Why You Should Link Improvements to Strategy

While it’s good that firm’s see Lean as a way to improve their operational performance, too many of them fall into the trap of focusing on operational improvements rather than strategy.

Strategy is the search for a deliberate plan of action that will create a competitive advantage, and compound it over time. If a firm is to compete profitably, it must have a strategy for positioning itself optimally in the marketplace relative to the competition and market forces. Competitive advantage, which is the achievement of the highest rate of profitability within an industry, does not happen by luck – it happens through a well-thought-out and effectively implemented strategy.

Strategy begins to define the capabilities that a firm must enable through its processes and structures to compete effectively. When these needed capabilities are not present, or function poorly, the overall strategy is not likely to succeed. Thus, if an organization hasn’t updated its strategy, it may not have the capabilities it requires to compete effectively.

Strategy allows an organization to discover and define how it will compete effectively. Once the strategy is set, the unique set of capabilities and processes required by the strategy should flow out from that. Then, improvement work should be focused on establishing and improving the capabilities and processes that are required to build a competitive advantage. The worst mistake a firm can make is to assume that its legacy capabilities, processes, and structures are indeed the right ones for competing effectively. Following this assumption then leads to a “polishing the brass on the Titanic” mindset, where the firm blindly pursues operational improvements in the mistaken belief that this will build a competitive advantage.

Lean is great, but by itself it is not a basis for building a competitive advantage. Why? Because the principles and tools of Lean production can be readily imitated and copied by competitors. What is needed is for an organization to first re-invent itself strategically, and then to use approaches like Lean to build and refine the unique capabilities required under the organization’s strategy.

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