Operational Effectiveness + Strategy Development

By M. Isi Eromosele

In strategy development, companies must be flexible enough to respond quickly to competitive and market changes. They would have to benchmark continuously to achieve operational best practices and gain efficiencies. Additionally, they must nurture core competencies to maintain competitive advantage over their competitors.

However, many companies are failing to differentiate between operational effectiveness and strategy development. In the search for productivity gains, many companies have come to rely simply on management tools and techniques such as total quality management, time-based competition, re-engineering and change management.

Implementing management tools without an underpinning strategy is like trying to row a boat at low tide. While some companies have indeed seen incremental operational improvements, many have been frustrated by their inability to translate these gains into sustainable profitability. The result is that companies are imperceptibly moving farther away from achieving feasible competitive advantage.

Operational Effectiveness

Operational effectiveness and strategy are both essential to superior performance. However, they work in different ways. A company will outperform its rivals only if it can establish sustained differentiation it can maintain. It must provide greater value to its customers or create comparable value at a competitive cost, or do both. What follows is increased profitability. Operational effectiveness is the performance of similar activities better than competitors perform them.

Efficiency is a major component of operational effectiveness. This allows a company to implement best practices that let the firm better utilize its inputs, such as reducing the percentage of defective products or accelerating the time-to-market of new products. Conversely, strategic positioning is the performance of similar activities differently from the way rivals do them.

There are pervasive differences in the way operational effectiveness is implemented among companies. Some companies derive more form their inputs better than others because they eliminate inefficiencies, improve staff core competencies and have greater insight into managing specific process activities. Such differences in operational effectiveness are directly related to the level of profitability from one company to the other. This is because they directly affect relative cost positions and levels of differentiation.

Achieving higher productivity can apply to individual activities, to groups of linked activities or to an entire company’s activities. When a company improves its operational activities, it moves toward higher productivity. Doing so require implementation of corporate strategy, capital investment, better trained employees and improved management techniques. As new techniques are integrated into business activities, improved management approaches need to be developed as novel inputs become available.

M. Isi Eromosele is the President | Chief Executive Officer | Executive Creative Director of Oseme Group - Oseme Creative | Oseme Consulting | Oseme Finance

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