An exploratory study of strategic operations audit methods in services

The purpose of this paper is to close the gap between theoretical approaches to strategic operations auditing and empirical analysis of practice in service organisations. Through analysis of the two different views of strategy formulation – environment‐market and resource‐based – the paper aims to provide insights on how strategic operations audit methods are being used and under what circumstances.

The case study methodology was employed which involved a three‐stage data collection and analytical process. Its purpose was to identify how strategic operations audit methods were being used, why they were used and the particular circumstances of their use. Trails of operational improvement within each of six case studies show links between service operational activities, the benefits achieved by the improvements and the formulation and/or execution of each service company's business strategy. These trails of improvement provided a means by which to reveal some of the strategic operations audit methods being used. In addition, interviews and analysis of supporting documentation ensured the complete set of methods being utilised was identified.

The results indicate three main findings. First it is recognised that the service companies all look to adopt a top down approach to strategic operations auditing and seek to maintain, and where possible, gain greater strategic impact from their service operations. Second, the competitive state of the business impacts the choice of strategic operations audit method used. All companies studied employed an environment‐market method to assess operations – market fit. Only when a company is confident of its competitive position will managers then look to also devise a resource‐based method in order to assess its current ability to nurture new capabilities to exploit. Third, companies use a variety of integration techniques to verify on‐going cohesion across infrastructural decision‐making categories of the content of service operations strategy. The assessment of cohesion within service operations strategy takes place within subsets of the content of the strategy. The authors did not find integration techniques that hone structural decision categories or service operations strategy as a whole. The results also show that methods used by managers are pale imitations of the rigorous procedures originally devised by researchers.

Service operations managers possess inadequate understanding of how the application of a strategic operations audit method should be made and limited ability to undertake the audit in a structured and meaningful way. A strategic operations audit methods selection process is put forward to remedy this. The process acknowledges that the choice of a particular method is contingent on the stage of development of the company's service operations strategy. It guides managers through the decision‐making process of what strategic operations audit method to use and when managers should be using it. The message for academics is that new resource‐based methods need to be created that are accessible to managers and relevant when service operations strategy has successfully evolved to the point where greater influence is being sought from it in the formulation of business strategy.

An empirical study within service operations management of the practice of strategic operations auditing is rare. The paper's findings begin to address the gap between theory and practice. The paper presents revisions and additions to the operations manager's tool kit of strategic operations audit methods and culminates in a selection process to guide managers on which tool to use and when.