Part 1 Flashcards
First fill the blank
… Is Not Strategy
Operational Effectiveness Is Not Strategy
Some rules managers have been learning in two decades following 1970
just to mention few
Just read Thrice
Companies must be flexible to respond rapidly to competitive and market changes.
They must benchmark continuously to achieve best practice.
They must outsource aggressively to gain efficiencies.
They must nurture a few core competencies in the race to stay ahead of rivals.
What was once the heart of strategy
Is it still considered as the heart of strategy?
Positioning was once the heart of strategy
it is currently rejected as too static for today’s dynamic markets and changing technologies
What is the root of problem in this case?
where companies fall into path of mutually destructive competition
The root of the problem is the failure to distinguish between operational effectiveness and strategy
Is operational effectiveness necessary comparing to strategy?
Necessary but Not Sufficient
Operational effectiveness and strategy are both essential to superior performance, which, after all, is the primary goal of any enterprise
How a company can outperform rivals?
describe with an example.
A company can outperform rivals only if it can establish a difference that it can preserve
It must deliver greater value to customers or create comparable value at a lower cost, or do both
delivering greater value to customers or creating comparable value at lower price
how do they result in superior effectiveness?
delivering greater value allows a company to charge higher average unit prices
greater efficiency results in lower average unit costs
Cost is generated by ……. and cost advantage arises from ……..
Cost is generated by performing activities, and cost advantage arises from performing particular activities more efficiently than competitors
where does the differentiation of activities come from?
Differentiation arises from both the choice of activities and how they are performed
what are basic units of competitive advantage
Activities
Overall advantage or disadvantage results from all a company’s activities, not only a few.
definition of OE
Operational effectiveness (OE) means performing similar activities better than rivals perform them. ***it allows companies to utilize it inputs better***
Some examples of OE
reducing defects in products
or developing better products faster
compare OE to strategy
Operational effectiveness (OE) means performing similar activities better than rivals perform them Strategic positioning means performing different activities from rivals' or performing similar activities in different ways
An actual business example of differences in operational effectiveness in 1980s
Differences in operational effectiveness were at the heart of the Japanese challenge to Western companies in the 1980s.
The Japanese were so far ahead of rivals in operational effectiveness that they could offer lower cost and superior quality at the same time
Is constant improvement in operational effectiveness necessary to achieve superior profitability?
It is necessary to achieve superior profitability. However, it is not usually sufficient. Few companies have competed successfully on the basis of operational effectiveness over an extended period, and staying ahead of rivals gets harder every day.
Why improved Operational effectiveness is insufficient?
2 reason
The most obvious reason for that is the rapid diffusion of best practices
The second reason is competitive convergence
What does “diffusion of best practices in OE” mean?
Competitors can quickly imitate management techniques, new technologies, input improvements, and superior ways of meeting customers’ needs.
What does OE competition mean for improvement in operational effectiveness?
Example of this in U.S Printing industry
in the $5 billion-plus U.S. commercial-printing industry The major players are competing head to head, serving all types of customers, offering the same array of printing technologies (gravure and web offset), investing heavily in the same new equipment, running their presses faster, But the resulting major productivity gains are being captured by customers and equipment suppliers, not retained in superior profitability
What does “competitive convergence” mean for businesses?
The more benchmarking companies do, the more they look alike. The more that rivals outsource activities to efficient third parties, often the same ones, the more generic those activities become.
An activity raised in the industry that could be considered as a result of OE competition
The recent wave of industry consolidation through mergers makes sense in the context of OE competition
Driven by performance pressures but lacking strategic vision, company after company has had no better idea than to buy up its rivals
Some results of a decade of impressive gains in OE
Just read Thrice
many companies are facing diminishing returns
drawing companies toward imitation and homogeneity
pressures on costs that compromise companies’ ability to invest in the business for the long term.
Why the Japanese version of OE used to work but it wont work anymore?
In the 1980s, with rivals operating far from the productivity frontier, it seemed possible to win on both cost and quality
But as the gap in Operational effectiveness narrows, Japanese companies are increasingly caught in a trap of their own making
2 elements that make changing Japanese way of progress harder than it seems?
- cultural barriers : Japan is notoriously consensus oriented, and companies have a strong tendency to mediate differences among individuals rather than accentuate them.
- Ingrained service tradition : The Japanese also have a deeply ingrained service tradition that predisposes them to go to great lengths to satisfy any need a customer expresses. Companies that compete in that way end up blurring their distinct positioning, becoming all things to all customers
Competitive strategy is about …
Competitive strategy is about being different
Competitive strategy is about being different
What does it mean?
It means deliberately choosing a different set of activities to deliver a unique mix of value
The essence of strategy is choosing to perform activities differently than rivals do
What does it mean?
Choosing to perform activities differently
/or to perform different activities than rivals
An example of strategy
Southwest airlines
A full-service airline is configured to get passengers from almost any point A to any point B. To reach a large number of destinations and serve passengers with connecting flights, full-service air. lines employ a hub-and-spoke system centered on major airports. To attract passengers who desire more comfort, they offer first-class or business class service. To accommodate passengers who must change planes, they coordinate schedules and check and transfer baggage. Because some passengers will be traveling for many hours, full-service airlines serve meals. Southwest, in contrast, tailors all its activities to deliver low-cost, convenient service on its particular type of route. Through fast turnarounds at the gate of only 15 minutes, Southwest is able to keep planes flying longer hours than rivals and provide frequent departures with fewer aircraft. Southwest does not offer meals, assigned seats, interline baggage checking, or premium classes of service. Automated ticketing at the gate encourages customers to bypass travel agents, allowing Southwest to avoid their commissions. A standardized fleet of 737 aircraft boosts the efficiency of maintenance.
