Strategic
Versus Tactical
Strategic decisions have long-term and wide-ranging
consequences. They are pervasive in nature and affect
activities, decisions, attitudes and behaviors
throughout the organization. Their impact is profound
but often far removed in time from the original
decision. Strategic decisions answer such questions as:
- How should we structure the organization?
- What product technologies should we develop for
the next decade?
- How do we align our manufacturing capabilities
with our marketing strategy and targeted customers?
- When should we add new capacity?
- Should we make a major investment in a new
process technology?
- What corporate image should we strive for in our
major advertising campaign.
Conversely, tactical decisions have narrow and
short-range consequences. They have limited influence;
the effects come in days, weeks or months rather than
years or decades. Tactical decisions answer such
questions as:
- Who should we hire for the new sales position?
- Which supplier should we use for our XYZ
component?
- Which supplier for our new production equipment?
Tactical decisions, because of their shorter range
and limited focus, are usually more predictable and
subject to quantitative analysis. Historical data
reasonably predicts near-term performance and
conditions. The narrow range limits the number of
factors that can interact. If something does go wrong,
damage is more contained.
Poor tactical decisions often come from incomplete
use of available information. Decision processes where
provincial concerns and power dominate also cause poor
tactical decisions.
The disparate nature of tactical and strategic
decisions requires different approaches. The factors
that influence the quality of these decisions are also
different between tactical and strategic.
The Limits of Quantitative Analysis
Managers must usually make strategic decisions in
ambiguous, conditional and probabilistic circumstances.
Facts are unclear. Quantitative data is questionable.
Results depend on combinations of other circumstances.
Factors that are trivial in one instance become
significant in another. Future events are uncertain.
Historical information and data have little relevance in
a world of discontinuities.
Under these conditions, quantitative methods have
limited use. Managers who rely on them become
uncomfortable. They frequently find increased comfort by
ignoring anything they cannot quantify. This approach
limits them to incremental improvement along historical
directions.
Analysis paralysis results when quantitative and
definitive methods are inappropriately used. Analysis
shows what is or what was but it cannot create.
Intuition is creative. Through intuition we see what
could be and should be, even things that never before
existed.
In physics, the early experimental work of Morley,
Michelson, Plank and others uncovered anomalies in
Newtonian theory. By assuming that the anomalies were
valid, Einstein used intuition to connect mass, time and
energy. Analysis and experiment subsequently confirmed
much of Einstein’s model.
As in physics, the most important strategic insights
are almost always intuitive. Analysis lays the
groundwork and confirms the results but cannot create.
We need both.
What Is A High Quality Decision?
One obvious answer is “a decision that works.” But
poor decisions are sometimes lucky. Would another
decision have worked better? And, managers need to know
if their decision is good before implementation, not
weeks, months or years after. Since we cannot know the
result in advance, managers must judge the quality of
their decisions by the process, not the results.
We suggest that a high quality decision is one with
the best probability of success at attaining a clear
goal at the time the decision occurs. It comes from
examination of the widest range of feasible options and
uses both quantitative and qualitative analysis, often
with a high dose of intuition.
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A Focus on Process
A manufacturing firm served markets from three
factories in the East, Southwest and Midwest. Initially
they had only one factory that made every product. The
firm built new factories and products multiplied from
200 to 1500 items. The factories became increasingly
difficult to manage, costs went up, quality declined and
deliveries faltered.
The company made several attempts to apply
Focused
Factory concepts developed by Wickham Skinner. Focus
is one of the most important components of a
manufacturing strategy. The early attempts failed
because:
- Factory managers distrusted one another.
- Key headquarters people did not grasp the
concept.
- The accounting system emphasized freight cost
and obscured the costs of changeover, inexperience,
tooling and poor quality.
- Sales and Marketing had no involvement.
Strategos
assisted this firm in convening a strategic team to
develop plans and make decisions on future Manufacturing
Strategy. This team included plant managers, schedulers,
marketing and corporate executives.
The group started with training that introduced the
concepts of focused factories. A second round of
training included the
MIT Beer Game to show the dynamic and psychological
effects of multi-tier distribution systems. At the end
of the training sessions the group brainstormed possible
applications of their new knowledge.
The subsequent session convened several weeks later.
We first identified criteria for a final decision, i.e.,
what do we want the new strategy to do or accomplish.
Many participants had joined this team originally with
an implicit assumption that our purpose was freight cost
reduction. The team soon developed a surprisingly long
list of potential goals that went far beyond simple cost
reduction. These included:
-
Changeover Cost
-
Inventory
Reduction
-
Delivery Speed
-
Delivery
Reliability
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Training Issues
-
Quality
-
New Product
Launches
-
Daily Management
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Each participant had the “Ah-Ha” of a paradigm shift.
With this new understanding, their individual goals,
objectives and “hidden agendas” moved from provincial
concerns to a higher plane.
Then the team brainstormed options. They excluded
nothing. Plans included division among the plants by
customer, distribution channel, volume and geographic
area. They then weighed each option against each
decision factor. This forced critical and focused
thinking over a wide range of options, issues and
outcomes. The team brought sales data and performed a
simple, straightforward, real-time analysis during the
sessions.
We then narrowed the options. The “harebrained” plan
made an important contribution since some its good
features transferred into other plans.
The final selection separated plants by product
volume. This was a radical approach that had seemed
infeasible prior to these deliberations. This option
moreover, corresponded closely with separation by
distribution channel or by customer. The figure below
illustrates. Our concern here, however, is not the
advantages of focused factories but the way such
decisions are made.
Perhaps the most remarkable result was the wide
acceptance and enthusiasm for the selected option. The
issues addressed by this team had been contentious and
divisive throughout the organization for many years. Now
there was unanimity, enthusiasm and cooperation. This
team had high confidence in their decision because they
had explored a wide range of options and knew their
fundamental logic was sound. And, they had watched
several of their most provincial and vocal teammates
rise to business statesmanship.
Summary
The results of strategic decisions are usually
wide-ranging, pervasive throughout the organization,
difficult to modify and far removed in time from the
decision point. Therefore it is especially important to
ensure that the decision process is likely to produce a
high-quality decision. Such high-quality decision
processes usually include:
- Education on
Issues & Options
- Broad
Participation
- Guided
Discussion & Debate
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