Discussion

to customized) equipment which would reduce the capital cost of the technology and may also imply lower maintenance and running costs. However, it is unlikely to be as flexible. Implicitly the strategy is accepting that cost is more important than flexibility. So, we would expect all other decisions to correspond with the same prioritization of objectives, for example: capacity strategies that exploit natural economies of scale; supply network strategies that reduce purchasing

costs; performance measurement systems that stress efficiency and productivity; continu- ous improvement strategies that emphasize continual cost reduction; and so on.

● Does operations strategy identify critical issues? The more critical the decision, the more attention it deserves. Although no strategic decision is unimportant, in practical terms some decisions are more critical than others. The judgement over exactly what decisions are par- ticularly critical is very much a pragmatic one which must be based on the particular cir- cumstances of an individual firm’s operations strategy. But they must be identified.

✽ Operations principle Operations strategies should be comprehensive, coherent, correspond to stated objectives and identify the critical issues.

OPERATIONS IN PRACTICE

Only a few years ago Nokia was the king of the mobile phone business – and it was a good business to be in, with double-digit growth year on year. Nokia was omni- present and all-powerful, a pioneer that had supplied the first mass wave of the expanding mobile phone indus- try. Nokia dominated the market in many parts of the world and the easily recognizable Nokia ring-tone ech- oed everywhere from boardrooms to shopping malls. So why did this, once-dominant, company eventually sink to the point where it was forced to sell its mobile com- munications business to Microsoft in 2013? The former Nokia CEO, Jormal Ollila, admitted that Nokia made sev- eral mistakes, but the exact nature of those mistakes is a point of debate among business commentators. Julian Birkinshaw, a professor at London Business School, dis- misses some of the most commonly cited reasons. Did Nokia lose touch with its customers? Well, yes, but by definition that must hold for any company whose sales drop so drastically in the face of thriving competitors. Did it fail to develop the necessary technologies? No. Nokia had a prototype touchscreen before the iPhone was launched, and its smartphones were technologi- cally superior to anything Apple, Samsung or Google had to offer for many years. Did it not recognize that the basis of competition was shifting from the hardware to the ecosystem? (A technology ecosystem in this case is a term used to describe the complex system of inter- dependent components that work together to enable mobile technology to operate successfully.) Not really. The ‘ecosystem’ battle began in the early 2000s, with Nokia joining forces with Ericsson, Motorola and Psion to create Symbian as a platform technology that would keep Microsoft at bay.

Where Nokia struggled was in relying on an opera- tions strategy that failed to allocate resources appro- priately and could not implement the changes that were necessary. As far as resource allocation was concerned, Nokia saw itself primarily as a hardware company rather than a software company. Its engi- neers were great at designing and producing hard- ware, but not the programs that drive the devices. They underestimated the importance of software (including, crucially, the apps that run on smart- phones). Largely it was hardware rather than software experts who controlled its development process. By contrast, Apple had always emphasized that hardware and software were equally important. Yet while it was losing its dominance, Nokia was well aware of most of the changes occurring in the mobile communica- tions market and the technology developments being actively pursued by competitors. Arguably, Nokia was

Nokia, a failure to change 11

100 PART ONE DIRECTING THE OPERATION

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Operations strategy implementation Operations strategy implementation is the way that strategies are operationalized or exe- cuted. It means attempting to make sure that intended strategies are actually achieved. It is important because no matter how sophisticated the intellectual and analytical underpinnings of a strategy, it remains only a document until it has been implemented. But the way one implements any strategy will very much depend on the specific nature of the changes implied by that strategy and the organizational and environmental conditions that apply during its implementation. However, three issues are often mentioned by strategy practitioners as being important in achieving successful implementation:

● Clarity of strategic decisions – There is a strong relationship between the formulation stage and the implementation stage of operations strategy. The crucial attribute of the for- mulation stage is clarity. If a strategy is ambiguous it is difficult to translate strategic intent into specific actions. With clarity, however, it should be easier to define the intent behind the strategy, the few important issues that need to be developed to deliver the intent, the way that projects be led and resourced, who will be responsible for each task, and so on.

● Motivational leadership – Leadership that motivates, encourages and provides support is a huge advantage in dealing with the complexity of implementation. Leadership is needed to bring sense and meaning to strategic aspirations, maintain a sense of purpose over the implementation period, and, when necessary, modify the implementation plan in the light of experience.

● Project management – Implementation means breaking up a complex plan into a set of relatively distinct activities. Fortunately there is a well-understood collection of ideas of how to do this. It is called ‘project management’ and a whole chapter is devoted to this subject ( Chapter 19 ).

Operations strategy monitoring Especially in times when things are changing rapidly, as during strategic change, organiza- tions often want to track ongoing performance to make sure that the changes are proceeding as planned. Monitoring should be capable of providing early indications (or a ‘warning bell’ as some call it) by diagnosing data and triggering appropriate changes in how the operations strategy is being implemented. Having created a plan for the implementation, each part of it has to be monitored to ensure that planned activities are indeed happening. Any deviation from what should be happening (that is, its planned activities) can then be rectified through some kind of intervention in the operation.

Operations strategy control Strategic control involves the evaluation of the results from monitoring the implementation. Activities, plans and performance are assessed with the intention of correcting future action if that is required. In some ways this strategic view of control is similar to how it works opera- tionally (which is discussed in Chapter 10 ), but there are differences. At a strategic level, con- trol can be difficult because strategic objectives are not always clear and unambiguous. Ask

not short of awareness, but it did lack the capacity to convert awareness into action. ‘ The failure of big companies to adapt to changing circumstances is one of the fundamental puzzles in the world of business ’, says Professor Birkinshaw. Occasionally, a genuinely ‘ disruptive’ technology can wipe out an entire indus-

try. But usually the sources of failure are less dramatic. Often it is a failure to implement strategies or technol- ogies that have already been developed, an arrogant disregard for changing customer demands, or a com- placent attitude towards new competitors.

CHAPTER 3 OPERATIONS STRATEGY 101

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