Operational Strategy: Turning Strategy Into Action
What an Operational Strategy Is and Where It Fits With Other Strategies
Welcome to a new series on operational strategy! Over the next few posts, we’ll explore how organizations can put their operational strategies into action, go about executing those strategies (a much different process than acting on them), and ultimately achieve the results those strategies are aiming for. We’ve broken down each one of these — action, execution, and results — into separate discussions because operational strategy itself is no simple endeavor.
As different departments within an organization have their own goals, processes, and strategies, it can be difficult to zoom out to see how they function together as part of an operational strategy. Often, developing, enacting, and measuring an operational strategy requires an independent consultant to manage on behalf of an organization so that departments can continue their respective projects while also staying in alignment with the overall operational strategy.
It’s also important to note that operational strategy is different from a business strategy or competitive strategy. By the time an organization is working on its operational strategy, the latter two should already have been developed and be well underway. However, an operational strategy does touch on them since “operations” is the action of a company and without action, the business cannot do what it set out to do and compete with others in its industry.
First, let’s set some groundwork. What is an operational strategy? It’s the methods that organizations use to achieve their goals. While the strategy is essentially a roadmap, it forces companies to inspect the ways they’re using capital, their employees, and the processes that connect them all together. There are a number of other components that go into operational strategy, but those are more tactical than strategic. We’ll touch on them, but for now, let’s dig into taking the first step in any operational strategy.
Putting the Pieces of Operational Strategy into Place
Before anything can be done with your operational strategy, it must be planned. Such a plan should be a framework for how the operational strategy is developed, how the parties involved should use it, what its goals are, how it should be evaluated, and how adjustments should be made. These aren’t easy tasks and require the participation, adoption, and support of everyone involved in order for the strategy to work. We’ve outlined five areas of focus for such a group to get started.
1) Understand and Define Your Goals
So you want to have an operational strategy? Great! But why? What are you trying to achieve? Some common goals of an operational strategy might be to reduce warehouse operational costs, improve the productivity of a distribution facility, or reduce the time of a distribution cycle. These are great and worthy goals, but they must be specific. There must be something to aim for, and it must be realistic. Remember, you can always adjust goals or develop a “phase two” if you discover along the way that your goals could be pushed further. The use of the SMART system — specific, measurable, achievable, relevant, and timely — is appropriate for developing these goals.
A better example of goals in an operational strategy based on the SMART system might be to decrease warehouse operation costs by 15 percent, increase distribution output by 10 percent, reduce the average distribution cycle time from five business days to three — all by the end of Q2 in 2019. These are basic examples that don’t account for the many nuances of the business, but by being specific (stating the goal), measurable (quantifying), achievable (not too lofty), relevant (appropriate), and timely (defining when it should happen), the business can accomplish its overall strategy of improving its distribution system. At River Rock Advisors, we use a variety of models and methods to help you achieve goals such as these as part of an operational strategy.
2) Develop an Action Plan
Once you have your goals, you and the other stakeholders can jump in, right? Not unless you want to descend immediately into anarchy and confusion. You must outline your approach so that everyone understands what needs to happen first, what should be happening in conjunction, who is responsible for what, and what the requirements are. This is a component of overall project management, where the financial, time, and quality parameters are set, along with accountabilities and other factors.
Your action plan should establish who will be doing what, how, and over what period of time. It should account for crossover, potential risks and changes, future knowns, and other possibilities that cannot be immediately foreseen. Once the action roadmap has been developed, the process of alignment can occur.
3) Aligning Everyone Involved
With the goals defined and roadmap set, it will be time to share the operational strategy with everyone involved. This is critical and, if possible, should not be kept confidential. By empowering departments, teams, and individuals with the knowledge of what is being undertaken, everyone can understand why certain things are happening that differ from everyday tasks. Communication leads to clarity, clarity leads to understanding, and understanding leads to adoption. You’ll need all parties doing their best.
Ensuring alignment between all parties is not a one-time effort, however. In our work for our clients, we maintain consistent alignment checks to ensure work completed and work scheduled are in alignment with the overall operational strategy. Think of it as a check-up. Going to the doctor once doesn’t guarantee that everything will be fine one month or one year from now. Consistent check-ups are needed to ensure your health. The same goes for your operational strategy. If things appear to be derailing, you’ll be glad you checked.
4) Maintaining Controls
Controls are important to numerous aspects of a business. For an operational strategy, controls ensure that the efforts that are being put forth to achieve the strategy do not derail. The alignment checks we just discussed are one such control but at a higher level. Controls for an operational strategy, such as improving distribution efficiency, might involve other tools, resources, or processes to keep an eye on performance and make adjustments as needed.
For example, controls might include dashboards and reporting mechanisms to monitor the increase in output on a weekly basis. Ideally, the output would increase at a steady level, culminating in the 10 percent that the operational strategy called for. Even better would be to define these periodic increases quantitatively, so that sudden increases or decreases could be evaluated. Say a bi-weekly increase of one percent was called for, but one week, it was five percent. That might appear as a positive thing, but there may be cause for concern. Is the reason for the increase sustainable? Or will it revert just as quickly?
5) Review and Adjust
Even with defined goals, an action roadmap, team alignment, and a system of controls, things can change. Large-scale influencers such as political trade agreements, material shortages, and other uncontrollable factors could necessitate a shift in strategy. To account for this, a system of regular reviews and adjustments, with clearly defined leadership and decision authority, should be followed to ensure the strategy is moving along as needed and to make changes where necessary.
What this looks like is dependent on your organization’s culture and existing processes, but remember that the operational strategy must be factored into those in order for it to succeed. Not every team or individual needs to be involved; leadership can perform these reviews and adjustments. But remember, if something changes, the cycle must repeat. How will changes affect the goals? Will the roadmap change, too? Will teams need to be realigned? Will the system of controls change?
When the Foundation is Set, You’re Ready to Rock
These elements, along with others, create the fuel that will drive your operational strategy forward. Once the foundation is set, you can take action and begin to execute. We’ll discuss the concept of execution next time. But for now, if your organization has been evaluating its operational strategy, doesn’t have one at all, or has achieved limited success with strategies of the past, we’d love to hear from you.
Let us know where your operational strategy stands, and where we might be able to help.