Building and Managing the Strategic Architecture
This chapter explains the connection between operations and strategy. There is, or should be, a direct connection between this functional area and the organizational plan. The strategy provides the foundation for the operational decisions made daily. In other words, as an operations manager, you choose tactics based on the developed organization's corporate, business, and functional level strategy. Take time to complete the action checklist activity at the end of the chapter.
Building the Strategic Architecture
Why Has Performance Followed a Particular Path?
Earlier
chapters have given us all the elements we need to develop a complete
picture of our business, together with the information that explains why
it has performed as it has up to now. These pieces are as follows:
- the time chart of one or more performance measures (e.g., profits, sales, service levels), with scale and timing
- the list of likely resources involved (e.g., customers, clients, staff, products, services, cash, capacity)
- the chain of immediate causes for that performance, often with simple arithmetical relationships (e.g., gross margin, revenue, labor costs, customer demand)
- at the head of those causal chains, the resources driving demand, supply, and performance (e.g., customers, staff, products, services, cash)
- the flows of resource (e.g., customers won and lost per month; staff hired, promoted, or leaving per month; products added or discontinued per year) into, through, and out of the organization's system
- the immediate causes of these rates of flow, whether your own decisions or other factors
- the dependence of each resource flow on existing resources, either for the same resource or others
To
illustrate these stages, let us go back to the performance of your
restaurant that you wanted to understand before deciding what to do
next. Start by pulling the pieces together.
- The time chart of one or more performance measures, with scale and timing (Figure 1.4 "Restaurant Performance Example").
- The list of likely resources involved. (Note: Not all of these may be
needed to tackle a specific challenge. Subsequent stages will identify
those that are involved).
- The immediate causes of that performance (Figure 2.1 "The Explanation for Restaurant Sales and Labor Costs").
- The resources driving demand, supply, and performance (Figure 2.2 "Your Restaurant's Resources and Operating Profits").
- The flows of resources into, through, and out of the organization's
system (Figure 3.6 "The Separate Flows of Customers Into and Out of Your
Regular Customer Group").
- The immediate causes for these
flows to be running at the rate they are (a) why customers are being won
(Figure 4.1 "Marketing Decisions Change the Inflow of Customers" shows
the “normal” rate at which new customers arrive, plus those won from
your marketing spending). (b) why customers are being lost (extended
version of Figure 4.8 "The History of Service Quality and Customer
Losses").
- The dependence of each flow on existing resource levels (Figure 4.9 "Why Service Quality Suffered Then Recovered").
Doing It Right: Do Not Try to Do Everything
Figure
5.1 "The Strategic Architecture of Your Restaurant, With Data
Explaining Recent Performance" is far from a complete architecture of
your restaurant. It does not, for example, include certain resources,
such as the menu or the seating capacity. Nor does it include
potentially important factors that could drive changes in performance,
such as price or competitors' actions. The best approach is to include
as much of the architecture as is necessary to create a plausible
explanation of performance over time.
This needs great care!
- First, do not do unnecessary work, such as collecting data on things that are not relevant. Keep the pictures to a minimum, so you can show people what is happening and why.
- Conversely, check you do not leave out factors that are (or could be) important. This is especially tricky when looking forward rather than just trying to explain the past.
- Finally, when you have an architecture that explains performance, ask whether you have missed anything that may be important to the question you set out to answer.
Figure 5.1 The Strategic Architecture of Your Restaurant, With Data Explaining Recent Performance
![Figure 5.1 The Strategic Architecture of Your Restaurant, With Data Explaining Recent Performance](https://learn.saylor.org/pluginfile.php/5676157/mod_book/chapter/57279/ff00108036781562697ff822cbb56368.jpg)
These
elements connect together to provide a complete explanation of recent
performance and future challenges (Figure 5.1 "The Strategic
Architecture of Your Restaurant, With Data Explaining Recent
Performance").