Michael E. Porter reminds us that too many leaders mix up ‘strategy’ with ‘operational effectiveness’. Both are needed, but they are different – one is about leadership, the other about management. However, in my experience, too many strategies are still more about operational effectiveness (being number one in…, or being better than…, or ‘being first to…,) rather than being and making a difference.
Strategies built around Operational Effectiveness are about doing the same things as others, but better and in a more efficient way, or the similar things in consistently good quality ways. ‘My car’s better than your car!’, kind of thing – and in today’s fast-moving world, being ahead using that methodology is usually short-lived – today’s breakthrough is tomorrow’s norm. Operational effectiveness has its basis in for example, Japanese or Deming continuous improvement, benchmarking, six-sigma etc., approaches. These management methodologies correlate directly with reduced costs, increased productivity, and leaner processes that drive out waste. Nothing wrong with any of that, it is a great ‘management’ tool to improve the potential for a price value gap increase. In defence of Operational effectiveness, it comes into its own when deploying strategy, but on their own are rarely differentiators in turbulent, ever-changing global or even local environments. Initiatives like TQM are engaging and bring about better balance in the three e’s of efficiency, effectiveness and economics, but they don’t do much to sustain growth and profitability for the long-term. They serve to tempt the competition to mimic, and the organisation to become a better version of itself. Copycat tactics rarely create difference, they just lead to increased sector sameness… Also they trick with a false sense of security, for example, you can have the most accurate, high-quality, polished product, but unless you are vigilant and nimble, you will miss the threat of substitution or new entrant (the verticals on Porters Five Forces). For example, some that didn’t see things coming: horse & carriage versus motor vehicle, slide-rule versus hand-held calculator, dial phone versus smartphone… need I go on? The threat of substitution is real, and is why every executive team must engage in scenario and horizon scanning, strategy post-mortems and red teaming as a matter of course; and as an input to strategy development.
Strategy must be about difference, not sameness. It is disruptive and delivers different products/services or similar product/services in different ways. For example, the iPod and resulting Smartphone (Steve Jobs famous 3 in 1 speech), didn’t just change the way we listen to music, it changed the entire music industry, telecoms industry, and global social communication culture. This kind of strategy does not polish and tweak processes and productivity, it delivers difference to linked systems that impact entire infrastructures and cultures. Organisations that build real strategy know they have to kill off and burn bridges on some products or services if they have to achieve strategy. This kind of disruptive approach requires courage, conviction, creativity and collaboration – four of the Balanced Organisation leadership competencies – two masculine and two feminine.
If I think of my clients in the NHS, I see too much sameness and compliance to ‘how things get done around here’ creating the culture, and the resulting operational effectiveness strategies. If the NHS is to continue to be an outstanding healthcare provider, it too must build strategy differently – that’s my wish. Instead of initiatives and some bonkers management targets and measures that create the wrong behaviours, it must be courageous, have the conviction towards different and collaborate properly to create a strategy that will effect huge change and benefit for patients, families and communities across our country for generations to come.
After all, if you always do what you always did, you’ll always get what you always got… will you be same or different, or a blend of both?
Lynne Copp
Founder, The Worklife Company Limited.
The five areas of value:
- Price: What will customers be willing to pay for goods and services – customer delight and cost of delivery gap value
- Suppliers, Partners & Alliances: what can be outsourced, supplied by others – supplier diversity value
- Employees: recruitment to retirement: attract, maintain, and retain talent – identify, recruit, develop, engage, deploy and affinity value
- Resource & workload devolvement: efficiency, effectiveness, allocation value
Wellbeing: people and organisational wellbeing: wellness, engagement, belonging, sustainability, creativity value
- Willingness to pay (WTP): The maximum amount a customer is willing to pay for a company’s goods or services
- Price: The actual price of the goods or services
- Cost: The cost of the raw materials required to produce the goods or services
- Willingness to sell (WTS): The lowest amount suppliers are willing to receive for raw materials, or the minimum employees are willing to earn for their work
The difference between each component represents the value created for each stakeholder. A business strategy seeks to widen these gaps, increasing the value created by the firm’s endeavors.
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