The best way of thinking about the closed loop process, Doctrine, Strategy, Tactics and Operations (DSTO), is to work an example.
Let’s first examine the process loop.
⦁ From the top, the doctrine—the guiding principles of the enterprise—starts the process. Examination of the principles defines why the enterprise exists. Doctrine defines the purpose for the actions that management takes.
⦁ Leadership, vertically throughout the organization, defines the strategic commitments leadership is willing to make to support the principles and defines what the enterprise will do. Strategy declares the objectives for any planning efforts.
⦁ For each of the strategic commitments, middle leadership must devise multiple tactical theories to support each of the strategies. Tactics are plans, ideas about how the enterprise will deliver on strategic commitments. Since these are plans and not operational actions, the plans may not work, so each strategy requires multiple tactics supporting the commitment.
⦁ The tactics provide guidance in execution for the front line leaders in operations. The operations leaders, following the tactical plans, execute the actions required to deliver the strategic commitments.
Feedback loops must exist between each of the components; not only between the sequential parts, but also among all of the parts. For example, the leaders in operations must examine the performance of the operations to the doctrinal principles of the company. Operations must measure the success of the execution to the strategic commitments, and to the planning accuracy of the tactics.
As we defined in past articles, doctrine is the fundamental principles that guide the enterprise’s actions in support of its objectives. Not only does doctrine support the objectives, but doctrine declares the fundamental reasons why the organization exists, the purpose.
Elsewhere in our writings, we make the argument that it is the moral obligation of the management of any business to create a profit. We also make the argument that the owners of the enterprise have the sole right to define the purpose of a business. We go as far as to define a Prime Directive of Business: Make More Money, Now and in the Future.
A business can have many other guiding principles, but not including the Prime Directive as a doctrine is stupid on a galactic level.
For our example, let’s agree that the Prime Directive is in force.
There are many strategies that can support the Doctrine of the Prime Directive. Maximizing the utilization of deployed working capital is one example.
Working capital is a combination of earned organic operating cash and cash from financing activities, i.e., borrowed money. The better a company uses its working capital, the more cash the enterprise generates. The CFO of your company knows very well how tight or loose the working capital is in the company. How tight or how loose the working capital is in a company is a matter of balance, not too loose and definitely not too tight. Loose working capital allows a company to have high flexibility in paying bills and meeting cash obligations, but too loose means that not all the capital is working to make more cash. When the working capital is tight, there is not enough liquid cash available to meet all the cash obligations the company may have.
Another strategy that supports the Prime Directive is having in stock what the customers want, when they want it, where they want it, however they want it. Some may argue that this strategy is more of a doctrine, but if you read it through, it reads like a commitment. Doctrines are the purpose of a company, while strategy is what the company does to support the purpose. “Always have what the customer wants” is a commitment.
There should be several strategies supporting each doctrine. Given time, we could come up with dozens that support the prime directive.
The term tactical has gone through a strange metamorphosis in the past few decades. Perhaps it started in Hollywood with the old 1970s TV show, "S.W.A.T," (Special Weapons And Tactics). I am sure that at some point a script writer who knew nothing about tactics penned the line, “time to go tactical,” because it sounded cool. Sadly, the term sticks, and people continue to think of actual operations as tactical.
Tactics are how to do things. Tactical planning is really a theoretical exercise. The US Army publishes hundreds of Technical Manuals that teach tactics, techniques, and procedures for a variety of different operational activities, including driving truck convoys, exploring enemy storage sites, even using socks, dynamite and grease to make bombs. All these materials are theoretical in nature. They teach soldiers what to do in the field when fighting in battles, what to do when they find weapons caches, or how to avoid harm when driving in a convoy. Some of the tactics and techniques may have developed from actual experience in the field, but until the soldier actually uses the tactic in an operation, the tactic is still just a theory.
In business execution, we deploy tactics every day. If your company follows a standard operating procedure for dealing with a customer lost shipment claim, it may have developed the process in some form of tactical planning. I say “may have” because so many of the business processes used in most companies today are undocumented, the product of the thinking of different people who either did the job in the past, or people who supervised the job. Not to say that the process is bad, more that the process evolved with little design for integration into other tasks in the operation.
A well designed company spends a great deal of time thinking about its tactics, and how it will execute the work. Tactical planning may involve trips to the gemba, to the operations floor. But in almost all cases, tactical planning happens a step above the operations floor. Good tactical planning looks at how each tactic serves the strategy it is aligned under. Great tactical planning looks to make each tactical effort supports multiple strategies.
Considering the Prime Directive Doctrine in our example, and the strategic commitment to maximize working capital, a number of tactics come to mind that support the strategy.
Improving inventory turns is a measured result, the product of less inventory and/or increased shipments. There are a number of more detailed tactics that achieve inventory turns improvements. For our example, we can include things like reducing safety stock, improving inventory accuracy, changing the reorder frequency, order size, or even the lead time for reorder. All of these are viable tactics that support the overall strategy of reducing inventory.
Shortening the cash-to-cash cycle is another way to improve working capital efficiency. Reducing receivable days or increasing payable days will help. The faster cash is converted from inventory asset to cash in the bank, the faster the company can spin the working capital and make more operating cash flow.
Tactics define the different areas of the operations. Tactics define the tools, the data, and the methods used in the operations. But tactics are not operations. Operations uses tactics to execute the work.