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Operational Mix

When we look at business in its simplest form, we see it is really nothing more than a series of trades. You and your customers exchange possessions that hold a greater value to the other than to either of you. Your customers' side of the equation is simple. Typically, they offer money. Your side, however, is much more complex. While the value of money is straight forward, the value of your products or services is not. It's the responsibility of Marketing to communicate that value to your customers, but it's the responsibility of Operations to create value in the first place.

Your Operational Mix is the guide that keeps your operational functions aligned with each other and moving in the direction of your Strategic Objective. Just as you wrote a Marketing Mix to clarify the marketing perspective for your company, here you will write an Operations Mix to clarify your operational perspective. Your Operations Mix is made up of three main strategic components.

  1. Research and Development Strategy
  2. Production Strategy
  3. Delivery Strategy

Research and Development Strategy

Research and Development is necessary for every business, even if your business does not involve manufacturing. A grocery store, for example, would typically be thought of as simply a reseller of products, but think back to our marketing discussions for a moment. What is a product from a customer's perspective? If a customer thinks of a product in terms of solutions to his or her needs, than a product is more than a thing. A product is a solution. A grocery store, then, offers solutions to hunger needs, nutritional needs, and even social needs (i.e. food for a party).

This means that product displays, product information, product location relative to other products (i.e. displaying pasta related items in the same vicinity) and even the decision about which products to buy, are all aspects of the product offering, and as such, can be improved.

Your Research and Development strategy guides the innovation process that upgrades your products and services. What must your Research and Development department focus on if it is to regularly create outstanding new or improved products and services that fit with your business model? You're not looking for new product ideas yet; you just want to define your parameters.

Use the space below to write your Research and Development Strategy. Remember, your purpose here is to give yourself a basic guide for future development. We'll decide how to make it happen when we design your Research and Development systems a little further on.

We will continuously upgrade our existing products, drawing on employee input and continuous research. Additionally, we will bring a minimum of one new product to the market every two to four years, keeping us an innovative leader within our industry. Research and Development will impact all areas of product development but the focus will be on products and features that reduce, or ease, our customers' waiting time.

Production Strategy

Your Production Strategy guides the management and design of your production processes. There are three basic approaches to production strategy.

  1. Higher volume production with limited variables — Assembly line manufacturers are an obvious example, but many larger retailers and wholesalers such as Costco/Price Club fit the bill too. Here, products are sold in high volume with little or no customization available for individual customers.

  2. Customized lower volume or one-of-a-kind production — An architect would be a good example here because each customer receives a unique, custom designed set of drawings.

  3. Hybrid — Most businesses fall someplace in-between the above two extremes, offering a basic set of products or services along with some amount of customizing. Automobiles, for example, are sold with a given set of standard features but are typically available with a limited number of optional features as well.

Consider your business in light of the above, and then describe the production approach you will use to achieve your Strategic Objective. This is the strategy that will guide your production decisions. For example, will you produce products or services that are of such high quality that costs are of secondary concern? Or will your turn around time be the standard for the industry? Strategic decisions such as these keep your production department from straying out of line with your company's Operational Strategy.

Use the space below to write your Production Strategy.

Quality of workmanship will remain our first priority as we strive to reduce our production costs and increase our production output. To this end, outsourcing will be minimized and we will become a company of “master craftsmen.”

Delivery Strategy

Your Delivery Strategy guides the process of delivering your products and services to your customers. It ensures that your delivery systems are as efficient as possible. From a marketing perspective, the minimum standard is “on time and exactly as ordered,” but from an operations perspective, there are many ways to get there. For example, you could hire an outside delivery service or you could make your own deliveries. Remember, however, that delivery does not only mean transportation. If your customers come into your place of business to pick up your products, or if you operate a service business, for example, your delivery process may be more concerned with your customers' experiences than it is with the physical transfer. So make sure your delivery systems are both efficient and customer friendly.

Use the space below to write your Delivery Strategy.

Every effort must be made to ensure our customers have confidence in, and enjoy, the delivery process. At a minimum, this must include personal, courteous, prompt and attentive service. Costs must also be reduced whenever possible, without negatively impacting our customers.

As with all of your strategic tools, your Operational Strategy and Operational Mix will need to be reviewed from time to time in order to ensure they are continuing to provide adequate guidance in the pursuit of your Strategic Objective. An annual review will probably be adequate, but try to fit it in with your other strategy reviews.

In this chapter you should have designed, shared, and made a plan to review your:

  • Operational Strategy.
  • Organizational Structure (updated as necessary).
  • Operational Mix.
  • R&D Strategy.
  • Production Strategy.
  • Delivery Strategy.