Introduction
Whether you’re a startup founder, a CMO or a nonprofit operator, operational efficiency is critical to your survival and profitability—it helps you squeeze more productivity out of limited resources, reduce costs and scale up quickly.
Operational efficiency means using resources efficiently to benefit the business, resulting in a more efficient, flexible and profitable company.
The development of generative AI promises to eliminate a lot of repetitive work, making it more important than ever to leverage the power of AI to do more with less.
TL;DR: Operational efficiency
- Operational efficiency is critical for the survival and profitability of businesses.
- Gumroad's success story is a masterclass in operational efficiency.
- Improving operational efficiency can help achieve profitability, automate repetitive tasks and get clarity into business operations.
- Diagnosing operational efficiency problems involves mapping existing processes, describing the issue and creating a hypothesis to experiment with.
- AI solutions can improve operational efficiency by simplifying processes, automating tasks and making knowledge easily accessible.
Operational efficiency: Gumroad's success story
How far would you go to save a failing company? That’s a question Sahil Lavingia had to answer within three years after he launched Gumroad, the creator economy platform for people selling stuff online.
After shipping version 1 over a weekend in April 2011, Lavingia raised $7M in venture capital from Kleiner Perkins et al. to build a $1B company.
By November 2014, Gumroad was burning through cash and growing rapidly, but not fast enough to raise a $15M Series B to grow the team and scale up the product. If they didn’t cut spending or become profitable (highly unlikely), they’d exhaust their runway within 18 months. Or, they could opt to return the remaining funds to their investors.
But, they choose a third option—operational efficiency. CEO Sahil scaled back expenses and gradually grew the company into profitability over the next six years.
Today, Gumroad is a profitable $100M company with $1M in monthly revenues.
Sahil does a great job covering his story about starting Gumroad and failing to build a $1b company here. It’s a masterclass in operational efficiency and doing a lot with limited resources.
What is operational efficiency & why is it essential for businesses?
Operational efficiency refers to an organization’s ability to stop wasting time, effort and resources and use every resource you invest in to its highest potential.
At the heart of operational efficiency is the need to:
- Become profitable or increase profitability.
- Grow rapidly, especially when you’re facing fierce competition.
- Reduce waste and extend your runway.
- Justify your budget to your company’s leadership or external investors.
- Free up extra cash to invest in visionary projects.
Operational efficiency is based on the idea that even if you're doing well, you can increase your impact without spending more money—by just using what you have more effectively.
The need for operational efficiency has never been more important, especially in today's economy.
It isn't easy to get outside funding, and companies are letting go of many employees. Similarly, internal departments are facing budget cuts while needing to hit the same output levels.
Businesses need to find ways to get more value and show great growth in order to get funds.
Operational efficiency will help you discover where you’re wasting resources, automate tasks and save time for growth initiatives.
What are the benefits of improving operational efficiency?
1. Achieve or increase profitability
Like in the example of Gumroad in our intro, sometimes the only way to save a company is to make money or to increase quickly so that you can get more funding even when you don't have money.
Unless you’re Wikipedia, which seemingly has an endless stream of generous donors offering hundreds of millions of dollars with no strings attached, you can’t lose money forever.
But, it’s more complicated than it seems on the surface. And it’s no wonder that 38 percent of startups fail because they run out of cash.
Operational efficiency can help you take a closer look at your current resource allocation to see where you can lower spending, choose more effective substitutes and automate repetitive tasks.
2. Automate repetitive tasks
The basic idea behind operational efficiency is to do more with less.
The best way to achieve operational efficiency with automation is to:
- Start process mapping.
- Assess each stage.
- Automate repetitive tasks that don’t need creative effort.
Using workflow automation tools like Zapier and Make, you can build if-then sequences that share data between applications and complete specific actions when conditions are met.
- Automatically send new customers a welcome email when they sign up.
- Trigger an alert in Slack when users submit a helpdesk ticket.
- Book a meeting with a user when they submit a request on your website.
- Use generative AI tools like ChatGPT to craft emails and replies to users at scale.
- Share daily or weekly sales reports to a Slack channel.
- Ask for feedback after a customer buys your product or has an interaction with customer service.
💡What is ChatGPT? Everything You Need to Know
3. Get clarity into your business operations
In the quest for operational efficiency, you need to break down your company’s operations into bits to see opportunities for growth, cost reduction or more effectiveness.
This way, you can better grasp how every new hire, subscription, or action impacts your revenues, growth, profitability, and ability to scale up.
