Mind the strategy-operations gap

If you don’t understand your business operations from the customer’s point of view, you may as well throw your strategy in the bin. And if you think that this is a harsh assessment then consider the number of corporate strategy failures and company survival rates. The truth of it is, that whenever leaders and planners learn to profoundly reconnect with operations they are always shocked by what they find. Shocked enough to rethink the purpose of their organisation, their strategic practices and even their system of management. Why is it happening? And how might taking an operational turn solve the problem?

What is the purpose of strategy?

Peter Drucker articulated that the purpose of any organisation is to create and keep customers by providing services that they value. And this means understanding the mechanisms by which customers are created and retained. In services organisations, value is created by meeting a need or solving a problem (customer demands). The more effective and efficient we are at meeting these demands, the greater our profits will be. Strategy therefore must be linked to this over-arching purpose.

‘You can’t spot a diamond by flying over a forest’

In services organisations, the creation of value takes place far away from the offices of leaders and planners. This creates a tension as it is assumed that being strategic requires detachment and a helicopter view to achieve differentiation, positioning and fit against competitors. It is this ‘fallacy of detachment’ Mintzberg highlighted strategists must overcome. It is well known that understanding customers and their experiences is often a key lever in creating breakthrough new services and innovations. In many organisations this strategy-operations gap is bridged through the use of common practices, intended to reconnect leaders whilst preserving a detached view.

Common approaches used to bridge the strategy-operations gap

Each of the core stages of strategy (analysis and assessment, strategy formulation, execution and evaluation) comes with a common set of strategic practices. In the initial stages these tend to be outwards things like market analysis, benchmarking against competitors and then inwards approaches such as; assessing performance measures, mood surveys, leadership away days (facilitated), workshops, scenarios and personas, vision, values and objectives. In the execution stages, pushing strategy downwards can include principles, transformation programmes and projects, presentations, posters, KPIs and targets (department, unit, team, individual), strategic dashboards. These are intended to bridge the strategy-operations gap by providing a bottom-up view during formulation and then top-down implementation of the plan. Do these work as intended? Do they actually close the gap?

AUDIO: An example of measures used for strategy

Taking an operational turn

Many years ago I asked a leader why they had set out to study their business from the customers point of view, using better method. ‘Howard’ he said, ‘my performance measures were telling me that I was delivering an effective service, and yet I was getting customers complaining’. This dichotomy led him to take an operational-turn. With his managers and staff, he began to study customer demand in operations and to understand what customers were trying to achieve (their purpose for making contact). Then they followed these demands until they were fulfilled, or not. They learned that almost none of their measures said anything about value from the customer’s point of view or the actual customer experience. Worse still, the measures were driving waste and failure into operations.

Efficiently ineffective

Traditional efficiency-focused measures (normally derived from manufacturing) take no account of value or if the service actually solved a customer’s problem. Instead what is measured is how long staff took to do something or the time taken to close a service request. What many leaders who take an operational turn learn, is that instead of driving quality, these measures drive harmful activity, worker fatigue and customer dissatisfaction. Leaders begin to see that the majority of performance is down to the design of operations. It has been identified that typically between 40-60% (it can be as high as 80%) of all demand coming into contact centres is failure demand. Professor John Seddon defined failure demand as ‘a failure to do something or do something right for the customer’. Knowledge of these gaps between measures and the true customer experience and actual operational performance act as clarion calls to strategic leaders and planners.

Bridging the gap – strategy workshops

The use of workshops as a method to connect strategy with operations without an operational turn should come with a health warning. And there is a growing awareness of how traditional workshop practices are often based upon assumptions and are fraught with danger for organisations (see Ten signs improvement workshops may be harming your business). When leaders accept that there is a gap between the measures-in-use and actual performance, they understand that strategy workshops may rest upon a bed of assumptions. These assumptions are often about the effectiveness of current operational designs, measures and what works. The only remedy for the gap is to take an operational turn and get knowledge.

The system of management is a strategic advantage

Consultant Jeremy Cox has identified that there are two systems of work at play in organisations, the ‘system of work’ and the ‘system of management.’ The system of work is the one that is visible to us. How the work works from customer demand and then how operations do things to create value and deliver a service. The system of management is invisible. It is made up of the assumptions and thinking behind management decision-making. It is the assumptions that bring physical organisational designs into being. For leaders who take an operational turn, this second system becomes very visible. And because strategic leaders tend to be astute, they come to the conclusion that the system of management can be a strategic advantage. Strategic work takes places to change management assumptions and jettison method that doesn’t deliver.

Taking an operations turn and getting knowledge

Returning again to the leader who when confronted by a dissonant situation, took an operational turn. After getting knowledge, he and his managers and staff changed both the system of management and the system of work. By studying their own operations from the customers point of view they learned what it takes to truly meet customer purpose. They introduced innovations unheard of anywhere at the time. Customers began turning-up with flowers and chocolates. And the business saved millions. This leader also had a better set of measures related to purpose from the customer perspective, used differently. To find these dichotomies and dissonant moments in their own businesses, strategic leaders must take an operational turn. Profoundly reconnecting with operations helps to make strategy succeed.