Operations strategy is the plan that outlines how an organization will use its resources effectively to achieve its business goals. The decision-making framework guides the processes, technologies, and workforce in an organization’s operations to create the highest level of efficiency possible.

Here are some key elements of an operations strategy:

  1. Resource Utilization: This includes how the organization uses its physical resources, such as facilities and equipment, and its human resources, such as employees’ skills and knowledge.
  2. Process Design and Improvement: This involves designing and refining processes to make them more efficient and effective. This could include improving manufacturing processes to make them faster or less wasteful and streamlining service delivery to enhance customer satisfaction.
  3. Supply Chain Management: This involves managing the movement of goods and services from suppliers to customers. It could include strategies for managing supplier relationships, inventory management, logistics, and distribution.
  4. Quality Management: This focuses on ensuring that the organization’s products or services meet certain standards. This could involve quality control, quality assurance, and continuous improvement strategies.
  5. Technology and Innovation: This includes how the organization uses technology and innovation to improve its operations. This could involve adopting new technologies, developing innovative products or services, or implementing innovative process improvements.
  6. Customer Service: This focuses on how the organization meets the needs of its customers. This could involve strategies for improving customer satisfaction, increasing customer loyalty, or attracting new customers.

An operations strategy should align with the organization’s overall business strategy and support its mission, vision, and objectives. It should be flexible enough to adapt to changes in the business environment and provide a consistent framework for decision-making.

Types of operations strategy

Broadly, operations strategies can be categorized based on the competitive priorities of a company. Here are a few common types:

  1. Cost Strategy: This type of operations strategy focuses on keeping production and operational costs as low as possible without sacrificing quality. Companies with a cost strategy often emphasize efficiency, streamlined processes, and economies of scale. Many companies in highly competitive markets, such as retail, might prioritize a cost strategy.
  2. Quality Strategy: In this case, the focus is on producing high-quality goods or services that stand out in the marketplace. This might involve rigorous quality control processes, superior materials, or highly skilled labor. Many luxury brands emphasize a quality strategy.
  3. Flexibility Strategy: Companies with a flexibility strategy prioritize their ability to adapt quickly to changes in the market. This might involve flexible manufacturing processes that can quickly switch between different products or offer a wide range of customizable products or services.
  4. Delivery Strategy: This strategy emphasizes the speed and reliability of delivery to the customer. This might involve efficient logistics and distribution systems, reliable order fulfillment processes, or quick service turnaround times. Many e-commerce businesses emphasize a delivery strategy.
  5. Innovation Strategy: Companies with an innovation strategy focus on creating new or significantly improved products, services, or processes. This might involve a strong emphasis on research and development, a culture encouraging creativity and risk-taking, or a process for quickly bringing new ideas to market. Innovation Strategies: Explained with examples and framework
  6. Service Strategy: This strategy focuses on providing superior customer service. Companies that prioritize a service strategy may invest in training and developing their customer service staff, implementing customer relationship management systems, or finding ways to exceed customer expectations. Service strategy: Explained with Examples

Remember, these strategies are not mutually exclusive. Many companies may aim to excel in more than one area. For instance, a company might strive to provide high-quality products quickly and at a reasonable cost. The key is choosing strategic priorities that align with the company’s overall business strategy and help it differentiate itself in the marketplace.

Developing an operations strategy

Developing an operations strategy involves several key steps. Here’s a general guide:

  1. Understanding the Business Strategy: The first step is understanding the organization’s overall business strategy. This includes the organization’s mission, vision, and strategic objectives. The operations strategy should align with and support this overall business strategy.
  2. Analyzing the Operating Environment: This involves analyzing the internal and external environment in which the organization operates. This could include analyzing the organization’s current operations, competitors, market trends, technological developments, and other relevant factors.
  3. Identifying Operational Objectives: The next step is to identify the operational objectives based on the business strategy and the analysis of the operating environment. These are the specific goals that the operations strategy should achieve.
  4. Developing the Operations Strategy: This involves deciding on the specific strategies that will be used to achieve the operational objectives. This could include decisions about process design, resource utilization, supply chain management, quality management, technology and innovation, and customer service.
  5. Implementing the Operations Strategy: Post developing the operations strategy, the next step is implementing it. This could involve changing processes, systems, and structures; training and developing employees; and managing change effectively.
  6. Monitoring and Adjusting the Operations Strategy: Finally, it’s important to monitor the performance of the operations strategy and make adjustments as necessary. This could involve regularly reviewing key performance indicators (KPIs), getting feedback from employees and customers, and staying alert to changes in the business environment.

