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Strategy vs Operational Effectiveness



Kirjoittanut: Hassan Chakir - tiimistä SYNTRE.

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Esseen arvioitu lukuaika on 3 minuuttia.

In the modern days we find a lot of companies that work in some particular industry, are presenting the same services or products. And it is really hard to distinguish between them, or even to tell what is the competitive advantage of one from another. Moreover, the management tools have been taking over the world, which make companies fall into similarities when building their strategies. Even if there are differences, businesses tend to copy features from each other.

The failure to discern between operational effectiveness and strategy is at the heart of the problem. Total quality management, benchmarking, time-based competition, outsourcing, partnering, reengineering, and change management are just a few of the management tools and approaches that have sprung up in response to the desire for productivity, quality, and speed. Despite often spectacular operational advances, many businesses have been frustrated by their inability to transfer such advantages into long-term profitability. Management tools have gradually, almost unconsciously, assumed the place of strategy. Managers drift further away from viable competitive positions as they strive to improve on all fronts. (Porter, 1996)

The art of developing strategy, or good strategic positioning, boils down to developing a distinct and long-term competitive advantage.  You’re attempting to instill a willingness to spend in your clients because you’re different from your competition, providing a more desirable mix of value.

Strategy is the context in which you perform what you do. And all too frequently, you encounter cases where this context is missing, and the result is illogical. For example, you can find some great deluxe interior design apart-hotels. But there were only cupboards in the kitchen.  They have nothing inside of them! There was no stove, fridge, sink, or crockery. This indicates that they simply copied the looks from images. They have no concept how the thing should work. (Monkhouse, 2021)

However, Operational effectiveness (OE) refers to completing similar activities better than competitors. Efficiency is one aspect of operational effectiveness, but it is not the only one. It refers to a variety of strategies that enable a company to better utilize its inputs, such as decreasing product faults or generating better products faster. Strategic positioning, on the other hand, entails undertaking actions that differ from those of competitors or performing identical operations in different ways. (Porter, 1996)

It is, of course, relative to your competition.  You can learn from any organization that is similar to yours in order to increase your operational effectiveness.  Examining how, why, and what they do in order to improve. On the other hand, you can promote best practices by becoming the most efficient business in your industry or by developing a transformational new process.

A question may show up at this point, what if there is operational effectiveness without a strategy? Luckily, we have an example we can refer to from Japan. Between the 70s and the 80s, the Japanese sparked a worldwide revolution in operational effectiveness. As a result, for many years, Japanese manufacturers had significant cost and quality advantages.

However, Japanese firms rarely developed distinct strategic stances such as those outlined in this article. The downsides of Japanese-style competition are becoming more apparent. With opponents operating far from the productivity frontier, it appeared conceivable to win on both cost and quality indefinitely in the 1980s. All Japanese firms were able to expand in a booming domestic economy and by entering global markets. They seemed to be unstoppable. However, as the operational effectiveness gap closes, Japanese companies are increasingly ensnared in a trap they have created. Japanese corporations will need to understand strategy if they are to avoid the mutually destructive wars that are currently wreaking damage on their performance. (Alves, 2020)

They may have to overcome significant cultural barriers to do so. Japan is notoriously consensus-oriented, and businesses have a strong inclination to mediate rather than highlight individual differences. Strategy, on the other hand, necessitates difficult decisions. The Japanese have a deeply ingrained service tradition that predisposes them to go to tremendous lengths to meet any requirement expressed by a customer. Companies that compete in this manner wind up blurring their distinguishing positions and becoming everything to everyone. (Porter, 1996)

To summarize, failing to distinguish between operational effectiveness and strategy is a common problem in business. While many management strategies have contributed to operational gains, long-term profitability is dependent on building a distinct and sustainable competitive edge. The concepts of operational effectiveness and strategy are interwoven but distinct, with the former emphasizing efficient execution and the latter emphasizing differentiating a company from competitors. The Japanese experience serves as a cautionary tale, indicating that even outstanding operational efficiency can lead to vulnerability in the absence of a clear strategic posture. To flourish in a competitive world, firms must strike a balance between operational excellence and strategic positioning, even if it means overcoming cultural or organizational barriers.

 

REFERENCES:

  1. Porter. What is strategy. Harvard business review. 1996. Link: https://hbr.org/1996/11/what-is-strategy
  2. Monkhouse. Strategy vs operational effectiveness – are you clear on the difference?. Monkhouse and company. 2021. Link: https://www.monkhouseandcompany.com/blog/strategy-vs-operational-effectiveness-are-you-clear-on-the-difference/
  3. C. Alves. Why does a Japanese company rarely follow strategies. Lookatmepro. 2021. Link: https://www.lookatmepro.com/postblogwhy-does-a-japanese-company-rarely-follow-strategies

 

 

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