Building an Understanding of Business Operations

Introduction to Business Operations

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The beauty of running a business in America is that entrepreneurs generally have the creative leeway to operate in the way that they wish. Certainly, there are rules, regulations, and standards to comply with, but each company has the freedom to create its own set of strategies and business plan.

Managing business operations is the responsibility of the owner and designated stakeholders who can utilize unique processes to generate wealth, organize the supply chain, and deliver value to consumers.

Though managing business operations can vary based on the industry and desires of the company, there are some general guidelines to follow that can help save money, allocate resources effectively, and streamline business activities.

Read ahead for an overview of the best practices for managing operations to ensure a successful business.

What Are Business Operations?

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Business operations refer to the plans and strategies accessed by investors and management to gain an understanding of all of the working parts of an organization. This includes the role of labor, equipment utilized, and the necessary workflows required to improve a company's value.

Business operation management allows stakeholders to oversee project management and allocate the resources needed to run an organization properly. The purpose is to find inefficiencies that prevent meeting key objectives and then strategize to solve these problem areas.

Operations management uses insights to designate responsibilities to the appropriate personnel, prepare for risk management, and allocate resources effectively. Managing business operations properly requires staying within a budget and ensuring that all departments are working and communicating with one another to create the best outcomes.

To drill down into inefficiencies and streamline workflows, stakeholders need to oversee different key operational functions, including-

  • Marketing Operations- Personnel, workflows, and technology that allows marketers to function efficiently and maintain quality.

  • Financial Operations- Overseeing the accounts receivable and accounts payable processes, data collection, and everything else needed to ensure good financial decision-making.

  • Accounting Operations- in conjunction with financial operations, operational accounting is the practice of overseeing the accounting operations and making certain that activities coincide with an organization's financial strategies.

  • Production Operations- The process of transforming raw materials into a final product or service through a set of specific policies and procedures.

  • Sales Operations- The activities that support and ensure sales teams can sell quickly and efficiently.

  • Management Operations- The planning and supervising of the production and manufacturing of products and services, ensuring inputs are quickly and effectively turned into outputs without reducing quality.

Essential Elements of Business Operations

To manage business operations, a business operations manager needs to focus on improving key elements, including-

1. Supply
Bringing in supplies or raw materials that are eventually turned into a functioning product/service is an essential function of business operational management. For those who sell services, data collection and management are the primary supplies to worry about. Manufacturers need to seek the best supply prices, find the most reliable suppliers, and ensure supplies are high quality.

2. Efficiency
Improving efficiency in all areas of the business is one of the most essential goals for business operation managers. For manufacturers and service-based industries, increasing efficiency involves implementing a leaner management team, an organized distribution chain, and a simple step-by-step process for completing a finalized product/service.

It also necessitates finding the best equipment with a low breakdown rate, improving the turnover rate, and using good hiring practices. Making improvements to all of these areas will allow businesses to produce as much as possible in as short a time as possible.

3. Reliability and Adaptability
There is a pendulum that swings between reliability and adaptability in business operation management. Operational processes need to be reliable so that management can produce as many products/services as possible in a short time frame.

At the same time, an organization needs to be able to adapt to changing circumstances, new competitors, and shifts in the market. There must be a willingness to embrace new procedures and technologies that improve efficiency while still maintaining or improving those reliable practices.

4. Quality Control
Improving each step of a workflow process is essential to increase efficiency, but maintaining the quality of a final product/service is equally important. Business operation managers need to analyze the final product/service and regularly ask for customer feedback.

An efficient operational/production process is worthless if the final product is not living up to expectations. Managers should not accept more than a minimal number of product defects as it damages the company's reputation and affects the bottom line. Learning from product defects, and using customer feedback are tried methods for ensuring quality control.

Using Elements of Business Operations to Improve Effectiveness
Making improvements to all areas of business operations will improve the overall effectiveness of an organization.

Using a company's budget to purchase the most cost-effective supplies while making systematic changes to address efficiency, reliability, adaptability, and quality control will help to streamline all of the business activities and maintain a competitive edge.

Business Operations - Operational Effectiveness vs. Strategy

Operational effectiveness refers to the level of quality, productivity, and efficiency in an organization. Without making systemic operational improvements to each of these areas, a business can't be effective and stay competitive.

Strategy pertains to the unique approach taken to achieve key objectives. Finding an effective strategy is not just about performing at the same level as everyone else, but exceeding expectations and differentiating workflow processes from the competition. Using the best strategies is how an organization competes, innovates, and maintains its effectiveness.

In summary, here are the key differences between operational effectiveness and strategy-

  • Operational Effectiveness- Finding the best practices to achieve a result and increasing performance across the entire organization.

  • Operational Strategy- Generating a unique value proposition, or the promise of value to customers, stakeholders, and investors. The operational strategy also refers to conducting business and performing activities differently than the competition.

