The role of operations capabilities in achieving business strategy

Abstract
Building the right strategy is step number one, but it needs to be soundly cascaded among the
different levels of the business to the individual level. Alignment needs to be ensured and
balance need to be supported in terms of financial, customer, internal processes and learning and
growth perspectives toward building a lead and lag strategy map that operates the business and
maximize positive performance. New ways of doing business are a must now a days, so
embedding creativity and innovation in businesses and building the right culture that supports
attracting talents and elevate teamwork between all business stakeholders to create, learn and
improve are what is needed to benefit the most of operations capabilities and resources. In this
paper, we identified what are the operations capabilities and how they can support achieving
business strategy collaboratively.

Introduction
According to the EFQM Model 2020, sustaining businesses is what drives developing and
operating effective and efficient processes and attracting the right talents. The right drivers need
to be identified and tackled properly to be able to move to the future. This is where operations
capabilities need to be identified and managed soundly with clear alignment across the business,
in terms of innovation, leadership, employees, processes, culture and many others (EFQM 2020).
Competitiveness depends on improving productivity of employees and ensure harmony among
them (Porter, M. E. and J. W. Rivkin 2012). It also depends on creating value that is different
than what is created by competitors which should lead to long term success (Hayes-Pisano
1994).
What is needed to achieve business strategy and how can operations’ capabilities support this
direction? This is what we will explore in this paper.

Strategies and Resources Hand-in-Hand

In the current continuously changing demand and growing innovations in the technological
industry, companies are facing challenges to remain in market and continue to be competitive;
thus, increasing their market base and growing their financial numbers. Competitive advantage
for companies is only temporary and need to develop continuously while considering not only
effectiveness but also efficient utilization of resources, towards performing activities differently
than competitors to reduce copying and increase differentiation (Porter 1996). G. McGrath
highlight that the unpredictable demand should change the way companies approach the market.
They need to be more agile in setting new initiatives that can add value to their customers and
the market they operate in. These initiatives will be managed through a portfolio that continues
to assess the value adding and trigger the need to continue with any new initiative, or to drop it.
Suh a portfolio should continuously be fed with new initiatives and people need to be agile as
well supported with culture agility to help them switch from one direction to another with one
main aim which is the surviving of the company and more profits to be earned.
Differentiation is important to stay ahead in the market and distinguish delivered services and
products from competitors, which can lead to co-creation of value; Co-creation is where
customers play vital part in developing the value they receive and utilize throughout the usage of
the product or service they purchased; thus moving from a goods dominant logic where

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companies believe they know more about what customers should have, to a service dominant
logic where customers are an important part of the value chain (Stephen L. Vargo and Robert F.
Lusch 2004). Value creation relies more on the balance a company can achieve between the
current price they sell at, and the willingness to pay (WTP) from customers, and the willingness
to sell (WTS) by suppliers; this balance is where companies ensure the delight for customers in
the margin between WTP and the actual price, thus adding value that they appreciate, and at the
same time building long term relationships with suppliers, where they can make profit while
reducing cost, increase quality and improve lead time, through the margin between what they
buy with from suppliers and what suppliers are willing to sell at. As Oberholzer says “Unless an
initiative creates value for customers, employees, or suppliers—unless it moves the needle on
WTP or WTS—it’s not worth doing”. The balance also applies on value creation for employees
where they get better working environment, empowerment, development, better compensations
towards more productivity and involvement in the workplace. Such value creation and
management continue throughout the lifecycle of the service or product by shifting during the
life cycle from value creation to value capture depending on the maturity in the cycle curve
towards more willingness to pay by customers, more delighted customers, and thus more profits
as a lagging indicator (Oberholzer-Gee F 2021).
Leadership is the key to the success in businesses to achieve strategies. Their existence applies
on many areas where they put together all parts of the business to work in harmony and improve
performance. Parts that develop the business are considered within a chain where every part
affects the rest whether positively or negatively, depending on how its performing and managed.
Considering these parts within 4 perspectives of financial, customers, internal processes and
learning and growth; then the lead and lag effect between them applies as follow; increasing
profit will depend on having more market share, more loyal customers, more satisfied customers,
better net promoter score. For these to happen; operations and internal processes need to operate
effectively and efficiently, reduce defects and errors, improve lead time and for those to be
tackled; employees need to be productive, satisfied, involved, empowered. So, leadership is what
put all of this together through a supporting culture that transmits its vibes internally among
employees and operations, and externally among customers, suppliers, partners and of course
revenue gains and market share (Heskett et.al. 1994).
Competitiveness, value creation, value capture, value management, growing profits, cost
reduction; are all important for any business to survive and sustain their existence, however,
these should be tackled first by developing the right direction forward. Identifying the reason
behind the existence of the company and the impact they intend to cause where they operate (a
mission), supported with setting a long-term goal (a vision) and sound guiding principles (value
statements) are vital to be able to understand the position they intend to reach and be able to
develop the appropriate strategic direction to achieve the long-term goal. Strategies need to
clearly identify the competitive direction and the growth direction of the company, supported
with SMART strategic objectives that are measured with balanced KPIs and pre-set targets that
are challenging but achievable which will then be linked with initiatives for execution (Kaplan
2008). Executing these initiatives will require having the needed resources of personal,
competencies, experiences, systems, processes, assets, culture, and others; while it’s important to
secure the needed resources, its also important to sustain them and maximize their utilization to
efficiently execute the initiatives and accomplish the objectives of the company. It’s the strategy
that defines way forward but it’s the resources that differentiate one company from another and

