Why operations are at the heart of any business strategy

I blog about operations.  But this has to be placed in the context of the overall strategy of the business or organisation conducting those operations.  So it’s worth now and again to ponder on strategy, and reflect on current thinking in this field.  Except this article from strategy + business is somewhat critical of current (and even historic) strategic concepts.

But it seems to me that it falls foul of the very thing that it is critical of – namely that strategy has largely been a set of fashionable “universal prescriptions” that have quickly become superseded by the next big thing.  One problem with this critique is that many of the concepts it suggests are ‘strategies’ are clearly not.  For instance, the article suggest that TQM and business process reengineering (BPR) are ‘strategies’, when they are not.  Like many that talk about this subject, it confuses means with ends.  TQM and BPR are the means by which the strategy can be delivered, not the strategy itself.

Despite this, the article is an interesting read especially as it proposes the five core elements of any strategy.  These are:

  1. What business should you company be in?
  2. How should you add value to your business?
  3. Who should be the target customer for your business?
  4. What should be the value proposition to those customers?
  5. What capabilities should differentiate your ability to add value to your business and deliver its value proposition?

(Personally I think question 1 and 2 are redundant.  If you answer questions 3, 4 and 5, by definition questions 1 and 2 are answered for you.)

From this it is clear where operations fit into strategy.  We spend the entire second chapter of our book explaining and discussing order qualifiers (OQ) and order winners (OWs).  Just to remind you – OQs are necessary for a product or service to be considered by a customer, and OWs are the characteristics of a product or service which directly contribute to winning business from the customer.  There are five main OWs – cost, quality, flexibility, dependability and speed.  Within these there are total of 32 specific OWs.  Selecting which of these specific OWs to offer answers question 4 i.e. they make up the ‘value proposition’.  Then selecting the right processes to deliver these resolves question 5 i.e. they differentiate you from others in the market – in one of two ways.  Either you have a unique combination of OWs that no one else has (not easy to achieve these days), which is what the article talks about as  the “big idea”.    Or you have the same OWs as competitors, but you outperform them in one or more of them.

So if your target market is the price-sensitive, short haul, leisure traveller, you combine predominantly cost OWs in oder to create a low cost strategy designed to compete in the budget airline industry.  Whereas if customer are concerned about quality, you combine predominantly quality OWs into an operations strategy – which may or may not be termed TQM or continuous improvement depending on your specific approach.

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