Operations Strategy and Competitive Priorities

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OPERATIONS TECHNOLOGY MANAGEMENT

• Operations Strategy and Competitive Priorities

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Understanding Customer Wants and
Needs Dissatisfiers requirements that are
expected in a good or service. If these features
are not present, the customer is dissatisfied,
sometimes very dissatisfied. Satisfiers
requirements that customers say they want.
Exciters/delighters new or innovative good or
service features that customers do not expect.
Examples?
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Understanding Customer Wants and Needs Basic
customer expectations - dissatisfiers and
satisfiers are generally considered the minimum
performance level required to stay in business
and are often called order qualifier. Order
winners are goods and service features and
performance characteristics that differentiate
one customer benefit package from another, and
win the customer's business.
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Understanding Customer Wants and Needs Search
attributes are those that a customer can
determine prior to purchasing the goods and/or
services. These attributes include things like
color, price, freshness, style, fit, feel,
hardness, and smell. Goods such as supermarket
food, furniture, clothing, automobiles, and
houses are high in search attributes.
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Understanding Customer Wants and
Needs Experience attributes are those that can
only be discerned after purchase or during
consumption or use. Examples of these
attributes are friendliness, taste, wearability,
safety, fun, and customer satisfaction.
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Understanding Customer Wants and Needs Credence
attributes are any aspects of a good or service
that the customer must believe in, but cannot
personally evaluate even after purchase and
consumption. Examples would include the
expertise of a surgeon or mechanic, the knowledge
of a tax advisor, or the accuracy of tax
preparation software.
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How Customers Evaluate Goods and Services
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Competitive Priorities Competitive advantage
denotes a firms ability to achieve market and
financial superiority over its competitors.
Competitive priorities represent the strategic
emphasis that a firm places on certain
performance measures and operational capabilities
within a value chain.
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Competitive Priorities

• Cost
• Quality
• Time
• Flexibility
• Innovation

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Competitive Priorities Every organization is
concerned with building and sustaining a
competitive advantage in its markets. A strong
competitive advantage is driven by customer needs
and aligns the organization's resources with its
business opportunities. A strong competitive
advantage is difficult to copy, often because of
a firms culture, habits, or sunk costs.
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Interlinking Quality and Probability Performance
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Competitive Priority Quality Competitive
strategies often led to tradeoffs between quality
and cost some company strategies are willing to
sacrifice quality in order to develop a low cost
advantage.
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Competitive Priority -- Time Time is perhaps
the most important source of competitive
advantage. Customers demand quick response,
short waiting times, and consistency in
performance. Many firms use time as a
competitive weapon to create and deliver superior
goods and services such as Charles Schwab, Clarke
American Checks, CNN, Dell, FedEx, and Wal-Mart.

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Competitive Priority -- Time Reductions in
processing (flow) time serve two purposes.
First, they speed up work processes so that
customer response is improved. Deliveries can be
made faster, and more often on-time. Second,
reductions in processing time can only be
accomplished by streamlining and simplifying
processes and value chains to eliminate
non-value-added steps such as rework and waiting
time.
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Competitive Priority -- Time Processing (flow)
time reductions often drive simultaneous
improvements in quality, cost, and productivity.
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Competitive Priority -- Flexibility Mass
customization requires companies to align their
activities around differentiated customer
segments and design goods, services, and
operations around flexibility. High-levels of
flexibility might require special strategies such
as modular designs, interchangeable components,
and postponement strategies.
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Competitive Priority -- Flexibility Flexible
operations require sharing manufacturing lines
and specialized training for employees.
Flexible operations may also require attention
to outsourcing decisions, agreements with key
suppliers, and innovative partnering
arrangements, because delayed shipments and a
complex supply chain can hinder flexibility.
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Competitive Priority -- Flexibility Mass
customization is being able to make whatever
goods and services the customer wants, at any
volume, at any time for anybody, and for a global
organization, from any place in the world.
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Competitive Priority -- Innovation Innovation
is the discovery and practical application or
commercialization of a device, method, or idea
that differs from existing norms. Innovations
in all forms encapsulate human knowledge.
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Competitive Priority -- Innovation Innovations
take many forms such as Physical goods such as
telephones, automobiles, refrigerators,
computers, optical fiber, satellites, and cell
phones. Services such as self-service, all-suite
hotels, health maintenance organizations, and
Internet banking Manufacturing such as
computer-aided design, robotic automation, and
smart tags. Management practices such as
customer satisfaction surveys, quantitative
decision models, and Six Sigma.
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Strategic Planning Strategy is a pattern or plan
that integrates an organizations major goals,
policies, and action sequences into a cohesive
whole. Effective strategies develop around a few
key competitive priorities - such as low cost or
fast service time - which provide a focus for the
entire organization, and exploit an
organizations core competencies - the strengths
unique to that organization.
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Strategic Planning Most large organizations have
three levels of strategy A Corporate strategy
is necessary to define the businesses in which
the corporation will participate and develop
plans for the acquisition and allocation of
resources among those businesses. A Business
strategy defines the focus for SBUs. The major
decisions involve which markets to pursue and how
best to compete in those markets that is, what
competitive priorities the firm should pursue A
Functional strategy is the set of decisions that
each functional area - marketing, finance,
operations, research and development,
engineering, and so on - develops to support its
particular business strategy.
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• Strategic Planning
• The operations strategy is how an organizations
  processes are designed and organized to produce
  the type of goods and services to support the
  corporate and business strategies.
• Managers recognize that the value (supply) chain
  can be leveraged to provide a distinct
  competitive advantage, and that operations is a
  core competency for the organization.
• Whoever has superior operational capability over
  the long term is the odds-on-favorite to win the
  industry shakeout

