Product management glosary

Operational Efficiency

What is Operational Efficiency?

Operational efficiency is a term used in product management to describe the ability of a company to optimize its operations and processes to achieve maximum productivity with minimal resources. It is a measure of how well a company can use its resources to produce goods or services in the most cost-effective way possible.

Why is Operational Efficiency Important?

Operational efficiency is important for several reasons:

  • Cost savings: When a company is operationally efficient, it can produce goods or services at a lower cost, which can lead to higher profits.
  • Improved quality: Operational efficiency can also lead to improved quality of goods or services, as processes are streamlined and errors are reduced.
  • Increased customer satisfaction: When a company is able to produce goods or services quickly and efficiently, customers are more likely to be satisfied with the experience.
  • Competitive advantage: Companies that are operationally efficient are often able to offer lower prices than their competitors, which can give them a competitive advantage in the marketplace.

How to Improve Operational Efficiency

Improving operational efficiency requires a systematic approach. Here are some steps that companies can take to improve their operational efficiency:

  1. Identify inefficiencies: The first step in improving operational efficiency is to identify areas where processes are inefficient or where resources are being wasted.
  2. Streamline processes: Once inefficiencies have been identified, companies can work to streamline processes to eliminate waste and improve productivity.
  3. Automate processes: Automation can help to reduce errors and improve efficiency by eliminating manual processes.
  4. Invest in technology: Investing in technology can help to improve efficiency by providing better data and analytics, as well as automating processes.
  5. Train employees: Employees should be trained on new processes and technologies to ensure that they are able to work efficiently.


Operational efficiency is a critical component of product management. Companies that are able to optimize their operations and processes can achieve cost savings, improve quality, increase customer satisfaction, and gain a competitive advantage. By identifying inefficiencies, streamlining processes, automating tasks, investing in technology, and training employees, companies can improve their operational efficiency and achieve their business goals.