Operations and Strategy With Nigel Slack
Summary
TLDRIn this insightful discussion, Professor Nigel Slack from the University of Warwick explores the strategic significance of operations management. He emphasizes that capabilities, developed through operational processes, are crucial for long-term strategy and competitive advantage. Slack highlights the importance of process management across all functions, not just in traditional operations, and stresses the need for senior executives to understand and improve process efficiency to leverage capabilities effectively.
Takeaways
- đ Operations and strategy are intertwined, with operations being a key component of building long-term capabilities within an organization.
- đ The difference between 'operational' and 'operations' is crucial; 'operational' refers to day-to-day activities, while 'operations' refers to the strategic management of resources.
- đ Capabilities are embedded in operations processes and are built over time through experience, making them difficult for competitors to imitate or acquire.
- đ A strategic capability is something an organization is particularly good at, which provides a competitive advantage that is hard to copy or substitute.
- đ€ The strategic advantage of a capability is derived from its ability to be leveraged in various ways, unlike specific investments that may become obsolete.
- đ Process management is a fundamental capability that all functions within an organization should be involved in, not just operations.
- đ„ Every function within a company manages processes, and therefore, everyone is an operations manager to some extent, emphasizing the importance of process management skills.
- đ Understanding process management, including bottlenecks, capacity, and variability, is essential for all leaders, not just those in traditional operations roles.
- đ Standardization in processes is key to reducing variability, leading to more effective and efficient operations, a point often overlooked by non-operations leaders.
- đĄ The importance of recognizing and managing the internal delivery of services through processes is highlighted as an area where many senior leaders lack awareness.
- đŹ Senior VPs and other leaders need to have a grasp of technical knowledge, strategic leadership, and process management to effectively contribute to and drive organizational strategy.
Q & A
What is the relationship between operations management and strategy according to Professor Nigel Slack?
-Professor Nigel Slack explains that operations management and strategy are not as different as many people think. He believes that operations, which refer to the resources that create services and products, can be viewed from both a strategic and an operational perspective. Furthermore, he argues that capabilities, which are an important part of strategy, are built and stored within the operations processes.
How does Professor Slack define 'capability' in the context of operations management?
-Professor Slack defines a capability as something an organization is particularly good at doing. A strategic capability, in particular, is something that is difficult for competitors to copy, imitate, substitute, or buy off the shelf. It is developed over time and is unique to the organization.
Why are capabilities important in the strategic context of an organization?
-Capabilities are important because they represent the organization's unique strengths that are difficult for competitors to replicate. They can provide a competitive advantage in the marketplace and can be leveraged in various ways, making them a fundamental part of the organization's activities to earn money.
What is the difference between operational and strategic activities according to the transcript?
-Operational activities are described as day-to-day, routine, and detailed tasks, while strategic activities involve long-term planning and building capabilities. Operational is the opposite of strategic, focusing on immediate needs rather than long-term goals.
How does the concept of process management relate to building capabilities within an organization?
-Process management is integral to building capabilities because capabilities are embedded within the operations processes. All functions within an organization manage processes, and therefore, everyone involved in these processes should be concerned with managing and improving them to build and enhance capabilities.
What are the three types of knowledge that a functional vice president or similar executive should possess according to Professor Slack?
-The three types of knowledge are technical knowledge specific to their function, broad strategic leadership knowledge to contribute to strategic decisions, and knowledge about delivering service internally and managing the processes that create various services within the organization.
Why is it important for executives to understand the management of processes within their organization?
-Understanding process management is crucial for executives because it enables them to deliver services effectively and efficiently. It involves knowledge about bottlenecks, capacity, loading, flexibility, and service quality, which are essential for optimizing the performance of internal processes.
What is the significance of standardization in processes according to the transcript?
-Standardization is significant because it reduces variability in processes, leading to more effective and efficient operations. This can result in better service satisfaction and cost-effectiveness for the organization's clients.
How can capabilities be leveraged in different directions depending on market needs?
-Capabilities can be leveraged by adapting them to meet the specific needs of the market. For example, a diagnostic capability to understand customer requirements can be applied universally across different areas of the organization to improve products or services.
What is the potential disconnect between senior executives and the processes they manage, as highlighted in the transcript?
-The potential disconnect is that senior executives may not be fully in touch with the operational aspects of their processes. They may not understand the fundamental laws of process behavior, such as identifying bottlenecks, managing capacity, and reducing variability, which are crucial for effective process management.
What is the role of process management in the broader context of an organization, beyond just the operations department?
-Process management plays a crucial role across the entire organization, as all functions manage processes. It is important for everyone, from marketing to accounting to HR, to understand process management principles to build competences and capabilities within their respective processes.
