Operational Analysis & Strategy

Operational analysis is a method of examining the current and historical performance of an operational (or steady-state) investment and measuring that performance against an established set ofsa1 cost, schedule, and performance parameters.[1]

Operational analysis gives us an understanding what has happened now with our operations, it is a short term view on past events. Even though one single short term event can not jeopardize the long term goal set by strategic planning it is important to be analysed. To make sure that we can achieve our long term goals we must assure that we are on the right track with every step.

To have the best understanding of what operational analysis means we have first to look at the “big picture” that is set by the strategic aspect of our actions. More details about strategic planning and strategic management can be found in previous posts here and here.

We have also to understand what drives the planning phase of operational and strategic aspects because in the planning phase the drivers can be found; drivers that can be later on monitored and benchmarked in the analysis phase.

Strategic planning is an organization’s process of defining its strategy, or direction, and making decisions on allocating its resources to pursue this strategy. Generally, strategic planning deals, on the whole business, rather than just an isolated unit, with at least one of following three key questions:

  • “What do we do?”
  • “For whom do we do it?”
  • “How do we excel?” [2]

The process which predetermines the day to day activities of the business is known as Operational Planning. The planning is done to support the strategic planning in order to accomplish the organizational goals. In this process, short run objectives of the company are determined as well as a means to achieve those objectives are also discovered. [3]

Key Differences Between Strategic Planning and Operational Planning

The following are the differences between strategic planning and operational planning:

  1. The planning to pursue the organization’s vision is known as Strategic Planning. The planning to achieve the tactical objectives of the organization is known as Operational Planning.
  2. Strategic Planning is long lasting as compared Operational Planning.
  3. Operational Planning is done to support Strategic Planning.
  4. Strategic Planning takes into account the internal as well as external environment of business. Conversely, Operational Planning is concerned with internal environment of business.
  5. Strategic Planning is done by top level management, whereas the Operational Planning is a function of middle level management.
  6. Strategic Planning covers the whole organization, but Operational Planning is done in a particular unit or department of the organization.[3]

Strategic Plans are made to achieve the vision, mission, goals and objectives. On the other hand, Operational Plans are made to effectively perform the basic activities of the business in order to achieve tactical objectives.[3]

After understanding the drivers of the planning phase we can go to the next step , the analysis of the actual data.

Analysis of data is a process of inspecting, cleaning, transforming, and modelling data with the goal of discovering useful information, suggesting conclusions, and supporting decision-making. Data analysis has multiple facets and approaches, encompassing diverse techniques under a variety of names, in different business, science, and social science domains.[4]

Coming back to the headline of this post, operational analysis and strategy, it is safe to say that operational analysis is only half of the job. You must understand the operational results and their drivers to be able to derive corrective measures that guarantee that you will achieve your strategic goals. In some cases you must even adjust the strategic goals due to external independent factors that influence your business results on operational and strategic level.

As mentioned also in an previous post , your goals, especially the strategic ones, can be adjusted in order to be also aligned with the actual situation.

The operational analysis results can give very valuable insides on how your business is doing , it is only up to you understand correctly the signals and make the needed adjustments and corrections.

TopCFO is glad to support you in understanding correctly the signs that your business is giving you. Enjoy the post and if you would like more details please get in touch with TopCFO .

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[1] http://ocio.os.doc.gov/ITPolicyandPrograms/dev01_003715

[2] http://www.riskope.com/2014/04/03/lets-define-strategic-tactical-and-operational-planning/

[3] http://keydifferences.com/difference-between-strategic-planning-and-operational-planning.html

[4] https://en.wikipedia.org/wiki/Data_analysis


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