Any business that wants to excel, or even compete, in the current capricious market must have the ability to make the best, most efficient use of its resources. In the past, that meant cutting facilities budgets or reigning in travel allowances.
Today, however, success requires a detailed review and breakdown of each process a business carries out to make and deliver its goods and services (also known as operations).
This operations overview, or process visibility, can reveal common areas of waste and bottlenecks that cost companies millions in time and revenue each year. It can also reveal the sources of these issues, which gives leadership the means to create a plan of action to not only solve them, but also withstand market volatility, develop the business, and take it into the future.
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What is an operations strategy?
An operations strategy is a deliberate, company-wide plan that drives the production and distribution of goods and services. No matter the department or team, every process of the business is designed to support the defined operational strategy and meet its objectives.
Business operations generally fall under the umbrella of one of the following categories: product management, supply chain, inventory, forecasting, scheduling, quality, or facilities planning.
A strong operations strategy aligns long-term and short-term processes throughout these categories and creates conduits between them via four main objectives: cost, quality, flexibility, and speed. Every process in an organization works toward at least one of these objectives.
Operational costs are the expenses required to produce and distribute an organization’s goods and services. Cutting those costs, or even managing them, never happens by accident. Businesses must set cost objectives at the creation stage of their operations strategy. Operations are, after all, where the money is spent.
Complete knowledge of business operations plays an important role in budget planning — this is, after all, where the money is spent. For example, understanding and controlling procedures in specific stages of production prevents work stoppages and subsequent ballooning costs.
Until fairly recently, rising costs were rarely, if ever, calculated into strategic planning. The market fallout of the COVID-19 pandemic, including the supply chain interruptions and rising inflation rates, however, were a rude awakening for many business leaders.
By deploying procurement professionals to negotiate for short-term stocks of supplies, training existing workforces in essential digital skills, and halting the outsourcing of materials in favor of efficient in-house services (among other suggestions), McKinsey suggests that operations planning holds the keys to controlling costs.
This is included in the vast majority of business success metrics. It directly affects customer satisfaction rates and business reputation. Operations strategies place a heavy emphasis on quality by establishing detailed procedures and training for the four parts of quality management: planning, control, assurance, and improvement. This effectively eliminates inefficiencies and flawed processes that produce sub-par quality and non-compliant goods.
You’ve heard it countless times: change is inevitable. For most businesses, it comes in the form of supply and demand; sudden or extreme changes can have dire consequences.
Operations strategies integrate flexibility directly into processes from the point of conception: product design and manufacture. Multi-use parts, multi-functional machines, and the operational cross-training of employees, can save costs and jobs when demands shift or regulations change.
An iconic American brand leveraged operational flexibility to entice and secure a new generation of customers. As the COVID-19 pandemic forced millions to shelter in place, the demand for Campbell’s Soup Co. products surged. Rather than sit back and watch the profits roll in as companies around them floundered, Campbell’s recognized the opportunity and seized it, setting the strategic objective to retain the Gen Z customers they’d fostered during lockdown.
Mid-pandemic, they dramatically pivoted their marketing strategy, partnering with digital gaming outlets like the NFL for ads and securing actor/writer Mindy Kaling as a spokesperson. They also introduced two new product categories — one focused on healthy living, and the other a line of spicier versions of existing soups.
And the risk paid off. A strong operations strategy providing built-in flexibility allowed Campbell’s to shift research and development, marketing, and production priorities. A superior operations strategy most likely identified the Gen Z consumer gap prior to 2020, and included ideas to gain and retain those new customers at the first opportunity.
Productivity and turnaround times are major indicators of business success. Companies like Amazon and Apple that offer same-day shipping have raised the bar for all businesses attempting to compete online. The nuanced, detailed planning of operations strategies make these lightning speeds possible and, what’s more, look easy.
Quickly producing goods and services is every business’ goal, but we don’t often think about the planning involved to keep things moving quickly — and at all times. One transaction can involve PO approval and entry, inventory checks, testing, QA checks, packing, and shipping. The logistics and regulations involved in even one of these stages are extensive, yet one malfunction in any of them can affect the rest.
The best operations strategies, therefore, include careful planning for process continuity to keep each aspect of the business running quickly and smoothly, no matter the circumstances. They standardize every possible process, then set specific goals and run trials to optimize each task.
Benefits and impacts of a solid operations strategy
Companies implement operations strategies for a reason: they are effective in achieving operational excellence. The move from a lacking to a strong operations strategy is a huge, but beneficial, shift for any organization. Chief among those benefits are:
The efficiency that a good operations strategy delivers gives businesses a huge competitive boost. Subsequent cost savings that emerge from eliminating process waste (a more efficient procurement process yielding better price negotiations, for example) can be passed along to customers; this is the first and often best way to succeed in a competitive market.
