Monday, January 13

Operative Effectiveness vs Strategy

For a long time now, Strategy has become a buzz word in management. Managers have been deploying various practices in the name of Strategy. 

Flexibility to respond to changing business environment, benchmarking competitors' best practices to achieve best practice for self, cost effectiveness through various cost management approaches such as outsourcing and so on.

Unfortunately, what should be called as operative effectiveness is termed as strategy and has thus failed to translate into sustainable profitability options. Operational effectiveness is necessary in business to ensure sustainability but this is often temporary. Operative effectiveness means performing the business functions - functions relating to creating producing, selling, delivering products and services - faster, cheaper, with fewer inputs and less defects as compared to peers or competitors.

While it is important for businesses to attain operational effectiveness, these can be easily emulated by others. As we know in basic economics, the market forces everything to the level of "normal profit" or what is termed as Competitive Convergence. This also leads to a shift in Productivity Frontier - a measure of maximum value that a company can deliver at a given cost at best management techniques, technology and skills. This improves value and lowers cost for the industry but does not lead to a sustainable advantage. The organisations become more and more indistinguishable and no one benefits in the long run.

Strategic Positioning is relatively more static in nature and refers to doing different things than peers or doing same things differently. This leads to achieving sustainable competitive advantage by preserving what is distinctive about the organisation. 


1 comment:

  1. Financial Planning and Strategic Positioning is relatively more static in nature and refers to doing different things than peers or doing same things differently. Financial planning leads to achieving sustainable competitive advantage by preserving what is distinctive about the organisation. Planning and Strategy has now become a buzz word in management.

    ReplyDelete