Operational effectiveness in building renovation business: Best practices for profitable execution

Many building renovation (BR) companies struggle with profitability, which is an unresearched area in the BR business at the company level. This is worrying since BR companies are becoming increasingly important due to the growth of BR needs, like energy efficiency improvements to existing buildings. This study examines the BR business and profitability from an operational perspective, focusing on daily activities involved to complete renovations. The study reviews the operational effectiveness of BR companies, aiming to enhance understanding of how it influences profitability and to identify best practices contributing to profitability. Methodologically, the multiple case study design was used with two cases, high profitability (HP) and low profitability (LP), each consisting of small-and medium-sized (SME) BR companies. To review the operational effectiveness, semi-structured interviews were used with two frameworks: operational excellence through the 4P model and a model developed in this research, critical operational key elements (COKE) in the BR business. The findings show that operational effectiveness was seen similarly in both cases, but there were differences in execution. The HP case unconsciously possesses certain mainstreams of Lean principles, also visible in the four identified best practices: focus on customers, business orientation, striving for simplicity and clarity, and treasuring employees and subcontractors. The findings provide new insights into how operational effectiveness affects BR companies' profitability, and practitioners can utilize them for profitability improvements. The COKE model contributes to further research of the operational core of the BR business and can be applied in the business development of BR companies.