Introduction
The activity of any organization requires essential basis for the successful performance and the further development of the company. Organizational effectiveness and the strategy of the organization are regarded to be the basic components of business activity. These two concepts are interconnected and mutually dependent. However, on the other hand, their connection is deeper than simple mutual dependence. Moreover, there is strong necessity to distinguish Operational Effectiveness from strategy, and, this distinguishing is one of the most crucial tasks that managers face.
OE and Strategy
Originally, both components of business activity are important and significant, however, they have different agendas. It is often emphasized that operational agenda entails the plans for continual improvement of business performance of any organization, and no trade-offs are accepted. Most researchers emphasize that failure in organizational planning makes vulnerable even powerful companies with strong strategies, thus, decreasing the Operational Effectiveness. According to Mintzberg (2000, p. 345) there is strong necessity to emphasize the following notion: “The operational agenda is the proper place for constant change, flexibility, and relentless efforts to achieve best practice. In contrast, the strategic agenda is the right place for defining a unique position, making clear trade-offs, and tightening fit.”
The scheme of Operational Effectiveness and strategy shows that organizational success is defined by the level of interconnectedness of these two components:
In spite of the simplicity of the scheme, it is necessary to mention that the relationship between these components goes essentially deeper than just mutual dependency. They inform, inter-add to each other. According to Wood (2004, p. 27): “Operational Effectiveness is about having functions in the organization that work well. These functions are, of course, the organization’s skill sets or ‘core competencies’ and, therefore, must fit together and work together to implement the strategy. On the other hand, the possible strategies available to an organization are constrained, at least in the medium term, by the skill sets available to implement them.” Thus, in the light of this fact it is necessary to clarify that strategy may be ambitious, however, the Operational Effectiveness may be restricted. Thus, ice cream manufacturer may have a strategy of entering a wine manufacturing industry, however, the functional skills, as well as the Operational Effectiveness will not allow to do this. Strategy requires capability, while capability restrains strategy essentially.
Strategy, in its turn, governs the allover organizational purposes and the long-range direction as well as goals. Strategy is aimed to establish the range of businesses in which the organization is planning to compete. Creating a strong strategy is essential for shaping the values for customers and stakeholders of the organization. Organizational strategy and the set of goals provide the necessary framework for the implementation of decisions, made by business managers. The business strategy is claimed to indicate the scope of each business and organizational unit and how these units will be able to compete. The strategy establishing process should be featured with the determination of portfolio of units and defining what is required for the maintenance of the organization’s allover goals and what functions should be emphasized. As Kanter (1990, p. 8) stated in his research: “Operational Effectiveness may also create the opportunity for strategy development by inventing new technologies or methods. For example, the experimentation to find improved glue in 3M that led to the invention of the post-it note.”
Marketing Planning
The marketing dimension of the Organizational Effectiveness and Strategy is generally regarded as the product management component of the business activity. It is stated that there is no direct control over numerous price-shaping factors. Nevertheless, a product manager should be able to distinguish the high-value features, and take them into account while elaborating the business strategy. Product strategy, which is the essential component of the allover business strategy, as well as the high-value features, will only justify the previously set up price levels and add to Operational Effectiveness and cause the increase in the sphere of competitive advantage by decreasing the wastes and expenses for Research and Development. From this point of view it is necessary to give the words by Mintzberg, Ahlstrand and Lampel (1998, p. 293) who stated that it is possible to uncover the essential principle for Operational Effectiveness by evaluating the idea of personal effectiveness and defining the key factors and requirements for this. They also stated the following notion: “The answers are such ideas as capability, expertise, know-how, talent, and skill. If product manager summarizes all these notions in the single word ‘knowledge’, it is possible to state that personal effectiveness is principally determined by knowledge. Moreover, this principle may be extended to the level that knowledge underwrites effectiveness for any organizations by elaborating on the forms that knowledge takes within an organization and the effects that these have. The list below does just this, starting, for the sake of completeness, with the antithesis of knowledge – ignorance – and working up through the number levels at which knowledge operates within an organization.”
Marketing planners should be aware of the concepts that form the Operational Effectiveness and strategy as well as the concepts that prevent organization from creating successful strategy. Thus, there is strong necessity to take into account the fact that ignorance is the largest enemy of Operational Effectiveness. It is costly for any company in numerous ways: time wasted, materials wasted, poor quality products or services that have to be replaced, alienated customers, etc. Originally, these factors not only decrease the Operational Effectiveness, but also prevent company from successfully implementing the strategy.
Personal knowledge is the factor that may either prevent or promote the successful implementation of the strategy and increasing the Operational Effectiveness. It is the factor, which is immediately available to a person to apply to the task.
Corporate knowledge is not the sum of personal knowledge of all the workers and teams. Corporate knowledge is the experience of the standardized business and organizational processes. Kanter (1990, p.7) emphasizes the following fact: “Corporate knowledge provides further leverage by coordinating and making consistent the productive activity of many people. Corporate knowledge also leverages knowledge by providing a ‘jump-off point’ or ‘platform’ for process improvements and the means by which process improvements are communicated and implemented.”
Another factor and marketing perspective of Operational Effectiveness is the Embedded Knowledge. These are the knowledge, which are transformed into business artifacts and tools, required for successful business performance. These are closely linked with automation of business performance, and performing tasks that can not be performed by people. On the one hand the potential of these artifacts and the importance of Embedded Knowledge is absolutely unlimited, nevertheless, in practice there is strong necessity for control of these artifacts: managers responsible for this control should clearly realize the principles of managing, maintaining and improving these artifacts.
Functional Performance
Operational Effectiveness is generally aimed at improving functional performance of the organization. In the light of the fact that functional performance is the part of business strategy and the essential component Operational Effectiveness, it is necessary to emphasize that for the effective functioning, managers are obliged to lead and control the functional activities within the organization. For this purpose, there is strong necessity to measure and improve the procedures and task solving processes for which they are responsible. Thus, leveraging those processes through standardization, communication and automation is required. Leveraging, in its turn, improves the Functional Performance and Operational Effectiveness.
Conclusion
Finally, it is necessary to state that Operational Effectiveness and Strategy are not simply inter-dependable. Originally, they are closely linked to each other through various factors and components of business activity. The most important link between them is the Functional Performance, which shapes the potential success of the company. Corporate, Individual and Embedded Knowledge are the internal factors, which influence the external components of Strategy and Operational Effectiveness, consequently, there is strong necessity to maintain and expand the knowledge base for effective implementation of Strategy and Business decisions, aimed to increase the Operational Effectiveness.
It should be taken into account that Strategy may be either restricted or completed with the Operational Effectiveness. This concept is explained on the example of an ice cream manufacturer.
References
- Kanter, R (1990) How to compete, Harvard business review. v. 68, no. 4 (1990), pp. 7-8
- Mintzberg H, Ahlstrand, B and Lampel, J (1998) Strategy safari: a guided tour through the wilds of strategic management, Free Press New York
- Mintzberg, H 2000, The rise and fall of strategic planning, Pearson Education.
- Porter, M. (1996) What is strategy? Harvard business review. v. 74, no. 6 (1996), pp. 61-78
- Wood, M. (2004) Marketing planning: principles into practice. Harlow: Prentice Hall/Financial Times, 2004.