The Importance of Effective Business Operations

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Those who oversee business operations have a critical responsibility to supervise activities and ensure key objectives are met in all departments. This is only achievable by communicating and coordinating with every involved stakeholder that helps carry out these activities.

Ensuring effective business operations is essential because-

  • It Improves Productivity The higher the ratio of output to input is, the more efficient the overall organization will be. Improving business operations will help achieve a higher level of productivity and increase a company's output/sales.

  • It Reduces Incurred Costs Better business operations increase the output and decrease associated costs that come from wasted resources or inefficient workflows.

  • It Reduces Investments If resources are utilized efficiently, the organization doesn't need to invest as much in production costs.

  • It increases Revenue With a higher rate of output and a more effective workforce, customer satisfaction will improve. Happier customers tend to purchase more products and generate more revenue for the organization.

  • Provides the infrastructure for Innovation Efficient business operations provide a culture that supports innovation and growth.

How to Improve Business Operations

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It's more effective to employ a strategy to methodically fix problem areas rather than addressing issues as they arise. Here are the best strategies to improve business operations and allocate resources more efficiently-

1. Minimize Duplicate Processes
Going lean is a business philosophy that centers on continuously refining processes that result in a delivered product or service. By using best practices to eliminate the duplication of effort and overlapping activities, an organization will achieve operational efficiency.

Use modeling techniques and ask department managers for feedback to determine where duplication is happening. Then, enact policies that eliminate or minimize those inefficiencies to improve business operations.

2. Focus on Quality Control
Quality control was typically used by manufacturers who wanted to make certain their production management was resulting in a high-performing finalized product. Over the years, service-based industries are also focused on quality control to improve business operation management.

Every company can minimize wasted resources and subpar outcomes to avoid remaking a product or re-delivering a service. This will help save money and improve the company's reputation in its market.

3. Improve Forecasting
Most organizations use predictive analysis to improve sales, manage stock, streamline the distribution chain, and use good hiring practices. Collecting historical data and learning from past mistakes is essential to making improvements in the future and staying competitive.

Performing a cost analysis to determine where inefficient spending is happening can help to save money and resources in the future.

4. Focus on the Customer
Many companies claim to put the customer first but don't manage day to day business operations effectively enough to deliver that promise. Businesses can't survive without taking a customer centric attit that relies on feedback and considers the market demands.

Focusing on the best strategies to ensure customer satisfaction and attract new clients is one of the most important aspects of effective business operations.

The Value of Business Operations Software

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Using business process management software to decrease costs and increase revenue will help to automate tasks and analyze data to learn from mistakes. BPM technology makes it easier for an organization to adapt to change and respond to an evolving market. Top benefits of BPM software include-

1. Save Money
Every organization has incurred costs, but those who maximize sales and generate high output can manage them. Utilizing a good business process management tool automates repetitive tasks and streamlines activities to systematically improve quality control and minimize risk.

Many software systems allow users to manage workflows, assign and monitor tasks, and create reports that show where waste occurred. Though purchasing software is an investment, the cost savings opportunities gained by utilizing it makes it well worth it.

2. Streamlined Workflows and Adaptability
Through better process managemen and customized workflow templates, a business intelligence software solution can help improve business operations. Software solutions can also integrate with mobile devices and personal laptops, allowing employees to access and share information from any location.

Automation is another benefit of implementing a software system, as it minimizes labor costs and allows employees to focus on more important tasks. Utilizing BPM technology gives an organization complete visibility into every business activity so everyone knows what is happening in real-time. This allows for better decision-making, improved analysis of inefficiencies, and increased knowledge-sharing.

3. Increased Compliance
To maintain operations, businesses have to make certain they are complying with local, state, and federal labor laws and health guidelines. Utilizing a business management system allows an organization to integrate compliance directives into all of its activities and workflows.

If there is the potential for non-compliance, most software systems automatically update the authorized users so they can prevent a potential legal issue. This helps free up time and resources for the human resource department so they can focus on other essential duties.

4. Improve Employee Morale
Utilizing a software management system improves employee morale by allowing workers to focus on projects while having access to the data they need in one location. Managers can gain real-time insights into current business activities and then make better business decisions based on their collected data.

When workflow processes are streamlined and data is accessible to everyone who needs it, employees are more likely to be satisfied with their jobs. Management can also create a reward system based on the insights gained from reporting, further increasing workforce productivity, efficiency, and morale.

Key Takeaways on Business Operations

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Here are the key takeaways to remember about business operations-

  • Business operations encompass the plans, strategies, and activities accessible to investors and managers to understand the working aspects of an organization.
  • Operational effectiveness includes finding the best practices to increase performance across an organization. Strategy refers to generating the best value proposition to customers and investors.
  • Improve business operations by minimizing duplicate processes, focusing on quality control, improving forecasting, and focusing on the customer.
  • The value of operational software includes cost savings, streamlined workflows, increased compliance, and improved employee morale.