© Nigel Slack and Michael Lewis 2003 Performance objective A Performance objective B Operations...
Transcript of © Nigel Slack and Michael Lewis 2003 Performance objective A Performance objective B Operations...
© Nigel Slack and Michael Lewis 2003
Performance objective AP
erfo
rman
ce o
bje
ctiv
e B
Operations Resources
Market Requirements
OPERATIONS STRATEGY
Strategic Reconciliation
?
Topics in operations strategy treated in this chapter
Time, trade-offs and targeting
© Nigel Slack and Michael Lewis 2003
PRODUCT/SERVICE TECHNOLOGY
MARKETING OPERATIONS
Where does the business get its competitive advantage?
The “technological” specification of its product/service?
The way it positions itself in its market?
The way it produces its goods and services?
© Nigel Slack and Michael Lewis 2003
OPERATIONS
PRODUCT / SERVICE TECHNOLOGY
MARKETINGOPERATIONS
PRODUCT / SERVICE TECHNOLOGY
OPERATIONSMARKETING
PRODUCT SERVICE
TECHNOLOGY
The contribution of each area will change over time
MARKETING
© Nigel Slack and Michael Lewis 2003
STRATEGIES OF VOLKSWAGENWERK
1920 - 1992
BEFORE 1948FERDINAND PORSHE - ‘PEOPLES CAR’ 1920sGOVERNMENT SUPPORT 1934 - PLANT ON STREAM
19391939 WAR - PLANT TURNED TO PRODUCTION OF WAR VEHICLES1948 NORDHOFF PUT IN CHARGE
1948NORDHOFF TAKES HALF A STRATEGY - PEOPLES CARADDS EMHPASIS ON QUALITY, TECHNICAL, EXPORT, SERVICE STANDARDS
1949 - 1958INTENDED STRATEGY REALIZEDCAR IDEAL FOR POST WAR CONDITIONSRAPID EXPANSION IN VOLUMENO NEW MODELS (WORK ON NEW MODEL HALTED IN 1954)
© Nigel Slack and Michael Lewis 2003
1960 - 1964 1500 MODEL INTRODUCED
SALES INCREASED BUT PROFITS SQUEEZED
1965 - 1975PRESSURES OF COMPETITION BECOME SEVERENEW STRATEGY FROM AUDI - FRONT WHEELED DRIVE, STYLISH,
WATERCOOLEDOTHER LINES DROPPEDPRODUCTION RATIONALISED ON WORLD BASISMARKETING EMPHASISED PERFORMANCE, RELIABILITY AND SERVICE
1976 - 1989GOLF ESTABLISHED AS MARKET LEADER
CONTINUED EMPHASIS ON TECHNICAL EXCELLENCEOLD DESIGNS PERIODICALLY FASHIONABLEMAIN EUROPEAN COMPETITOR SEEN AS FIATSOME PRESSURE FROM JAPANESE MANUFACTURING
1959INCREASED COMPETITION AND CHANGES IN TASTESRESPONSE - INCREASED ADVERTISING
- DESIGN STARTED FOR 1500 ORIGINAL STRATEGY UNCHANGED IN ESSENTIALS
© Nigel Slack and Michael Lewis 2003
1990 - 1996INCREASING PRESSSURE ON COSTS FROM JAPANESE MANUFACTURERSGERMAN LABOUR COSTS AND EXCHANGE RATE ARE DISADVANTAGEOUSLATTERLY EUROPEAN RECESSION INCREASES PRESSURECOST CUTTING MEASURES - EAST EUROPEAN PLANT - AGGRESSIVE
PURCHASING
1997 - 2000DEVELOPING SEPARATE BRANDING STRATEGIES TO OCCUPY DIFFERENT MARKET SEGMENTSDEVELOP SEPARATE PRODUCTS FROM COMMON PLATFORMS TO
REDUCE COST CONTINUE AGGRESSIVE COST REDUCTION AND PROCESS IMPROVEMENT
© Nigel Slack and Michael Lewis 2003
MINTZBERG’S CONCEPT OF EMERGENT STRATEGIES
NOT ALL INTENDED STRATEGIES ARE REALISEDand …...
