You’re Doing It Wrong: Strategic vs. Operational Goals

¨A goal is a dream with a deadline.¨ Napoleon Hill 

Any organization needs to have a strategy and respective strategic goals, however, on most strategy maps the focus is on incremental operational objectives that can rarely result into sustainable profitability. 

[Infographic] You’re Doing It Wrong: Strategic vs. Operational Goals

Strategic vs. operational

Intuitively anyone recognizes the contrast between operational and strategic:

  • “Operational” is something that helps things to work smoothly today, and requires constant attention, while
  • “Strategic” is something from the world of top managers, defined for a longer-term, often less tangible, but still very important.

Can we call ¨15% increase of the market share” a strategic goal? Is ¨Implementing new technology” strategic or operational? Is strategic/operational defined only by planning horizon or by something else as well?

6-Point Checklist: Strategic vs. Operation Goal

In order to answer these questions and have a point of reference for the following discussion, we can build a checklist that compares a “strategic” goal vs. an “operational” one.

Strategic GoalOperational Goal
1Doing things differently. Doing the right things.Doing things better. Doing things right.
2Long-term (2-4 years)Short-term (week, month, quarter)
3Aligned with mission/visionAligned with strategic goals
4.Gives coherence to the operational goalsAllows achieving strategic goals by giving workable execution plan
5.Sustainable advantages. Long-term profitability.Best practices. Short term profitability.
6.Game of top managersGame of line managers

If you have more ideas for the checklist feel free to share in the comments!

How to find out if the goal is a strategic or an operational one?

According to my experience, the checklist above is generally well accepted by any auditory. Why not then try to use some examples to see how it works in practice. Let’s start with these 3 goals, and do a quick analysis:

AnalysisClassification
Goal A: Answer customer queries regularlyThis looks like a classical operational goal. Company needs to keep doing what it was doing.Operational Goal
Goal B: Answering customer queries fasterCompany is improving here on the best practices, so again, it looks like operational goal.Operational Goal
Goal C: Improving customer support service during 5 yearsThis one is too broad to be operational goal, so it fits into the concept of strategic goal.Strategic Goal

Now, let me ask some tricky questions…

Is a strategic goal aligned with the company’s mission/vision?

Just because “Improving customer support service during 5 years” is a long-term broad goal, it doesn´t make it a strategic one! The main question is if the company actually needs to have a better customer service (point 3 in the checklist) or everything is just fine now… In other words: does improving customer support service lead a company to where it wants to be in its dream-future? That’s a good question to ask. What if the answer is “No, it is not aligned with our mission/vision!” Then this is not a strategic goal, at least not for your organization.

Does a goal require incremental improvement or a critical change?

Another thing that we need to look at is the degree of the change that the goal implies. Let´s take “Goal B: Answering customer queries faster” as an example. What exactly stands behind this goal? Is it about training some additional staff and adding more articles into the knowledge base, or it is about re-investing the whole idea of customer support?

The goal, as it is formulated now, is not specific enough to answer these questions. We need to take into account its business context:

  • For a start-up company “Answering customer queries in 24 hours rather than in 48 hours” might be a good operational goal, as it is something achievable for a small team,
  • For an international company with a complex structure and a certain way to do things the same goal might result in radical changes in the organization, and will be more than strategic. For sure, we are not talking here about outsourcing everything to a cheap call center.

The essence of the problem was well formulated by Keith Hammonds in the article “Michael Porter’s Big Ideas”[1]. He wrote: “[companies that] produce the highest-quality products at the lowest cost […] They’re just trying to improve on best practices. That’s not a strategy.”

That’s what happened to Nokia’s mobile phone business: the company produced great phones, the design was nice, the battery lasted for a 1 week, there was no need for a protective case… but it has missed the smart phones market.

Here is how Harvard Business School[2] described the improvement on best practices:

  • “[…] rarely are “best practice” advantages sustainable. “

Focusing on best practices and quality is not necessary a sigh of myopic strategy

Henry Ford once said: ¨Obstacles are those frightful things you see when you take your eyes off your goal. ¨ From some point of view his approach to the business might look like incremental changes (focusing on quality, reducing costs, reducing prices), but behind these operational goals there were a bigger strategic one that gave a sense to all other operational objectives. That´s a positive example of how good a strategic goal works.

Another positive example is the focus on safety is Alcoa[3] company that gave a sense of direction to all supporting operational goals. In their case, achieving highest safety levels is a great strategic goal.

Short and clear: the difference between strategic and operational goals

I´d like to share the explanation of what strategic goal is that I use during my talks:

  • It is big enough to give you a sense of direction for a long period,
  • It is aligned with your mission-vision,
  • It is outside of your comfort zone, so you are forced to reinvent things rather than just improve,
  • It is measurable, so you can find one or two good KPIs for it,
  • It is achievable. You know how to divide it into smaller operational goals, or at least where to start.

Planning is important, but execution is what really matters

In the end a little bit of wisdom from Chinese philosopher Laozi[4]:

  • ¨A good traveler has no fixed plans, and is not intent on arriving.

This quote gives an interesting point of view on the balance between strategy execution (traveling in this metaphor) and strategic planning. What do you think? Share in the comments!

References

  1. ^ Michael Porter’s Big Ideas, Keith H. Hammonds, Fastcompany, 2001
  2. ^ Operational Effectiveness vs. Strategy, Institute for Strategy & Competitiveness Harvard Business School
  3. ^ How to Find 1 Keystone Indicator that Needs to Dominate on Your Scorecard, Aleksey Savkin 2015, bscdesigner.com
  4. ^ Laozi, Wikipedia

Related Articles

Strategy and KPIs Scorecard Expert | Speaker | CEO. Aleksey Savkin (LinkedIn, @bscdesigner) is helping companies to better formulate their strategies and make the process of strategy execution more tangible with KPIs. His areas of expertise are Balanced Scorecard, Key Performance Indicators, business performance management. Aleksey is a frequent speaker at conferences; the author of a number of articles and books on Balanced Scorecard.

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