Are your strategic issues masquerading as operational ones?

Operational issues tend to be highly visible. Many of them have a hidden strategic cause. These type of operational problems will recur and recur until the strategic issue is surfaced and addressed.

In the same way that individuals tend to get blamed when they are put in a difficult environments, strategic issues can also appear as operational problems.

A construction subsidiary of ours confessed that they had run up significant losses on some contracts that they had priced too keenly and been caught out. In addition to the heads rolling, there was an immediate call for tighter risk management procedures and the implementation of new controls.

In reality, there already was a comprehensive set of checks and balances, they were just routinely pushed to the limits (and occasionally beyond) by management. The subsidiary competed in a cut-throat market, and in order to support their fixed costs they were forced to bid for contracts in the most price-sensitive segment of the market where they had no competitive advantage.

Management knew they were taking risks, but with a weak position in an unattractive market they felt they had no alternative to stay in business.

Treating the operational symptom by increasing controls without addressing the underlying strategic cause would just make the problem worse – they would win even less business and be even more tempted to get round the rules.

Think through your operational issues. Could there be a strategic cause underlying them?

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