NOT ALL REALISED STRATEGIES ARE INTENDED
Emergent strategies derive from the shared understanding of managing the resources of the organization
The concept of emergent strategies therefore has a particular significance for operations strategy
DELIBERATIVE STRATEGIES
UNREALISED STRATEGIES
EMERGENT STRATEGIES
© Nigel Slack and Michael Lewis 2003
Market Requirements
Strategic Reconciliation
Operations Resources
Emerging, any
working vehicle
Maturing, simple robust
vehicle
More sophisticated performance,
quality
Uncertain rejection of
VW traditional products
Building up capacity and capability
Systemisation of resources and processes
Minor reconfigura-tion for new model
Fragmented acquisition of new resources
Multiple new
designs
New 1500
model
Standardized design
1946-1951
Implementing strategy
1952-1958
Continuity of strategy
1959-1964
Minor change and continuity
1965-1970
Searching for viable strategy
Simple design
Market requirements, operations resources and strategic reconciliation at VW for half a century
© Nigel Slack and Michael Lewis 2003
Clarifying around
style, quality and
variety
Segmentation around
performance, style and variety
Increasingly competitive
around price
Branding with
price, quality,
and style
Adapt best practices from enlarged group
Accommodate new models and acquisitions
Drastic reconfiguration to increase efficiency, reduce costs
Continuous process improvement and cost reduction
Common product
platforms
Design for low-cost
manufacture
Product development
paths
Defined range
1971-1975
Emergent strategy
1976-1989
Continuing with minor changes
1990-1996
Major change
(internal)
1997-2000
Implementing strategy
Market Requirements
Strategic Reconciliation
Operations Resources
Market requirements, operations resources and strategic reconciliation at VW for half a century
© Nigel Slack and Michael Lewis 2003
Intended Strategy
Realised Strategy
Deliberate Strategy
Mintzberg’s concept of emergent strategy
Unrealized Strategy
Emergent Strategy
© Nigel Slack and Michael Lewis 2003
Order winners and qualifiers
Low HighNegative
Order Winners
Qualifiers
Positive
Neutral
Achieved Performance
Co
mp
etit
ive
Ben
efit
© Nigel Slack and Michael Lewis 2003
Adding ‘Delights’
Low HighNegative
Order Winners
Qualifiers
Positive
Neutral
Achieved Performance
Co
mp
etit
ive
Ben
efit
Delights
© Nigel Slack and Michael Lewis 2003
Low HighNegative
Order Winners
Qualifiers
Positive
Neutral
Achieved Performance
Co
mp
etit
ive
Ben
efit
Delights
Delights become order winners and order winners become qualifiers
© Nigel Slack and Michael Lewis 2003
What service dimensions are delight, order winners and qualifiers – now, and in the future?
Delights
Order Winners
Qualifiers
Today Tomorrow
© Nigel Slack and Michael Lewis 2003
Delights
Order Winners
Qualifiers
Today Tomorrow
Budget Hotel Chain
Central reservation
Location (autoroutes)Location (restaurants)
PriceLoyalty cards
Central reservationLocation (autoroutes)
Location (restaurants)PriceLoyalty cardsCleanlinessDécor
CleanlinessDécor
Service
?
© Nigel Slack and Michael Lewis 2003
Delights
Order Winners
Qualifiers
Today Tomorrow
Central reservation Price
Location (autoroutes)Location (restaurants)
PriceLoyalty cards
Central reservationLocation (autoroutes)Location (restaurants)
Location (restaurants)PriceLoyalty cardsCleanlinessDécor
CleanlinessDécor
Service
?
Budget Hotel Chain
© Nigel Slack and Michael Lewis 2003
Delights
Order Winners
Qualifiers
Central reservationLocation (autoroutes)
Location (restaurants)
Location (restaurants)Price
Loyalty cardsCleanliness
Decor
Price
What aspects of service will form tomorrows
delights, order winners and qualifiers?
What new capabilities will operations need to
develop to deliver these?
More, smaller sites
Cheap land costs
Build at low cost
Operate at low cost
Search processesFlexible design
Low fixed costsStandardization
Low overheadsLow labor costsNew technology
Partnership deals with restaurants
Budget Hotel Chain
© Nigel Slack and Michael Lewis 2003
Trade-offs
“Do you want it good, or do you want it Tuesday?”
“No such thing as a free lunch.”
“You can’t have an aircraft which flies at the speed of sound, carries 400 passengers and lands on an aircraft carrier. Operations are just the same.” (Skinner)
“Trade-offs in operations are the way we are willing to sacrifice one performance objective to achieve excellence in another.”
© Nigel Slack and Michael Lewis 2003
Competitive Objective
A
Competitive Objective
B
Model II: Pivot and Function (Slack, 1991)
Competitive Objective
A
Competitive Objective
B
Model I: Function (Skinner, 1992:
Hayes and Pisano, 1996)
Two ways of illustrating the trade-off concept
© Nigel Slack and Michael Lewis 2003
Performance measure A
Per
form
ance
mea
sure
B
Performance measure A
Per
form
ance
mea
sure
B
Performance measure A
Per
form
ance
mea
sure
B
“Natural” Frontier of Performance
X
Y
Three schools of trade-off thought
“It’s all about positioning” (e.g. Skinner)
“Must aim to be good at everything”
(e.g. Schonberger)
“You have to choose when to reposition and when to
overcome trade-offs through improvement”
(e.g. Hayes and Pisano)
Y1
Y2
Y3
X3
X2
X1
X
Z
Y
© Nigel Slack and Michael Lewis 2003
Trade-off changed because improved system attributes have enabled both A
and B to be improved without changing their relative position
Pivot
Base +
Base
A B
Trade-off changed because improved system attributes have enabled A to be improved without reduction in B
Pivot
Base +
Base
A
B
Trade-off changed because A is now required to have higher performance but system attributes have not improved so
performance of B is lower.
