Operational management is one of the three fundamental pillars of a successful business. For any company to thrive, it must excel in all three pillars. If any of these pillars falter, the entire business is at risk. History has shown that when companies fail, it's often because one of these critical areas collapsed, bringing the rest of the business down with it.
So, what are these three pillars? They are Customer Acquisition, Product or Service Delivery, and Revenue Management. If any of these pillars fail, the business will inevitably follow. When starting a small business, most of us excel in one of these areas and are naturally drawn to it. You might be a salesperson skilled at attracting clients, an operations enthusiast who believes that delivering a superior product or service is key, or a finance expert who knows the importance of managing money effectively.
Here’s the harsh truth: all three are equally important. Neglecting any one of them will eventually lead to failure. While they are interconnected—improving customer acquisition can enhance product delivery, and better financial management can support sales—it’s crucial to view them as distinct areas. This separation helps identify and address specific problems more effectively.
Understanding Operations
Let's delve into operational management, the area where many entrepreneurs start their journey. Often, people believe that creating a better product or delivering superior service is the foundation of a successful business. Initially, your first few clients may come easily—perhaps they were already clients before you started your business, which reinforces your belief that your product or service is the key to success.
However, why do so many businesses with superior products or services still fail? The answer might surprise you. Success in operations isn't just about having the right product. While it's crucial to understand that you must spend less to produce a product or service than you charge to deliver it, many businesses still fail due to operational issues.
One of the most critical aspects of operations is communication—both internally within your team and externally with your clients. As a small business owner, many factors are beyond your control, and competing on price is often a losing battle. If you can compete on price, it’s likely because you’ve overlooked certain costs or hidden expenses, or you might be more efficient than larger companies. However, as you grow, these advantages can disappear.
Competing Through Better Products and Communication
To compete effectively, you need to focus on producing a better product. But “better” doesn’t always mean higher quality—it means a product that better fits your clients’ needs. This could mean lower cost, lower quality, or different features that align more closely with what your clients want.
This is where communication becomes paramount. Being honest with your clients about potential issues, such as delays, is crucial. Why is communication, especially honest communication, so important? The biggest reason clients switch to other vendors is frustration. While factors like price, value, and quality play significant roles in purchasing decisions, once a client has chosen to buy from you, there’s some flexibility in these areas—as long as the client trusts you.
If problems arise, or if you need to change your prices, failing to communicate these changes effectively can lead to client frustration and lost trust. While we strive to always deliver on time and produce quality products, perfection isn’t always possible.
However, if you have established trust with your clients through open and honest communication, you can mitigate potential disasters. You may be fortunate enough to avoid significant issues, but for most of us, transparent communication is essential in maintaining client relationships and operational success.