Operations and Strategy With Nigel Slack

Summary

In 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

• 📚 Operations and strategy are intertwined, with operations being a key component of building long-term capabilities within an organization.
• 🔍 The difference between 'operational' and 'operations' is crucial; 'operational' refers to day-to-day activities, while 'operations' refers to the strategic management of resources.
• 🏭 Capabilities are embedded in operations processes and are built over time through experience, making them difficult for competitors to imitate or acquire.
• 🛠 A strategic capability is something an organization is particularly good at, which provides a competitive advantage that is hard to copy or substitute.
• 🤔 The strategic advantage of a capability is derived from its ability to be leveraged in various ways, unlike specific investments that may become obsolete.
• 🔑 Process management is a fundamental capability that all functions within an organization should be involved in, not just operations.
• 👥 Every function within a company manages processes, and therefore, everyone is an operations manager to some extent, emphasizing the importance of process management skills.
• 🛑 Understanding process management, including bottlenecks, capacity, and variability, is essential for all leaders, not just those in traditional operations roles.
• 📈 Standardization in processes is key to reducing variability, leading to more effective and efficient operations, a point often overlooked by non-operations leaders.
• 💡 The importance of recognizing and managing the internal delivery of services through processes is highlighted as an area where many senior leaders lack awareness.
• 🔬 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

00:00

📘 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.

05:01

📚 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.

Keywords

💡Operations Management

Operations Management refers to the administration of business practices to produce the highest quality goods and services at the lowest possible cost. It is central to the video's theme as it discusses how operations can be strategic and not just routine or detailed work. The script mentions that operations involve the resources that create services and products, and it is through these operations that capabilities are built and stored.

💡Strategic Capability

Strategic Capability is a distinctive ability that an organization possesses, which provides a competitive advantage and is difficult for competitors to imitate or substitute. The video emphasizes the importance of building capabilities over the long term, which are embedded in operations processes. It is exemplified in the script when discussing the uniqueness of certain operational processes that competitors cannot easily replicate.

💡Process Management

Process Management involves the coordination and supervision of processes within an organization to ensure they are efficient and effective. The video broadens the discussion to process management, stating that all functions within an organization manage processes and should be involved in building process capabilities. It is highlighted as a universal concern that goes beyond traditional operations roles.

💡Capabilities

Capabilities, in the context of the video, are the skills, knowledge, and resources that an organization uses to deliver value. They are embedded within the operations processes and are a key part of the organization's strategy. The script discusses how capabilities are built through experience and are stored within the operations processes, rather than being a static pile of resources.

💡Operational

Operational refers to the day-to-day activities and routines within an organization. The video script contrasts 'operational' with 'strategic,' explaining that while operational implies routine and detail, operations can also be strategic in nature. The term is used to highlight the difference between short-term, routine tasks and long-term strategic planning.

💡Bottleneck

A Bottleneck in process management is a point where the rate of flow, processing, or production is slowed down. The video script uses the term to illustrate the importance of understanding process dynamics, such as identifying and addressing bottlenecks to improve efficiency within operations.

💡Variability

Variability in processes refers to the differences or fluctuations in process outcomes or performance. The script discusses how reducing variability through standardization can lead to more effective and efficient processes, which is a key concept in operations management.

💡Standardization

Standardization is the process of making something uniform or conforming to a standard. In the video, it is mentioned as a powerful tool to reduce variability in processes, which in turn leads to more predictable and efficient operations, a concept that is important for building strategic capabilities.

💡Competitive Advantage

Competitive Advantage is the attribute that enables an entity to outperform its competitors. The video discusses how strategic capabilities can provide a competitive advantage, particularly when they are difficult for others to copy or substitute, which is a key aspect of operations strategy.

💡Long-term Strategy

Long-term Strategy involves planning and actions that are intended to achieve goals over an extended period. The video script emphasizes the importance of building capabilities as part of a long-term strategy, where investments in operations processes are made with future value in mind.

💡Service Quality

Service Quality refers to the degree to which a service provided meets or exceeds the expectations of the customer. The video script discusses how understanding and managing processes, such as reducing variability and addressing bottlenecks, can lead to improved service quality, which is a critical aspect of operations management.

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