Technical Services: Alignment between operational strategy and customer needs

Technical Services: Alignment between operational strategy and customer needs

• What do we understand by business strategy?

The concept of business strategy comprises the overall purpose of an organization with a view to the market. It is for this reason that it is necessary to find the best conceptual model that allows us to understand its meaning in order to apply it concretely to day-to-day activities.

In this article we will seek a summarized definition that will allow us to highlight those concepts that the company’s operations require from the business strategy to guide its own decisions.

The concept of strategy itself involves the idea of decision and/or definition. Strategy is not an obligatory path but responds to a decision of those who manage the company regarding certain issues. These issues are those that define the business itself and towards the market, and that is why we say that business strategy is a set of structural decisions and definitions made on aspects of the business.

These aspects of the business can and should be: the products and services that the company will market, to whom, how and in what markets it will offer them, how the business will expand, how and against whom it will compete in the market, whether the company will seek any type of differentiation and what this would be, and many other issues.

Note that in the items mentioned above there is always more than one alternative, and it is for this reason that business strategy is a set of decisions and definitions. It is true that companies that are in the birth or growth stage fight in the beginning for their survival, so these decisions that make up a strategy are not explicit and in many cases are not even present.

We do not say this as a value judgment, but with the purpose of highlighting that at that stage of the business, perhaps the most convenient thing for these companies is to opt for the path that allows them to sustain and grow. On the other hand, when companies grow and occupy a decisive position in the market, not only are they in a position to choose, but they must do so with the objective of aligning the company’s efforts and resources in a common direction aimed at obtaining effective results.

In order to organize knowledge, different types of strategies used by companies are identified. Although these types or categories do not represent in themselves the complete set of definitions that a strategy requires, they effectively fulfill the purpose of giving a truly clear idea of the orientation chosen by the company to perform in the market. At the same time, they allow the company’s personnel to understand in a simplified and straightforward way what the orientation of the structural decisions taken by the company is, and they also serve as a guide for the orientation of day-to-day actions and decisions.

In the 80s, Michael Porter identified two types of business strategies:

• Cost strategy: this refers to companies that compete on price. In this category belong those companies that do not seek to differentiate themselves in other aspects such as the diversity of the product portfolio offered (variety), quality of their products and services, delivery times, after-sales service, etc. This does not imply that these companies do not contemplate these other attributes mentioned, nor that they deliberately do it badly. They simply aim not to differentiate themselves in these attributes, but to reach standards acceptable to the market. In this sense, they seek internal efficiency to achieve low costs, and consequently achieve the best prices in the market with standard products and services.
• Differentiation strategy: this refers to companies that seek to differentiate themselves from their competitors in certain business attributes, such as variety of products and services, quality, delivery times, reliability, after-sales service, technical advice, services peripheral to the delivered product, etc. In this case, in return for this differentiation, these companies seek to obtain a reward in the form of a higher price, for which it is necessary that there really exists a market segment that values these attributes in which the company stands out, to the point of accepting to pay a higher price for these products or services.

In the 1990s, new categories were identified, which are in some way specifications of the previous ones mentioned, as follows:

• Product differentiation: refers to companies that seek to stand out through their products. The basis is innovation; they are those companies that permanently launch new products to the market, with new applications, and set the trend in their industry. They do not place excessive emphasis on cost, but rather the opposite (high price), and neither on service, since they target the public that is looking for that different product.
• Customer intimacy: refers to companies that seek to adapt their product and service offerings according to customers’ needs. Although they have a standard offer base, their strategy is based on adapting this base of products and services to the particularities demanded by customers.
• Operational excellence: refers to companies that offer a portfolio of products and services limited to a defined range, but do so with the highest standards of quality, service and price. Compared to the other strategic dimensions mentioned above, they do not seek to adapt to customers or to offer an innovative product, but rather, based on an established product and service offering, to be the best in terms of price, quality and service.

Strategic alignment: what, why and for what purpose

In the same way that we define the business strategy, we can define the different internal strategies of a company, such as its financial, human resources, information technology and, consequently, its operational strategy.

With reference to the latter, we define operational strategy as a set of structural decisions and definitions made on aspects inherent to operations.

 Note that we use the term “structural” again only to isolate the day-to-day or short-term decisions made in the day-to-day exercise that every company manages.