How can you diagnose operational efficiency problems?
So, let’s say you’re at a crossroads in your business (or team, department, etc.): you’re investing heavily into all the right productivity tools, hiring consultants and scaling up brand campaigns and partnership programs.
But, for all that effort, you're not seeing a corresponding increase in revenues, mindshare, or profitability.
This is the perfect time to do a root cause analysis to see why your efforts are not leading to the level of growth you expect.
1. Map your existing processes
A process map is a picture of the different tasks and stages of input needed to reach a goal.
It helps you find ways to get rid of unnecessary steps, automate repeated tasks and find out what's slowing down a process or causing inefficiencies.
To successfully map a process (and improve your process efficiency), you need to:
- Document your process step-by-step using a tool like Scribe or Lucidchart.
- Collect feedback from everyone who works with the process in question to understand where they encounter friction.
- Identify steps and tasks that can be automated or eliminated.
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2. Describe the issue you’re facing
Make it as detailed as possible using the SMART goals framework.
- Specific.
- Measurable.
- Attainable.
- Realistic.
- Time-based.
For instance, if you’re struggling to increase customer satisfaction, you might be tempted just to say that customers aren't happy with the quality of service.
But that blanket description doesn’t help you understand why this issue has arisen, for how long it has existed and where you can apply effort to solve it.
Instead, you can describe your situation by saying, "Our CSAT score has dropped by 80 percent over the past three months, mainly because our customers are unhappy with the long lead times before we reply and close tickets."
This definition frames the problem and makes it easier to solve because three of the five elements of a SMART goal:
Specific target
Customer satisfaction is dropping.
Measure
Users have been leaving poorer CSAT ratings after customer service interactions; we averaged these scores out, and they’re 80 percent less than our scores from three months ago.
Timeframe
The downtrend started three months ago. What did we change within that timeline?
A detailed breakdown of your challenges helps you diagnose problems better, decide on the most effective fix and launch it quickly.
3. Create a hypothesis and experiment until you find a fix
A hypothesis is a guess made with some evidence that you then test to see if it is true.
In the situation we described above, we guessed that customer satisfaction might be decreasing because of a recent price increase or the product's bad uptime.
So, on the one hand, you need to do more customer research to pinpoint what’s the problem.
On the other, you can tweak a few variables (reduce your price, offer a discount, set a target to reply to every ticket within 5 minutes) to see if it:
- Solves the problem.
- Makes it worse.
- Has no impact on the issue you’re trying to fix.
Operational efficiency requires experimentation to understand how different factors influence your results and what you can change to eliminate waste.
AI solutions: the key to improving operational efficiency
The key to achieving efficiency in your operational plan is to:
- Make it easy for teammates to share knowledge across your organization.
- Simplify your processes so that everyone can follow them with ease.
- Use contextual support to guide users inside the tools they already use and trust.
- Automate repetitive tasks.
That’s why we built Scribe: to help growing teams make their processes more effective.
Scribe is an AI-powered process documentation platform that enables you to capture your workflow and generate step-by-step guides and policy docs your team can use. That way, you can standardize processes across your organization, make workflows predictable and bring new hires up to speed.
Using Scribe, you can:
- Embed how-to guides on your websites, helpdesk pages, applications, and more.
- Generate step-by-step guides you can share with your team by simply going through your normal workflow. Click record, and our extension will capture every step, split it into slides, and perfect it with an AI-generated title.
- Integrate with the rest of your software stack and embed helpful guides in Zendesk, HelpScout, ServiceNow, Stonly, etc.—essentially, anywhere your employees, coworkers, or customers need help.
The secret to operational efficiency is to put the knowledge people need to work faster and better at their fingertips. And that’s what Scribe helps you solve.
If you want to reduce process documentation time by 93 percent, see what Sidd Hora, Crosscard’s former Sales Operations and Enablement Manager has to say:
“Before Scribe, one article would have taken me 10-to-15 minutes or even more. Scribe has literally reduced the time to one or two minutes.”
Whether you’re a startup founder trying to reduce burn and become profitable, a manager trying to survive on 80 percent of your budget, or a business owner trying to grow your profits, Scribe can help you:
- Onboard and train new hires.
- Offer your customers engaging support and self-service.
- Create powerfully detailed SOPs in seconds.
Best of all, it’s free to get started 🙂
Save 20+ hours a month explaining, training and answering quick questions. Send a Scribe instead.
Try Scribe for free and unlock the full potential of AI-powered operational efficiency.
