Process of Operations Strategy Sustainable Alignment

OverviewThe process of achieving sustainable alignment of market requirements with operations resources The process of using substitutes for strategyThe process of implementing operations strategy

What is sustainable Alignment?Why is sustainability of alignment so important?What is formulation process trying to achieve?What are the practical challenges of formulating operations strategies?

What is sustainable alignment?The process of continually reconciling operations resources with market requirements to achieve a degree of alignment or fitThe process of achieving the alignment between parts of the firm responsible for marketing activities and those responsible for resource management activities is difficult, sinceUncertain nature of the market does not provide the clear objectives to develop the operations resourcesOperations capabilities or constraints of operations resources may not be always predictable

What is sustainable alignment?Since different parts of the firm are engaged in pursuing different objectives there arises lack of alignment between market requirements and operations resourcesAlignment means a balance between required market performance and actual operations performanceSo when an alignment is achieved, customers do not expect levels of operations performance which the firm is unable to supply - IDEAL SITUATION

What is sustainable alignment? A conceptual modelNature and level of market requirements - reflect customers needs or shaped by firms marketing activityStrength of brand or reputationDegree of differentiationExtent of market promisesLevel and nature of firms operations resources and process capabilitiesAbility of operations to achieve competitive objectivesEfficiency with which operations utilizes resourcesAbility of firms resources to align with business processes

Should operations resources align with the market or vice versa?Task of achieving alignment can be two waysFirms can identify market requirements and align operations resources to match themTraditional top down hierarchy of strategiesOperations to analyze resources and find market opportunities that align with the resourcesAlignment is both static and dynamicHow well is the resources aligned to market needsWhat changes in resources are required to align with changing market needs

Fit can also mean that market requirements are moved to exploit operations resource capabilities

Fit operations resources to market requirementsOperations capabilitiesOperations strategy decision areasOperations performance objectivesMarket positioning Market segmentationCompetitor activityUnderstand marketsDefine competitive positionState market requirements in terms of operations performance objectivesMake strategic operations decisions to enhance core capabilities

Fit market positioning to operations resources capabilitiesDetermine competitive positionDefine market potential of operations performanceMake appropriate strategic operations decisionsIdentify core capabilitiesUnderstand resources and processesOperations capabilitiesOperations strategy decision areasOperations Performance Potential market positioning Tangible and intangible resourcesOperations processes

Achieving alignment at different levelsFit between market requirements and operations capabilitiesIf the requirements placed by the market on operations is not demanding, then the level of operations capabilities is not high.More demanding the market is, then level of operations capabilities is highAchieving alignment is a necessity, not sufficient condition for successful operations strategyFirms would achieve alignment at a level that implies some degree of long term competitive success (Eg. Philips plastic tape deck mechanism)

Market requirements Level of operations resource capabilityIn operations strategy fit is the alignment between market requirements and operations capabilityLine of fitAlignment at a high levelXYX1Y1Alignment at a low levelAB

Achieving alignment at different levelsRefer the graph showing the alignment between market and operations capabilitiesFirms would assume that Point B is more desirable than Point A, since aligning at a higher level signifies a financially successful positionHigh levels of market performance, achieved through high level of operations capability will be more difficult for the competitors to match

Excessively tight fit can increase the risks of misalignment between market requirements and operations resource capabilityMarket requirements Level of operations resource capabilityLine of fitMovement in market requirements and operations resources produces misalignmentTight fit

Tight alignment and loose alignmentTight alignmentWell defined statement of market requirements and a narrow set of operations capabilitiesMarkets and operations resource capabilities may change over timeMarkets are dynamic and exhibit unexpected changes Operations resource capabilities can show unexpected movements, may be at a slower paceIf the alignment between market requirements and operations capabilities is very narrow, there can be always a possibility that the two can get misaligned

Tight alignment and loose alignmentStrategies should be formed repeatedly over time to address changes in both market requirements and operations resourcesMany big companies have gone into oblivion as they did not review their operations strategies time and again (Eg. Kodak)These companies might have aligned market and operations capabilities at one point of time but failed to realign as both the market and operations capabilities changedA broader (loose) set of capabilities and market relationships can provide some stabilityExample could be Dell, Toyota