Consequently, in the case of the operational strategy, these decisions will refer to aspects such as the location of the facilities, the design of the processes, the organizational structure of the operational areas, the profile of the operational human resources, the technology to be used in the operations, the quality management system, and many others that make up the structural design of the operational system itself.

Once again, we emphasize that, in every aspect, in order to be able to speak of decisions it is because there are alternatives, and precisely the exercise of selecting one of these alternatives is to define the operational strategy.

Of course, when making these types of decisions that will lead to the explicit definition of a company’s operational strategy as a whole, we may encounter different criteria. This is precisely where the concept of “strategic alignment” comes in.

Aligning the operational strategy with the business strategy means that the guiding criterion in the structural decisions of the operational design is related to or determined by the business strategy. In this way, we state that there are no good or bad operational strategies in themselves, but rather strategies that are more or less aligned with their respective business strategy.

For example, it does not seem that a company that bases its business strategy on innovation can have the same operational strategy as a company that competes in the market on costs. Intuitively we deduce that the structural design of both operations could not be the same, and if we consider the theoretical model expressed above, we can then see and understand why.

Having an operation whose structural design is based on the business strategy is the cornerstone for successfully achieving the desired results in the market, based on adequate management.

On the other hand, if we look at it from the operational side, we see that designing an operation without knowing the business strategy would be venturing to make decisions based on personal and technical criteria, but without a market-oriented foundation and, consequently, without a business orientation.

On the contrary, not only the operational strategy must be aligned with the business strategy, but also with the commercial, financial, human resources, and all areas that manage resources and make decisions.

Thus, alignment no longer seems to be an interesting tool but a necessary one, since how can we ensure that all areas point in the same direction if they are not structurally designed under the same criteria?

Application to the Technical Services

In this particular article we are interested in focusing on technical services aimed at companies. Therefore, we exclude products and services aimed at the mass consumption of individuals, and we focus especially on those services of a technical nature offered to companies.

By way of example, this may include logistics services, industrial services, technical services, engineering, technology, movement of materials or equipment, provision of technical personnel, among many others. Thus defined, we can see that they apply to all types of industry, be it automotive, construction, energy, agriculture, technology, etc.

The following are some of the distinguishing characteristics of technical services, as opposed to mass consumer products and services.

•  Technical specification: First and foremost, a technical service has or should have a clear technical specification agreed with the client. Aspects such as scope of service, technical details, boundaries of responsibilities, quality attributes, deadlines and specific functions should be detailed in this specification.
• Performance attributes: technical services have or should have rigorously defined and periodically measured performance attributes. Since it is a service for companies, good practices indicate that it is necessary to pre-establish the expected level of service and quality.
• Service as a sub-process: technical services, in general, are part of a more integral process. This leads to know in detail this integral process and ensure the necessary coordination and synchronism to enable the correct articulation between them. This knowledge will also allow understanding the critical aspects of the service, as well as the preventive controls to be developed.
• Knowledge of the client: in general, the client knows as much or more about the details of the service operation than the company. This increases the demand not only for the result of the service, but also for aspects such as planning, management, resource allocation and improvement actions. In conclusion, on many occasions it will happen that the client will propose decisions and actions to be taken on the operation.
• The impact of the failure: another critical feature of technical services is that, in many cases, a service failure generates a major impact on the customer’s core process. This leads to a particular requirement to design and implement a sophisticated system of preventive controls and contingency actions in order to address this criticality.
• The profile of the technical personnel: the nature of the activity requires that the field personnel have a strong technical orientation. And at the same time, such personnel is in permanent contact with the client’s personnel. Do the company’s personnel have the competences and skills to solve the situations raised by the client in the field? The answer to this question often poses a new challenge when thinking about the profile of operational personnel.

As can be seen, the technical services provided to companies have certain characteristics that enhance the challenge at the time of their provision, and at the same time lead to review the operational strategy with the objective of aligning it with the business strategy.

These characteristics must be taken into account when designing the operational strategy, in order to ensure the achievement of the desired objectives.

To summarize, then:

• This article allows us to understand which items of the business strategy we must identify in order to structurally design an operation that serves these purposes effectively.
• This structural design is called operational strategy, and the alignment consists of taking the business strategy as the central criterion for its design.
• The technical services provided to companies have very specific characteristics that have an impact and must be taken into account when designing the operational strategy.
•  Consideration of these special features highlights the strategic aspects of technical services.