Operations management chapter 3 operations strategy summary
Strategy is the total pattern of decisions and actions that position the organization in its
environment and that are intended to achieve long-term goals.
Operations strategy
Operations strategy concerns the pattern of strategic decisions and actions that set the role,
objectives and activities of the operations.
Operations= the resources that create products and services.
Operational= is the opposite of strategic, meaning day-to-day and detailed.
Operation strategy has content and process. The content concerns the specific decisions
which are taken to achieve specific objectives. The process is the procedure which is used
within a business to formulate its strategy.
From implementing to supporting driving strategy
Most business expect their operations strategy to improve operations performance over
time. This means that they should be able to, in turn, master the skills first to ‘implement’.
Then ‘support’ and then ‘drive’ operations strategy.
Implementing business strategy
The most basic role of operations is to implement strategy.
Supporting business strategy
Support strategy goes beyond simply implementing strategy. It means developing the
capabilities which allow the organization to improve and refine its strategic goals.
Driving business strategy
The third, and most difficult, role of operations is to drive strategy by giving it a unique and
long-term advantage.
Operations should try, progressively, to implement, support and drive strategy.
Hayes and Wheelwright’s four stages of operations contribution
Hayes and Wheelwright developed a four-stage model which can be used to evaluate the
role and contribution of the operations function. The model traces the progression if the
operations function from what is the largely negative role of stage 1 operations to its
becoming the central element of competitive strategy in excellent stage 4 operations.
Stage 1: Internal neutrality (Holding the organization back)
This is the very poorest level of contribution by the operations function. It is holding the
company back from competing effectively. It is inward looking and, at best, reactive with very
little positive to contribute towards competitive success. The goal is to be internally neutral.
It attempts to improve by ‘avoiding making mistakes’.
Stage 2: External neutrality (as good as the competitors)
, The first step of breaking out of stage 1 is for the operations function to begin comparing
itself with similar companies or organizations in the outside market (being ‘externally
neutral’). This may not immediately take it to the first division of companies in the market,
but at least it is measuring itself against its competitors’ performance and trying to
implement ‘best practice’.
Stage 3: Internally supportive (clearly the best in the industry)
Stage 3 operations are among the best in their market. Yet, stage 3 operations still aspire to
be clearly and unambitiously the very best in the market. They achieve this by gaining a clear
view of the company’s competitive or strategic goals and supporting it by developing
appropriate resources. The operation is trying to be ‘internally supportive’ by providing a
credible operations strategy.
Stage 4: Externally supportive (redefining industry expectations)
The company views the operations function as providing the foundation for its competitive
success. Operations look to the long term. Stage 4 operations are innovative, creative and
proactive and are driving the company’s strategy by being ‘one step ahead’ of competitors –
what Hayes and Wheelwright call being ‘externally supportive’.
Perspectives on operation strategy
Different authors have slightly different views and definitions of operations strategy. Between
them 4 perspectives emerge:
- Top-down strategy: what the whole group or business wants to do.
- Bottom-up strategy: activity where operations improvements cumulatively build
strategy. It is based on day-to-day experiences and suggest what operations must do.
- Translating market requirements: what the market position requires operations to
do.
- Exploiting capabilities of operation resources: what operations resources can do.
Top-down strategies
So, one perspective on operations strategy is that is should take its place in this hierarchy of
strategies. Its main influence, therefore, will be whatever de business sees as its strategic
direction. It is from the top-> down. There is a corporate strategy what is determined by the
direction. Every business unit needs to have their own business strategy. And there is a
functional strategy, that determines how a particular function within that company should
work to contribute to the strategic goals of the company.
Bottom-up strategies
Looked at operational level and day-to-day experiences what operations should do. It is an
upcoming strategy and it is called emergent strategies. This view of operations strategy is
perhaps more descriptive of how things really happen, but at first glance it seems less useful
in providing a guide for decision making.
The top-down perspective sets the overall direction and objectives for operations decisions
and activities. In fact, in order to implement top-down strategy, the day-to-day activities of
the operation must be aligned with the strategy.
