Operations strategies drive a company’s operations, the part of the business that produces and

distributes goods and services. Operations strategy underlies overall business strategy, and both are
critical for a company to compete in an ever-changing market. With an effective ops strategy, operations
management professionals can optimize the use of resources, people, processes, and technology.

In the book Operations Strategy, authors Nigel Slack and Michael Lewis define the term. “Operations
strategy is the total pattern of decisions which shape the long-term capabilities of any type of operations
and their contribution to the overall strategy,”

What Are the Operations of a Company?

A company’s operations are the activities that produce and deliver a product or service. Operations
management is the profession that encompasses planning, implementing, and supervising that
production. Some people think of operations as the daily tasks and tactics that transform materials or
actions into a product or service, but operations strategy goes a level higher to determine operations
approaches and goals.

In a car company, for example, operations could include the following: obtaining and transporting raw
materials (metal, rubber, and plastic, etc.), dealing with suppliers, conducting and measuring the steps
that transform materials into parts, managing the people, machines, and processes, assembling the
vehicles efficiently, maintaining quality and troubleshooting problems, delivering car orders on time, and
managing and continually optimizing the whole value chain. In addition, operations could play a role in
product design, plant capabilities and design, and production or sales forecasting.

The seven main functions of operations are:

 Product management

 Supply chain

 Inventory

 Forecasting

 Scheduling

 Quality

 Facilities planning and management

Some people still understand operations as an organization’s daily operations and tactics, while others
see operations strategy as having a key role to play in companies of any size.

The Role and Purpose of Operations Strategy

Operations strategy is only one part of overall business or corporate strategy, but it’s crucial for
competitiveness and success. Without a strong operations strategy, companies fail to keep up with
changing markets and lose out to more strategic competitors. Many companies, big and small, have
struggled with operations strategy, often lacking in comparison with technologically savvy competitors.
For example, Amazon, while constantly advancing technology such as drones for delivery, has pushed
aside myriad brick-and-mortar retailers.
To be effective and competitive, all parts of a company must work together. All departments should
contribute to the company mission and have strategies underlying the overall corporate/business
strategy. In addition to having an operations strategy, they should also have functional area strategies in
finance, IT, sales, marketing, human resources, and possibly other departments, depending on the type
of business.

“An operations strategy should guide the structural decisions and the evolution of operational
capabilities needed to achieve the desired competitive position of the company as a whole,” says Tim
Laseter in his article "An Essential Step for Corporate Strategy.”

These days, however, it’s not enough to simply follow best practices. Companies must innovate, not just
play catch-up to practices already mastered by competitors.

Authors Steven C. Wheelwright and Robert H. Hayes categorized types of organizations based on a
company’s attitude toward operations:

tage 1: Internal Neutrality - Fix the Worst Problems

This is the stage at which the operations function is attempting to reach a certain minimum standard
and is generally considered to be at the very poorest level of contribution by the operations function.
The other business functions view it as a hindrance when it comes to the delivery of competitive
advantage. Its goal at this stage is to be largely ignored, focusing on avoiding mistakes, it tends to be
reactive and somewhat in-ward looking.

Stage 2: External Neutrality - Adopt Best Practice

Here as a first step of breaking out of stage 1 the operations function must compare its performance
with competitor organisations. Bench-marking its performance against its competitors will enable the
business to identify and adopt best industry practice. The operations function can then attempt to be
externally neutral by trying to match the benchmarks it has identified.

Bench-marking promotes superior performance by providing an organised framework through which

organisations learn how the "best in class" do things, understand how these best practices differ from
their own, and implement change to close the gap, the essence of bench-marking is the process of
borrowing ideas and adapting them to gain competitive advantage (Besterfield et al., 2003).

Stage 3: Internally Supportive - Link Strategy with Operations

In reaching stage 3 the business operations will be broadly up there with the best having reached the
‘first division’ in their market and by linking strategy with operations, they will have aspirations to
continue to improve in order to become clearly and unambiguously the very best in the market.

Stage 4: Externally Supportive - Give an Operations Advantage

At stage 4 the company will be looking to the future, the vision for the operations function at this stage
will be to provide the foundation for future competitive success by taking a lead role in strategy
formulation. Over time it will develop operations-based capabilities by organising resources in
innovative ways and deliver strategic flexibility which will allow the business to adapt as markets
change.

Starting at Stage 1 a review of the internal processes will allow managers to set minimum performance
standards for the operations function of their business. Moving to a higher stage to regain competitive
advantage in their local market, bench-marking with immediate competitors will allow them to identify
and adopt best practice. It will also enable them as process managers to implement strategies to
increase service, operations and process capacity within their business. With these industry and
competitive analysis in mind they can set out to carve a distinctive strategic position where they can
outperform their rivals by building competitive advantage.