining Operational Excellence in Energy

Many energy companies respond to the low price of oil by cutting costs and focusing on operational excellence. While this sounds good, the term "operational excellence" is translated many different ways.

One source (BusinessDictionary.com) defines operational excellence as “a philosophy of the workplace where problem-solving, teamwork, and leadership results in the ongoing improvement in an organization. The process involves focusing on the customers' needs, keeping the employees positive and empowered, and continually improving the current activities in the workplace."

Huh?

Defining Operational Excellence

There is confusion over the true meaning of attaining operational excellence in the energy industry. A quick look at the top five energy companies’ websites reveals significant inconsistencies in the definition.

Trenegy defines operational excellence as aligning critical business processes, systems, and organizational capabilities to focus the company on its core mission and outpace the competition.

This simple definition has a lot of hidden complexity. Executives typically have differing views on what outpacing the competition means. Most companies do not have processes in place to ensure continuous improvement. Worse, there is little data collected to measure and benchmark performance.

Attaining operational excellence is important for energy companies. A correctly implemented program will allow a company to efficiently and effectively serve and retain customers with the desired margins. In other words, continuously improving what makes an energy company money until the organization is considered consistently the best.

What to Focus On

Energy companies can focus on continuous improvement in the following areas to achieve operational excellence:

• Safety – Focus on injury and incident-free operations to ensure the welfare of employees and those involved in daily operations. By involving these people in our business, we agree to send them home in as good or better shape than they arrived. Incident-free operations ensure that the infrequent yet catastrophic events never happen.
• Reliability – Operations must run as required. Companies that focus on built-in quality and maintenance will ensure reliability. Reliability is measured in uptime—the time business is operating toward what makes money.
• Major project execution – It's important to retool or build upon the business through major projects, but only if properly managed to drive financial returns. Successful project execution is includes selecting the right projects and and planning to ensure a company's growth.
• Efficiency – Do what makes you money better, faster, and at a lower cost than your competition.

While it sounds easy to focus on these things, creating a successful operational excellence program is like building a house. Start with safety as the foundation and end with efficiency as the roof. In the end, the house becomes an operational excellence management system which should keep a company safe and out of the storms of financial pain.

Trenegy helps organizations manage any element of the operational excellence spectrum using a proprietary methodology. Contact us at [email protected] for more information.