Operational Effectiveness Is Not Strategy

In the world of business today, rivals can quickly copy market position, and competitive advantage is temporary. The problem is the failure to distinguish between operational effectiveness and strategy. Operational effectiveness and strategy are very important but they work in very different ways. A company can outperform rivals only if they can deliver greater value to customers or create comparable value at a lower cost, or do both. We can have cost advantage if we perform particular activities more efficiently than competitors and we have to look from all a company’s activities, not only a few.

Operational effectiveness (OE) means performing similar activities better than rivals perform them, while Strategic positioning means performing different activities from rivals’ or performing similar activities in different ways. When companies try to improve its operational effectiveness, such as TQM, it requires capital investment, different personnel, or simply new ways of managing. Improvement in operational effectiveness is not usually sufficient because competitors can quickly imitate management techniques, new technologies, input improvements, and superior ways of meeting customers’ needs.

Strategy rests on unique activities We have to be unique or different from competitive. For example, Southwest airline is able to compete to other nation airline because they have a different strategic. They offer short-haul, low-cost, point-to-point service between midsize cities. Strategic positions emerge from three distinct sources. -Variety-based positioning: It is based on the choice of product or service varieties rather than customer segments. For example, Jiffy Lube. -Needs-based positioning: It is based on a segment of customer. Serving most or all the needs of a particular group of customers.

It arises when there are groups of customers with verities of needs. -Access-based positioning: Segmenting customers who are accessible in different ways. Access-based is less common and less well understood than the other two bases. A Sustainable strategic position requires trade-offs Be a difference is not guarantee a sustainable advantage. This make other want to copy. There are two ways to do so. First, competitors can reposition itself to match the superior performer. Another one is straddling, seeks to match the benefits of a successful position while maintaining its existing position.

But it is not always true like Continental Airlines tried to do the same with Southwest airline. A strategic position is not sustainable unless there is trade-off with other position. Trade-off creates the need for choice and protect against repositioner and straddlers. Trade-offs makes companies have a chance to achieve a sustainable advantage There are three reasons why trade-offs arise. -Trade-off arises from inconsistencies in image or reputation: Company has many kinds of product and tries to attempts to deliver two inconsistent things at the same time.

Trade-off arises from activities themselves: Different positions require different product configurations, different equipment, different skill, etc. -Trade-off arises from limits on internal coordination and control: Making organizational priorities clear. Fit drives both competitive advantage and sustainability Positioning choice determine not only which activities a company will perform and how it will configure individual activities but also how activities relate to one another. Southwest airline, for instance, involves a whole system of activities.

Its competitive advantage comes from the way its activities fit and reinforce one another. Fit is important because discrete activities often affect one another. The most important fit is strategy-specific because it enhances a position’s uniqueness and amplifies trade-offs. There are three types of fits. -Simple consistency between each activity and the overall strategy. Consistency makes sure that the competitive advantages of activities cumulate and do not erode or cancel themselves out. -Activities are reinforcing. For example, Neutrogena put their soap in the upscale hotels. Once guests have tried it, they are more likely to purchase it. Optimization of effort is third-order fit. It goes beyond activity reinforcement. All three types of fir are more important than individual part. Competitive advantage grows out of the entire system of activities. The competitive value of individual activities- or the associated skills, competencies, or resources- cannot be decoupled from the system or the strategy. Fit and sustainability Strategic fit among many activities is fundamental. It is harder for a rival to match an array of interlocked activities than it is merely to imitate a particular sales-force approach, match a process technology, or replicate a set of product features.

It is difficult to achieve fit because it requires the integration of decisions and actions across many independent subunits. Rediscovering strategy The failure to choose The great threat to strategy often comes from inside company. Many managers do not understand the need to have a strategy. The failure to choose sometimes comes down to the reluctance to disappoint valued managers or employees. The growth trap Managers are tempted to take incremental steps that surpass those limits but blur a company’s strategic position. Trying to compete in several ways at once create confusion and undermine organizational motivation and focus.

Profitable growth Growth imperative is hazardous to strategy. One approach is to look for extensions of the strategy that leverage the existing activity system by offering features or services that rivals would find impossible or costly to match on a stand-alone basis. The role of leadership Leadership is very important. General management is to defining and communicating the company’s unique position, making trade-offs, and forging fit among activities. One of the leader’s jobs is to teach others in the organization about strategy and to say no.

The most important is to guide employees in making choices that arise because of trade-offs in their individual activities and in day-to-day decisions. In my opinion, marketing strategy is very important, but it is not easy to make a good strategy. It is easy for competitor to copy our idea, product, and marketing strategy in this day, so you need something that difference from your competitor. If your strategy is working and your competitors want to copy they might need to trade-off something for that. If strategic fit created, you will have competitive advantage and superior profitability.

Many companies have met problems because they cannot lose one thing for another thing. On the other hand, strategy can cause a problem for us if we do not know about what strategy are we doing. Apple inc. is a good example here. At first they made only computer, but then they have a new marketing strategy. They believe that cell phone will become more important in people life, so they made Iphone. As you can see Iphone has made a lot of money for Apple because the product itself is difference from other, Nokia and RIM did not expect about it and they do not want to trade something off for this new kind of phone.