What Is Operational Innovation? (Definition and How It Works)

Operational innovation is the practice of assessing existing business processes and finding new ways to improve them. This approach extends beyond the confines of a single department to re-imagine processes and systems at every level of an organization.

Acute disruption changed social, economic, and, perhaps most significantly, technological life in 2020. Every industry has been impacted by COVID-19, but banking may be the most so. Banking executives are beginning to investigate ways to use innovations to help drive financial progress in the face of the virus because they are located at the center of the economic storm.

Operations 4.0: Next era of Operational Excellence

Benefits of operational innovation

Operational innovation may be implemented by operational managers and business leaders for a variety of reasons. One of the main advantages of using this strategy is that it can assist you in developing a more engaged corporate culture. It can also inspire team members to offer fresh suggestions for improvement at every level of an organization. Operational innovation can also benefit the company you work for by boosting sales, broadening your offering of goods and services, and giving you a competitive edge.

What is operational innovation?

Operational innovation is the process of analyzing current business procedures and coming up with fresh ideas for how to make them better. This strategy reimagines systems and processes at every level of an organization, going beyond the boundaries of a single department. For instance, executives may use operational innovation to introduce a new product line, enhance customer service, or boost marketing initiatives. Instead of making gradual changes, operational innovation frequently entails the introduction of new processes or a complete definition of existing ones.

How is operational innovation used?

Depending on the sector they work in, the size of their organization, and their strategic objectives, operational managers and business leaders integrate operational innovation into their organizations in different ways. However, it may be helpful to comprehend some of the ways that leaders typically introduce and use operational innovation. The following actions can be taken to employ operational innovation:

1. Encourage big ideas

Make coming up with ideas a top priority in the company you work for because they are the basis of every successful innovation. Start by identifying areas where the business’s current procedures can be improved. Maybe a particular product line could perform better, or you’d like to see a higher ROI from your social media advertising.

To find out about the procedures in place at the company, ask your team members for feedback. then seek their suggestions on how to completely overhaul these procedures rather than just making improvements to them. Your potential for successful operational innovation may increase the more qualified team members you can persuade to share their innovative ideas.

2. Get inspired by innovators outside of your industry

Get inspired by innovators outside of your industry rather than studying the company’s competitors to find out what they are doing differently. Examine the procedures they use and think about how you could implement similar tactics in your own business. To learn more about other industries’ business practices, you can also get in touch with leaders in your network who work in those sectors. They may be willing to share information about their business practices since they aren’t direct rivals, which could motivate you to come up with a ground-breaking concept that enhances the organization’s workflows and processes.

3. Identify and overcome existing barriers

Focus on sharing solutions instead of making assumptions. This can assist you in creating a productive workplace full of analytical thinkers who seek out chances to take on challenges. Try to identify any obstacles or ways of thinking that the organization might have in the way of implementing truly innovative change. These obstacles could be as simple as requiring more resources to support your sales team or as complex as a lack of recent research on market trends.

Once you’ve recognized these potential obstacles, start looking for ways to get around them. Create ideas with the help of the other team members, discuss them, and decide which ones have the best chance of succeeding. This can assist you in changing the mindset of your team and encouraging them to come up with novel ideas that challenge the status quo.

4. Reimagine existing processes

Despite the fact that operational innovation frequently focuses on implementing new systems and workflows, it’s crucial to integrate your ideas with current procedures. Think about the areas of the company that are performing well but could use a few minor adjustments. Then put your fresh ideas into practice in a way that works with current frameworks. This may make it simpler for other team members to adjust to the change.

For instance, rather than completely replacing the programs your team currently uses, you might decide to introduce a new software program along with the ones your team already uses. This provides an opportunity for your team to become familiar with the new software program and incorporate it into their current workflow.

5. Track your progress

You can gauge the effects each change you make has on the organization by monitoring your progress. For each change you implement, establish benchmarks and key performance indicators (KPIs). Then review these metrics every month, quarter or year. Keep in mind that some changes may take longer than others to produce benefits.

For instance, it may take a few weeks to see if your new marketing strategy is effective, but it may take months to assess whether launching a new product line was a profitable business move. Share your team’s insights with them so that you can continue to improve your performance and processes.

Operational innovation vs. operational excellence

Although both operational innovation and operational excellence are methods for fostering organizational growth, there are some significant distinctions between the two that must be understood. Operational excellence focuses on achieving consistently high performance by utilizing tried-and-true procedures and processes to reduce waste and minimize errors. This typically results in steady, marginal improvements over time.

Operational innovation, on the other hand, focuses on how to alter current work procedures in order to develop more productive ways of thinking that yield substantial gains. While operational excellence initiatives are frequently implemented quickly, integrating operational innovation is a continuous process that necessitates a business to reassess its principles and manner of operation. To effectively implement operational innovation, leaders must make strategic adjustments to their organization’s structure and management strategies rather than relying on what they have done in the past.


Is operational excellence a type of innovation?

Operational Excellence is built on the two pillars of innovation and strategy execution.

What is innovation and examples?

8 Types of Innovation Processes
  • Marketing & Branding: innovating the customer experience.
  • Ideation: innovating the product idea & concept.
  • Technology: innovating the product functionality.
  • Co-creation: innovating the customer involvement.
  • Social Innovation: innovating the corporate culture.

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