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establish their level of competitiveness especially when these resources are unique and exist
when needed. Those resources can be tested to assess if they are qualified to support the strategy
or not; tests can vary between inimitability and physical uniqueness test; that identify if resources
are hard to be copied, path dependency test that assess the building of strong relationships
leading to loyalty but needs years to be achieved, casual ambiguity test, that relates to identifying
the valuable resources and steps to create them, and the economic deterrence test, where
companies assess the readiness to invest in an asset that this is difficult to be imitated or copied
by others (Collis-Montgomery 1995).
Capabilities are the resources that support the strategy accomplishment and benefits realization,
therefore, its vital to build them overtime and treat them as a driver for business sustainability.
Failing to do so will keep companies behind when competing against others and always
dependent on other sources to supply what is needed, so less differentiation, less control over
cost and more reactiveness than proactiveness. This can be obvious with companies like in the
USA, which have outsourced their production to other countries thus losing the benefits of
capturing the needed skills, experiences, and knowledge which are the enablers for process
engineering and R&D work; thus, a governmental focus to shift this direction is needed (Pisano,
G. P. and W. C. Shih 2009).

Innovation Towards Benefits Realization

An important capability in any company in current era is the ability to create new ideas and
transform them into innovations towards differentiation and sustaining the business through
meeting changing demands and satisfying customers. Innovation is not an item that can be
bought or copied from others, but an internal capability that businesses can build and manage to
support the overall strategy. Innovation is not a complimentary anymore, neither an extra item to
think of in meetings or when directing teams, but a driver to create value in services and
products; therefore, embedding innovation in the DNA of the company is the way forward to
maximize its benefits and develop strong linkage between it and the value creation and later.
Innovation varies between routine innovation where companies build on current business models
and technologies (Like in new versions of Apple iPhone), disruptive innovation where
companies can create a new business model and disrupt the market with different way of
delivering their service or product (Like in Google’s Android operating system), radical
innovation where we consider new applications using existing technologies to achieve long term
goals (Link in farming equipment with sensor technology to support farmers with farming
decisions and alternatives), and architectural innovation (like in digital photography); but what’s
important is how to embed in the DNA of the company and how to eliminate silos between
departments and people to maximize collaboration, experiences sharing, ideas generation and
more distinguished innovations to be created.
It’s mainly through the right leadership who first recognize how important innovation is and how
necessary it is to continue in existence and for strategy accomplishment. They develop their
resources while having innovation in the center supported with empowered people, developed
R&D processes, willingness to fail and learn, ability to continuously improve performance, while
building on lessons learned. This is when companies can realize the benefits of innovation and
better understand how this capability can drive strategies while supporting operations to reduce
costs and improve productivity (Pisano, G.,2015).
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When it comes to innovation to support operations and achieve business strategy, it gets linked to
technological trends and benefit from the growing developments in the technological field to
reflect in businesses. Data management, algorithms and development of sound and reliable
technological infrastructure are considered important to expedite on innovation and benefit from
the artificial intelligence growth to drive processes, automate decisions, reduce lead time,
increase effectiveness and efficiency. This to be reflected on reshaping the business model and
leadership practices to be able to maximize the gains (Iansiti, M. and K. R. Lakhani 2020).
Alibaba (a Chinese company) had benefited from this and developed a comprehensive ecosystem
operated by artificial intelligence and machine learning to identify and manage customer needs
in real time, while making it simpler for businesses to operate customer demands, manage
payments and decision making. They allow their employees to create new ideas and embed in the
business to boost performance and elevate/create needed capabilities to sustain the business and
support overall decision making. With the current trends worldwide, many companies are
shifting to use AI, machine learning and Big Data to improve their operations and value
generated for their customers while improving the efficiency of their operations (Zeng, M. 2018).

