Operation strategy

• Strategy


  • Setting broad objectives that direct an enterprise towards its overall goal
  • Planning the path (in general rather than specific terms) that will achieve these goals
  • Stressing long-term rather than short-term objectives
  • Dealing with the total picture rather than stressing individual activities
  • Being detached from, and above, the confusion and distractions of day-to-day activities
• Operations strategy

  The pattern of decisions and actions that shape the long-term vision, objectives and capabilities of the operation and its contribution to the overall strategy of the business
• Content of operations strategy

  The specific decisions and actions that set the operations role, objectives and activities
• Process of operations strategy

  The method that is used to make the specific 'content' decisions
• Hayes and Wheelwright four-stage model

  • Traces the progression of the operations functions from what is the largely negative role in operations to a position where it is the central element of competitive strategy
• Stage 1: Internal Neutrality

  The operations function is inward-looking and at best, reactive with very little positive to contribute towards competitive success. The vision is to be 'internally neutral' so to stop holding the organization back, it attempts to achieve this by avoiding making mistakes and correcting the worst problems.
• Stage 2: External neutrality


  The operations function begins comparing itself with similar companies or organizations in the outside market. The vision is to become 'externally neutral' with operations in the industry.
• Stage 3: Internally supportive


  The operations function has reached the 'first division' of their markets. The vision is to be clearly and unambiguously the very best in the market by gaining a clear view of the company's competitive or strategic goals and supporting it by developing appropriate operations resources. The operation is trying to be 'internally supportive' by providing a credible operations strategy.
• Stage 4: Externally supportive


  The operations function is providing the foundation for an organization's competitive success. It is forecasting likely changes in markets and supply, and it is developing the operations-based capabilities which will be required to compete in future market conditions. Stage 4 operations are innovative, creative and proactive and are driving the company's strategy by being 'one step ahead' of competitors – what Hayes and Wheelwright call being 'externally supportive'.
• Top-Down perspective on operations strategy


  Operations strategies should align with what the whole group or business wants. It identifies three related levels of strategy: Corporate, Business, and Functional.
• Corporate strategy


  Positions the corporation in its global, economic, political, and social environment. This consists of decisions about what types of business the group wants to be in, where to operate, etc.
• Business strategy


  Sets out an individual mission and objective. This guides the business in relation to its customers, markets, and competitors, and the strategy of the corporate group it is part of.
• Functional strategy


  Considers what part each function should play in contributing to the strategic objectives of the business.
• Correspondence between different levels of strategy is not enough, operations strategy must also be coherent, both with other functional strategies and within itself.</b>
• Business model


  The plan that is implemented by a company to generate revenue and make a profit (or fulfil its social objectives if a not-for-profit enterprise). It includes the various parts and organizational functions of the business, as well as the revenues it generates and the expenses it incurs.
• Operating model


  A high-level design of the organization that defines the structure and style which enables it to meet its business objectives.
• Outside-In perspective on operations strategy


  The operations function should respond by providing the ability to perform in a manner that is appropriate for the intended market position.
• Order winners


  Things that directly and significantly contribute to winning business. Customers regard them as key reasons for buying the product or service.
• Order qualifiers


  Factors where the operation's performance has to be above a particular level just to be considered by the customer. Performance below this 'qualifying' level often disqualifies the organization from being considered.
• Less important factors


  Neither order winning nor qualifying. They do not influence customers in any significant way.
• Product/service life cycle


  Generally shown as the sales volume passing through four stages – introduction, growth, maturity and decline. The implication is that products and services will require different operations strategies in each stage.
• Bottom-Up perspective on operations strategy


  Organizations will consult the individual functions about their capabilities and constraints and incorporate the ideas that come from each function's day-to-day experience.
• Emergent strategies


  High-level strategic decision making may simply confirm the consensus around a given strategic direction and provide the resources to make it happen effectively.
• Inside-Out perspective on operations strategy


  Long-term competitive advantage can come from the capabilities of the operation's resources and processes, which should be developed over the long term to provide the business with a set of capabilities or competences.
• Resource-based view (RBV) of the firm


  Organizations with 'above-average' strategic performance are likely to have gained their sustainable competitive advantage due to their core competences. The way an organization inherits, acquires, or develops its operations resources will have a significant impact on its strategic success.
• Protecting a competitive advantage can be done by creating barriers to entry through product differentiation or making it difficult for customers to switch to competitors or controlling the access to distribution channels.</b>
• The RBV sees firms being able to protect their competitive advantage through barriers to imitation: that is, by building up 'difficult-to-imitate' resources.</b>
• A starting point is to examine the transforming and transformed resource inputs to the operation. An operation is not just the sum of its processes; it also has intangible resources, which may not be as evident within an operation, but they are important and often have real value.</b>
• Resource-based thinking requires identification of both operations capabilities and constraints. While the operations resource perspective may identify constraints to satisfying some markets, it can also identify capabilities that can be exploited in other markets.</b>
• Transforming and transformed resource inputs

  An operation is not just the sum of its processes; it also has intangible resources, these intangible resources may not be as evident within an operation, but they are important and often have real value
• Operations management


  • The central issue is to ensure that its pattern of strategic decisions really does develop appropriate capabilities
  • Resource-based thinking requires identification of both operations capabilities and constraints
  • While the operations resource perspective may identify constraints to satisfying some markets, it can also identify capabilities that can be exploited in other markets
• Strategic resources and sustainable competitive advantage

  The 'resource-based' explanation of why some companies manage to gain sustainable competitive advantage is that they have accumulated better or more appropriate resources
• Resources that can lead to sustainable competitive advantage

  • They are scarce
  • They are not very mobile
  • They are difficult to imitate or substitute for
• Structural and infrastructural decisions

  Structural decisions primarily influence design activities, while infrastructural decisions influence the workforce organization and the planning and control, and improvement activities
• The best and most costly facilities and technology will only be effective if the operation also has an appropriate infrastructure which governs the way it will work on a day-to-day basis
• Four perspectives of operations strategy

  None of the four perspectives alone can give a full picture of any organization's operations strategy. But together they do provide a good idea of how its operations are contributing strategically. Each perspective is 'reconciled' with the others.
• Operations strategy matrix


  It brings together (a) market requirements and (b) operations resources to form the two dimensions of a matrix. It describes operations strategy as the intersection of a company's performance objectives and the strategic decisions that it makes.
• Line of fit between market requirements and operations capabilities


  • There should be a reasonable degree of alignment, or 'fit', between the requirements of the market and the capabilities of the operation.
  • Improvement means achieving 'alignment', achieving 'sustainable' alignment, and improving overall performance
• Importance-performance matrix


  It is used to gain an understanding of the relative importance to customers of the various competitive factors and to determine operations strategy improvement priorities
• Process of operations strategy

  1. Formulation

  2. Implementation

  3. Monitoring

  4. Control