strategy-vs-operations

Strategy vs. Operations

Strategies are roadmaps that outline a company’s vision for the future and how supporting goals and objectives will be achieved. Operations, on the other hand, define how each department within a company plans to carry out the strategy on a weekly, monthly, or quarterly basis.

Understanding strategy and operations

To understand the relationship between strategy and operations, we like to think of each as an outboard motor on a boat.

When both motors are operating efficiently, the boat moves forward purposefully and in a straight line. When only one motor is running, however, the boat veers to one side, completes a circle, and ends up where it started.

When a business focuses on operation and ignores strategy, its longevity is compromised.

When operations are sacrificed for strategy, the business does not understand its operational capacity – or what it can produce in a given amount of time.

This results in a strategic plan without any real substance since leaders do not understand the needs of customers or the wider industry.

Operations are important since many employees are involved in the day-to-day running of the business and can provide valuable information about what actually works.

Put another way, the business can leverage its operations staff to create value that drives sales and meets business objectives at the same time.

This also ensures that the business secures an adequate ROI on operation activities that can be resource-intensive.

Strategy is also important for another reason. It defines how operations are performed and, in an ideal world, secures the company a newfound competitive advantage.

This makes strategy a vital tool in creating and sustaining success that is aligned with overarching goals and objectives. 

Strategy vs. operations example

With Microsoft and Amazon dominant in the cloud computing sector, IBM executives knew they needed to do something radical to compete.

In response, IBM acquired Red Hat in a landmark deal worth $34 billion that was ultimately driven by a growth strategy to become the leading hybrid multi-cloud provider.

While the deal was made public in 2018, IBM executives were no doubt discussing it many months or years beforehand.

This was particularly important for a deal as complex as the acquisition of Red Hat, which necessitated that every IBM department was evaluated and redefined to ensure it supported the company’s growth strategy.

The sales department, for example, would likely review processes, metrics, content, and tools post-acquisition and then adjust operations to enable sales teams to increase revenue.

The customer service department would also undertake a similar review to determine what changes were necessary to ensure customer success and loyalty.

Key takeaways:

  • Strategies are roadmaps that outline a company’s vision for the future and how supporting goals and objectives will be achieved. Operations define how each department plans to carry out the strategy on a weekly, monthly, or quarterly basis.
  • When a business focuses on operation and ignores strategy, its longevity is compromised. When operations are sacrificed for strategy, the business does not understand its market, customers, or growth potential.
  • IBM’s deal to acquire Red Hat was in line with the company’s growth strategy to create a new market in cloud computing. At the departmental level, the deal necessitated that various operations be altered to support the strategy post-acquisition.

FourWeekMBA Business Toolbox

Business Engineering

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Tech Business Model Template

business-model-template
A tech business model is made of four main components: value model (value propositions, missionvision), technological model (R&D management), distribution model (sales and marketing organizational structure), and financial model (revenue modeling, cost structure, profitability and cash generation/management). Those elements coming together can serve as the basis to build a solid tech business model.

Web3 Business Model Template

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A Blockchain Business Model according to the FourWeekMBA framework is made of four main components: Value Model (Core Philosophy, Core Values and Value Propositions for the key stakeholders), Blockchain Model (Protocol Rules, Network Shape and Applications Layer/Ecosystem), Distribution Model (the key channels amplifying the protocol and its communities), and the Economic Model (the dynamics/incentives through which protocol players make money). Those elements coming together can serve as the basis to build and analyze a solid Blockchain Business Model.

Asymmetric Business Models

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In an asymmetric business model, the organization doesn’t monetize the user directly, but it leverages the data users provide coupled with technology, thus have a key customer pay to sustain the core asset. For example, Google makes money by leveraging users’ data, combined with its algorithms sold to advertisers for visibility.

Business Competition

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In a business world driven by technology and digitalization, competition is much more fluid, as innovation becomes a bottom-up approach that can come from anywhere. Thus, making it much harder to define the boundaries of existing markets. Therefore, a proper business competition analysis looks at customer, technology, distribution, and financial model overlaps. While at the same time looking at future potential intersections among industries that in the short-term seem unrelated.

Technological Modeling

technological-modeling
Technological modeling is a discipline to provide the basis for companies to sustain innovation, thus developing incremental products. While also looking at breakthrough innovative products that can pave the way for long-term success. In a sort of Barbell Strategy, technological modeling suggests having a two-sided approach, on the one hand, to keep sustaining continuous innovation as a core part of the business model. On the other hand, it places bets on future developments that have the potential to break through and take a leap forward.

Transitional Business Models

transitional-business-models
A transitional business model is used by companies to enter a market (usually a niche) to gain initial traction and prove the idea is sound. The transitional business model helps the company secure the needed capital while having a reality check. It helps shape the long-term vision and a scalable business model.

Minimum Viable Audience

minimum-viable-audience
The minimum viable audience (MVA) represents the smallest possible audience that can sustain your business as you get it started from a microniche (the smallest subset of a market). The main aspect of the MVA is to zoom into existing markets to find those people which needs are unmet by existing players.

Business Scaling

business-scaling
Business scaling is the process of transformation of a business as the product is validated by wider and wider market segments. Business scaling is about creating traction for a product that fits a small market segment. As the product is validated it becomes critical to build a viable business model. And as the product is offered at wider and wider market segments, it’s important to align product, business model, and organizational design, to enable wider and wider scale.

Market Expansion Theory

market-expansion
The market expansion consists in providing a product or service to a broader portion of an existing market or perhaps expanding that market. Or yet, market expansions can be about creating a whole new market. At each step, as a result, a company scales together with the market covered.

Speed-Reversibility

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Asymmetric Betting

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Growth Matrix

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In the FourWeekMBA growth matrix, you can apply growth for existing customers by tackling the same problems (gain mode). Or by tackling existing problems, for new customers (expand mode). Or by tackling new problems for existing customers (extend mode). Or perhaps by tackling whole new problems for new customers (reinvent mode).

Revenue Streams Matrix

revenue-streams-model-matrix
In the FourWeekMBA Revenue Streams Matrix, revenue streams are classified according to the kind of interactions the business has with its key customers. The first dimension is the “Frequency” of interaction with the key customer. As the second dimension, there is the “Ownership” of the interaction with the key customer.

Revenue Modeling

revenue-model-patterns
Revenue model patterns are a way for companies to monetize their business models. A revenue model pattern is a crucial building block of a business model because it informs how the company will generate short-term financial resources to invest back into the business. Thus, the way a company makes money will also influence its overall business model.

Pricing Strategies

pricing-strategies
A pricing strategy or model helps companies find the pricing formula in fit with their business models. Thus aligning the customer needs with the product type while trying to enable profitability for the company. A good pricing strategy aligns the customer with the company’s long term financial sustainability to build a solid business model.
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