Operational Effectiveness Vs. Strategic Positioning

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A manager and designer at a clothing factory look at documents on a clipboard
A manager and designer at a clothing factory look at documents on a clipboard (Image: kzenon/iStock/Getty Images)

Strategic positioning is a plan to distinguish your business from competitors by doing things differently. Operational effectiveness involves performing similar activities in more efficient ways than the competition. Top companies emphasize both approaches to planning and production.

Creating a Difference

Differentiation is the development of business factors that give you a competitive advantage. Your strategic positioning is a central component of building differentiation. For example, movie and game rental company Redbox developed a strategic leadership position in kiosk-based rentals. By distinguishing its brand early in this category, it attracted customers looking for a quick, convenient, affordable experience. The key to long-term success with a given position is to have your offerings appeal to a sizable number of customers in the market.

Driving Revenue

Another key distinction with strategic positioning is its emphasis in driving revenue. Revenue and expenses are the two factors of profitability. Your strategic plan outlines what you intend to do to attract and retain customers to build ongoing revenue. Often, companies invest heavily in building a strategic position compelling to the target market. Top quality, elite service and environmental responsibility are a few common factors companies incorporate into their strategic position. The "top-quality provider" attracts customers willing to pay whatever it takes to get the best quality available.

Managing Cost-Effectiveness

Operational effectiveness emphasizes efficient production and cost controls. It involves performing the same tasks and production activities as competitors, but better. If all competitors carry out a particular manufacturing process, for instance, your goal with operational effectiveness is to perform it more efficiently than anyone else. Efficiency means completing the process faster, while also minimizing production defects and maintaining quality standards. From a profit standpoint, operational effectiveness aims to minimize the cost per unit. Combined with optimized revenue, a low cost per unit drives profitability.

Industry Benchmarking

A common element of operational effectiveness is industry benchmarking. Benchmarking means identifying the company that performs a certain process the best and attempting to match it. Industry benchmarking fits more into operational effectiveness than strategic positioning, since it centers on activities all companies perform. If your business meets the benchmark on non-strategic processes and activities while also setting itself apart in clear ways, it is primed for long-term profitability. Benchmarking is an ongoing process, though. Technology and talent drive benchmarks higher over time.

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