Suppliers Support for Agility and Sustainability

Capabilities of business can be captured at all levels of the organization whether in processes,
systems, assets, and others, which are supported with suppliers and partners as stakeholders since
they are crucial part in the supply chain of any business to achieve their business strategies.
Businesses need to choose the right suppliers, those who are fast, agile, and proactive to change;
this will include having suppliers with more efficient processes, shorter lead time with
predictable supply and of course at the lowest cost possible. It’s a lead and lag effect, where
shorter lead time will affect operating cost and the overall performance, thus, establishing the
right balance between these aspects is needed to achieve and sustain positive levels of
performance towards longer intervals of differentiation in the market (Fisher 1997).
Sustainability needs to be tackled from three main dimensions: environmental, social, and
financial. For this reason, companies try to embed sustainability practices and measures
throughout the value chain starting from suppliers up to the point where customers use purchased
services and products. Embedding the sustainability practices in the supply chain is done by
many companies now, where they try to focus on their suppliers to consider environmental and
social aspects whether from waste management and recycling point of view, in addition to
health, safety and even employment and labor rights. This is not an easy direction, since when it
comes to lower-tier suppliers, things get more complicated as they operate in distant areas, and it
gets difficult to raise awareness in these areas and push them to adopt the right practices to
spread throughout their operations. Its again a chain within a chain, that starts with first-tier
suppliers and continues to lower-tier suppliers, therefore it’s important to introduce sustainability
performance indicators for first-tier suppliers that apply on all their suppliers, support them to
raise awareness along their supply chain and work with NGOs and international standard
organizations to receive needed support and commit to related standards. Its needed effort that
needs to continue with sound governance and follow up and great focus on awareness, for

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everyone to be part of the sustainability of the planet we will live in (Villena, V. H. and D. A.
Gioia 2020).
The last pandemic has directed the compass to how important it is to continuously assess your
supply chain and rank suppliers as low, medium, and high-risk suppliers, based on their location,
lead time commitments, quality of supplies and even when having only one supplier that supplies
an important material for your operations. Such assessment should reveal scenarios on how to
minimize these risks by diversifying the supplier’s network in different countries and regions and
reduce dependency on small range of suppliers or even one supplier. This can be supported by
adopting new technologies in manufacturing and operations like 3D printing which can help in
making certain parts and reduce dependency on certain suppliers. Keeping certain stock levels
while considering the needs, costs, and safety measures of storage should also be considered
(Shih, W. C. 2020).

