What is the difference between operational effectiveness and strategy

It provides a completely different purpose to the work you do. It frames how different performance management systems serve different purposes in an organisation.

You of course need a scorecard for operational management and checking your effectiveness. You may also need a higher level one to check that your strategy is working. The central message here is very clear. Of course do thing effectively, benchmark, adopt good practices, use six-sigma and lean, outsource if you think that will help.

However, most of these are copycat approaches to strategy that may help you keep up with your competitors. They are a necessity. They are not the basis for a distinct or sustainable competitive advantage. Your email address will not be published. Thus, "positions built on systems of activities are far more sustainable than those built on individual activities" p. Such systems are difficult to untangle and imitate even if the competitors are able to identify the interconnections.

Further, a competitor benefits very little by imitating only a few activities within the whole system. Thus, achieving fit is an arduous task as it means integrating decisions and actions across many independent subunits. Additionally, fit among activities creates pressures and incentives to improve operational effectiveness, which makes imitation even harder. Fit means that poor performance in one activity will degrade the performance in others, so that weaknesses are exposed and more prone to get attention.

On the other hand, improvements in one activity will "pay dividends in others" p. Strategic positions should have a horizon of a decade or more, not of a single planning cycle, as continuity promotes improvements in individual activities and the fit across activities, allowing an organization to build unique capabilities and skills custom-fitted to its strategy. Frequent shifts in strategy are not only costly but inevitably leads to hedged activity configurations, inconsistencies across functions, and organizational dissonance.

If there is no fit among activities, there is no distinctive strategy and little sustainability. Moreover, the fundamental problem lies in the "best-practice" mentality of the managers, who believe in making no trade-offs, incessantly pursuing operational effectiveness, and imitating competitors to catch up in the race for operational effectiveness.

Thus, managers simply do not understand the need to have a strategy. However, most companies start with a unique strategic position involving clear trade-offs. Nevertheless, with the passage of time and the pressures of growth, companies are led to make compromises, which were at first, almost imperceptible. Thus, through a succession of incremental changes, which seemed sensible at the time, companies have compromised their way to homogeneity with their rivals.

Compromises and inconsistencies in the pursuit of growth eventually erode the competitive advantage of a company and their uniqueness. Rivals continue to match each other until desperation breaks this vicious cycle, and results in a merger or downsizing to the original positioning. According to Porter, efforts to grow blur uniqueness, creates compromises, reduces fit, and ultimately undermines competitive advantage.

One approach to persevering growth and reinforcing strategy is to concentrate on deepening a strategic position rather than broadening and compromising it. A company can do so by leveraging the existing activity system by offering features or services that rivals would find impossible or costly to match on a stand-alone basis.

But currently many companies attempt to grow by adding hot features, products, or services without adapting them to their strategy. Moreover, strong leaders, who are willing to make choices, are essential. General management should do more than just stewardship of individual functions. Further, the leader should decide which changes in the industry and customer demands, is the company going to respond to.

The leader should be able to teach others in the organization about strategy - and to say no. Strategy is about choosing what to do as well as what not to do. Deciding which target group of customers, varieties, and needs the company should serve is fundamental to developing a strategy. Strategy is also however, in deciding not to serve other customers or needs and not to offer certain features or services.

Thus, strategy requires continuous discipline and clear communication. Strategy should guide employees in making choices that arise because of trade-offs in their individual activities and in day-to-day decisions. Moreover, managers need to understand that operational effectiveness, although a necessary part of management, is not strategy. Managers should be able to clearly distinguish between the two.

A company must continually improve its operational effectiveness and actively try to shift the productivity frontier; at the same time, there needs to be ongoing effort to extend its uniqueness while strengthening the fit among its activities" p. However, a company may have to change its strategic position due to a major structural change in the industry. A company should choose its new position depending on its ability to find new trade-offs and leverage a new system of complementary activities into a sustainable advantage.

Christensen, C. Making strategy: Learning by doing. Harvard Business Review November-December : , , , , , Clinton, B. Product value analysis: Strategic analysis over the entire product life cycle. De Geus, A. The living company. Harvard Business Review March-April : Fonvielle, W. This method is known as P. While strategy includes this external analysis and further internal analysis that examines the relationship between areas of the company, operational efficiency is usually only internal and unrelated to external factors that operational strategy has already assessed.

Operational efficiency should be considered an ever-evolving, continuous process, according to operational improvement firm Innovar Partners, with efficiency perfected on a weekly or even daily basis. Within a business quarter, the face of operational efficiency within a company can change dramatically. Operational strategy, on the other hand, is usually conducted on a monthly or quarterly basis, when top-level and mid-level managers meet to discuss overall company goals and objectives, and how those will be met each month or quarter.

Many of the management concepts, tools and techniques of recent years are operational effectiveness methods:. These aren't useful tools for strategic positioning because they don't help organizations stand out. Industries seize on new management tools and embrace them, so it's unlikely that yours is the only organization using them.

Strategic positioning, by contrast, is all about standing out. One strategy isn't automatically superior to another. Positioning yourself as the low-price alternative may be just as effective as positioning based on quality. It's important to remember that in practice, the two goals are not in conflict.

It should never be about operational effectiveness versus strategic positioning, where you have to choose between them. Every organization needs operational effectiveness.

Constant improvement isn't optional unless you've already achieved perfection. Strategic positioning is just as important to your branding and marketing. Effectiveness is no good if nobody's buying your wares. Fraser Sherman has written about every aspect of business: how to start one, how to keep one in the black, the best business structure, the details of financial statements.