Real world operation versus think-tank strategy

01 November 2011 Jonathan Holden, Lion of Africa

Often one hears of the clash between operational and strategic focus and the downfall of one at the expense of the other. What should you do to make sure your day to day business activities gel with your long-term strategy?

Operationally focused activities tend to revolve around day to day activities and processes, like how you get to Cape Town from Johannesburg via Bloemfontein, for example. There are many operational activities that make up a full process, and just as many processes that constitute a function or division within a company. The time horizon for the outputs of such activities tends to be of short duration, often daily.

Long-term strategies

A strategic focus, on the other hand, plays out over much longer periods. The steps that need to occur to achieve a specific strategic objective are less important than the strategic goal and the broad factors that will influence this goal. Effective strategy rests on the formulation of unique activities and often ignores issues of operational effectiveness. Strategy begs the question: “Are we going in the right direction given the rapidly changing environment we conduct business in? This question is particularly relevant given the ongoing state of flux in the insurance industry.

The difficulty managers and executives face, is extracting themselves from the detail of granular processes, operational breakdowns, transactional dealings, day to day staff issues, compliance circulars etc and contributing to strategic discussions about the long term success and sustainability of their companies and the industry.

The importance of execution

Make no mistake, operational effectiveness is the ultimate determinant of the success or failure of a company – and is therefore just as important as strategy. However, without the sufficient strategic focus to anticipate the next hurdle and make the necessary changes, a focus on day to day operations could prove your downfall. Today’s operational effectiveness quickly becomes tomorrow’s operational redundancy – with the result your practice experiences a slow and painful demise. The converse is true too. Strategy without meaningful execution will fail dismally!

The task of separating the two imperatives and devoting sufficient time to each is becoming increasingly more difficult in an insurance environment, where the rules of engagement and regulations have been ramped up from all sides. SAM compliance, Binder regulations, Treating Customers Fairly, the list goes on. The art lies in anticipating environmental changes, making them an important consideration in setting strategy, and looking for opportunities to exploit change for gain.

An ongoing activity

Strategic planning should be an ongoing activity within a company. Operational effectiveness and excellence should be a key performance measurement for all managers too. You should consider how well you execute strategy and adapt to the necessary changes. Managers should be exposed to the external environment to gain an intimate understanding of the environment in which they operate, allowing them to change activities and focus as required. Active participation on industry bodies and forums is one good way of achieving this.

In conclusion, operational focus will lead to efficiencies and short term gains. However, in the absence of a robust and flexible overarching strategy, companies may find themselves playing a game that has long since changed. It is time for stakeholders in the insurance industry to embrace the many challenges and start thinking unconventionally about industry issues and customer needs. As Ralph Emerson said, “The man who knows how will always have a job, the man who knows why will always be his boss”.

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