Course Instructor: Afzal Adamjee

Why is operations excellence fundamental to strategic success?

What is strategy?
What is operations strategy?
how should operations strategy reflect overall strategy?
how can operations strategy learn from operational
experience?
how do the requirements of the market influence operations
strategy?
how can the intrinsic capabilities of an operations resources
influence operations strategy?
What is the content of operations strategy?
What is the process of operations strategy?

What Is Operations And Why Is It So

Important?

Every organisation produces some mix of products and services.

All operations use their resources and processes to transform
inputs into outputs that satisfy some customer need.
This idea of the transformation model applies to all types of
operation, manufacturing and service, for-profit and not-forprofit, those with external customers and those with internal
customers.
The transformation model also describes functions other than
the operations function
Marketing, finance, information systems and HRM

But the principle holds true: all parts of the business and all
functions of the business are, in a sense, operations.

Operation could have several suppliers and several customers and

may be in competition with other operations producing similar
services to those it produces itself. This collection of operations is
called the supply network. Also, inside the operation, there will be
a network of processes. Some of these processes will be
operations processes in that they are within the operations
function. But many processes in this internal network will be in the
other functions of the business. Sales, marketing, HRM, finance and
all the other functions processes will form part of (and hopefully
be integrated with) the internal process network. Whats more,
within each process there will be a network of individual
resources (technology and people). At each level of analysis,
functional managers must understand the capabilities of each
element, and the relationship between them. This idea is called the
hierarchy of operations

It can reduce the costs of producing products and services by

being efficient in the way it transforms inputs into outputs.
can increase revenue by promoting outstanding customer
satisfaction through its ability to provide exceptional quality,
responsiveness, reliability and flexibility.
It can reduce operations-related risk and promote resilience (the
ability to recover after operations failure).
It can reduce the amount of investment (capital employed) that
is necessary to produce the required type and quantity of
products and services. It can do this by increasing the effective
capacity of the operation and by being innovative in how it uses
its physical resources.
It can provide the basis for future innovation by building a solid
base of operations based capabilities, skills and knowledge
within the business.

setting broad objectives that direct an enterprise towards its

overall goal;
planning the path ( 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;

Business objectives may not ever become clear. In

fact, most organisations will have multiple objectives
that may themselves conflict. For example, an
outsourcing decision may improve profitability but
could involve a firm in long-term reputational risk.
Markets are intrinsically unstable in the long term so
there must be some limit to the usefulness of
regarding strategy as simply planning what to do in the
future. It may be more important to keep close to what
is actually happening in the market and adapt to
whatever circumstances develop.

Many decisions are far less formal than the simple

planning model assumes. In fact many strategic
decisions emerge over time rather than derive from
any single formal senior management decision.
Organisations do not always do in practice what they
say they do, or even what they want to do. The only
way to deduce the effect strategy of an organisation is
to observe the pattern of decisions that it makes over
time.

One of the biggest mistakes a business can make is to confuse

operations with operational. The meaning of operational is
the opposite of strategic; it means detailed, localised, shortterm and day-to-day.
And operations management is very much like this.
Operations strategy is concerned less with individual processes
and more with the total transformation process that is the
whole business.
It is concerned with how the competitive environment is
changing and what the operation has to do in order to meet
current and future challenges.

It is also concerned with the long-term development of

its operations resources and processes so that they can
provide the basis for a sustainable advantage.
If a business does not fully appreciate the strategic
impact that effective operations and process
management can have it is missing an opportunity.

Two concepts that have emerged over the last few years
are relevant to operations strategy (or at least the terms
are new; one could argue that the ideas are far older).
These are the concepts of the business model and the
operating model.

The value proposition of what is offered to the market.

The target customer segments addressed by the value proposition.
The communication and distribution channels to reach customers and
offer the value proposition.
The relationships established with customers.
The core capabilities needed to make the business model possible.
The configuration of activities to implement the business model.
The partners and their motivations for coming together to make a
business model happen.
The revenue streams
The cost structure resulting from the business model.

key performance indicators (KPIs) with an indication of the

relative importance of performance objectives;
core financial structure profit and loss (P&L), new investments
and cash flow;
the nature of accountabilities for products, geographies, assets,
etc.;
the structure of the organisation often expressed as capability
areas rather than functional roles;
systems and technologies;
processes, responsibilities and interactions;
key knowledge and competence.

Operations 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.

There are several segments in the lighting design and

supply market, but the fastest growing segment is the
conference market.
Competition is getting tougher in the theatre market
because the large international lighting groups are able
to provide lower-cost lighting solutions. Also exhibition
venues are increasingly developing in-house operations
and encouraging exhibitors to use the in-house service.
Margins are being squeezed in both markets.
Therefore the company has chosen to target the broad
conference market where margins and growth are
higher.

They believe they can differentiate themselves from

competitors by their aesthetically innovative designs,
ability to give good presentation advice, high
customisation of lighting solutions, and fast and
reliable supply.
Operations, therefore, needs to prioritise high-quality
technical and aesthetic consultancy advice,
customisation, fast response and dependability.

Operations strategy is the total pattern of

decisions that shape the long-term capabilities of
any type of operation and their contribution to
overall strategy, through the reconciliation of
market requirements with operations resources.

Understanding the relative importance of the

operations performance objectives; and
understanding the influence on them of the
decision areas that determine resource
deployment.

Five generic performance objectives:

Quality
Speed
Dependability
flexibility and cost

Capacity strategy
Supply network strategy including purchasing
and logistics
Process technology strategy
Development and organisation