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Rufat Azizov

Degree:

EMBA

Location:

Azerbaijan

Industry:

Steel Manufacturing

Year:

Jan 2019 - Sept 2020

By Rufat Azizov

Integration of Strategy, Operations and Leadership for excellence

I was rather sceptical about “standard” EMBA courses like Leadership, Strategy, and Operations before I took the module. Even though I have taken these courses before during my previous degree programs, it was difficult and nearly impossible to apply standard models and frameworks in real business.

Many companies still struggle with strategy application, as usually it is not aligned with operations and company culture. I paid for strategy consulting services two times, but it never worked. I have participated in re-organisation and leadership transition processes that were never completed and just increased paperwork full of nice charts and words. Operations and real processes with the production assets are the core of business, but again application of general guidelines like lean six sigma has never worked for me in reality. I always ponder over the reason why general models are not so easy to apply in real business and how successful companies deliver them.

After Oxford EMBA Strategy, Leadership and Operations modules, I have understood that life is not as bad as I thought… Analysis of real business cases revealed out integration of all factors affecting business from strategy to local mindset. I am calling it “natural approach” that does not discuss standard models or limits businesses to frames, but deeply analyses Strategy, Operations and Leadership as interdisciplinary subjects.

Here are my key takeaways:

Strategy

Generally, expectations from strategy is about Porter’s Five Forces, SWOT, BCG, VRIO, competitive advantage, strategic positioning and other different standard terms and frameworks… However, strategy course in Oxford EMBA showed a more practical and realistic approach. It was about Strategy as Practice, how Ritz-Carlton reaches excellence in services by continuous and detailed training. How practices are shared, meaningful routines that operate within social boundaries and produce valued objects.

Another crucial one is strategy as innovation, where the ability to determine if the organisation implements the right activities and makes necessary changes in a rapidly progressing world. How BT telecoms was successful in building dynamic capabilities and organisational agility, managing risks and uncertainty in innovation economy. Innovation occurs through practices of sensing, shaping and seizing opportunities that create new lines of business and new ways of doing business. They are transforming factors of organisation to align with the opportunities of modern world and avoid market threats for long-term growth. How strategy practices integrate across organisations? Integrations occurs through open culture and practices of collaborative leadership that create opportunities for employees to thrive. How does closed culture create obstacles for innovation and as a result giant SONY lost competition to Apple or Samsung?

My favourite was “How can strategy practices lead to diligence”. According to traditional economics, strategic success comes from sustainable competitive advantages protected by barriers to imitation or a company cannot beat its rivals by adopting widely available practices. However, many oil-gas, mining companies, banks, manufacturing, electric and gas utilities companies fail to adopt well known, basic cost-saving practices. Thus, it is even possible to be competitive with ordinary resources by day-to-day execution and right allocation. Diligence occurs through practices of identifying, measuring and monitoring key performance activities that create tangible performance gains. Daily intensive focus on quality, high production volumes, attention to every small detail pushes everybody in the company towards daily success. The diligence and hustle of using ordinary resources more efficiently can also create competitive advantage of processes in the long run.

The rise of a new industry of platforms and pipelines requires strategy shifts from controlling to orchestrating resources. The community resources of community members becomes critical. It means irrational factors coming from community and people become stronger in comparison with a traditional rational strategy approach. Optimising internal processes to facilitating external interactions, increasing customer value to maximising ecosystem value and understanding profit pools in the new economy are keys to success in new industries.

Operations

In our days, we discuss a lot about new technologies, start-ups, platforms, apps, robotics, nanotechnologies, 3D technologies and things alike. All of these are very important for technological progress in our century. However, success rate of start-ups is very low, robotics is not feasible for low margin businesses, 3D technologies cannot replace high scale manufacturing, at least for now, and nanotechnology is not affordable for many companies and countries. Everyday fresh news about high tech should not lead us to forget or underestimate success and the importance of existing operational methods.

When we buy equipment for our plant, we receive many operational, control, inspection and maintenance procedures from equipment supplier. Unfortunately, even having all relevant process data nobody cares about data analysis for long-term silent running of equipment. To produce more, achieve production plan, and get bonuses are usually the main drivers in manufacturing. Leadership pushes for continuous production, acts reluctantly in terms of equipment life, preventative maintenance and monitoring. This mindset leads to this logic to be applied to the entire company structures, resulting in continuous equipment breakdown, shutdowns and reinvestment loop.

