Figure 3.3 The four perspectives on operations strategy
Perspectives on operations strategy
Different authors have slightly different views and definitions of operations strategy. Between them, four ‘perspectives’ emerge:3
● Operation strategy is a top-down reflection of what the whole group or business wants to do.
● Operations strategy is a bottom-upactivity where operations improvements cumulatively build strategy.
● Operations strategy involves translating market requirementsinto operations decisions.
● Operations strategy involves exploiting the capabilities of operations resourcesin chosen markets.
None of these four perspectives alone gives the full picture of what operations strategy is. But together they provide some idea of the pressures which go to form the content of operations strategy. We will treat each in turn (seeFigure 3.3).
strategy of the corporate group of which it is a part. Similarly, within the business, functional strategiesneed to consider what part each function should play in contributing to the strategic objectives of the business. The operations, marketing, product/service development and other functions will all need to consider how best they should organize themselves to support the business’s objectives.
So, one perspective on operations strategy is that it should take its place in this hierarchy of strategies. Its main influence, therefore, will be whatever the business sees as its strategic direction. For example, a printing services group has a company which prints packaging for consumer products. The group’s management figures that, in the long term, only companies with significant market share will achieve substantial profitability. Its corporate objectives there- fore stress market dominance. The consumer packaging company decides to achieve volume growth, even above short-term profitability or return on investment. The implication for operations strategy is that it needs to expand rapidly, investing in extra capacity (factories, equipment and labour) even if it means some excess capacity in some areas. It also needs to establish new factories in all parts of its market to offer relatively fast delivery. The import- ant point here is that different business objectives would probably result in a very different operations strategy. The role of operations is therefore largely one of implementing or
‘operationalizing’ business strategy. Figure 3.4 illustrates this strategic hierarchy, with some of the decisions at each level and the main influences on the strategic decisions.
‘Bottom-up’ strategies
The ‘top-down’ perspective provides an orthodox view of how functional strategies shouldbe put together. But in fact the relationship between the levels in the strategy hierarchy is more complex than this. Although it is a convenient way of thinking about strategy, this hierarchical
Figure 3.4 The top-down perspective of operations strategy and its application to the printing services group
Functional strategy
model is not intended to represent the way strategies are always formulated. When any group is reviewing its corporate strategy, it will also take into account the circumstances, experiences and capabilities of the various businesses that form the group. Similarly, businesses, when reviewing their strategies, will consult the individual functions within the business about their constraints and capabilities. They may also incorporate the ideas which come from each func- tion’s day-to-day experience. Therefore an alternative view to the top-down perspective is that many strategic ideas emerge over time from operational experience. Sometimes companies move in a particular strategic direction because the ongoing experience of providing products and services to customers at an operational level convinces them that it is the right thing to do.
There may be no high-level decisions examining alternative strategic options and choosing the one which provides the best way forward. Instead, a general consensus emerges from the operational level of the organization. The ‘high-level’ strategic decision-making, if it occurs at all, may confirm the consensus and provide the resources to make it happen effectively.
Suppose the printing services company described previously succeeds in its expansion plans. However, in doing so it finds that having surplus capacity and a distributed network of factories allows it to offer an exceptionally fast service to customers. It also finds that some customers are willing to pay considerably higher prices for such a responsive service. Its experiences lead the company to set up a separate division dedicated to providing fast, high- margin printing services to those customers willing to pay. The strategic objectives of this new division are not concerned with high-volume growth but with high profitability.
This idea of strategy being shaped by operational level experience over time is sometimes called the concept of emergent strategies.4Strategy is gradually shaped over time and based on real-life experience rather than theoretical positioning. Indeed, strategies are often formed in a relatively unstructured and fragmented manner to reflect the fact that the future is at least partially unknown and unpredictable (seeFigure 3.5). 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 specific decision-making. Yet while emergent strategies are less easy to categorize, the principle governing a bottom-up perspective is clear: shape the operation’s objectives and action, at least partly, by the knowledge it gains from its day-to-day activities. The key virtues required for shaping strategy from the bottom up are an ability to learn from experience and a philosophy of continual and incremental improvement.
Emergent strategies
Figure 3.5 The ‘bottom-up’ perspective of operations strategy and its application to the printing services company