Operational Efficiency

As all the companies getting tighter on cost and seeing where they are spending each dollar; the question that come to me is operational efficiency and profitability.

Let me make it clear, I am not debating on if cost cutting is good or bad; it is certainly good to cut un-necessary cost, irrespective of good or bad times. I am thinking on operational efficiency.

In my opinion, there is a limit to which you can reach in operational efficiency; beyond that it is impossible to grow that number. It doesn’t make sense to try improving it any further. We should concentrate only so much on improving the efficiency, and there is no point in beating that any more. On the contrary, focusing on the business revenue and customer acquisition should be main focus and this focus has to be sharper during recession. There seems to be absolutely no alternative for this.

So, lets not get it wrong; it is business acquisition should be the prime focus of every company. If we put together a decent operational engine in place; that company becomes unbeatable.

Look at Wal-Mart, they have efficient supply and distribution system in place, a must have for any retail company. But rather than trying to make this system more efficient they have been focusing on increasing the business. Other examples are Big Bazar and ICICI bank. Both might not have state of the art and efficient operational excellence, but both seem to have focus on its customers.

It is DNA of a company which defines all such things and that is what we call as “Company Culture”. And this is precisely why some companies do well and some companies just can’t compete.

Any takers?