Excessively tight fit can increase the risks of misalignment between market requirements and operations resource capabilityMarket requirements Level of operations resource capabilityLine of fitLooser fit between market requirements and operations resources preserves alignmentLoose fit

Static and dynamic sustainabilityStatic approach to sustainability means to develop resources which are considered valuableScarce, difficult to move, difficult to copy, or difficult to find substitute for (eg. INTEL chips)Because they are difficult to replicate such resources act to sustain competitive advantageOverall performance of a firm depends on how its strategy takes into account the structure of the industry it is inDynamic approach to sustainabilityEven in isolated markets, customer requirements evolve and along with that operations capabilities need to evolveOperations can raise the barrier through innovation and change to maintain sustainability (Eg. Philips plastic tape deck mechanism)

Learning, appropriation and path dependencyFor any operation to achieve dynamic sustainability Operations strategy must encourage learning to make sure that operations knowledge is carried forward with timeOperations strategy must ensure that the firm appropriates (captures the value of) the competitive benefits that are derived from any innovationOperations strategy must take into account that innovations are influenced by what has happened before

Organizational LearningIn uncertain environments it may be better for an organization to adapt as circumstance changeMore uncertain the environment, the more an organization needs to be flexible and develop its ability to learn from events.Development of insights and knowledge through learningEstablishing connections between past actions, the results of such action and future intentions How does an operations strategy encourage, facilitate, exploit learning in order to develop strategic sustainability

Single and double loop learningSingle loop learning occurs when there is a repetitive association between input and output factorsEg. Statistical process control output from this can be used to control supplier quality, manufacturing consistency, trainingDouble loop learning questions fundamental objectives and market positions and culture of the organization.Challenges existing operating assumptions and remain open to changes in the competitive environmentAn operation needs both single loop learning to create consistency and stability and double loop learning develop internal and external objectives

Examine the performance of operations processesOperations innovationCompare this performance against objectivesDevelop new insights and capabilitiesSingle loop learning in operations

Reduce performance of operations processesOperations innovation less easyPerformance objectives less appropriateInsights and capabilities less usefulShifts in technology, processes or markets, leading to improved competitor performanceThe potential limitations of single-loop learningCompare this performance

Examine the performance of operations processesOperations innovationCompare this performance against objectivesDevelop new insights and capabilitiesQuestion the relevance of objectivesDevelop new (more relevant objectives)Double-loop learning questions the appropriateness of operations performance

Process choiceOperations strategy Corporate objectives Marketing strategyHow do products or services win orders?Step 1Step 2Step 3Step 4Step 5Prof Terry Hill framework of operations strategy formulationPriceQuality Delivery speedDelivery dependabilityProduct/service rangeProduct/service designBrand imageTechnical serviceProduct/service markets and segmentsRangeMixVolumesStandardisation or customisationInnovationLeader or followerGrowthProfitROIOther financial measuresProcess technology Trade-offs embodied in processRole of inventoryCapacity, size, timing, locationFunctional supportOperations planning and control systemsWork structuringPayment systemsOrganisational structureInfrastructure

The Platts-Gregory procedureKen Platts and Mike Gregory incorporates a form of prioritization based upon an assessment of relative competitive performanceStage 1 involves developing an understanding of the market position of the organization it seeks to identify the factors that are required by the market and then compares these to a level of achieved performanceStage 2 seeks to identify the capabilities of the operation. Decision categories are provided to help managers classify current operations practice and then link these practices to the priorities identified in stage 1.organisationStage 3 encourages managers to review different options they have for improvement and developing a new operations strategy against the backdrop of market criteria

FacilitiesCapacitySpan of processProcessesHuman resourcesQualityControl policiesSuppliersNew productsThe existing operationWhat do we need to do to improve the revised operations strategy?What the market wants?FeaturesQualityDeliveryFlexibilityPriceOpportunities and threatsThe PlattsGregory procedureHow the operations performsFeaturesQualityDeliveryFlexibilityPricePrioritisation based upon an assessment of relative competitive performanceUnderstanding of the market position of the organisationIdentify the capabilities of the organisationDeveloping a new operations strategy against the backdrop of market criteria

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