Operational Effectiveness vs Strategy final part 8

Today I have been...

Reading the final part of Porter's article Operational Effectiveness vs Strategy. (Reader p61-62)

Why?

Required reading

So What?

Operational Agenda:-

• Continuous Improvement Everywhere that no tradeoffs exist
• Fail at this and you're vulnerable irrespective of strategy
• Shifts the productivity frontier

Strategic Agenda:-

• Defining a unique position
• Make Clear Tradeoffs
• Tighten fit
• Reinforce and extend the company's position
• Demands discipline and continuity
• Must avoid distraction and compromise

Your strategic continuity should make your continuous improvement more effective. Sustainable advantage comes through the right strategy.

How will I use it?

So Porter has helped us see the difference between operational and strategic thinking. Operational thinking relates to the activities that you are carrying out. By improving operational effectiveness you are reducing costs in these areas or improving productivity, reducing risk etc. You are doing the things you do better. But so can your competitors.

Strategic thinking is more holistic. It looks at what the activities are, and how they fit, and whether you should or should not be doing them. It allows you to reflect on how the different activities help deliver the organisational mission through delivering your product or service which has a distinct, differentiating value to the market.

Operational effectiveness allows you to implement your strategy better, but on its own it is normally not enough. You will be imitated.

Porter says it is not even enough to integrate operational and strategic thinking. They work in different ways. He points out that trying to achieve operational effectiveness can actually cause a distraction from your strategy, and end up with the eventual homogenisation of your industry where it becomes hard for a customer to distinguish from all the players. Distinctiveness is at the heart of competitive strategy.

As a manager, striving for operational effectiveness should be automatic. You need this just to remain on a par with your competition. But what is important for sustained competitive advantage is to 'deliberately choose a set of activities to deliver a unique mix of value'.

(This reminds me a little of the diagrams that show Herzberg's two factor theory. Operational effectiveness is your Hygiene factors equivalent. Strategy is your motivation factors equivalent)