Strategy and Operational Effectiveness

"Managers
must clearly distinguish operational effectiveness from strategy. Both are essential, but the two agendas are different. The operational agenda
involves continual improvement everywhere there are no trade-offs. Failure
to do this creates vulnerability even for companies with a good strategy.
The operational agenda is the proper place for constant change,
flexibility, and relentless efforts to achieve best practice. In contrast, the strategic agenda is the right place for defining a unique position,
making clear trade-offs, and tightening fit."
 from "What is
strategy?", Michael E. Porter, Harvard Business Review, Volume 74, Number 6

With reference to my previous post and the insightful discussions in the comments, I thought to clarify my thinking a little further.  Design (not design thinking), very clearly falls in the realm of operational effectiveness, as derived from the explanation given above – let’s use the iPod as a commonly understood example – it is very well designed. It would not have reached it’s iconic status if it were not well designed. But, to hazard a guess, since I don’t know Steve Jobs, Apple’s strategy could be said to be the leader in the market of portable, user friendly, hard drives that allow you replay the stored information. Hypothetically, mind you, and with respect to the iPod only, for the purposes of this conversation. His vision is clear and Apple’s unique value proposition – the experience – well differentiated. But his  strategy of maintaining leadership in this arena [clearly defined, per Porter's definition in the previous post] is supported by his operational effectiveness in releasing a new product [in the same product category - strategy] with a quality and frequency that leaves the other players behind.

Had he not had this clear strategy he could have done any number of things that many do to maximize the revenue generation possiblities – released an iPod clothing line, offered iPod accessories, whatever, but these would have moved him away from his core value proposition. This would have been short term thinking, how to maximise the cachet of the iPod brandname or, you could say, the result of not having a well defined strategy. By continuing to make trade-offs and tightening fit, he’s continued to maintain his strategic agenda.

[Update Feb 7 2006] BusinessWeek has this interesting news snippet today about Apple’s latest release, a  cheaper version of the Nano and  a price cut on the Shuffle, both  of these activities directly impacting the increase in shareholder value viz.,

"The only other company that has cheaper products out there is
Creative," Munster said. "So not only are Apple products the best, now
they’re also the cheapest, which makes it impossible for others to
compete."

One more link – no, I wasn’t looking for this, it just popped up in Google news – is to this interesting discussion on Apple’s iPod and it’s customer service set up, or lack thereof. I found it of interest because the author says,

Consumers, though, don’t really understand this. As much as they like
being able to buy computers for less than $1,000, they neither accept
nor understand that the trade-off is minimal tech support
. Nor do the
consumer electronics companies want to spell this out; instead, they
pretend that their service is terrific.

Thus, there is a gap between what customers expect from companies
that sell them complicated digital machines, and what companies feel
they need to do in order to insure that those machines are profitable
[...]
Its battery wears down and
can’t be easily replaced because an iPod can’t be opened up by mere
mortals. All of these were conscious design choices Apple made. Given
that the core customer is a teenager, and that even the rest of us give
our iPods a lot of wear and tear, you have to wonder.

There’s something in that, I’ll come back to it, but in the context of the rest of this post one wonders whether trade-offs in operational effectiveness are good strategy?

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8 Responses to Strategy and Operational Effectiveness

  1. jens says:

    love that clear line michael and you are drawing “strategy vs operational effectiveness”.
    now you put design (not design thinking (to use this dreadful term)) on the side of “operational effectiveness” – and that IMO is…….. veryyyyyyyyyyyyyyy right.
    what is interesting about that?
    the fact that also with the whole design thinking innovation movement QUALITY OF EXECUTION – OPERATIONAL EFFECTIVENESS moves into the center of management attention. but mind you! not necessarily through the lens of your average controller. operational effectiveness in the eyes of the consumers!
    and here now we can see something interesting: companies are rarely short of strategy but extremely often very short of excellence in execution.
    especially when it comes to aesthetical execution as in design and – god forbid – consistent aestetical execution as in brand.
    in our new economy the work of implementation and ensuring – if you want to say so – aesthetical effectiveness of organisations – is by no means trivial.
    it in fact proves to be much more tricky than pulling out some strategy out of the hat.

  2. Ralf Beuker says:

    … this is getting quite blurry now, ideed … and I want to avoid another Odo-like discussion ;-) So if anyone is interested in some deeper comments: You know where you find me …

  3. Niti Bhan says:

    Jens – in one sense you’ve hit the nail on the head with what I’m struggling to articulate, of course, but taking your insight one step further, the other side of the coin is that ‘design thinking’ – the willingless to accept fuzzy strategies, willingness to launch with a ‘not yet perfected’ prototype (Google’s Betas come to mind for example, though it may not apply to a Boeing or an Airbus since tolerance levels for failure differ between industries and products) – is a far more insightful approach to the creation of strategies because it takes the ‘user’ into account for the strategy as well. So to use your words, it’s only operational effectiveness in the eyes of the customer (design) but also strategy from the point of the end user (design thinking viz., empathy, experience et al)
    Ralf, pardon my blurriness. I’m sorry I don’t quite understand the Odo reference.