Outlines
đ Strategic Significance of Operations Management
In this paragraph, the speaker, an executive director of supply chain management, engages in a discussion with Professor Nigel Slack about operations management and strategy. The conversation clarifies the misconception that operations and strategy are distinct, emphasizing that operations encompass the strategic use of resources to create products and services. The speaker highlights the importance of building capabilities over time through operational processes, which are embedded within these processes. A strategic capability is defined as something a company excels at and is difficult for competitors to imitate or substitute. The discussion also touches on the idea that capabilities can be leveraged in various ways, unlike specific investments in machinery or facilities.
đ Cross-Functional Process Management and Capabilities
This paragraph delves into the broader concept of process management, asserting that all functions within an organization, not just operations, manage processes and should be involved in building capabilities. The speaker points out that while functional vice presidents may have technical and strategic knowledge, they often lack understanding of the internal processes that deliver services. It is argued that everyone in the organization should be trained in process management, design, and improvement. The speaker also discusses the three types of knowledge a functional vice president should possess: technical knowledge of their function, strategic leadership knowledge, and knowledge of delivering internal services through effective process management. The disconnect between strategic leadership and process management is identified as a common issue, with a call for greater awareness and understanding of process behaviors, such as bottlenecks, capacity, and variability.
Mindmap
Keywords
đĄOperations Management
đĄStrategic Capability
đĄProcess Management
đĄCapabilities
đĄOperational
đĄBottleneck
đĄVariability
đĄStandardization
đĄCompetitive Advantage
đĄLong-term Strategy
đĄService Quality
Highlights
Operations management and strategy are interconnected, not separate concepts.
Operations refers to the resources that create services and products, while operational is the opposite of strategic, indicating day-to-day routine tasks.
Capabilities are built over the long term through the experience of running operations processes.
Capabilities are embedded within operations processes and are not just stored in an office.
A strategic capability is something a company is particularly good at that competitors cannot easily copy, imitate, substitute, or buy off the shelf.
Capabilities can be leveraged in different ways and are more fundamental than specific investments like machinery.
Investing in capabilities involves taking a risk, as their value depends on future market conditions.
Capabilities like the ability to decode customers' real requirements are universal and can be applied in various directions.
All functions within an organization manage processes, making everyone an operations manager in some sense.
Teaching technical aspects of functions like marketing or accounting often neglects the importance of managing the processes that deliver services.
Everyone should be involved in training about processes, process design, and process improvement to build capabilities.
Process management is a capability that should be developed across the organization, not limited to specific departments.
Senior executives have three types of knowledge: technical, strategic leadership, and internal service delivery.
Executives are often disconnected from the management of processes that deliver their services.
Understanding process management, including bottlenecks, capacity, and variability, is crucial for effective service delivery.
Standardization reduces variability, leading to more effective and efficient processes.
Process managers can provide efficiency and quality benefits by understanding and managing process fundamentals.
Transcripts
I'm summon crewman the executive
director of the supply chain management
Institute here at the University of San
Diego and I have
me professor Nigel slack from the
University of Warwick Nigel is professor
of operations management and strategy
Nigel that's a interesting title the
notion of operations management and
strategy tell me a little about how
operations can be strategic yeah that's
a good question a lot of people think
operations and strategy are very
different things they're not at all
operations and operational are different
words operational is the opposite of
strategic it means day to day it means
routine it means detailed but operations
that is the resources that create
service and create products well you can
look at that both from a strategic and
an operational perspective in fact I
think it goes further than that because
if you believe as I do that an important
part of strategy is the way we build
capabilities over the long term well
where do you build capabilities you
build them through the experience of
running operations based processes and
where do you store capabilities you go
into an office there isn't a pile of
capabilities just sitting there waiting
to be examined and sifted there isn't a
pile of capabilities that are waiting to
be examined and sifted capabilities
actually exist within the operations
processes that's where they are there
they are embedded there for all time
that's an interesting point about
capabilities being embedded in
operations and there's a lot of
interesting capabilities a lot of
literature that talks about capabilities
but what is the capability how do you
start by saying this is a capability and
this is just an activity or resource
what distinguishes a strategic
capability from something that's not a
capability well if you want a very rough
and ready answer a capability is
something that you are particularly good
at doing furthermore a strategic
capability is something that you're
particularly good at doing that other
people can't copy or can't imitate in
some other way or can't find a
substitute for or can't buy off you in
other words it's difficult for
competitors to get hold of that certain
something that you've developed over
time that's a capability okay so that
that implies that you're doing something
better than anybody else and it's
difficult for them to copy you but if
its strategic where does the advantage
come from that capability how do you say
well this is giving us an advantage I
don't know with the customer or with the
marketplace sometimes you just can't
tell sometimes you have to build
capabilities in in the vague hope almost
that it will prove valuable depending on
what the markets going to be in the
future but that's the same with any kind
