What is your business strategy?
Is it consistent across the
Is it appropriate for your
business and current economic environment?
Organizational strategy and
objectives need to be well defined and communicated throughout the
organization. In defining
strategy and objectives, they need to address customer needs and
acknowledge the constraints that the organization operates within.
Effective communication of the
business strategy and objectives is a minimum requirement to ensuring
consistency in understanding across the organization.
The business strategy should be cascaded down though the
organization, to have the strategy at the lower levels support the overall
organizational strategy. Even
with the common understanding of the organizational objectives,
“operational silos” may still exist, as the different parts of the
organization optimize the performance of their individual groups,
resulting in sub-optimal performance of the overall organization.
Output for capital-intensive
business can be internally constrained, or externally constrained. Some businesses can change between internally and externally
constrained depending upon the industry response to economic situations.
Strategy needs to address the issues imposed by the constraint.
A business where the output is internally constrained can sell all
the output that can be produced, but is limited in the amount it can
produce. Typical businesses
are commodities that sell at a market-set price.
Externally constrained output is imposed by factors not controlled
by the organization, such as market demand for the output, derived demand
(demand driven by other product, e.g. electrical transmission, pipelines,
transport), scarce inputs, or logistics required by a complex process
(e.g. JIT used in automotive assembly).
The strategy in the internally constrained situation is to focus
effort on asset management to increase output, thereby increasing revenue.
In the externally constrained situation, the focus on asset
management is upon producing to the level of the constraint in the most
economical manner. For an
organization that changes between internally and externally constrained,
it must understand its response to the economic environment, and adjust
its strategy to match the current situation.
Do you understand your own
business output constraints?
Do you manage the business
strategy to match your constraints?