How does a leader know whether their business issue is strategic or operational? (a Quora.com Question)
As already mentioned, the answer to this question is multi-faceted, even multi-dimensional; without understanding the context in which the question is asked it is difficult to give clear guidance (or opinion). However, I have been in a similar situation where this very issue was evident within an organisation I was working in; I offer an overview of the approach we adopted to finding the answer below:
The organisation in question was healthy: it had good margins and satisfied customers. However the management team felt that this phase was not going to be long lived as market conditions were changing and two of its competitors had recently exited the core market.
They also felt that they could be doing so much better; growth had been much slower than expected, although margins healthy. The operations support structure couldn’t be described as creaking, but it did seem to be busy all the time with little opportunity to catch a breath. The management team were unsure if this was due to a poor business strategy or were simply executing it incorrectly.
After internal conversation with the management team, it was clear that the overall strategy of the organisation was not clear to those responsible for implementing it, or even that the current direction of the business would be viable in two years’ time, let alone in three to five years’ time.
The following approach was adopted to investigate further:
Foreword: I maintain the opinion that, as a senior manager within the organisation, it is the management team’s role to give direction to the business, whether it is operational or strategic.
On this basis, the leader set about investigating the organisations trading/market position. He/she looked to his management team to aid him/her in understanding the situation. It was also useful to bring in some neutral outside help to give perspective, such as a consultant. I found this invaluable, as it facilitated open frank discussion, ensuring that everyone had a voice.
A structured approach was then facilitated: constructive assessment of the organisations market position was completed using a simple SWOT analysis and Porters Five forces. This gave the management team context and understanding. This exercise was very useful, as it not only highlighted the Strengths, the Weaknesses, the Opportunity and the Threats to the organisation but gave perspective on organisational strengths, both in the now, and the potential position in the future. Clarity of the current position is pivotal to making decisions on the future direction of the business.
From initial analysis it was clear that further information was required on specific elements of the organisations strategy and current practise. From here the management team, under the leadership of the CEO, agreed areas requiring further investigation. Further meetings followed, where feedback was given and information was assimilated into a plan. Some of the tools used during this process included the Osterwalder & Pigneur’s Business Model Canvas, a variation of Harnish’s One-page business plan, formal customer feedback/analysis, industry trading reports, staff and culture survey and supply chain assessment (to mention a few). Many of these reports were readily available to the organisation, so preparation time was not too lengthy: about a month.
Once everything was compiled a much more accurate view of the organisation was evident; management understanding of the organisations strategy and operational performance was clearer.
But what was the answer to the question?
Well, the strategy was realigned, although none of the core service provisions were scrapped, but a few were outsourced to free up internal resource. Some decisions were made not to promote certain services, as the ‘opportunity cost’ of doing higher margin services was possible. Some service areas were beefed up and two sub service was given priority status with a new structure and investment.
So in answer to the question, the strategy was still appropriate, but with some considered changes it became more relevant to the opportunities presenting themselves now and in the next two to three years. The management team also started looking further ahead: discussion of what the organisation is working towards in four or five years-time is common.
This process also found several business units operating at, or close to, breaking point. The decision to outsource non-critical support functions and change process and procedures allowed a more flexible approach to business execution.
In reality, it was a bit of both. The strategy was still appropriate but not technically aligned to maximise the organisations position. Operationally the organisation was spending a lot of its time doing non-essential tasks when it could have been increasing profitability, or doing things that made a difference to its customers experience or employees worklife. The upshot of asking this question was that the organisation was fitter and more adaptable for answering it.
Further responses to this question can be found at: