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  1. MGT 563OPERATIONS STRATEGIES Dr. Aneel SALMAN Department of Management Sciences COMSATS Institute of Information Technology, Islamabad

  2. Recap Lecture 29 • Decision Making

  3. What is ‘formulation’ of operations strategy? • Formulation of operations strategy is the practical process of articulating the various objectives and decisions that make up the strategy. It is essentially about different ways of aligning plans, activities and objectives. It will be a relatively occasional activity, although operations strategy consideration may form part of the annual planning cycle. Many detailed formulation models have been developed.

  4. What is the role of ‘alignment’ in formulation? • Alignment is the state where an operation’s capabilities match the requirements of its market. Most organisations try to make their operations resources fit the requirements of their market, but at higher levels of alignment they may look at their unique capabilities and then attempt to leverage these into appropriate market positioning.

  5. What is meant by strategic sustainability? • Sustainability is the achievement of alignment over time. Maintaining an existing market requirements and operations capability balance is a ‘static’ approach to sustainability. Attempting to raise both operations capabilities and market requirements through a process of innovation is called a ‘dynamic’ approach to sustainability. • There is really no alternative to considering sustainability if an organisation wishes to survive. Even if an operation’s ambitions are not to raise its level of alignment to higher levels of market requirements and operations capabilities, it needs to ensure that its position is not eroded.

  6. What analysis is needed for formulation? • Although most frameworks start with the requirement to understand markets, this is not always straightforward. • Markets are, by their nature, dynamic, and companies frequently mistake market reaction. Similarly, understanding operations resources is not straightforward. In particular, understanding the nature and value of intangible assets can be problematic. Also, the sheer inertia of organisations makes implementing strategic decisions difficult. • In large companies especially, radical new changes in markets or internal technologies can often be underestimated.

  7. How do we know that formulation is complete? • In terms of the operations strategy matrix, the formulation process is trying to make sure that the operations strategy: • is comprehensive, covering all the important aspects of strategy; • has internal coherence between the different decision areas; • ensures that decisions correspond to the appropriate priority for each performance objective; • highlights which resource/requirement intersections are the most critical with respect to the broader financial and competitive priorities of the organisation.

  8. What is operations strategy implementation? • Operations strategy implementation is the way that strategies are operationalised or executed. It involves the processes that attempt to ensure that strategies are achieved. • It is important because no matter how sophisticated the intellectual and analytical underpinnings of a strategy, it remains only a document until it has been implemented.

  9. Who is responsible for implementation? • Although operational line managers are important in operations strategy implementation,it is those managers occupying ‘staff’ positions who usually have a strategicmonitoring, planning and shaping role. • The role needs close liaison with marketingplanners, product and service development and finance. They also need someorganisational ‘space’. • There are four types of ‘staff’ central operations roles calledgovernors, curators, trainers and facilitators.

  10. How can participation affect implementation? • A key aspect of overcoming resistance to the changes implied by any implementationis to include the people to whom the change would happen in the process,and allow them to influence what changes would take place. • Doing so improvesthe likelihood of their ‘buying in’ to the change. Also, involving users in the designallows those managing the implementation to access their detailed knowledge andexperience. • This is especially important because some elements of strategy maybe developed, at least partially, by external contractors and consultants.

  11. How can participation affect implementation? • Althoughthere is no simple formula to ensure commitment to an implementation, there aresome basic human resource practices than can facilitate successful involvement. • Forpeople to be involved effectively in an implementation they must have the confidencethat involvement will be a positive experience, have the education that willallow them to contribute intelligently, and be allowed the opportunity to participatein the implementation process.

  12. What are the differences between operational and strategic monitoring and control? • Strategic monitoring and control involves the monitoring and evaluation ofactivities, plans and performance with the intention of corrective future action, ifrequired. • The strategic view of monitoring and control is similar to the operationalview, but there are differences. • At a strategic level objectives are often less clear.There may also be less knowledge of how to bring about the desired outcome. • Similarly, the frequency with which control interventions are made is different.

  13. Strategic control can be non-repetitive, with each implementation task involvingunique projects or investments. One model of control uses the following questionsto distinguish between: • expert control • trial and-error control • intuitive control • negotiated control • routine (operational) control.

  14. How is progress towards strategic objectives tracked? • Monitoring and control involves tracking performance, scanning the environment,interpreting the information that it detects, and responding appropriately. • Monitoring includes the first three of these activities. To do this successfully anyoperations strategy process should: • be tracking progress against two types of implementation objective – ‘project’objectives that indicate the progress of the implementation towards its end point,and ‘process’ objectives that indicate the consequences that the implementationhas on the operations processes that it is intended to affect; and • compare progress against some aspiration or target, preferably involving a broadrange of measures, as is the intention of the balanced scorecard, which retains traditionalfinancial measures, but also includes measures of customer satisfaction,internal processes, innovation and other improvement activities.

  15. What are the dynamics of monitoring and control? • Monitoring often indicates that the trajectory of the implementation may have tobe changed. How easy this is depends partly on how tightly its operations resourcesare aligned with its market requirements. • ‘Tight’ alignment means that very specificmarket requirements are aligned exactly with a relatively narrow set of operationscapabilities. • ‘Loose’ alignment indicates a broader set of capabilities matching anequivalently wide set of market requirements. This can provide some insuranceagainst unexpected shifts in the environment.

  16. How can the monitoring and control process attempt to control risks? • A key task in the operations strategy process is the consideration of potential risks,because understanding risks can help to cope with them should they occur. Thereare five aspects of risk that are particularly relevant to operations strategy: • The risk of market and operations performance becoming out of balance, whichcan lead to ‘external’ and ‘internal’ operations-related risk. • The distinction between pure risks, involving events, which will produce the possibilityonly of loss (or negative outcomes) and speculative risks, which emerge fromcompetitive scenarios and hold the potential for loss or gain (positive outcomes).

  17. Controlling risk through prevention strategies (where an operation seeks toprevent an event occurring), mitigating strategies (where an operation seeks toisolate an event from possible negative consequences) and recovery strategies(where an operation analyses and accepts the consequences from an event butundertakes to minimise, alleviate or compensate for them).Adjustment cost risk: these are the losses that could be incurred before the newstrategy is functioning as intended. • Intervention risk, which is incurring ‘type I’ and ‘type II’ errors. Type I errorsoccur when managers intervene unnecessarily. Type II errors occur when themanagers fail to recognise the need for intervention where it actually exists.

  18. How does learning contribute to strategic control? • Implementation risk is reduced as an organisation learns over time. Four issues are important in understanding how learning affects implementation. • How can an operations strategy encourage the learning necessary to make sure that operations knowledge is carried forward over time? Here the distinction between single-loop and double-loop learning is important. • How can an operations strategy ensure that the organisation appropriates (captures the value of) the competitive benefits that are derived from the buildup of operations knowledge? • How can an operations strategy take into account the fact that the innovations that derive from the buildup of operations knowledge have a momentum of their own and are strongly path dependent (they are influenced by what has happened before)? • How can an operation take into account the interaction between the extent of resource and process change?

  19. How does stakeholder management contribute to strategic control? • All implementation projects have stakeholders, who are the individuals and groupsthat have an interest in the project process or outcome, and should be included inits planning and execution. One approach to discriminating between different stake -holders, and how they should be managed, is to distinguish between theirpower to influence the project and their interest in doing so. This results in the power–interest grid. Stakeholders’ position on the grid gives an indication of how theymight be managed.