Why Operational Excellence Is the Real Competitive Advantage in Service Businesses

Operational excellence is an increasingly popular philosophy system where businesses encourage and equip their employees to continuously improve.

This unique kind of teamwork focuses less on a hierarchical structure where higher-ups are solely responsible for redesigning workflows and more on every individual within an organization doing their part to optimize productivity while minimizing waste.

Below, we discuss how operational excellence works and how it provides a serious competitive advantage to service businesses. 

What Is Operational Excellence?

Operational excellence is a business philosophy that focuses on constantly improving how a brand operates. Each and every employee is encouraged to improve the efficiency with which they complete their daily tasks in order to bring greater value to the customer base.

Operational excellence is built on streamlining everyday business operations and consistently maintaining a high level of employee performance without overly risking burnout. There are many different business-specific and industry-specific ways to go about operational excellence, but the basic concept is always about finding innovative ways to sustainably improve how a business operates.

Properties of Operational Excellence

According to the Six Sigma model, there are five main properties of operational excellence. The first is making data-driven decisions so that every choice is strategic. The second is to streamline processes for optimum efficiency. The third is to empower employees to make innovative decisions about their daily workflows.

The fourth property is to make these improvements part of a continuous improvement culture. The fifth and final property is to also make these improvements part of a company culture that prioritizes the customer’s wants and needs.

Benefits of Operational Excellence

Over time, fostering a business culture of operational excellence will lead to a wide range of competitive advantages that set your service business apart from the competition. Some of the most crucial benefits of operational excellence include:

• Employee engagement
• Service quality
• Cost optimization
• Customer loyalty
• Word-of-mouth marketing

Employee Engagement

One of the first major benefits of operational excellence is employee engagement. Running an inefficient workplace is one of the easiest ways to sabotage employee performance. A worker who does not feel like they are equipped to do their job well will not be as productive, and such conditions can even lead to workplace burnout, absenteeism, and ultimately high turnover rates.

On the flip side, a workplace focused on operational excellence will lead to workers that are more productive and more innovative, because they are working somewhere that makes sense and that encourages them to take control over their daily routines. The sustainability principle at the core of operational excellence will also improve work-life balance, meaning that employees can work very hard and efficiently without feeling too much pressure.

For example, an engaged employee at a tent rental company might notice that she is spending too much time telling customers about larger tent size options and the various add-ons available. Fueled by operational excellence, she suggests that the company creates branded content that advertises their large tent rentals as well as the company’s most popular add-ons, including air conditioning and heaters.

Service Quality

Operational excellence also leads to better service quality. Business efficiency leads to better employee satisfaction and engagement, and happier employees always offer better services and show improved levels of customer service. Improving daily workflows also tend to mean delivering your brand’s services more quickly and consistently, both of which your customers are bound to appreciate.

In product-oriented businesses, operational excellence has been proven to minimize defects and reduce waste company-wide. Within service businesses, the exact same principles apply except it is the service quality that is improving. A company whose culture encourages and equips employees to continuously and sustainably improve their daily workflows is going to see fewer mistakes and less overall time wasted.

Cost Optimization

Operational excellence is naturally associated also with cost optimization. One of the highest-priority objectives of almost any business is to cut costs, and better efficiency will always save your company money in the end. Making mistakes and wasting time are chronic issues with inefficient operations, and decreasing instances of both are in the financial best interest of your company.

Slowly reducing the overall cost of your business means that you can sometimes even lower your service prices to more competitive levels and/or find monetary ways to further incentivize your employees. To put it another way, the time you spend worrying about cost can now be spent on improving customer satisfaction and other forms of innovation.

Customer Loyalty

An underappreciated and long-term benefit of operational excellence is improved customer loyalty. More efficient daily workflows lead to better employee engagement and better service quality, both of which lead to improved customer experience. Consistently improving customer experience will then organically increase customer loyalty.

One way that businesses have been improving their customer service models is by employing virtual reception and other AI technologies. Using emerging tech to improve or even fully replace daily workflows is exactly the kind of innovation that fuels operational excellence. Businesses with these automated customer service models can have their employees focus on other tasks with better engagement, better quality, and lower costs.

Word-of-Mouth Marketing

Another long-term benefit of operational excellence is better and built-in word-of-mouth marketing. If every one of your employees is engaged in continuous improvement, your company is bound to perform high-quality services.

In addition to building a loyal customer base, this will also likely result in customers telling their colleagues, friends, and family about how pleased they are with your business.

Summary

Operational excellence is a business philosophy that encourages company cultures built around continuous improvement, process optimization, and customer satisfaction.

Service businesses that embrace this system will experience higher rates of employee engagement, better service quality, better cost optimization, increased customer loyalty, and better word-of-mouth marketing. Thanks to all of these benefits, operational excellence provides a real competitive advantage for service businesses trying to stand out from the competition.