Page 343 - Operations Strategy

318 CHAPTER 9 • THE PRoCEss of oPERATions sTRATEgy – foRmulATion And imPlEmEnTATion
strategic sustainability

The CAG example reinforces the point that even the most successful and appar-
ently problem-free development paths include times of mismatch between resources
and requirements. More specifically, it illustrates the two basic models for assuring
sustainability:

● The use of ‘static’ mechanisms that defend a given position
● The use of ‘dynamic’ mechanisms that encourage innovation and change

‘Static’ or defensive approaches to sustainability
‘Static’ mechanisms for achieving sustainability are concerned with preventing com-
petitors from attacking existing market and resource positions, rather than trying to
move to an entirely new position. So, to some extent, it is a defensive rather than offen-
sive approach. An operation can seek to identify the market-isolating (barriers to entry)
and resource-isolating (barriers to imitation) mechanisms that minimise change and
act to keep a lock on a specific resource/requirement position. It can do this by using
internal and external approaches.
Internal approaches exploit the idea that we have used before – that operations
resources can be considered particularly valuable if they are scarce, difficult to move,
difficult to copy or difficult to find substitutes for. Because they are difficult to repli-
cate, such resources act to sustain competitive advantage by preventing competitors
replicating their advantage. External mechanisms are based on the idea that the overall
performance of a firm will depend on how well its strategy and its actions take into
account the specific structure of the industry in which it is competing. In particular,
the work of Michael Porter has been hugely influential in understanding this view. The
forces Porter refers to can be summarised as: (a) the bargaining power of suppliers and
buyers; (b) the threat of potential market entrants; (c) the threat of substitute products/
services; and (d) the challenge from existing competitive rivals. Table 9.1 offers some
illustrations of how operations strategy can exploit both internal and external strategic
attributes of sustainability.

‘Dynamic’ or offensive approaches to sustainability
Ultimately, even in the most isolated of market niches, customer requirements evolve
and, as a result, operational capabilities also need to evolve. So, in addition to exploit-
ing existing barriers to entry and imitation, operations can raise their game through
innovation and change in order to achieve sustainability. Doing this involves the
operation actively moving up the line of alignment and achieving a balance between
market requirements and operations resources at a higher level. For instance, prior to
the launch of the Federal Express ‘next day’ delivery service (‘for when it absolutely,
positively has to be there overnight’), market analyses suggested that few organisations
4
needed such a fast and dependable service. Once launched, however, early adopters
of the service, such as global industrial firms and professional and financial services,
obtained competitive advantage from the speed and dependability benefits of over-
night mail. As a result, increasing numbers of firms began to use the service. Although
rivals eventually began to imitate the services, for a number of years this radical oper-
ating innovation proved to be hugely profitable for Federal Express, who in effect had
gone to market with an entirely new set of capabilities delivering significantly improved
speed and dependability performance.

M09 Operations Strategy 62492.indd 318 02/03/2017 13:27