Operations Strategy Framework

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Operations Strategy Framework

• Ken Boyer, Associate Professor, MSU

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Operations Strategy Framework

• Operations is a broader term than manufacturing.
  Much of manufacturing advantage comes from
  non-manufacturing activities such as new product
  development, supplier management, matching
  operations with marketing, etc.

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Learning Objectives

• Understand the importance of setting clear
  competitive priorities
• Learn how to match priorities with operating
  decisions AND strategies of other functional
  areas.
• Recognize the need to promote strategic
  consensus.
• Appreciate the opportunities associated with
  technological proactiveness.
• Realize the need to build infrastructural
  capabilities.

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Operations Strategy Process
Decision Areas
Competitive Priorities
Business Strategy
External Factors
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Competitive Priorities
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Decision Areas
Capacity Facilities Technology Vertical
Integration/Sourcing
Workforce Quality Production Planning Organization
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Competitive Priorities .... Order
Winners/Qualifiers

• Qualifiers Get a product into the market and
  keep it there, but dont win the order
• Winners separate the product/service from the
  pack. Things that actually win the order or
  provide a distinctive competence

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• Many companies fail to appreciate that the MOST
  CRITICAL orders are the ones to which the answer
  says ......

NO!!!
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Changes in Operations Strategy.... An Example
Ford (1915)
Pre-Ford (1900)
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Henry Ford and the Model T

• From 1909 to 1923 Ford Model T improved in price
  by a factor of 4
• Primary competitive priority (order winner) was
  clearly COST
• Fords competitive priorities gave rise to a
  coherent set of STRUCTURAL and INFRASTRUCTURAL
  decisions with a single, over-riding objective

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Ford Motor Co. Methods Used

• Product Stability
• Capital Equipment Specialization
• Process Rationalization
• Scale Economies
• Material Specialization
• Labor Specialization

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Too much of a good thing .....

• By 1920 Ford was SO SUCCESSFUL and TOO RIGID ....
• Henrys motto was You can have it in any color
  ....
• .... So long as it is BLACK!!!

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Time for A NEW Strategy!

• GM could not beat Ford at COST, so Sloan decided
  to beat them with FLEXIBILITY.
• More models, more colors
• Ford became so inflexible, that in 1926 had to
  shutdown for one year to retool for Model A
• Ford fell from No. 1 automaker .... and has never
  recovered.

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Ford (1915)
Pre-Ford (1900)
GM (1930)
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Another Example ....

• Anybody ever heard of Mostronics Calculators?
• In 1970s they were a leading manufacturer, BUT
  Texas Instruments aggressively reduced prices to
  fit experience curve
• Drove Mostronics out of business because they
  could not compete based on cost.

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An Alternative Strategy

• Hewlett Packard remained in the business by
  emphasizing QUALITY and FLEXIBILITY rather than
  low price.
• Similar example IBM vs. Compaq or Dell computers
  (1st generation), Packard Bell or Gateway (2nd
  generation)

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Trade-off Model of Competitive Priorities

• This is the traditional model
• Companies can only emphasize a single priority at
  a time.
• i.e. COST ....
• or ................. FLEXIBILITY or
• QUALITY
• or ............................................
  DELIVERY

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Cumulative or Sand-cone Model

• Companies can simultaneously compete on several
  competitive priorities.
• Possible due to advanced manufacturing
  technologies (CIM FMS)

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Operations Reactive or Proactive?3 Dimensions
of Proactivity

• Manufacturing Involvement
• Operations is centrally involved in formulating
  business strategy as well as other functional
  areas
• Technical Assertiveness (Structure)
• Operations makes efforts to anticipate the
  potential of new technologies
• Capability Building (Infrastructure)
• Operations pursues long-range programs in order
  to acquire capabilities in advance of needs.