Strategy vs Operations: Understanding The Difference

Topics: Strategic Management, Strategy

In today’s competitive business world, effective managers need to understand the difference between the operational side of the business and the strategy side of the business.

Expanded knowledge of how these two business engines can work in parallel with one another will drive better performance and competitiveness for the organization.

We have observed many organizations in which the line between the operational and strategic engines of the business can become blurred and confusing.

Understanding the tension that exists between these two business functions will help managers recognize ways to reconcile those differences. When that happens, managers will see ways they can play a role in each of these important aspects of the business.

To provide greater clarity, think of operations and strategy as two separate, but related, engines on a boat. Both engines propel the boat forward. While forward movement can occur with only one engine, the boat moves faster and is more responsive if both engines are running efficiently.

Each engine is important, and each engine requires fuel, maintenance, and skillful attention so the boat’s ability to deliver results is optimized.

Think of your organization as a big boat. If we focus all of our attention, effort, and resources solely on the operations side of the business, we put the whole organization at risk. This risk comes from the operational engine running harder.

Being so focused on operations may seem like the smart thing to do at the moment, but over the long run, your efficiency may suffer. Running one engine hard could quickly move you in a direction that will backfire, taking your future competitive advantage with it. The idea of focusing solely on the strategic engine is equally bad.

Without the operational capacity to implement or take advantage of our insights about future innovations, processes, or market needs, all of our strategic effort and planning will be for nothing. We must understand and balance both sides of the business, and to do that well, a greater depth of understanding is necessary. Let’s get started.

The Operational Engine of the Business

Most individuals can successfully explain what the operational side of the business does.  Because many people are directly connected to and support the operational engine in one way or another, “operations” is easy to understand.

Think of the operational engine as the current value chain of activities that drives the delivery of business objectives. Those core business activities familiar to most people include:

  • Production
  • Logistics
  • IT
  • Finance
  • Marketing
  • Sales
  • Service

The operational engine is concerned with executing on everyday activities and commitments. Think of operations as the “How’s” of the organization using the following questions:

  • How do we produce our product or service right now?
  • How do we respond to customer orders this week?
  • How do we improve efficiencies in our invoicing system this month?
  • How do we drive costs down and maximize profitability?
  • How do we sell to our current customers?

The purpose of the operational engine is to keep the current activities in the organization moving and functioning at peak levels. We focus a lot of our energy, resources, and brain power on how to best execute these activities today while also executing them well.

Most people can and do have a positive influence on the organization’s current activities. Contributing effort towards the organization’s daily business requirements provides value and organizations need to develop and maintain a culture of continuous improvement in order to constantly become better and more efficient along the value chain.

This is extremely important, because if we are ineffective on the operational side, strategic positioning ultimately doesn’t matter.

The Strategic Engine

Strategy asks what you could be doing to equip and transform the operational engine in order to be competitive in the long run. Its intent is to help the organization discover new sources of competitive advantage.

In simple terms, the “strategy engine” is driven by four questions:

  1. Where should we compete in the future? (The future space we will operate within)
  2. How should we compete in the future? (The future space we will operate within)
  3. What should we be doing?
  4. How we should be doing it?

A business strategy defines how the business and its members should evolve in order to achieve long-term success. We are asked to discover new sources of competitive advantage and perform activities differently, better, and at a lower cost compared to our rivals in the market place.

A strategy asks questions concerning new solutions, services, and concepts the business may want to offer, as well as new markets and customers you may want to serve. The strategy engine needs to work in tandem with the operational engine, understanding threats and opportunities, experimenting with new processes and solutions, and shaping the future so the organization positions itself to win in both the short- and long-term.

The strategy engine tends to have a long-term outlook—typically 3 to 5 years—but strategy is not wedded to this time frame; each business and each function in the value chain of activities is different and, as a result, their strategic timing will vary widely.

For those in the consumer electronics industry, 10 months may be considered long-term. For those in the energy business, 10 years may be more realistic long-term timeframe.

The Strategic Engine helps the business make changes or adjust its direction to ensure that the organization is adding value for customers, owners, and employees and doing its best work while avoiding misfires. Strategy looks at:

  • Offering quality products and services that customers will need in the future
  • Taking advantage of new technologies
  • Being prepared for future environmental factors or calamities
  • Responding to possible new substitutes or the predatory actions of rivals
  • Anticipating future needs before competitors do

Everyone in the organization needs to understand the strategy, offer ideas, and craft a supporting strategic plan that aligns with the overarching strategy of the business. The operational workforce will largely determine whether the strategic shifts will succeed or fail as the operation adapts to a brave, new strategic change.

If the strategic engine does its part, the organization will avoid the calcification and atrophy that occurs when a business doesn’t think ahead and disposes of strategic initiatives. If you give it proper attention, the strategic engine will take you in a direction that leads to:

  • Growth (of the people and the business)  {Insert Link Here}
  • Secure opportunities for people
  • Increased shareholder value for owners
  • Improved services for customers
  • Greater market share

It takes a lot of discipline to simultaneously manage the two engines that drive successful business forward. A perfect balance between operations and strategy will never exist; some days will require greater emphasis on operations; other days will be heavily focused on future-oriented strategic planning and execution.

But those businesses that don’t pay attention to both engines will soon find the market’s currents are driving them to ruin on the rocks of Shipwreck Point. Don’t let your ship sink down into the depths.

IF you carefully manage and maintain both your operational and your strategic engines, you’ll find yourself clearly navigating your business towards the destinations on the horizon—and the future of your dreams.

Share and Enjoy

Pinterest

Need help in developing the people in your organization?

Comments

Leave a Comment