Tactical management involves choosing an appropriate course of action to achieve a strategic plan or objective. Therefore, tactical management comprises the set of daily operations that support long strategy delivery. It may involve risk management, regular meetings, conflict resolution, and problem-solving.
Understanding tactical management
Monash University defines tactical management as:
“the administrative process of selecting among appropriate ways and means of achieving a strategic plan or objective. The use of tactical management in a business environment allows a manager to choose the best tactics or methods for each situation that arises, rather than following a particular standard procedure.“
In understanding tactical management, it is helpful to differentiate it from strategic management.
This is referenced in the above quote as “standard procedure”, which usually refers to creating a strategy that sets the direction for the organization as a whole.
Strategic management also defines roles, responsibilities, and the commitment of resources.
Tactical management, on the other hand, encompasses the daily operations that support long strategy delivery.
It may involve risk management, regular meetings, conflict resolution, and problem-solving.
Tactical management often necessitates that a quick decision is made using tactics that are best suited to the particular situation.
Conversely, strategic management requires thought, discussion, and planning. Or, as we saw earlier, the following of standard procedure.
Examples of tactical management tasks
Following is a look at two strategic goals and the tactical management tasks that may underpin them.
1 – Recruiting, developing, and then retaining a diverse and suitably experienced staff cohort:
- Establish a compensation benchmark based on industry salary data.
- Occupy a booth at a school or university job expo and liaise with a diverse range of student bodies.
- Regularly measure employee job satisfaction and engagement through surveying.
- Create an exit interview program to better understand the reasons for a high-performer seeking employment elsewhere.
- Provide training for managers to identify and allocate funds for employee upskilling or recertification.
2 – The implementation of flexible work arrangements:
- Start by conducting a thorough review of the industry to determine the feasibility of flexible work arrangements.
- From the list of feasible options, survey employees on which they deem is the most interesting.
- For the option to be implemented, develop a policy and procedure framework.
- Review the implementation framework annually in light of changing or extenuating circumstances.
Tactical management in investing
Tactical management is also prevalent in investing. Despite the differences between business strategy and investment strategy, tactical management is used in a similar way.
Using a tactical approach, investors intend to take advantage of daily market conditions using a range of acceptable percentages in each broad asset class.
On a red day, the intent is to act more defensively and reduce equity exposure. On a green day, however, the tactics pivot toward utilizing the higher end of each asset class.
In the same way tactical management supports business strategy, similar day-to-day management of the stock market helps supports the broader, long-term strategy of the investor.
Difference between tactical and strategic management
To understand the difference between tactical vs. strategic management, it’s important to emphasize the difference between strategy vs. tactics.
Whereas strategy is about long-term goals, tactics are the set of individual steps that can be taken in the short term to reach these long-term goals.
There is a key difference, though, between tactics and operations.
Whereas operations are intended to be very practical, in some cases, they might also conflict with long-term goals (take the case of a company that scales too quickly in its workforce, thus making it hard for the company to keep innovating).
Tactics are in alignment with the strategy. In short, tactics are short-term actions that serve to align with a long-term strategy.
Indeed, one of the most difficult aspects of a business is the alignment between short and long-term goals.
Oftentimes, to achieve the long-term vision, you got to do things that seem counterintuitive in the short term.
Take the case of a company that, when launching its operations, instead of going broad, goes narrow.
In business, this is known as niching down or microniching.
This is a powerful tactic because by narrowing down the market, it enables the company to create options to scale later on!
Take the case of Tesla; when it entered the market, it did that via a sports car called the Roadster.
The Tesla Roadster was a way for the company to showcase the technology while financing the business in the short-term, making it survive, and from there, creating options to scale!
In fact, once the Roadster proved successful, only there Tesla could plan to expand (gradually) the market.
Today, after fifteen years of rolling out this long-term strategy via short-term tactics, Tesla is finally ready for its final stage of rolling out mass manufacturing!
It took 15 years of short-term pivots to achieve its long-term strategy (and many near-death experiences)!
Another strategy is a hook product, which aim is to finance the short-term operations of the business, thus keeping it alive and making it possible to achieve its long-term mission.
One example is how Airbnb, in the early days, sold cereal boxes to finance its operations!
Any sane person would think this is not a great idea, and it doesn’t align with the business the company is in.
And yet, this simple idea enabled Airbnb to stay afloat in the short-term, in the early days, when being able to pay the bills was critical.
In other words, short-term tactics and tactical management are critical to pivot the business in the short-term and move it toward the long-term vision.
Even when from a superficial look, it seems that the tactic is counter-intuitive.
Hide the Margins
Today AWS is a key tenet of Amazon’s business model.
If you removed AWS from Amazon, you would get a completely different Amazon, burning a lot of cash and highly unprofitable.
Yet, when Bezos and his team launched AWS, they used a trick.
Indeed, when AWS officially launched, it was priced as a utility.
Bezos wanted to avoid “Steve Jobs’ mistake” of pricing the iPhone at such high margins to attract competition quickly.
Instead, Bezos initially made AWS a low-margin business, and over time, it became a highly profitable segment.
AWS rolled out its first mass-market product, Simple Storage Service, or S3, on March 14, 2006.
That is the official date of birth of AWS!
However, AWS was born in the early 2000s. As Amazon went through the dot-com bubble, the company had to redefine its business model.
now, if you have an incredible business unit, why do you want to hide it, especially when analysts are biting against Amazon’s lack of profitability?
Indeed, for years Amazon was the primary target of analysts complaining about Amazon’s lack of profitability.
This was a short-term tactic, which, while it didn’t help in the short-term the company’s valuation, created a behemoth that today is worth anywhere between $400-600 billion.
Amazon hid an incredible business, in the short-term, to conquer a whole market in the long run!
Market Expansion & Transitional Business Modeling
Another counterintuitive tactic is the transitional business model.
In other words, imagine that you’re Netflix in the early 2000s; you know that the DVD market will get replaced by something else, something much much larger.
In Netflix’s case, that would deliver content straight on the Internet (what we would later call streaming).
What do you do? On the one hand, you keep expanding on the current business model (DVDs), while you keep looking into the viability of delivering the content over the Internet.
That is what Netflix did. When streaming suddenly became viable in the 2010s, Netflix had successfully transitioned from DVD to a streaming platform.
Thus, you start from a transitional business model, which serves as the hook into the current market’s landscape, and you keep experimenting with a business model which might be viable at broader and broader scales.
An interesting fact, still today Netflix carries less than one percent of revenues still come from DVDs!
- Tactical management involves selecting the appropriate course of action to achieve strategic goals or objectives.
- Tactical management encompasses day-to-day operations such as conflict resolution, problem-solving, staff training, and the definition of roles, responsibilities, and procedures.
- Tactical management is also useful for stock market investors whose primary strategy is supported by managing daily market volatility.
Read Next: SWOT Analysis, Personal SWOT Analysis, TOWS Matrix, PESTEL Analysis, Porter’s Five Forces, TOWS Matrix, SOAR Analysis.
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