Every business operates along four basic focus dimensions: finance, customers, internal processes, and learning and innovation. These theoretical divisions of operations management come from the research of Robert S. Kaplan and David P. Norton. The dimensions aren’t mutually exclusive. For example, employees who become more competent through learning can improve the functioning of internal processes, according to “Management Principles: A Contemporary Edition for Africa,” by P. J. Smit.
Finance
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The heart of the financial dimension for most businesses is profit, though short-term financial goals might entail sacrificing current profits to increase future capacity. For example, a company might decide to reinvest all its profits into new and better machinery to increase production capacity and efficiency, but the ultimate goal remains greater profit. Managers must control the flow of money through the organization to ensure short-term goals align with long-term goals.
Customers
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Customers are the foundation of your business. Without the flow of their money through your organization, everything grinds to a halt. Managers aim to maximize the flow of customer money, but that doesn’t always mean securing as many customers as possible. A boutique hotel, for example, might focus on serving relatively few high-paying customers, while a chain hotel focuses on the wide swath of people who are unwilling to pay high prices. Though each business targets customers who have different needs, meeting those needs is equally vital to their profitability.
Internal Processes
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Optimization of internal processes leads to greater profitability and customer satisfaction. For example, a manager might focus on developing efficient communications within an organization to ensure orders travel quickly from the customer service department to the production line. The manager further expedites the order by ensuring the production department syncs with the shipping department to get the order to the customer quickly. Fine-tuning the process to make it maximally efficient keeps operating costs low and pleases customers, leading to greater profits.
Learning and Innovation
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Technology progresses and so must businesses. An invention that improves a manufacturing process, for example, might be a game changer that forces factories to upgrade their processes or lag behind competitors. A good manager stays abreast of technological shifts; a great manager anticipates and initiates change by encouraging her organization to focus on learning and innovation. Practically, this can mean anything from having a well-funded research-and-development team to paying for continuing education for employees. An organization that surmounts cognitive limitations stays one step ahead of its competitors.
