Explicating the microfoundations of operational excellence in services: A capabilities perspective

Abstract The operations management community has recognized operational excellence as a contemporary arena comprising a full spectrum of research paradigms. However, there is a dearth of theoretical development aimed at understanding and unpacking operational excellence and its strategic implications for competitiveness. Much of the existing research focuses on siloed operational improvement practices rather than on inherent capabilities. In this paper, we conceptualize operational excellence from a capabilities perspective. We derive our findings from within‐ and cross‐case analyses based on data gathered from four global banks with varying competitive positions. We posit the microfoundations of operational excellence in services by demonstrating how the cumulative aggregation of constituent capabilities leads to higher competitiveness in firms. We enhance the external validity of the emergent theory by showing its applicability in another service setting (healthcare). Our study demonstrates the importance of shifting managerial thinking from individual operational improvement practices to long‐term capability building through the microfoundations of operational excellence.