Remember, developing an operations strategy is not a one-time event. It’s an ongoing process that should be revisited regularly as the business environment and the organization’s objectives change.

Operations strategy model

There are several models for operations strategy, but one of the most widely used is the Hayes and Wheelwright Model (also known as the Four Stage Model), developed by Robert H. Hayes and Steven C. Wheelwright in their book, “Restoring Our Competitive Edge: Competing Through Manufacturing.”

The model describes four stages of manufacturing effectiveness:

  1. Stage 1 – Internally Neutral: At this stage, the company’s goal is not to mess things up; operations are seen as a necessary evil. The focus is on cost minimization and avoidance of any major issues. Manufacturing does not contribute to the company’s competitive advantage.
  2. Stage 2 – Externally Neutral: In this stage, the company looks outside, comparing its operations with competitors and aiming to match industry standards. The objective is to catch up with and meet external best practices.
  3. Stage 3 – Internally Supportive: A company’s operations align with its overall business strategy. The company tries to provide a level of operational performance that differentiates it from its competitors. This might involve offering higher quality, faster delivery, lower cost, or more innovative products.
  4. Stage 4 – Externally Supportive: In this final stage, the company’s operations strategy is a step ahead of the competitors and becomes an active weapon to enhance its competitive position. Operations not only follow the business strategy but also enable and drive it. The company seeks to change the competition rules in its favor by leading industry change.

The goal is to progress from stage 1 to stage 4, turning operations from a neutral function to a strategic one that actively contributes to the company’s competitive advantage. This model provides a roadmap for this progression and helps companies identify their current position and understand the steps they need to take to improve.

Operations strategy examples

Here are examples of operations strategies from different companies:

  1. Amazon – Cost and Delivery Strategy: Amazon has focused heavily on cost efficiency and quick delivery times. They use a vast network of warehouses and advanced inventory management systems to reduce costs and ensure quick delivery. They also continually invest in technology to automate their operations and improve efficiency. Their operations strategy supports their overall business strategy of being the go-to online retailer with a wide selection of products, low prices, and fast shipping. “All-Inclusive” business model of Amazon Prime
  2. Apple – Quality and Innovation Strategy: Apple’s operations strategy focuses on high-quality products and continual innovation. Their operations include strict quality control measures and heavy investment in research and development. This strategy supports their overall business strategy of offering premium, innovative products that provide a superior user experience. What does Apple do | How does Apple make money | Business Model
  3. Tesla – Innovation and Sustainability Strategy: Tesla’s operations strategy centers on innovating in the electric vehicle market and promoting sustainability. For instance, they operate a ‘Gigafactory’ for battery production, aiming to produce more lithium-ion batteries for their EV battery requirement. This supports their overall business strategy of driving the world’s transition to electric vehicles. How does Tesla make money: Business Model & Supply Chain Analysis
  4. Zara – Flexibility and Speed Strategy: Zara’s operations strategy is based on speed and flexibility. They have a fast fashion model where they quickly move designs from the runway to the store, often bypassing steps that traditional retailers use. This quick turnaround allows them to respond to changing fashion trends faster than competitors, which supports their overall business strategy.
  5. Southwest Airlines – Cost and Service Strategy: Southwest’s operations strategy is focused on cost efficiency and superior customer service. They maintain a fleet of identical aircraft for simplicity and cost savings and have a point-to-point operation rather than the traditional hub-and-spoke airline routing system. At the same time, they invest heavily in employee training to provide friendly, personal customer service. Their operations strategy supports their business strategy of being a cost leader with a fun, friendly image. A unique take on Southwest Airlines Strategy

These companies’ operations strategies align with their overall business strategy and help them achieve their strategic objectives.