An Introduction to Operations Strategy

Posted in management by Christopher R. Wirz on Mon Feb 01 2016

Operations/Organizational strategy is critical to operations management success and make a business more competitive. Everything done in an organization has to add value towards meeting the needs of the customers - and delivering something of value. Through consistent checks and metrics against a desired norm, a business can stay ahead of the competition and achieve success. Strategies within a company's operations will ensure the customer is continuously satisfied.

Corporate Strategy

The strategy of an organization is based on what is being produced and who it is sold to. Combined with the value that the company adds, these factors governs the processes on a continuous basis. These processes contain customers, suppliers, and internal departments - such as finance, human resources, and operations. Corporate strategy involves:

  1. Mission Statement
  2. External Environment
  3. Distinctive Competencies
  4. Competitive Priorities

Mission Statement

The Mission Statement depicts the direction and purpose of the organization. Not all businesses follow through with their mission statement. In this case, their mission statement is more of a vision - something that the organization intends to do. A vision references desire and thought - but a mission is a defined leadership through goals and priorities.

Goals are qualitative and general within the context of a mission statement. They are linked to priorities, but not usually money. Mission statements generally discuss the product of the company, the customers, the company's differentiation, and the culture within the organization. In fact, mission statements are culture specific.

An example mission statement may be "Our mission is to allow our customers to grow their own businesses through our quality software services that we provide at high quality and low cost with the customer's business systems in mind."

The mission statement should take into account the company's products, services, markets, values and concern for public image. The wording should convey a sense of priorities in how products and services are delivered. The statement also includes how the organization separates itself from other organizations of its kind.

So what does the mission statement do for the bottom line other than ensure consistency and direction? A study conducted by Watson/Wyatt indicated, "Companies whose employees understand the mission enjoy 29% greater return than other firms." A Workplace Employee Insight Survey states "75% of employees do not think their company’s mission statement has become the way they do business."

External Environment

The world has varying cultures, values and perspectives. All these differences make it a challenge to manage operations in a planned and consistent way.

Regarding cultures, international events such as disease, weather, tariffs, trade impositions, environmental standards, and terrorist attacks require contingency planning for organizations. Organizations also need to be prepared for the long term impacts. Issues that can be planned for (such as tariffs, trade impositions, and environmental standards) need to be understood and integrated into strategic efforts. However, reading the news might help in this type of macro planning.

In the technical community, innovations will arise and will impact the competitive advantage. Likewise, your company's innovation impact the competitive advantage of other companies.

A good way to mitigate any threats to competitive advantage is through business partnerships. These will help overcome international issues and will allow your company to leverage their competitive advantage when delivering value to your customer. Additionally, this might help to overcome any location-based challenges. An inclusive corporate can help mitigate location-based challenges as well. Partnering with high-performing companies will help to persist high productivity levels.

There are a number of different ways to get involved in a partnership.
Basic collaboration involves just doing for another business what they are not good at - or vise versa.
A Joint Venture is a more contractual collaboration involving defined roles and sharing of responsibilities.
Licensing allows your company to sell the products from another company to your customers.
Changing your business's location may bring you closer to a customer.

Distinctive Competencies

Distinctive Competencies are how resources are managed to increases value of goods and services provided to customer. These are the basis of strategies regarding aspects such as workforce, technologies, quality assurance, capacity, location, inventory, facilities, and equipment. Knowing your organization's distinctive competencies increases the probability of success.

When employees are aware of the company's distinctive competencies, they will engineer more innovative products, reach new customers, utilize supply chain and be more efficient and productive. Where the company lacks, other companies can be found to partner with to gain competencies.

Competitive Priorities

Competitive priorities comes from understanding markets and customers and a strategic perspective. Your company must know what they really like, what is important to them, what is of particular value, who are the competitors and what are they are offering. This body of knowledge is often called a “needs assessment. Customers have different priorities and their needs can change rapidly based on environmental conditions.

Competitive Priorities lead to operating advantages in providing goods and services to satisfy customers. Internal processes are built with these priorities in mind such that customers can efficiently determine the products satisfy their needs. When priorities are define, processes, supply chain and distinctive competencies are strategically built around them to be as competitive as possible.

Priorities are connected and balanced to meet the needs of the customer. Cost can be increased is speed is priority. Quality can decrease if cost decreases. These are examples of the variation. Examples of competitive priorities are:

Cost

Often times, providing lower cost product and services is a key to success. Given enough time a competitor that will try to produce the same value for a lower cost. Management should look to get the optimum levels of productivity with the least amount of waste in order to drive down cost. Buying input materials and services more cheaply will also certainly drive down cost.

Quality

Quality assurance can be a distinctive competency if quality is a competitive priorities as well. Quality is how consistently products and services meet customer expectations. Not every customer wants the product the same way, but quality assurance ensures it is delivered within requirements. Quality can be seen by the customer as high performance design and consistency.

High-performance design is the level of operational performance. Quality and performance can include tight tolerances of measurement, durability, safety, or courteousness.

Consistent quality is the second component of quality. It measures the frequency that the product or service meets specifications. The customer expects the same quality with each order. The customer wants and expects on a consistent basis with the expectation of performance.

Time

Delivery or lead-time is the measurement period between when a customer places an order to when it is received by that customer. Something like fine jewelery would have a longer lead time than a block of wood. On-time delivery is the frequency in which the time of the delivery is expected and realized. While different companies have different standards for timeliness, what is important are the promises made and the expectations of customers in having those promises made.

Development Speed is a measurement of how fast a new service/product is brought to market. This includes the time from idea through design and then production - such that it is available to your customer base. When competition is high, speed is crucial. When time is a factor, supply chain loyalty becomes less of an issue.

Flexibility

Flexibility is how quickly and efficiently the company can transition to satisfy the customers’ needs.

Customization is the ability to satisfy the unique requirements of a customer. It allows the company to make changes upon customer request. Operating systems account for flexibility to accommodate the customer. The degree of customization is a valuable competitive advantage.

Volume Flexibility is the ability to change the rate of production to satisfy varying degrees of volume demand. This requires management of distinctive competencies such as capacity, inventory, work force and quality assurance to meet that demand.

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