Collaboration, Continuous Improvement and Quality Management

Ensuring alignment in businesses will support collaboration and develop operation excellence. If
we would consider how operations capabilities support achieving business strategy, its important
to not keep strategies on the top, but cascade to lower levels of the organization; this involves
cascading objectives, KPIs and targets to departments level, sections level and individual level;
this identifies the contribution of every entity and personal towards the overall strategy. Such
alignment will support leaders, managers, and human resources to identify development needs
for their employees directly in relation with achieving the strategy. It will also support leaders
and managers to identify how operations management in terms of quality management, lean
management, processes optimization, can support the reduction of costs, minimize budget
variances and support achieving the strategy.
It’s all linked, but not easy to develop and requires persistence and continuous efforts. It’s not
easy to reflect best practices across all levels of the organization. It’s a journey that needs
collaboration from all to ensure alignment and adopt what is needed for continuous
improvement. This journey need to minimize what can slow such development like false
perceptions of current performance, lack of solid governance structure that clearly identifies
roles and responsibilities, skills shortage which need to be tackled and flag need to be raised
when a certain skill need to be developed internally in addition to elevating current employees’
skills for the benefit of the business, and organizational culture that need to enable productivity,
motivations, empowerment and involvement across all levels. Leaders and managers need to
understand how to think strategically and take the right decisions, this can mean, in order for
them to be able to steer companies forward, other parties inside the organization need also to
think strategically and be able to understand the direction and the reasons behind certain
decisions to maximize their contribution towards the success of these decisions (Sadun R, N.
Bloom and J. van Reenen, 2017).
Business silos are what can hinder growth, increase defects, and slow improvements. The
alignment between company’s operations, like manufacturing and R&D and innovation is
needed to put together all resources inside the company together towards achieving one strategy
that was set for all. Operations run through end-to-end processes that run over multiple entities
inside any business toward delivering the product or service to the end customer; this means
people need to be aware of the overall model they operate in, how they get inputs from

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previously run processes and how other entities benefit from outputs they generate. Once this
knowledge and experience are developed, innovation can add value by improving these
processes and help find different ways to operate these processes to increase efficiency, better
utilize existing resources and generate outputs that are better, different and with more added
value (Pisano, G. P. and W. C. Shih 2012).
Continuous improvement is the key to develop operations on continuous bases, learn from
previous experiences, allow failures to learn new ways of operating processes toward better
performance results over time. It’s a journey that never ends but need to start. Toyota are one of
the main players in this field who clearly understand that they need to continuously learn,
identify problems to resolve them, and support their people to share experiences, work as
collaborative teams, respect each other, be responsible, and allow operations around them to
improve while embedding innovations by everyone with one main aim for all which is to tackle
challenges and achieve the long-term vision. They managed to learn from their past experiences
to develop the flexibility in demand management where they linked the production in different
plants around the world through one system to meet fluctuating demand through the support of
multiple plants, but not necessary in the same country. At Toyota, they work with an aim to be
the best in the world, so they consider building strong foundation along the supply chain, from
supplier relationships and product development up to after sale service, through; better product
quality, cost optimization and developing the right people (Watanabe, K. 2007).
Toyota operates the principle of just in time where they produce what is needed and when its
needed. This means that their operations need to be up and running, not to produce in large
batches and push to the market, but to produce with exact needed batches and with the highest
quality. This is never easy and not doable without the collaboration from everyone in the
business. Its leadership, managers, employees, and suppliers who need to be ready to support the
adoption of these principles, through continuous learning and sharing experiences throughout the
supply chain to push each other to best performance and strive to achieve business strategy,
customer satisfaction and make more profits towards sustaining the business in the future. The
Toyota Production System (TPS) depends on two main principles, the Just-In-Time (JIT) which
ensure that any excess production than what is needed and when its needed is considered as
waste; this includes having smooth flow in the production lines with available tools and
equipment where needed and when needed. Moreover, the principle of Jidoka for identifying any
defect along the production line immediately when it happens, stop production and invite related
people to act on it to detect root causes and prevent in the future. This takes us back to the need
to have the right people but also with the good thinking that will continuously trigger solutions
while using the right analysis tools for any problems and challenges they face (Mishina, K. and
K. Takeda 1995).

Conclusion
Managing a business is never easy but also it shouldn’t be a chaos. Building the right model that
can develop operations capabilities and align them together to support the achieving of the
strategy is what is needed from leaders to push for, but also need to involve their people in
understanding this model and work together to operate it effectively and efficiently with one
focus in front of all which is the achievement of the strategy, that is well cascaded among the
different levels of the organization, supported with end-to-end processes, strong relationships
with suppliers, while encouraging them to become a key player in the success of the business and

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that without suppliers valuable contribution that needs to continuously improved; the business
can’t move forward steadily.

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