  4. niblettes says:

    Design school should list Porter’s “What is Strategy” paper as required reading. With the “I am a strategist, not just a designer” pose many designers seem to strike these days, it would be good for them to have at least some formal grounding in strategic planning. And Porter’s paper is a great start.
    Ironically, I’ve often brought up (in places like CPH127) Porter in my criticisms of the design profession. Our profession’s identity crisis and lack of respect in business stems, I believe, from our collective reluctance to specify what we will *not* do. In other words, design as a profession does not have the stomach to make the kinds of trade-offs Porter says are the essence of position and by extension strategy.
    As a result people outside of design have a very hard time understanding what it is and what value it offers (hell many inside design don’t really understand either). And many designers find themselves trapped in a tactical ghetto
    To be fair though, why would one turn to a designer to help solve strategic problems when the profession itself demonstrates so little comprehension of what strategy means and is?

  5. Niti Bhan says:

    Niblettes,
    While I’m suprised to find myself agreeing with you over so many things :), you make a lot of valid points here:
    The concept behind why one would turn to design, your last question, comes from the realization that there is only so far that markets can be grown, new products launched, etc etc from the same old same old – witness the stories I’ve linked to about Hoover – and while the understanding is still hazy, the realization is beginning that some measures that design has traditionally brought to the table, a concern for the user, empathy, the ability to visualize and synthesize a ‘whole’ may have the seeds for the next step in the evolution of business thinking and strategy. Chiefly, in that, design is not just a cost function but an approach to problem solving that may bring the required tools/tweaks/something we don’t as know yet, to take the markets and companies to the next level. Read this, and note how P&G is referred to, almost towards the end. http://www.chicagotribune.com/business/chi-0602050188feb05,1,7084459.story?coll=chi-business-hed
    At least, imho, I certainly believe so.

  6. niblettes says:

    I agree wholeheartedly–that is after all why I’m in this business. I think there are definitely a few of us who can not only talk the talk, but also walk the walk (at least I hope I’m one) in terms of design’s value as a strategic capability. There are a few of us who can answer that question in word and deed.
    But my experience in design has shown me that most designers simply can’t (and this belief gets daily affirmations from the design mailing lists I’m on). Furthermore design education seems to have failed to help student grow in a more strategic direction (despite the rhetoric).
    So I asked the question because until the discipline (and not just a few exceptional individuals) can answer this question in a consistent way, and communicate it effectively, we will simply continue to be systematically excluded from strategic conversations. This means that it will be up to each individual designer to fight the same fight over and over again to be included. This strikes me as a wasted effort.
    My question was a way of saying that perhaps we should not simplistically blame other disciplines for ghettoizing design because *they* are just too obtuse to get it (it’s so easy to blame the “other” isn’t it?). My question was a way of saying perhaps we might be our own worst enemy. Perhaps we’ve ghettoized ourselves (as Porter might suggest). It’s hard to accept blame like this. But it’s also liberating. It’s liberating because it means that we are not at the mercy of fate or some “other”. It means that we have complete control over our own deliverance—if we can only find the guts to exercise that control.
    Ok, I’ll sit down now.

  7. Niti Bhan says:

    Niblettes,
    Your comment has given me a lot to think about and I want to respond to it properly with a post, which doesn’t look like it’s going to happen only because of work, so here goes a quickie reponse,
    It seems to me that one way forward is by these very conversations that we are having, where we are articulating the strategic capabilities of design, in terms of the ‘other’ as you say. I think that the concept of ‘boundary spanners’ is not unknown, but here is a link to a previous post on this topic. http://sizematter.blogspot.com/2005/06/strategic-alliances-can-be-effective.html
    This has been a topic that I’ve wanted to come back to often – I believe that the design industry is becoming aware of the need to learn to communicate in their client’s language, i.e. the world of ROI, NPV and strategy, and that the onus is on the service provider to demonstrate the value of their service in terms of their clientele. Quite rightly, a shift is required in education and prevailing attitudes, but the fact that shift has taken place simply means that natural selection will play it’s part. As to individual designers to fight the same fight over and over again to be included, this is a nascent stage of the shift, the blurring of the lines between ‘business’ and ‘design’ and yes, there will be a measure of that, until the bodies representing the industry’s voice (are there any, or is it just a fragmented industry?) begin to speak the same language. I do not believe that any effort is wasted, it takes that effort to reach into the new, before the new becomes mainstream enough. And, where’s the fun in that? :)

  8. Perspective says:

    More on Dell and Alienware

    Yesterday’s post is still on my mind, unwieldy because I was overwhelmed by too many ideas and concepts. For clarity, I’m going to just look again at Dell and Alienware. Rant over, now one can evaluate their corporate strategy and

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