Operational Strategy
In Marketing, we identified your customers' needs and learned to align your business with them. Here we will focus on your side of the equation, that is, on the strengths and special abilities of your company. It's the difference between the philosophies of “the customer is always right,” and “build it and they will come.”
Many business consultants will encourage you to keep your focus on the customer, which to a large extent is good advice. After all, you can't build a business without customers. That's why we spent so much time focusing on your customers in “Marketing,” but is it really as simple as that? Can the future success of your business be found entirely in the minds of your prospects and customers? Perhaps, but do your customers always know exactly what they want before they see it, or is it up to you to second guess their needs before they have even thought of them? In truth, the answer probably involves a little of both. Your customers express their wishes and needs, while you offer solutions and innovations.
If you have completed the earlier Marketing section, then you already have a good understanding of your customers' needs. Now it is up to you to capitalize on this knowledge and build an operational structure that will fulfill those needs through reliable and innovative solutions; solutions your customers may never have thought of; solutions that emerge from your Operational Strategy.
Your Core Business Competencies highlight the particular skills that your business excels at the most. To steal an example from big business, one might say that, among other things, Apple excels at design, or that Google excels at searching. Certainly this is an oversimplification of these technology giants, but this basic concept has clearly been a component of their operational strategies. By focusing the broad expertise and extensive resources of their company in a single direction, they have succeeded in carving out a powerful niche in the marketplace for themselves.
You can use this concept in your business as well. Building on your strengths can be an effective strategy for distinguishing and distancing yourself from your competition.
Just as individuals have talents, so do businesses. We can make the most of those talents by using the very same concept of “investing versus spending time” that we discussed in “Leadership.” When we take the time to develop our strengths, we begin to tap into our true potential, permitting us to achieve things that would otherwise not be possible. Yes, this involves effort, but what worthwhile achievement doesn't?
Certainly we can and should put ourselves in a position to take advantage of good luck when it comes our way, but to rely on it is self-deceptive. Ultimately, it is up to us to build our own fortunes. Good luck comes as a result of “life's lottery,” that is, the random happenings that are out of our control. Besides, for a company, as for an individual, the rewards of honest and purposeful work last a lifetime. The lottery approach, no matter how successful, is a one-time deal. It's luck, pure and simple, and while you might benefit every once in a while, the results are really out of your hands.
So ask yourself what your business does particularly well. Is it the way you manage customer relationships? Is it your ability to innovate in a particular area? Or is it a unique specialization of skills within your industry. Think about the people who work with you. Why are they there? Do they share any unique qualities? If your employees are few, or non-existent, think about yourself, your partners, or the people you would like to hire and consider the same questions.
Your core competencies are not simply your ability to produce a particular product or service, although it may be reflected in this. It is the one or two outstanding abilities of your business. An athlete may have great balance or coordination, for example, and with enough work, she may be able to develop and ultimately capitalize on these core competencies in order to excel at a particular sport. If she manages to do this, one might say that her unique competencies were reflected in her success as an athlete. Certainly they are not the only contributing factors, but they are clearly important.
If your Marketing Strategy points the way to your customers, then your Operational Strategy takes you there. For example, if your Marketing Strategy was to produce high quality contemporary designs for an exclusive market, then your Operational Strategy might support this through tighter quality control mechanisms, higher quality materials, exclusive design and manufacturing processes and a highly skilled workforce.
Take Roger Federer, for example. Is he such an outstanding tennis player because of his work ethic or because of his particular talents? It's a trick question really, because the answer is, both. Certainly he has a natural ability to excel in tennis, but he would have never achieved anything close to his level of success without a highly focused work ethic.
Your Operational Strategy will help to support and strengthen your Market Position. Build on it, and you will secure your position as an industry leader. Consequentially, it is often better to outsource tasks that are not in harmony with your Operational Strategy rather than take on too many unrelated tasks and risk spreading yourself too thin. The result is often that most tragic of sins, mediocrity. It is better to be outstanding in a few areas than to be average in many, or in other words, focus on what you do well.
This is where your Corporate Culture comes in. A highly focused company requires highly focused people, and highly focused people thrive in a highly focused environment. As a result, your Corporate Culture must support your Operational Strategy. You must create an environment that encourages the relentless pursuit of perfection. Only then, will your Operational Strategy have the opportunity to come to life.
In the end, if your Operational Strategy is to be useful, it must support the achievement of your Strategic Objective and it must be in line with your Corporate Mission. In fact, all aspects of your corporate strategy must work harmoniously with each other, guiding your business with a unified purpose. Designed and used properly, they ensure that your company operates as a unit, providing your customers with a consistently positive experience.
The key word here is “consistent.” Customers are turned off by inconsistencies. Inconsistencies, even positive ones, lead to uncertainty and uncertainty raises questions about the integrity of your business as a whole. If something appears to be out of place in one location, your customers will conclude that the incident is not isolated. As a result, those inconsistencies make your business appear out of control, even if it is not.
A successful “fine dining” restaurant was not as busy during the weekday lunch hour as the owner would have liked. So in an effort to increase sales, he decided to offer a new lunch menu consisting of quick, low-cost meals. The experiment seemed to work as lunchtime sales increased, but the new format was also attracting a new crowd. Slowly, his original clientele started disappearing and since the new crowd wasn't interested in high priced fine dining, his evening sales began to suffer as well. As a result, total sales began to drop. The owner eventually returned to his original formula and regained his customer base, but not without taking a significant financial hit in the process.
Below is a list of potential Operational Strategies. Use it as a starting place for determining the ideal Operational Strategy for your business.
Cost/Price — Higher profit margins are often associated with fully customized, specialty products and services, whereas lower profit margins are often associated with standardized, mass-produced products and services with higher output volumes.
How might the issues of “cost and price” be reflected in the Operational Strategy for your company?
Quality — Quality is important to everyone, but different businesses and different products and services are influenced by it in different ways. For example, quality might mean “high performance” in one business while it means “consistency” in another.
What role might “quality” play in your Operational Strategy?
Dependability — As with quality, dependability can influence a business in various ways. The question is, “in what way must your business operations be dependable?” Must they be able to produce a certain number of products within a given time period? Must they be able to produce a wide variety of products all at the same time? What must you be able to count on 100 percent of the time from your operations?
How will “dependability” be reflected in your Operational Strategy?
Product Flexibility — Product Flexibility addresses your needs to customize your products or services. Do you need to be able to make adjustments or changes to your products or services on the fly? Do you need to be able to change which product or service you are producing quickly? You may need specialized equipment and your employees may need special training if either is the case. This may also influence the types of employees you need to hire for productions in the first place.
What part will “product flexibility” play in your Operational Strategy?
Volume Flexibility — Is it important that you can move from a small production run to a large production run and back again? If this is the case, outsourcing may be an option to consider.
How might “volume flexibility” be reflected in your Operational Strategy?
Time - The impact of time on business operations is extremely broad. Its impact can be felt at every level of your business operations. In today's fast paced business world, the time it takes to bring a new product to market can often influence its success. The speed with which your production department can turn out your products and services may affect your growth rate. And the speed and accuracy of your delivery schedule has a direct impact on customer satisfaction.
How might “time” be reflected in your Operational Strategy?
Take some time to reflect on the “core competencies” of your business. Ask your employees and even your customers what it is that your company does really well. Then, write an overview of your basic Operational Strategy in the space below.