Great quality and fast delivery are paramount to customers; continuously efficient operations guarantee shorter lead times and faster delivery than the competition. If your organization offers the best product, faster, at the best price, your customers will choose you every time.
Businesses that accomplish the four goals we outlined above (cost, quality, flexibility, and speed) as part of a solid operations strategy, will likely see a steady revenue increase. Their first step is to set strong but realistic financial goals (more on that later).
Companies looking for a significant revenue increase will make it a strategic focus, pinpointing key areas like pricing, inventory costs, and sales and marketing initiatives.
Operations strategies are a business’ main source of scalability and flexibility, which can, in turn, be sources of increased revenue. The ability to tweak production for more output, or quickly add a new test to the QA process can mean huge numbers at month-end. Companies that don’t strategize for these contingencies lose big to competitors.
Leveraging technology is another way to hit the reset button and streamline processes for increased revenue. Organizations are turning to business process automation (BPA) software to automate workflows in every department, from HR to IT.
Overdue notifications for all stakeholders ensure accountability, the approval signature process is simplified, and the latest results of 24/7 data analysis is available in dashboards and reports at the click of a button. BPAs eliminate the wasted time and effort that weigh teams down and transform those hidden costs into revenue.
The increased emphasis on customer experience in the business sector is no passing trend. Prioritizing it is a deliberate plan built into operations strategies. Businesses that develop an operations strategy and strive for the objectives we explored above (cost, quality, flexibility, and speed) reap their benefits — and so do their customers.
Operations strategies elevate customer satisfaction and inspire repeat business by providing:
- Easy, friendly service desk experiences,
- One-on-one attention to services and questions,
- High-quality products, and
- Timely delivery and fast response times.
Improved regulation compliance
Regulation compliance is complex, and, depending on the industry, a constantly moving target as standards are updated.
One security breach or QA failure can have catastrophic results for everyone involved, which means compliance is something that no business can afford to get wrong. A strong operations strategy instills a proactive, tactical approach to compliance from day one. Targeted objectives are determined by the specific regulations a business must adhere to.
The company-wide plan to meet these goals is then built accordingly, during which standard operating procedures (SOPs) and an employee training program are developed. In addition, compliance officers or QA managers devise a records storage organizational system, or assess the current one for improvement.
There are no shortcuts in regulation compliance, but operations strategies give companies the tools to keep data safe and adhere to the requirements of regulatory governance bodies and all local, federal, and international laws.
7 key components of an operations strategy
It hardly seems possible that one business tactic can affect so many different aspects of an organization. An operations strategy does so because — once drawn up and put into action — it is a foundation of the organization itself.
Operations strategies dictate the way products are made, the methods used to sell them, relationships with the customers who buy them, and just about any process useful for business operations. That’s why it’s so important to get them right.
Below, we’ll examine the seven components that make up a successful operations strategy.
1. Establishing goals and objectives
We’ve mentioned the importance of setting goals several times thus far because it is the first step in most processes. In the context of an operations strategy, it means gathering experts from every part of the organization together with leadership to agree upon and list specific outcomes that will denote success.
All businesses, even those within the same industry, are different because they may wildly vary in size, structure, location, ideology, and of course, how success is measured and defined.
Leadership looking for a place to begin, however, should consider the following questions:
- How will our product or service be created?
- What standards will our product adhere to?
- How will our product reach our customers?
- How will we respond to upward or downward shifting markets?
When applied to specific business areas, each of these questions leads to many more. The answers form the basis of an operations strategy.
2. Aligning operations with business strategy
While the focus of operations strategies remains fixed on processes, the business strategy is a different set of decisions; it dictates what steps the organization will take to make its products perform well at market.
Put another way, if operations strategies determine the how of commerce, business strategies provide the why. Business strategies consist of four parts:
- Tactical goals. What product does a company want to make? Who do they want to buy it?
- Improvement goals. What needs to be made better, faster, or more accurate, in order to make and sell the product? What is the time frame? How will success be measured?
- Action plans. What steps will be put into place to meet the outlined goals? Who will perform them? Who is responsible for making sure the work is done?
- Success measurement. Responsible parties will provide empirical evidence that improvements have been made and objectives have been met.
Over the last few years, business leaders have come to understand that a business strategy alone simply isn’t enough to reach targeted goals.
Those strategies were devised with great intentions, but supply chain management and manufacturing initiatives tended to fall to the wayside as leadership focused on what was most familiar to them: sales and marketing.
By breaking down and optimizing every process, operations strategies guarantee no operations fall through the cracks.
