Operations Management – Operations Strategy Notes

Operations Strategy

WHAT IS STRATEGY AND WHAT IS OPERATIONS STRATEGY

• Strategy includes:

  • Setting broad objectives that direct an enterprise towards its overall goal.

  • Planning the path 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.

• Strategic decisions refer to those decisions which are widespread in their effect on the organisation to which the strategy refers, define the position of the organisation relative to its environment and move the organisation closer to its long term goals.

• Strategy is more than a single decision; it is the total pattern of the decisions and actions that influence the long term direction of the business.

• Observing the total pattern of decisions gives an indication of the actual strategic behaviour.

Operations Strategy

• Operations strategy concerns the pattern of strategic decisions and actions which set the role, objectives and activities of the operation.

• Operations are the resources that create products and services.

• Operational is the opposite of strategic, meaning day to day and detailed.

• One can examine both the operational and strategic aspects of operations. It is also conventional to distinguish between the content and the process of operations strategy.

• The content of operations strategy is the specific decisions and actions which set the operations role, objectives and activities. The process of operations strategy is the method that is used to make the specific content decisions.

From Implementing to Supporting to Driving Strategy

• Most businesses expect their operations strategy to improve operations performance over time.

• In doing this they should be progressing from a state where they are contributing very little to the competitive success of the business through to the point where they are directly responsible for its competitive success.

• This means that they should be able to in turn master the skills first to implement, then support and then drive the operations strategy.

• Implementing Business Strategy

  • The most basic role of operations it to implement strategy. Most companies will have some kind of strategy but it is the operation that puts it into practice.

  • Without effective implementation even the most original and brilliant strategy will be rendered totally ineffective.

• Supporting Business Strategy

  • Support strategy goes beyond simply implementing strategy. It means developing the capabilities which allow the organisation to improve and refine its strategic goals.

• Driving Business Strategy

  • The most difficult role of operations strategy is to drive strategy by giving it a unique and long term advantage.

Hayes and Wheelwright’s Four Stages of Operations Contribution

• The ability of any operation to play these roles within an organisation can be judged by considering the organisational aims or aspirations of the operations function.

• Hayes and Wheelwright of Harvard University developed a four stage model which can be used to evaluate the role and contribution of the operations function. The model traces the progression of the operations function from what is the largely negative role of stage 1 operations to becoming the central element of competitive strategy I the excellent stage 4 operations.

• Stage 1: Internal Neutrality

  • The very poorest level of contribution by the operations function. It is holding the company back from competing effectively.

  • It is inward looking and at best, reactive with very little positive to contribute towards competitive success.

  • Paradoxically its goal is to be ignored as at least then it isn’t holding the company back in anyway. It attempts to improve by avoiding making mistakes.

• Stage 2: External Neutrality

  • The first step of breaking out of stage 1 is for the operations function to begin comparing itself with similar companies or organisations in the outside market.

  • It is measuring itself against competitor’s performance and trying to implement best practice.

• Stage 3: Internally Supportive

  • Operations are amongst the best in the market. However, still aspire to be clearly and unambiguously the very best in the market.

  • They achieve this by gaining a clear view of the companies’ competitive or strategic goals and supporting it by developing appropriate operations resources.

• Stage 4: Externally Supportive

  • The company views the operations function as providing the foundation for its competitive success. Operations look to the long terms.

  • It forecasts likely changes in market and supply and it develops the operations based capabilities which will be required to compete in future market conditions.

  • Operations are innovative, creative and proactive and are driving the company’s strategy by being one step ahead of competitors.

Perspectives on Operations Strategy

• Authors have slightly different views and definitions of operations strategy. Between them four perspectives emerge:

  • Operation strategy is a top down reflection of what the whole group or business wants to do.

  • Operations strategy is a bottom up activity where operations improvements cumulatively build strategy.

  • Operations strategy involves translating market requirements into operations decisions.

  • Operations strategy involves exploiting the capabilities of operations resources in chosen markets.

• Together they provide some idea of the pressures which go to form the content of operations strategy.

THE TOP DOWN AND BOTTOM UP PERSPECTIVES

Top Down Strategies

• A large corporation will need a strategy to position itself in its global, economic, political and social environment.

• This will consist of decisions about what types of business the group wants to be in, what parts of the world it wants to operate, how to allocate its cash between various businesses etc.

• These form the corporate strategy. Each business unit within the...

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