Operational strategy in this post is not what most businesspeople would necessarily think. So it will be important that you know what I mean by operational strategy. Operational strategy begins with defining your business in terms of the present opportunity in relation to the customer and product of the business. It then means, creating a development process by which the business will come to operate in such a way that it takes advantage of key leverage points found within operations; these points are found within the abovementioned definitions. In this post, I will simply focus on helping you find those key leverage points because these points are critical to the long-term success of any business.

Defining the need is nothing special. This is simply creating a customer profile that is true and accurate. Of course, a startup company may not have all the wonderful information that an established organization may have, but the least one can do is use some common sense, some good market research if necessary, and understand the importance of the need base so that when the business gets going, it can adjust if appropriate.

Most of us have already done this. We have an intuitive sense of the needs and the product or service which will fill the need. It?s just important to make sure that you?re senses are correct. This defining the needs and product or service in addition to the key operational aspects of the business lays the groundwork for operational strategy. Since for many entrepreneurs, this is pretty straight-forward, I?m not going to say anything more about it; rather, the process may be inferred from the next step which is determining which aspects of a business are the leverage points and then creating a business which operates upon those leverages.

Let?s give an example of this now for the tutoring service industry where I?ll go into a little more detail than I will for examples that will follow:

For the tutoring service, 50 percent of the business will depend on advertising and promotion. Fifty Percent! This is compared to some mom and pop store that do zero percent promotion and rely entirely on word-of mouth. Fifty-percent is referral business. This is defining the opportunity in terms of the critical operational characteristics. This, however, is where most entrepreneurs stop, and it is from here on out that mediocrity often sets in. One typically knows that, say, 50 percent of business comes from advertising and promotion, but one does not always know what is important. If the importance of an operations is unknown, chances are that some aspects of business will receive too much attention even though they?re not critical to success where other aspects on which the business?s life depends may be ignored. Controls will be set up for certain operational aspects maybe because the CEO had what he thought to be a creative idea but that creativity may have very well been focused in the wrong direction.

Back to advertising and promotion. Fifty percent of business comes from these components. What does this mean? It means that we?re going to create a killer marketing program because that?s half of our revenues right there. Create a mediocre program, revenues fall 10, 20, 30 percent?easily. If we don?t have the skills already, we?re going to hire right. Once we hire right, we?re going to make sure the rules and principles of marketing are followed to a ?t? and applied correctly relative to the opportunity at hand. We?re not going to give marketing a few dollars to work with but we?re going to give them the resources they need to be effective. They?re going to test methods and continually improve the program so that the efficiencies gained will create geometric gains in the future. The whole point here is that one must realize the importance of advertising and promotion in the marketing function and create a program that reflects that importance. You can create the most amazing tutoring service ever and go nowhere.

Alright, so 50 percent of business is advertising and promo where 50 percent is referral. One then must ask the question, how do we get a referral? Clearly, this begins with offering a service that meets customer expectations and hopefully even exceeding those expectations?on a regular basis. With this in mind, we?re going to create one killer of a tutoring program, and we?re going to place great emphasis on knowing the ever-changing needs of every single individual that comes through our door. Do a poor job of all this? Forget getting 50 percent of business via referral.

Go back and look at the general customer needs. Find out which ones are most important and don?t you dare not fill the most important ones and you sure better try to fill the others as well. Convenience is important: Don?t locate your tutoring facilities just anywhere, find out exactly what is most convenient for most mothers.

We?re going to get feedback from every single customer; this way we will know what all of them think of our business. We will know where to improve and we will grow a relationship with the customers as we truly care about their needs and how we meet them. Next, we will maximize this ?free? source of revenue. We will attempt to get this 50 percent referral rate to make up 85 percent of our business instead. If we can do this, we will have much lower advertising and promotion expenditure; cost of converting leads to sales dramatically decreases; we will have increased business from the most pleasant and most desirable customers. This is huge.

So what we find in this business is that if we can secure customers effectively and get referral customers in the door, we?re a very successful business. Unfortunately, this tutoring service example as I described it did not include any key competitive advantages that could really separate a business from competition. Preferably, you?d like such an advantage, and then you?d build strength in that advantage at all times.

Every business must determine what elements are critical to success and then not sacrifice when it comes to performing in those areas. I mentioned one such element in my last post:

A business with an uncommon and complex product requires extensive communication with consumers; this is absolutely vital and there must be no compromise whatsoever. You can only understand the vitality of communication, and thus, effectively carry out communication on a consistent basis if you understand the source?the complex product?and realize the simple fact that it must be explained. This comes from definition?simply recognizing the characteristics of the product. If you communicate this product amazingly well and a competitor does very well and you have comparable quality and price, you?ve just won 9 out of 10 customers. Now that?s a competitive advantage.

Let?s imagine you have a product that?s non-routine and hard to find. Do you see a critical operational leverage point? What happens if you put an amazing effort into getting that products name out in every channel, as well as you can do. Let?s say you spend more time doing this than you do creating a product that is better in quality than competitors?. Well, unfortunately for those competitors who?ve done a mighty fine job of creating a quality product, they won?t get the business because it?s you who have been found and it?s you who will get to sell the prospective customer who could find your product with comparable ease. Your competitor simply didn?t get a chance.

The companies that know what they?re doing, do exactly what I?m talking about here. They create huge value in their system where it matters and they leverage that against their competitors. Take Caterpillar, Inc. for example, maker of heavy construction, agricultural, and forestry equipment. What?s important here? Extreme reliability and extreme service for general help and repairs. Their products are known for superb quality where competition is always mentioned second in this respect; they also have amazing customer service. A repair part can be sent to any location world-wide within one day. That?s service where it matters, and they only keep improving.

In all, know your industry, the needs of your consumers, and translate that into the product and business as a whole. Once you know what you need to do to get those customers and keep them, hit it home, and do it again and again and again. Focus where it matters, and you?ll do just fine.

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