of investment every time you invest in a
machine a facility anytime you make any
long-term action including the idea of
building capabilities over the long term
you're still taking a risk of some sort
because you did this things take time
you don't know what the circumstances
the environment is going to be like in
the future now the great advantage of
what we conventionally call capabilities
something that's underlying what we do
is that they can be leveraged in
different ways you buy a machine that
can do certain amount of things if you
don't need to do those things in the
future well you've partially at least
wasted the investment in that machine
but if you invest in a capability that
is somehow more fundamental than that
like for example I don't know the
ability to decode customers real
requirements the deconstruction of
customers really requires that
diagnostic capability well that's
universal it can be leveraged in any
direction that you want it to be
depending on what hands over so
capability is something more basic
something more fundamental at the very
heart of of the activities that you do
in order to earn money in the
marketplace so leveraging that
capability with it with the customers is
that something that operations get
involved with in isolation or is that
something that you need to involve other
functions like marketing or supply in
you know how do you deal with that
process of this is what we're good at in
our operations and this is what the
market needs of course it isn't just
about operations
it's about all function
and the reason why that is is that all
functions manage processes in fact let's
broaden this whole debate away from
operations through to process management
everybody manages processes therefore in
that sense everybody is an operations
manager at least in my terms one of the
things that here at business schools we
sometimes forget is that when we teach
things like marketing we're teaching the
technical aspects of marketing we're not
teaching people to run marketing
processes very often the same with
accounting we're teaching the technical
aspects of finance and accounting but
whether you're marketing or accounting
or HR or whatever you will be running
the processes that deliver some kind of
usually internal surface and therefore
it's important that you know something
about the management of those processes
and the basic skills of building
competences and capabilities within
those processes so in that sense yes
everybody is concerned with building
capabilities and they do it because
everybody is concerned with managing
processes so everybody should be
involved in training about processes
process design and process improvement
and initiatives that are targeted
towards building up that that capability
I assume process management is a
capability everybody should be involved
in building up that capabilities it's
not just like the shop floor or a
factory or the call center that's going
to be involved in developing process
capabilities I think that's right but
I'd kind of phrase it slightly
differently if you put yourself in the
position of say a functional vice
president vice president marketing vice
president human resources whatever it is
any any chief officer or vice president
person has three types of knowledge that
he or she is usually dealing with
there's the technical knowledge that is
part of their function you know they
have to know about marketing and sales
they have to know about about finance
and accountancy or whatever it is
there's that technical knowledge that's
the equivalent to when I studied
engineering before I was a factory
manager
time ago then the second type of
knowledge that they have that they need
is that broad strategic leadership
knowledge because they are the
representatives of their part of the
organization on the main board of the
company
they have to be a trusted partner to the
CEO and their colleagues the rest of the
vice presidency in terms of contributing
to those strategic decisions so they
must understand the nature of strategy
and the nature of leadership the third
type of knowledge and this is the one
that they're traditionally very bad at
is delivering service internally
managing the processes that create
accounting services marketing services
human resources resources services and
delivering them effectively and
efficiently now in order to do that you
have to understand about processes you
have to understand about bottlenecks
about capacity about loading about
flexibility about service quality all
the things that within a say a factory
environment we're very used to dealing
with but I talk to a lot of people like
this and it's surprising how little they
know about managing and developing the
processes that deliver their services
okay I mean that makes a lot of sense
that you know somebody who's a senior VP
for HR or senior VP for marketing is is
going to be driving forward the strategy
but now you're saying that they're not
really in touch with what's happening in
their processes they don't understand
the management of the resources so this
seems to be a disconnect
well you there is a disconnect and I
don't want to be considered too harsh
it's that no one's ever pointed out to
them that there are some fundamental and
basic laws of behavior of processes now
anybody who manages say a manufacturing
processes process knows this they
understand that they know that there's
such a thing as a bottleneck and that
unless they take that button like a way
out provide extra capacity at that
bottleneck then the whole process is
limited by that you ask the typical HR
manager about whether they have
information on capacity and loading in
there
to identify those bottlenecks many don't
have or take another example the idea of
variability in processes now you know
and I know that the greater the degree
of variability then the less effective
and efficient the process will be
which is why standardization such a
powerful thing but you talk to say a
typical finance vice-president about why
they're wanting to standardize
throughout their network their internal
network and they'll come out with some
very good reasons but they're very often
miss out the key one which is
standardization means less variability
and less variability means far more
effective processes so you can deliver
control processes budgeting processes
whatever they are to a greater degree of
service satisfaction to your clients and
a lot more efficiently as well so it's a
double whammy that one because you
you're getting efficiency benefits and
quality benefits and the VP is probably
focusing on the fact that it's more cost
effective
hey process managers give you the best
of all possible worlds we all know the
Sun great
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