Transformational and Operational Strategies

According to an older (1999) article from McKinsey, there were two basic kinds of strategies: transformational and operational.

• A strategy is transformational when the company using it faces significant uncertainty, aims to change the game in the industry, and must address substantial customer, channel, or competitive challenges.
• Strategies are operational if companies face relatively low uncertainty and are mostly attempting to play the same old game better than the competition does.

It takes vastly different skills to execute these two kinds of strategies.

• For the operational approach, a company must focus doggedly on conventional measures like capacity utilization or throughput and on such basics as customer service.
• Transformational strategies, by contrast, require a company to use inadequate information to make timely options-based decisions about product or market priorities, investments in technology, the configuration of business systems, and industry partnerships.

BOTTOMLINE: Companies should think about strategy in terms of what is possible for them - where their core competencies lie. A strategy that fits the organization’s capabilities should be favored over one that appears more elegant in principle, yet not practical for execution.