Much is said about the concepts of competitiveness, strategy and operational excellence. There is also a lot of talk about the confusion between one another… strategists defend that strategy is the most important thing… those of operations defend that basic is operational excellence… In this article we will try to clarify these concepts.
Strategy concept
It must be borne in mind that the objective of the strategy is to achieve a positive differentiation from the competition, perceivable by the client and lasting over time. For this, it is necessary to think about creating a unique competitive position by transforming or redefining the sector in which it operates (or in which it can potentially operate).
This concept is not exclusive to large companies, but should be the “modus vivendi” of any organization of any size and in any sector.
It is common for managers not to believe in strategy and to use expressions such as "everything is already invented in my sector" or "we really cannot get any differentiation from our competition"… this is not true although nobody has said that strategically innovating is either simple. Cases like Dell's are a clear example of a small company that has become a big company thanks to strategic innovation.
Operational excellence
However, Operational Excellence seeks to achieve the best possible execution - in terms of time and costs - of what is defined in the chosen strategy. For operational excellence, tools such as total quality, process reengineering, process management, the incorporation of New Information Technologies at the operational level, etc. are used.
Clearly, the ideal would be to have a differential strategy and be excellent operationally speaking. Pursuing operational excellence is especially important when operating without any competitive / comparative advantage over competitors.
In some way it can be said that if the same product / service is offered as the competitors, you have to try to be a little faster, a little cheaper or with a little higher quality… although we must bear in mind that these are advantages that are relatively easily adopted by the competition.
Due to this confusion, I think that everything can be clarified using a simple "formula":
Competitiveness = How competitive we are strategically + How competitive we are operationally.
With this formula, it is proposed that strategy is equally important as operational excellence. If not, we should use some correction coefficients:
Competitiveness =
Coef. Strategy importance x Strategic competitiveness +
Coef. Importance of operations x Operational competitiveness
Thus, our experience - in accordance with the approach of famous strategists like Michael Porter - indicates that strategy is more important than operations for the competitiveness of the company. In other words, an organization with a good strategy and poor development of its operations is more competitive than an organization that is operationally excellent and has a bad strategy.
The next step would be to define all the values of this formula. Actually, all these values depend entirely on the organization and its environment, so they are particular to each of the cases. If you want us to collaborate with you to assess your competitive position, get to know our "strategic analysis" service.
In addition, the concept of “window of opportunity” must also be taken into account, whereby there can be a specific opportunity in time that allows a differential strategy but is not lasting in time.
For practical purposes, it is common to find companies that have had excellent results for many years thanks to a privileged competitive position and that at a certain moment due to the entry of new competitors, are losing their competitive position.
When this happens, it is increasingly difficult to sell the products / services with a profitability like that of the past, since there is no differentiation with the competition and all this leads to a very delicate situation.
In conclusion, we invite you to reflect on your strategy and be critical of its "competitive advantages" that make it "special" for your clients.