Japanese magic Lean Design coming from Toyota was the major one. Jidoka principles is one of them which allows for the following scenario. Shall an operator determine that a unit is operating outside the limits, he should immediately stop the process, call production and maintenance engineer to examine the case at the working station. Then maintenance engineer should ramp up, calibrate and restart that machine. Another one, Just in Time Production (JITP) to reduce inventory waste. The key principle of JITP is “produce only what is needed, only how much needed and when it is needed”.  Any excess production of any type of product should be considered as waste.  One more, Heijunka – produces diverse mix of products to satisfy daily demands and minimise overproduction. For example, if you need five red, seven yellow and three white cars today, so produce this mix in spite of operational difficulties.

The strong one, Kaizen – detailed working procedures and continuous improvement. The purpose of “Kaizen” is to eliminate waste in overproduction, waiting imposed by inefficient work sequences, unnecessary actions, unnecessary inventory, inappropriate processing, defects-reworks and transportation. Standardisation of work, equipment and other production procedures is required to remove waste. Lack of standardised and detailed working procedures are observed in many companies in all stages of processes. For example, operators see defects, then start to discuss what to do or how to twinkle equipment very quickly and continue production, as standard procedure is not in place. Lack of detailed procedures resulted in personnel dependent process, where different operators do the same job differently. Continuous improvement mindset (Kaizen) for better is must! Skipping improvements in operations, inspection, maintenance and ignoring documentation in favor of working harder to produce more gradually reduces process capability. Maybe it is not a big issue for today, if the factory is new, but it is just matter of time for process integrity to depreciate. Time spent on improvement and on working should be balanced for long-term excellence in capability and performance.

The big question is how to apply all written above related to strategy and operations? How to successfully implement Strategy as Innovation, Practice, Diligence and Integration. How to align strategy elements with Operations terms Jidoka, Kaizen, JITP, Heijunka and etc… Why are some companies successful, but most of them are still struggling?

Leadership

The big answer is culture that integrates leadership, strategy and operations elements. Company culture needs alignment with business strategy and operations. Any changes to strategy or operations procedures should be followed with the changes in leadership styles and organisational culture, which requires training and development plans related to creation of collaborative, innovative, problem solving, caring, supportive, and empowering environment. Being the CEO of a manufacturing company, I usually think about direct factors affecting the company like cost, non-stop production, new equipment, capacities, opportunities on the market, customer.

To deliver results however, it is pivotal to care about associates, create opportunity to think creatively, establish innovative culture by showing openness to new ideas, empower people within certain boundaries, support teamwork, encourage knowledge sharing and reward for results. All instructions and procedures prepared based on cultural excellence are critical pillars in any business for business strategy implementation and operational excellence.

For example, Strategy as Diligence is delivered by continuous improvements (Kaizen) in operations. To do this, company culture should motivate and empower operators for improvements and give chance for decisions. Could you imagine any innovation from operators working under dictatorship of plant directors? Certainly not. This employee is neither motivated nor empowered as he is working only when his boss is watching. This person is not feeling any ownership of the business and will hardly commit. Could you imagine sharing successful practices among fragmented and fighting business units? Virtually impossible.

Company strategy and operations procedures should strongly consider drivers for motivation. Firstly, humanity is driven to obtain goods, materials, feelings, entertainment, housing, travel, and social status that satisfy well-being. In the workplace, being heard, a chance for rewarding and promotion, being a team leader or even coordinator of a small project. People compare what they have with others, so they think about not only their compensation plans but others’ as well. Efforts to get more are dependent on a reward system, transparency of assessment plans and long-term personal development targets. Secondly, employees are motivated when they feel they are a genuine member of the organisation, team, or association, where they feel care about themselves. Organisational culture of caring and supporting, learning and sharing with each other plays a vital role in employee motivation. Employees are not motivated if they are isolated. Thirdly, we all need a drive for comprehension. Employees’ drive to comprehend comes from their contribution, doing something meaningful and challenging that causes them to grow and also learn new skills. Finally, we all have a self-defence feeling that commands us to avoid risks and look for safety and security. To ensure this in the workplace, one needs to set clear goals, ensure fairness, justice, and allow to express opinions. If culture is fulfilling, employees become more confident in pushing their limits.

Coming to conclusion, integration of strategy, operations and leadership is the only key to long-term success. Company culture created by leadership should consider strategy implementation in connection with operational excellence.

 

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