3. Process design and optimization
Once goals and targets have been set, the next priority in an operations strategy becomes process design. What does a business have to do in order to create a product or service?
The following steps pose useful questions when creating a process:
- Consider resources. What raw material is required to make the end product? What machines are needed to make it? How many people are needed?
- Decide on an output. What purpose will the end product serve? What should it look like? How will it work?
- Consider process constraints. What might keep the process from running smoothly?
- Factor in flexibility. Could the product be altered if need be? Could you make more if demand increased?
5. Capacity planning and resource allocation
Businesses must continually estimate which and how many resources they will need for future demand; this is known as capacity planning. It goes beyond materials to include the people and skills needed to keep an organization functioning.
Operations strategies instill capacity planning into processes at their inception by:
- Providing an accurate evaluation of the organization’s current capabilities, including the number of employees required, their hours, all available materials, and production budgets set by the business strategy.
- Forecasting anticipated demands, providing the numbers on similar, past projects in order to anticipate future needs.
- Planning for contingencies, evaluating past issues and/or emergencies, embracing new innovations like AI, and closely monitoring markets for potential upheavals.
An operations strategy helps effectively leverage resource allocation for growth and development by first optimizing and streamlining resources to eliminate waste. It also ensures that budgets are planned as processes are in development — not before when tasks dependent upon the completion of others are unknown, or afterwards when it is easy to underestimate costs.
6. Supply chain management
Supply chain management is the management of all of an organization’s processes and steps that must be taken to transform raw materials into final products and deliver them to customers. The supply chain encompasses so much of a business’ operations that its importance in developing an operations strategy cannot be overstated.
The operations strategy, in turn, orchestrates all of the supply chain elements (sourcing materials, manufacturing parts, assembling products, selling products, and delivering products) for smooth processes, high quality products, and great customer relationships.
7. Quality control and continuous improvement
Quality control is a built-in, robust operations strategy component that ensures the best possible final products by inspecting and testing design specificity, usage, and consistency, and by studying product feedback from customers and users.
Even before those products come to be, however, a strong operations strategy dictates that quality control specialists (and, in some cases, regulatory governing bodies) continually check manufacturing facilities and equipment for adherence to regulations.
5 types of operations strategies
Given the vast number of business sizes, industries, and customer bases, it should come as no surprise that there are several types of operations strategies. As you’ll see below, any of this criteria can dictate the operations strategy a business’ leadership opts to employ.
Core competency strategy
Core competency is an operations strategy that places emphasis on those processes that work best. The philosophy behind this approach is one of identifying and amplifying strengths that exceed industry competition and standards.
Corporate strategy is a frequently used operations strategy that calibrates operations to the main objectives of the organization. This approach interweaves operations into the organization’s comprehensive strategic plan.
This strategy, as its name implies, is one targeted on surpassing competitors. It involves examining competitor performance in areas like quality and price, and adjusting its own operations to exceed them.
Product or service strategy
This is an operations strategy that aims to deliver the highest possible product and offer valuable new product innovation. It is often facilitated by product management.
This strategy directly aligns operations to customer needs. Sales and marketing initiatives tend to drive this operations strategy in order to give customers the best possible experiences.
How to develop an effective operations strategy
Operations strategies are such an integral part of a business that, for those that have never created one, it may seem overwhelming.
As you begin, consider the following actions to shape your strategy and implement continuous improvement for your business.
Step 1: Conduct a SWOT analysis
It can be difficult to get a snapshot of your business operations without conducting multiple data analyses and surveys. A SWOT analysis is a relatively expeditious overview you can obtain in just a few steps. SWOT stands for strengths, weaknesses, opportunities, and threats. While it may be tempting to jump in and start making lists of those attributes of your company, there are a couple of things to clarify first. Follow these four steps to conduct a thorough SWOT analysis:
- Define the purpose of your study. In the context of operations strategy development, this will probably have a broad, company-wide scope, but SWOT analyses work for smaller, contained projects, as well. What are your goals, both short-term and long-term, and what are you looking to improve?
- Collect and organize data pertaining to goals. We cannot emphasize this step enough. Assemble financial information like earnings, budgets, and forecasts both past and present, results from customer surveys, employee surveys, recent market upheaval data, and anything else that could be relevant. Ask departmental leadership to do the same.
- Organize each piece of data into one of the four SWOT categories: strengths, weaknesses, opportunities, and threats. Many find it helpful to use a four-quadrant chart or matrix format to better visualize these concepts.
- Analyze the chart and use your findings to devise strategies to reach goals, eliminate bottlenecks, and set a defined direction for your business.
