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.

Connected Business Frameworks

first-principles-thinking
First-principles thinking – sometimes called reasoning from first principles – is used to reverse-engineer complex problems and encourage creativity. It involves breaking down problems into basic elements and reassembling them from the ground up. Elon Musk is among the strongest proponents of this way of thinking.
ladder-of-inference
The ladder of inference is a conscious or subconscious thinking process where an individual moves from a fact to a decision or action. The ladder of inference was created by academic Chris Argyris to illustrate how people form and then use mental models to make decisions.
six-thinking-hats-model
The Six Thinking Hats model was created by psychologist Edward de Bono in 1986, who noted that personality type was a key driver of how people approached problem-solving. For example, optimists view situations differently from pessimists. Analytical individuals may generate ideas that a more emotional person would not, and vice versa.
second-order-thinking
Second-order thinking is a means of assessing the implications of our decisions by considering future consequences. Second-order thinking is a mental model that considers all future possibilities. It encourages individuals to think outside of the box so that they can prepare for every and eventuality. It also discourages the tendency for individuals to default to the most obvious choice.
moonshot-thinking
Moonshot thinking is an approach to innovation, and it can be applied to business or any other discipline where you target at least 10X goals. That shifts the mindset, and it empowers a team of people to look for unconventional solutions, thus starting from first principles, by leveraging on fast-paced experimentation.
design-thinking
Tim Brown, Executive Chair of IDEO, defined design thinking as “a human-centered approach to innovation that draws from the designer’s toolkit to integrate the needs of people, the possibilities of technology, and the requirements for business success.” Therefore, desirability, feasibility, and viability are balanced to solve critical problems.
pareto-principle-pareto-analysis
The Pareto Analysis is a statistical analysis used in business decision making that identifies a certain number of input factors that have the greatest impact on income. It is based on the similarly named Pareto Principle, which states that 80% of the effect of something can be attributed to just 20% of the drivers.

Other related business frameworks:

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