Strategy and Operational Excellence: Trade-Offs Made in Design and Thinking

“Managers must clearly distinguish operational effectiveness from strategy. Both are essential, but the two agendas are different.

The operational agenda involves continual improvement everywhere there are no trade-offs. Failure to do this creates vulnerability even for companies with a good strategy.

The operational agenda is the proper place for constant change, flexibility, and relentless efforts to achieve best practice.

In contrast, the strategic agenda is the right place for defining a unique position, making clear trade-offs, and tightening fit.”

 “What is strategy?“, Michael E. Porter, Harvard Business Review, Volume 74, Number 6

With reference to my previous post, I thought to clarify my thinking a little further.

Design (not design thinking), very clearly falls in the realm of operational effectiveness, as derived from the explanation given above – let’s use that old classic, the iPod, as a commonly understood example – it is very well designed. It would not have reached it’s iconic status if it were not well designed.

But just for the sake of this thought experiment, let’s say that Apple’s strategy could be framed as “leader in the market of portable, user friendly, hard drives that allow you replay the stored information. Hypothetically, mind you, and with respect to the iPod only, for the purposes of this conversation.

Steve Jobs’ vision was clear and Apple’s unique value proposition – the user experience – well differentiated. But his strategy of maintaining leadership in this category [clearly defined, per Porter’s definition] is supported by his operational effectiveness in releasing a new product [in the same product category – strategy] with a quality and frequency that left the other players breathlessly behind.

Had he not had this clear strategy he could have done any number of things that many do to maximize the revenue generation possibilities – released an iPod clothing line, offered iPod accessories, distributed toy iPods in Happy Meals, whatever came to mind.  But any of these tactics would have moved him away from his core value proposition.

This would have been short term thinking, how to maximise the cachet of the iPod brandname or, you could say, the outcome of not having a well defined strategy from the very beginning. By continuing to make trade-offs that he did in his decision making and tightening fit, he continued to maintain his strategic agenda, envisioned in advance for Apple’s forward momentum.

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A company can outperform rivals only if it can establish a difference that it can preserve. It must deliver greater value to customers or create comparable value at a lower cost, or do both.

The arithmetic of superior profitability then follows: delivering greater value allows a company to charge higher average unit prices; greater efficiency results in lower average unit costs. – ibid

On the other hand, at the time of the iPod’s heyday, just prior to the iPhone’s full scale disruption, there was much discussion on some of the design choices made, particularly in the arena of customer service.

Some may recall that the battery could not be changed in the original iPod and customer service for the product was nowhere near what today’s CX and UX gurus would advocate.

Here’s the snippet from the wayback machine linked above:

Its battery wears down and can’t be easily replaced because an iPod can’t be opened up by mere mortals. All of these were conscious design choices Apple made.

There’s something in that and I’ll be coming back to it, but in the context of this post one wonders whether trade-offs such as these,  in operational effectiveness, make for good strategy in the long run?

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