Step 2: Set operations key performance indicators (KPIs)
You’ve set specific goals, so you know where you want to go. But how will you get there? As everyone prepares to do the required work, it’s crucial to use confirmed, numerical data to measure your business’ progress. That’s where KPIs come in.
Below, we’ve provided a list of KPIs, organized by department, that may be useful when developing an operations strategy. It is by no means comprehensive, and always keep in mind that businesses — even very similar ones — choose KPIs as specific as the goals they are striving for.
Department KPI examples
|Accounts receivables turnover: the rate at which a business collects on receivables; considered a good reflection of current market conditions.|
|Net profit margin: amount of cash a company earns when all costs have been subtracted, compared to revenue.|
|Operating cash flow: amount of cash flow generated from day-to-day company operations.|
|Net profit margin: amount of cash a company earns when all costs have been subtracted, compared to revenue.|
|Operating profit margin: amount of net sales made after subtracting the cost of goods sold (COGS) and operating costs; provides a picture of business profitability.|
|Cost per incident: the total dollar amount it costs to detect and resolve a cybersecurity attack.|
|Mean time to detect/resolve: the time it takes to detect a cybersecurity threat to your company’s data / the time it takes to resolve the issue once it is discovered.|
|Software/app performance: the measurement of the software/app loading times in a business’ tech stack.|
|Total support tickets vs. open tickets: the number of support tickets that have been submitted in a certain time period compared to the number that have been closed.|
|On-time delivery: the amount of customer orders delivered in the time frame the customer was given. The end goal for this metric should be 100% for customer satisfaction and retention.|
|Throughput: the number of products produced in a given production time period. This measures machine effectiveness.|
|Total cycle time: the total time required for a customer order to be completed, from beginning of production to shipment to customer.|
|Yield: the amount of error-free products are produced out of the total number of products produced.|
|Absenteeism rate: rate of unexcused employee absences (not including sick leave or vacation). This metric can reveal volumes about supervision, as well as employee engagement, habits, and burnout.|
|Employee turnover rate: the rate at which a business needs to replace its employees. It usually applies to employees leaving voluntarily, and sheds insight into management, employee workload, and work environment.|
|Manager feedback score: the approval rating of supervisors at a business by their direct reports. This is a handy metric to combine with those of employee turnover rate and satisfaction to evaluate leadership.|
|Quality of work: the error and defect rate of an employee’s work in a specific time frame.|
|Sales and Marketing Operations|
|Customer Acquisition Cost (CAC): amount of cash spent to get a new customer; indicates the success of an ad campaign.|
|Deals Closed YTD: the amount of sales made in the current year; measures how sales are rising or falling.|
|Lead Conversion Rate: percentage of leads that result in a sale.|
|Lead-to-Opportunity Ratio: compares the total number of leads to qualified leads; reveals whether or not a company’s marketing initiatives are reaching the right customer.|
Step 3: Identify bottlenecks and constraints
You’ve committed to developing an operations strategy for a reason. Where is improvement needed? The sources of bottlenecks are sometimes common knowledge and easy to spot. When they aren’t, the process mapping phase of operations strategy development is there to help.
Outlining each step and all that it entails can quickly reveal areas in which too much time is elapsing (for both employees and customers), areas in which there is a staff shortage or equipment issue, and confusion due to a lack of accountability.
An effective method of identifying constraints that many businesses overlook is simply talking to the employees who perform daily tasks. They often have expert-level concerns and observations about processes they carry out.
Step 4: Technology and automation integration
The single most effective way to develop the best operations strategy for your organization is by leveraging automation software to do the heavy lifting. BPA is the gold standard for process optimization for several reasons, but first and foremost, because it lays out an operations strategy in its very implementation. Users establish goals based on the business strategy, set KPIs, map and align processes, and measure the results.
Successfully implement an operations strategy with Pipefy
The best BPA systems feature fast, around-the-clock data analysis, the results of which are displayed in easy-to-read dashboards and reports that can quickly be run to apprise users of real-time data. If you’re exploring available options for a powerful, intuitive, no-code business process management solution to build your operations strategy, choose an option that can scale effectively and efficiently.
Pipfefy makes digital transformation smooth and accessible. Watch each link in your supply chain strengthen with faster quote and purchase turnaround, increased face-time with your customers, and better negotiations leveraging real-time data.
And with innovative features like Pipefy AI, remove the guesswork from your operations faster than ever. All you have to do is say what you need — whether it’s data, results, or process suggestions — and Pipefy AI delivers what you need in a matter of seconds!
Pipefy forms and portals centralize and simplify help desk requests for your customers and employees. Coupled with Pipefy AI chatbots, they remove the weight of frequently-asked questions and common issues from your service request teams. Imagine re-focusing IT’s operations strategy to one of app creation while providing faster solutions for your customers.