Operational excellence: Enabling transformational healthcare strategies


Bill Owad

Senior Vice President
Operational Excellence
Cardinal Health

Do your teams have the capability to transform their processes in a rapidly changing healthcare environment?

Does every member of your organization have the ability to improve your processes every day? If not, should they be able to? If your goal is to deliver differentiated patient outcomes and an outstanding patient experience in a highly efficient and effective manner, the answer to these questions is almost certainly yes.

High performing organizations demonstrate three consistent traits; (1) a system of daily improvement, (2) work organized to flow value to their customers, and (3) a management system that aligns strategy, performance measures and people development. The disciplines of “Lean” and “Six Sigma” are a set of well-developed management tools that enable organizations to operate as efficiently and effectively as possible. The combination of Lean (flowing value to your customers) and Six Sigma (eliminating inappropriate variation) combine to create competitively differentiated performance. This pursuit of perfection - delivering products and services of high quality with no waste – gives a sense of how ambitious this way of thinking is.

Lean Six Sigma has revolutionized other industries and is starting to do the same for healthcare today. Its methods are designed to create continuous paths to high levels of excellence, often beyond what was once considered achievable. Great managers decide where organizations are going. Lean Six Sigma builds a high-functioning system to get there.

Lean Six Sigma creates value in three key ways:

  • Identifying waste
  • Implementing improvements
  • Creating long-term, sustainable value

Cardinal Health is itself a Lean Six Sigma company. Starting the process a decade ago, we have unlocked more than $1 billion in economic value within our corporation. Lean Six Sigma has allowed us to improve our customers’ experiences by reducing waste and improving quality through engaging and developing our employees. Measured along the dimensions of Safety, Quality, Delivery and Cost, our evolution continues today with our entire organization acting as change agents.

Guiding principles

Like any successful Operational Excellence platform, ours is based on five guiding principles:

  1. Create Value for the Customer – Only the customer can define value – what is it that they (customer) perceive as value?
  2. Align the Value Streams – Create the “eyes” for seeing waste, and work to eliminate activities that do NOT add value for the customer.
  3. Create Flow and Customer Driven Pull – Design and product “Flow” smoothly and rapidly at the “Pull” of the customer.
  4. Seek Perfection – Speed up the cycle of improvement in the pursuit of perfection.
  5. Respect Every Individual – Enable a capable workforce that can rapidly change to meet the changing demands of our customers.

A system of daily improvement, value stream thinking and a Lean management system allow organizations to evolve and compete in a dynamic healthcare environment.

To help transform cultures and sustain excellence, an effective Operational Excellence platform comprises tools from both Lean and Six Sigma. By using “kaizen” – from a Japanese word that means “good change” –entire workforces are able to engage in problem solving. Staff at all levels of the organization are able to focus the steps in a process that create value, align on how the process can be measured and then experiment with how it can be improved. By training many employees to find and implement process improvements, Operational Excellence can become a way of business life, enabling daily innovation.

The proof is in the results

Companies can use Operational Excellence in big or small ways. It works tactically -- like a laser aimed at a specific problem – or strategically to bring about organization-wide cultural change. The ability to use the disciplines of Lean and Six Sigma at different engagement levels is part of the technique’s power. Here are some examples where I’ve seen Operational Excellence successfully applied:

Targeted projects.

A large pharmaceutical company reduced chargebacks more than 90% by finding and fixing the root cause of its chargeback problem – an IT systems communications issue.

Training and coaching.

A large grocery store chain trained an internal process improvement team in Lean Six Sigma, so the team could apply this knowledge throughout the organization. In just over a year, the team has applied the approach to its Central Fill Pharmacy network to accelerate performance.

Strategic roadmaps.

A hospital trying to improve its internal supply chain used the Lean Six Sigma methodology to interview 96% of supply chain employees and 20 internal customers. With this information, 52 actionable improvement opportunities were identified.

Full deployment.

The name says it all. Cardinal Health and other companies have adopted Operational Excellence as a strategy for comprehensive change. In our case, as noted earlier, this has led to more than $1 billion in savings since we started our journey.

Operational Excellence works at multiple levels and in many situations because it focuses on asking the right questions, quantifying the nuts and bolts and measuring change. It’s not easy. In fact, the rigor required can surprise those not familiar with Lean Six Sigma – as can the results.

As with any tool, Lean Six Sigma works best when an organization’s staff is knowledgeable and committed. A consultant may start the process or refine it. But healthcare executives, managers and front-line employees are the ones responsible for executing sustained excellence and the ones who reap the biggest rewards.

Interested in learning more?

The road to operational excellence in healthcare increasingly runs through the disciplines of Lean and Six Sigma. There are many ways to start the process or deepen your knowledge.

  • The Academy For Excellence in Healthcare at The Ohio State University’s Fisher College of Business offers four-day courses to help mid-level managers in sector of Healthcare. (Cardinal Health sponsors the program. I’m on the faculty.)
  • At an industry level there are a number of exciting developments. The Center for Lean Healthcare Research at the Fisher College of Business at The Ohio State University is working to build a body of research on successful healthcare process improvements.
  • The“Healthcare Value Network” at the Thedacare Center for Healthcare Value, a group of more than 60 Integrated Delivery Networks, are pursuing three (3) key strategies: (1) Data Transparency, (2) Pay for Value and (3) Implement Lean as the core healthcare operating system. The center also sponsors an annual Lean Transformation Healthcare Summit, in conjunction with the http://www.lean.org/, that’s worth attending.
  • You can also review these case studies, which capture how two different hospitals – Beth Israel Deaconess Medical Center in Boston, Mass., and Genesis Healthcare System in Zanesville, Ohio – have implemented these strategies to improve cost efficiency and patient care.

If you don’t lead innovation, your competitors certainly will. Operational Excellence is an area where some of healthcare’s most dynamic change is occurring.