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Most business leaders say: “I want fewer fires, fewer mistakes, and more consistency.”
That is exactly what operational excellence delivers.
But here’s the catch: many operational problems are not “mysteries” that require heroic creativity. They are solvable, and the solutions are often already known. The real challenge is that leaders don’t always seek out what best practice looks like and then apply it with discipline.
In Compounding Advantage, I’ve seen a clear pattern: when operational weaknesses exist, they repeatedly drag leaders back into firefighting mode, undermining strategy and consuming capacity. In fact, teams stuck in perpetual firefighting often need to fix operational foundations before they can successfully implement strategy.
So how do you build operational excellence in a way that actually sticks?
Diagnose the Context Before You “Solve” the Problem
Dave Snowden and Mary Boone’s Cynefin Framework is one of the most useful lenses for operational excellence because it forces a leader to ask: what kind of problem is this?
Cynefin describes different decision-making contexts including Simple, Complicated, Complex and Chaos. Each one requires a different approach.
Where this becomes critical for operational excellence is this:
Most operational aspects of a business sit in the Simple and Complicated domains — the domains where best practice and good practice exist.
Yet many entrepreneurial leaders default to a “Complex” style for decision making (probe, test, improvise) because that’s what made them successful early on. The risk? They treat solvable operational issues as if they require constant experimentation — which leads to inconsistent processes, weak systems, and a frustrating cycle of rework.
Best Practice vs Good Practice: Know the Difference
In Cynefin Framework:
- Simple problems have clear cause-and-effect relationships. This is the domain of best practice.
Think order processing, warehouse routines, or basic admin workflows — things that should be standardised and monitored. - Complicated problems still have cause-and-effect, but it takes expertise to see it. This is the domain of good practice and often “the domain of the expert.”
Think building a sales system, tightening financial controls or improving recruitment and onboarding.
Operational excellence requires the humility to admit: I may not know best practice here. And then the discipline to go find it and implement it.
That might mean hiring an expert, learning from proven operators, or using specialist support. The point is: don’t make your business the testing ground for problems that other people have already solved.
Step 1: Seek Out What “Best” Looks Like (Externally)
A major reason businesses stay operationally messy is that leaders define “best” using only their own experience. In some cases, there is even an aversion to best practice. I have heard entrepreneurs say we don’t want to implement that in our business it only applies to big businesses. Interesting logic, as you can’t build a big business thinking like a small business. When it comes to achieving operational excellence in each area of your business, what will work has probably already been established.
So, the first move is external:
- What does best practice look like in this operational area?
- What do great operators measure?
- What systems do they use?
- What routines and standards do they insist on?
This is not about copying blindly. It’s about shortening the learning curve and lifting your internal standards to match proven models.
Step 2: Define What “Best” Looks Like for Your Business (Internally)
Once you understand best or good practice, you then make it practical and specific:
- What does “best” look like for us, in our context, with our customers, our team, our constraints?
- What does excellence look like in each key operational area?
This definition becomes your operating standard. If it isn’t defined people do things “their way.” Quality varies. Mistakes repeat. And the leader gets pulled back into control mode.
Step 3: Improve Step by Step — and Let It Compound
Operational excellence isn’t achieved through a once-off “fix everything” project. It’s built through consistent, deliberate improvement against your definition of what best looks like — step by step — until excellence is achieved.
Two practical examples from Compounding Advantage illustrate this well:
Example 1: Financial Management — professionalism starts with accurate information
I’ve encountered only one business in financial difficulty that had accurate, up-to-date financial information. Every other struggling business I have worked with lacked reliable numbers to make informed decisions. Operational excellence here isn’t a mystery — to run a successful business you need monthly management accounts (income statement, balance sheet, cash flow), delivered on time, understood by leadership, and used to act decisively.
That’s best practice — and it prevents expensive mistakes.
Example 2: Measurement and scoreboards — what gets measured gets improved
Operational excellence requires visible, practical scoreboards. In the book, I describe three: the business scoreboard (operational metrics), the financial scoreboard, and the strategic execution scoreboard.
This matters because leaders need both leading indicators (what predicts performance) and lagging indicators (what reports results after the fact).
A great illustration is Lamberti Physiotherapists. They originally relied on lagging indicators and only knew if they had a good month at the end of it. They identified a key operational driver — patients treated per physio per day — then monitored it daily so they could intervene early and improve outcomes.
That’s operational excellence: define “best,” measure it, manage it, repeat.
The Compounding Advantage of Operational Excellence
Operational excellence does two powerful things:
- It reduces friction, errors, and firefighting — freeing leadership capacity.
- It creates reliable performance you can build on — so improvements compounds.
Stop treating solvable operational issues as if they require constant invention.
Instead, diagnose the context, seek out best or good practice, define what “best” looks like for your business, and move step by step towards it by implementing what is needed — with discipline.
That is how you achieve operational excellence in your business.
And that is how it becomes a compounding advantage.
