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-for-profit, 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, short-term 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