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Chapter 3 Operations strategy 63
Implement strategy
Support strategy
Drive strategy
responsible for its competitive success. This means that they should be able to, in turn, master
the skills to first ‘implement’, then ‘support’, and then ‘drive’ operations strategy.
Implementing business strategy. The most basic role of operations is to implement strategy.
Most companies will have some kind of strategy but it is the operation that puts it into practice.
You cannot, after all, touch a strategy; you cannot even see it; all you can see is how the
operation behaves in practice. For example, if an insurance company has a strategy of moving
to an entirely online service, its operations function will have to supervise the design of all
the processes which allow customers to access online information, issue quotations, request
further information, check credit details, send out documentation and so on. Without
effective implementation even the most original and brilliant strategy will be rendered totally
ineffective.
Supporting business strategy. Support strategy goes beyond simply implementing strategy.
It means developing the capabilities which allow the organization to improve and refine its
strategic goals. For example, a mobile phone manufacturer wants to be the first in the market
with new product innovations so its operations need to be capable of coping with constant
innovation. It must develop processes flexible enough to make novel components, organize
its staff to understand the new technologies, develop relationships with its suppliers which
help them respond quickly when supplying new parts, and so on. The better the operation is
at doing these things, the more support it is giving to the company’s strategy.
Driving business strategy. The third, and most difficult, role of operations is to drive strategy
by giving it a unique and long-term advantage. For example, a specialist food service company
supplies restaurants with frozen fish and fish products. Over the years it has built up
close relationships with its customers (chefs) as well as its suppliers around the world (fishing
companies and fish farms). In addition it has its own small factory which develops and
produces a continual stream of exciting new products. The company has a unique position
in the industry because its exceptional customer relationships, supplier relationship and new
product development are extremely difficult for competitors to imitate. In fact, the whole
company’s success is based largely on these unique operations capabilities. The operation
drives the company’s strategy.
The four-stage model of
operations contribution
Hayes and Wheelwright’s four stages of operations contribution
The ability of any operation to play these roles within the organization can be judged by
considering the organizational aims or aspirations of the operations function. Professors
Hayes and Wheelwright of Harvard University, 2 developed a four-stage model which can
be used to evaluate the role and contribution of the operations function. The model traces
the progression of the operations function from what is the largely negative role of stage 1
operations to its becoming the central element of competitive strategy in excellent stage 4
operations. Figure 3.2 illustrates the four stages.
Stage 1: Internal neutrality. This is the very poorest level of contribution by the operations
function. It is holding the company back from competing effectively. It is inward-looking
and, at best, reactive with very little positive to contribute towards competitive success.
Paradoxically, its goal is ‘to be ignored’ (or ‘internally neutral’). At least then it isn’t holding
the company back in any way. It attempts to improve by ‘avoiding making mistakes’.
Stage 2: External neutrality. The first step of breaking out of stage 1 is for the operations
function to begin comparing itself with similar companies or organizations in the outside
market (being ‘externally neutral’). This may not immediately take it to the ‘first division’ of
companies in the market, but at least it is measuring itself against its competitors’ performance
and trying to implement ‘best practice’.
Stage 3: Internally supportive. Stage 3 operations are amongst the best in their market. Yet,
stage 3 operations still aspire to be clearly and unambiguously the very best in the market.