How to set up business activities on a high level correctly and build operational processes that will bring value with time? Of course, each business case is unique, and there is no one-fits-all solution. Nevertheless, we believe there are some common tendencies. In this post, we've assembled a list of business efficiency tips that will help you accelerate growth in 2023–2025.
The key to improvement is knowing how to actually approach business efficiency. In this article, we'll bring more clarity to this topic. Let's go!
Achieving business efficiency is impossible without achieving business effectiveness, and vice versa. The problem is that these two concepts are often used interchangeably, but they imply different meanings altogether.
As you can see, effectiveness and efficiency are like two puzzle pieces that should be considered and balanced correctly.
A business can be considered efficient if it uses its resources in the best way for both its employees and its customers. That is, it pleases a customer in the most efficient way possible. For example, you don't have extra processes or anything that takes time. Instead, you have a system that works well and is properly tuned and optimized to give your customers what they want.
Whether you're just starting out or have a well-established business, increasing business efficiency is critical. By increasing business efficiency, you will be able to better utilize your resources, uncover patterns in operations, streamline processes, and cut expenses. Here are business efficiency tips to help you get started.
The first logical step is to know the level of your current efficiency. Define efficiency for your case and in your particular environment. How well does your business operate and correspond to these criteria? Are there any weak sides? To answer this question, you can use some of the well-known metrics that help to understand your efficiency and how your organization is doing today.
A return on investment, also known as an ROI or net present value, is determined by subtracting the beginning value of your investment in the business from the current value and then dividing the result by the beginning value. The outcome should be expressed as a percentage. ROI = (Present Value - Investment Cost / Investment Cost) x 100.
Many professionals believe that a good ROI is 10.5% or higher. ROI can also be affected by other factors such as inflation, taxes, and your time horizon. Hence, we recommend using Forbes' ROI Calculator to help you take into account all these issues and establish your bottom line.
Process efficiency is the amount of effort or input required to produce your business's product. For example, you could look at how much it costs and how long it takes to ship a product to see if there are any ways to improve the cost-to-income ratio.
Operational efficiency may help you understand the health and performance of your business. It is the ratio of your business’s inputs (the costs of producing your products and services) to its outputs (the revenues generated by selling those products and services). To figure it out, add up all of your operating expenses and divide the total by your total revenue. If your costs are x and your revenues are y, then your operational efficiency is counted as x/y.
Labor productivity is defined as real production per labor hour, and the change in this ratio over time is used to measure labor productivity growth. The labor productivity of a company can be measured by analyzing how many employees can do or generate in an average workday. The equipment, automation, and technical tools that employees have access to have a significant impact on this type of efficiency.
Financial efficiency tracks how successful a business is at converting expenses on development, sales, and marketing to revenue. It can be measured by figuring out how much of the company's income goes toward costs.
One way to improve business efficiency is to adopt the OKR methodology (Objectives and Key Results). It is a performance management framework designed to set and monitor broad organizational goals and results. Key results are the milestones that indicate how you know you will accomplish your objective.
Once you know your current situation, it is time to take action and work on finding ways to improve business efficiency. Define what you want to enhance and how. Most importantly, check whether it will be relevant for your company and your customers. Here are some pointers to consider at this step.
The goal of optimization is to create the best possible output given a set of prioritized criteria or constraints. Optimization is especially important in business because it helps to cut costs, which can lead to increased earnings and success in a competitive environment. There are various optimization strategies that you can employ.
Sometimes you have to slow down in order to make sure you are solving the right problems to achieve big goals more quickly. Here’s a structured problem-solving process that may help you reveal all the problems and bottlenecks.
Another important way to optimize business processes is to examine your operations and decide what you can cut. Look for redundancies, outdated or excessively complicated processes, or unclear procedures. Companies frequently spend large sums of money on technology, infrastructure, and third-party apps that they use but do not see any benefit from, or simply do not use at all.
All of these are prime candidates for consolidation or elimination. But don’t cut corners. Exclude only unnecessary processes. Prioritizing efficiency over quality or safety only leads to more problems later on and additional costs solving them.
For any organization, delegation is a critical management skill that increases productivity and opens up new lines of communication. Track how your internal tasks are distributed, and then determine which ones are taking up a lot of your time and effort. Workflow mapping can help you identify those tasks that are duplicated or challenging.
As for complex tech tasks, that require a high level of expertise, very often outsourcing brings lots of value. Instead of launching a long process of assembling the right team, you can hire the necessary specialists right away. That’s what we do at Wise Engineering and will gladly hear about your technical context and the issues you’d like to solve.
For any business that is dependent on software development, it is critical to prioritize developer experience (DX) and engineering efficiency. Automation Anywhere's research shows that most software engineers spend more than half of their days doing repetitive tasks. Therefore, it is important to look for ways to eliminate unnecessarily repetitive and duplicated tasks.
Technology as well as digital transformation services can help you automate processes and reduce the risk of manual errors. Depending on your business needs, different types of software can help you improve productivity.
No-code and low-code
This trend began approximately 10 years ago, and it will become even more evident that over the next 2-3 years, no-code will play a big part in digital spaces. No-code tools allow non-technical people (mostly in operations) to build prediction models on their own. Here are some of the instruments for the E-commerce sector.
These tools help speed up existing operations and tasks, so there is no need to wait for developers, which in turn lets them focus more on product development.
Another way to achieve successful digital transformations is through the use of data visualization and unified KPI tracking tools such as DataBox. Such services help you streamline the most time-consuming and repetitive tasks, while also maximizing the scope and value of services you can provide your customers.
Tools to predict future demand for their products
Tools such as Netstock, Solvoyo, or GMDH Streamline enable the planning team to incorporate real-time demand-sensing data into their inventory planning. Businesses, for example, may use real-time data from website traffic and search engine searches to better estimate future demand for their products.
If there aren't any out-of-the-box solutions that fit your needs, you can build custom software. Although building custom systems can be pricier and require a different strategy and approach, they tend to save time in the long run. If done correctly, such systems allow you to meet unique requirements, build your own solution, and automate a lot of internal processes.
Metalpark is a great example of how building custom software for order management can help businesses improve efficiency. The company is a manufacturer of water drainage systems, and its biggest challenge was processing complex orders with different specifications. The Wise team created a custom solution that allowed the company to streamline the order management process and provided its customers with fast access to up-to-date order information.
The new system enabled customers to automate their order management system, and even non-technical people can now create orders. All order information was kept in one location, and personnel from various departments could access it promptly.
The people who work on your project are your most valuable asset. Technology is powerful, and your idea is as well, but the people behind it, as well as the atmosphere of your workplace, are those forces that bring everything to action. Here are some helpful hints on how to make your team's environment enjoyable and aligned with your values.
Here at Wise, we believe there is no right or wrong movement toward improvement, you need to be ready to make mistakes but not scared to try again. We hope this article gives you insights and allows you to improve business efficiency in the long run.
Here are key takeaways from our article that will help you accomplish this goal.
If you need assistance in driving efficiency for your business, let's set a call and talk about your current challenges. The Wise team will be glad to help you find the optimal ways to achieve business efficiency, both in the short and long run.