Page 378 - Operations Strategy

hoW Can The monITorIng and ConTrol proCess aTTempT To ConTrol rIsKs? 353

Figure 10.7 Implementing a strategy that moves an operation from a to b may mean
deviating from the ‘line of fit’ and therefore exposing the operation to risk

Line of fit

B
Level/nature of market requirements External

risk (market needs
Internal operations- operations-related
related risk (excess exceeding current
capability for current levels of capability
market needs means means risk of failing
risk of unexploited to satisfy the
capabilities) A market)

Level/nature of operations resources capability

capability to satisfy it. This is called external operations-related risk. The area below the
diagonal implies that a firm has levels of competence or potential performance that are
not being exploited in the marketplace. This is called internal operations-related risk.

pure and speculative risk
A useful distinction is that between pure risks (involving events that will produce the
possibility only of loss, or negative outcomes) and speculative risks (which emerge from
competitive scenarios and hold the potential for loss or gain – positive outcomes). A
pure risk might be the risk that, while implementing a new blood-testing strategy for
HIV, a technician at a medical laboratory is involved in an accident that leads to pos-
sible infection. A speculative risk might be the risk associated with developing a new
computer-based diagnostics and information infrastructure to enable the laboratory
to offer a range of profitable new services. The risk here is that the technology may not
work (or not work on time or in budget), or that the market will not want to pay for the
new services. This is illustrated in Figure 10.8. The pure-risk type of ‘accident’ involves
a reduction in effective operations resource capability of the type represented by the
movement between A and C. Speculative risk of the type represented by the new infor-
mation infrastructure is represented by the possible outcomes B, D and E. Movement
from A to B is positive in the sense that it represents a fulfilment of the intended out-
come. Negative consequences are represented by point D, where market requirements
have increased as intended but operations capabilities have failed to match them, and
E, where operations capabilities have been increased but have not been fully exploited
in the market.

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