Operational effectiveness is not a strategy
Often we confuse one with the other, opening a window for mistakes and
misunderstood. OE does not fulfill the variety of problems to explore in the
efficiency of a business. This is because when we speak of operations it
translates to the activities that our company embraces for producing, that
said, managers often believe that making operations effectively will assure
their position in a competitive markets. The quest for productivity, quality
and speed has spawned a number of tools and techniques (total quality
management, identifying milestones, time-based competition, new resources
,associations, reengineering, change management, learning organization, etc..)
oriented operational efficiency, have been gradually taking the place of
strategy.
In the process of making OE companies frequently try to copy one and
another process, innovate technologies and so on, in a way that they can be one
step ahead and accelerate process or increase quality by the thought that this
will gain them more profitability which it does but on the other hand this
makes companies too much alike, then this move isn’t strategic at all.
Costumers look for difference not only in price, but in quality, which to me in
particular is directly related to creating comparable value at lower cost
because is the best way of giving the costumer what they want faster without
risking quality .
This difference is what distinguishes companies, establishing this, the
company can outperform rivals.
In fact, these differences were the essence of Japanese success in 80.
If it is necessary to continuously improve the OE, this is not enough to
sustain high yields, as the "best practice" operational fast spread
rivals are all doing same.
Strategy rest on unique activities
Competitive strategy is about being different, deliberately choosing
different activities to deliver a unique mix value.
A Sustainable Strategic Position Requires
Trade-offs
Strategic positions have three sources, not mutually exclusive and often
simultaneous:
1. Positioning
based on the variety: where instead of being in all
products segments you focus in one in particular this has much more to do with
the choice of variety and lees client segmentation. For Example in a company
that is dedicated only to sell books for school and no other school tools,
clients will be divided between different providers like variety stores.
2. Positioning
based on needs: Is directed to a particular segment of
customers, which satisfies all or majority of their needs. It can occur when
different customers (or a client) require different features in the products,
different levels of information, service, or have different price sensitivity.
Additionally, these requirements must be sufficient to satisfy different sets
of different activities. For example IKEA furniture company
targets young buyers that work, without much time to shop, but
looking for a modern furniture low prices .
3. Positioning
based on access: in better words this is different costumer
segmentation, but their needs are quite similar. May be my company is directed
to a segment A but segment C will have probably same need of one product or
another. For example Bon Ice-cream, anyone can buy their product because they
have a variety price menu, at first it wasn’t this way, it was the town’s
ice-cream shop , but they recognized that they had potential to open their
client segments not only to class B or C but to class A so they developed
a new line of ice cream called “Black Label” .
In conclusion , strategy involves the creation of unique and valuable
position involving a number of different activities. A sustainable strategic
position requires making trade-offs between strong.
Fit drives competitive advantage and
sustainability.
Fit are the activities in a company’s system that reinforce and
complement one another, there are three types of fits :
· First
Order: Simple consistency
· Second
order: Activities are reinforcing each other. Example: position or branding
lower marketing cost
· Third
order: Optimization of effort
Knowing where your company is position will determine the activities
that your company will eventually be forced to rely on. Sustainability
will soon rise by your company power to link its activities in a way that
rivals are unable to copy them.
Rediscovering Strategy
Failing in choosing right is the most common reason for lack of
strategy; while managers are looking for efficiency they frequently lose the
sight of the need of a strategy. This also occurs when companies don’t chose an
specific customer needs to satisfy and try to satisfy ALL of them, this major
threat comes from the inside when manager are not willing to make or keep
tradeoffs.
Managers should be very careful when the company is growing too, as I
said before when I spoke of BON , they were forced to create a complete new
line of products, in this specific area managers should be aware of what
the strategy path is and stay focused on it because if they go way off the road
then some of this new acquisitions could lead to a reduction of their company’s
competitive advantage by amplifying their client segmentation and ending in a
possible reduction of the product quality