Pivot
Base
A
B
Pivot
Base
A B
Original trade-off
ImproveNet improvement in performance because trade-off is overcome
Re
po
siti
on
Ch
ang
e in
rel
ativ
e p
erfo
rman
ce o
f co
mp
etit
ive
ob
ject
ives
Repositioning vs.improvement
© Nigel Slack and Michael Lewis 2003
vs.
vs.
vs.
Service Cost
good
bad
good
bad
Degree and number of service checks
Cost of providing
service
Average waiting time for service
Cost of providing
service
Ability to keep waiting time short even in peak periods
vs.Cost of
providing service
Range of services offered
Cost of providing
service
Examples of services vs. cost trade-offs at an auto quick fit center
© Nigel Slack and Michael Lewis 2003
vs.
vs.
vs.
Service Capital expenditure
good
bad
good
bad
vs.
Examples of services vs. capital expenditure at an auto quick fit center
Degree and number of service checks
Average waiting time for service
Ability to keep waiting time short even in peak periods
Range of services offered
Capital cost of purchasing computer
diagnostics equipment
Capital cost of providing extra physical capacity or
automated processes
Capital cost of providing extra capacity for peak
loading
Capital cost of purchasing wider
range of equipment
© Nigel Slack and Michael Lewis 2003
Capital expenditure
good
bad
good
bad
Service
vs.Capital cost of providing computer diagnostic equipment
Cost of providing service
Examples of cost vs. capital expenditure at an auto quick fit center
© Nigel Slack and Michael Lewis 2003
Working capital
good
bad
good
bad
Service
vs.Level of parts inventory kept in stock
Ability to replace part without any
delay
Working capital
good
bad
good
bad
Cost
vs.Level of parts inventory kept in stock
Cost of arranging for out of stock part to be
delivered
Working capital
good
bad
good
bad
Capital expenditure
vs.Level of parts inventory kept in stock
Capital expenditure on storage space
Examples of working capital related trade-offs at an auto quick fit center
© Nigel Slack and Michael Lewis 2003
Capital expenditure
CostService
Working capital
versus
versusversus
versus versus
versus
Trade-off categories
© Nigel Slack and Michael Lewis 2003
Performance objective A
Per
form
ance
ob
ject
ive
B
Y
X
Extended performance
frontier
Natural performance
frontier
Area Q
Area P
Z
Reconciliation as improvement by pushing back the performance frontier of a trade-off
© Nigel Slack and Michael Lewis 2003
Cost performance
Var
iety
‘Normal’ operation trade-off frontier zone
Trade-off curve of operation designed for narrow range of
activities only
Trade-off curves are (a) broad representations of a performance frontier zone; (b) dependent on how the operations have been designed
B
A
© Nigel Slack and Michael Lewis 2003
Market segment
A
Market segment
B
Operation A
Operation B
Operation C
Market segment
A
Market segment
B
Market segment
C
Operation A
Operation B
Operation C
Market and operations segmentation matched
Market and operations segmentation not matched
Segmentation of markets and operations resources
Market segment
C
© Nigel Slack and Michael Lewis 2003
IslandArmy 1
Army 2
Burning bridges behind you increases commitment but reduces flexibility
© Nigel Slack and Michael Lewis 2003
Learning and improvement
Structural vulnerability
but butbut
Operations Resources Market RequirementsStrategic reconciliation
Clearly focused
resources
Appropriate resources
Limited capabilities
Risk of market change
Clearly targeted market
Clarity of objectives
Focused operations can exhibit positive and negative characteristics in both market and operations perspectives
© Nigel Slack and Michael Lewis 2003
1st trade-off
Staff scheduling in retail loans
Response time
Utilisation of staff
2nd trade-off
Level of service purchased from credit agency
Operational cost of credit information
Speed and quality of
information
3rd trade-off
Retail loans on-site investment
Operations cost and speed of
serviceCapital
investment in ‘retail’ system
4th trade-off
Insurance IT system investment
Range of services possible Investment in
multi-function system
Three trade-offs in the Call Center example
© Nigel Slack and Michael Lewis 2003
B
A Ideal performance
Qu
alit
y o
f se
rvic
e
Limited BroadSuperficial
Specific
Range of services
B
A
Qu
alit
y o
f se
rvic
e
High LowSuperficial
Specific
Cost of providing services
Ideal performance
© Nigel Slack and Michael Lewis 2003
A Ideal performance
Qu
alit
y o
f se
rvic
e
Limited BroadSuperficial
Specific
Range of services
A
Qu
alit
y o
f se
rvic
e
High LowSuperficial
Specific
Cost of providing services
Ideal performance
CC
A Ideal performance
Qu
alit
y o
f se
rvic
e
Limited BroadRange of services
A
Qu
alit
y o
f se
rvic
e
High LowCost of providing services
Ideal performance
© Nigel Slack and Michael Lewis 2003
A Ideal performance
Qu
alit
y o
f se
rvic
e
Limited BroadSuperficial
Specific
Range of services
A
Qu
alit
y o
f se
rvic
e
High LowSuperficial
Specific
Cost of providing services
Ideal performance
A Ideal performance
Qu
alit
y o
f se
rvic
e
Limited BroadRange of services
A
Qu
alit
y o
f se
rvic
e
High LowCost of providing services
Ideal performance
C C
DD