Market-requirements-based strategies
Strategy is the total pattern of decisions and actions that position the organization in its
environment and that are intended to achieve long-term goals.
Operations strategy
Operations strategy concerns the pattern of strategic decisions and actions that set the role,
objectives and activities of the operations.
Operations= the resources that create products and services.
Operational= is the opposite of strategic, meaning day-to-day and detailed.
Operation strategy has content and process. The content concerns the specific decisions
which are taken to achieve specific objectives. The process is the procedure which is used
within a business to formulate its strategy.
From implementing to supporting driving strategy
Most business expect their operations strategy to improve operations performance over
time. This means that they should be able to, in turn, master the skills first to ‘implement’.
Then ‘support’ and then ‘drive’ operations strategy.
Implementing business strategy
The most basic role of operations is to implement strategy.
Supporting business strategy
Support strategy goes beyond simply implementing strategy. It means developing the
capabilities which allow the organization to improve and refine its strategic goals.
Driving business strategy
The third, and most difficult, role of operations is to drive strategy by giving it a unique and
long-term advantage.
Operations should try, progressively, to implement, support and drive strategy.
Hayes and Wheelwright’s four stages of operations contribution
Hayes and Wheelwright developed a four-stage model which can be used to evaluate the
role and contribution of the operations function. The model traces the progression if the
operations function from what is the largely negative role of stage 1 operations to its
becoming the central element of competitive strategy in excellent stage 4 operations.
Stage 1: Internal neutrality (Holding the organization back)
This is the very poorest level of contribution by the operations function. It is holding the
company back from competing effectively. It is inward looking and, at best, reactive with very
little positive to contribute towards competitive success. The goal is to be internally neutral.
It attempts to improve by ‘avoiding making mistakes’.
Stage 2: External neutrality (as good as the competitors)
, The first step of breaking out of stage 1 is for the operations function to begin comparing
itself with similar companies or organizations in the outside market (being ‘externally
neutral’). This may not immediately take it to the first division of companies in the market,
but at least it is measuring itself against its competitors’ performance and trying to
implement ‘best practice’.
Stage 3: Internally supportive (clearly the best in the industry)
Stage 3 operations are among the best in their market. Yet, stage 3 operations still aspire to
be clearly and unambitiously the very best in the market. They achieve this by gaining a clear
view of the company’s competitive or strategic goals and supporting it by developing
appropriate resources. The operation is trying to be ‘internally supportive’ by providing a
credible operations strategy.
Stage 4: Externally supportive (redefining industry expectations)
The company views the operations function as providing the foundation for its competitive
success. Operations look to the long term. Stage 4 operations are innovative, creative and
proactive and are driving the company’s strategy by being ‘one step ahead’ of competitors –
what Hayes and Wheelwright call being ‘externally supportive’.
Perspectives on operation strategy
Different authors have slightly different views and definitions of operations strategy. Between
them 4 perspectives emerge:
- Top-down strategy: what the whole group or business wants to do.
- Bottom-up strategy: activity where operations improvements cumulatively build
strategy. It is based on day-to-day experiences and suggest what operations must do.
- Translating market requirements: what the market position requires operations to
do.
- Exploiting capabilities of operation resources: what operations resources can do.
Top-down strategies
So, one perspective on operations strategy is that is should take its place in this hierarchy of
strategies. Its main influence, therefore, will be whatever de business sees as its strategic
direction. It is from the top-> down. There is a corporate strategy what is determined by the
direction. Every business unit needs to have their own business strategy. And there is a
functional strategy, that determines how a particular function within that company should
work to contribute to the strategic goals of the company.
Bottom-up strategies
Looked at operational level and day-to-day experiences what operations should do. It is an
upcoming strategy and it is called emergent strategies. This view of operations strategy is
perhaps more descriptive of how things really happen, but at first glance it seems less useful
in providing a guide for decision making.
The top-down perspective sets the overall direction and objectives for operations decisions
and activities. In fact, in order to implement top-down strategy, the day-to-day activities of
the operation must be aligned with the strategy.
Market-requirements-based strategies