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Strategic Planning Process Strategy development
refers to a company's approach, formal or
informal, for making key long-term business
decisions. The process typically takes into
account customer and market requirements, the
competitive environment, industry structure and
non-industry competitors, financial and societal
risks, human resource capabilities and needs,
technological capabilities, and supplier
capabilities.
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Strategic Planning Process The major steps are
as follows Step 1 - Gather and Analyze
Strategic Performance Data Step 2 -
Review/Analyze Existing Strategic Directions and
Documents Step 3 - Revise/Develop Strategy Step
4 - Deploy Objectives and Action Plans Step 5 -
Review Progress and Results Step 6 - Continually
Evaluate and Improve The next step is to
translate business strategy into operations
strategy, policies, and resource allocation plans
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Strategic Planning Process The strategic mission
of a firm defines its reason for existence. The
strategic vision (SV) describes where the
organization is headed and what it intends to be.
Example Strategic Vision
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Values are attitudes and policies for all
employees to follow that direct the journey to
achieving the organizations vision. Values
are reinforced through conscious and subconscious
behavior at all levels of the organization
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Example Strategic Values for a
leading restaurant are
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Operations Strategy An operations strategy
defines how an organization will execute its
chosen business strategies. Developing an
operations strategy involves translating
competitive priorities into operational
capabilities by making a variety of choices and
trade-offs for design and operating decisions.
Operating decisions must be aligned with
achieving the desired competitive priorities.
For example, if corporate objectives are to be
the low cost and mass market producer of a good
then adopting an assembly line type of process is
how operations can help achieve this corporate
objective.
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Operations Strategy and Competitive Priorities

• Professor Terry Hills Strategy Development
  Framework
• Operations design choices are the decisions
  management must make as to what type of process
  structure is best suited to produce goods or
  create services.
• Types of processes and alternative designs
• Supply chain integration and outsourcing
• Technology
• Capacity and Facilities (size, timing, location)
• Inventory
• Trade-off Analysis

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Hills Strategy Development Framework
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Operations Strategy and Competitive Priorities

• Hills Strategy Development Framework
• Infrastructure focuses on the non-process
• features and capabilities of the organization and
  includes the
• workforce,
• operating plans and control systems,
• quality control,
• organizational structure,
• compensation systems,
• learning and innovation systems, and
• support services.

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Four Key Decision Loops in Terry Hills Generic
Strategy Framework
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Operations Strategy and Competitive Priorities

• Hills Strategy Framework Applied to McDonalds
• McDonald's vision is to be the world's best quick
  service restaurant experience. Being the best
  means providing outstanding quality, service,
  cleanliness and value, so that we make every
  customer in every restaurant smile. To achieve
  our vision, we focus on three worldwide
  strategies
• (1) Be The Best Employer
• (2) Deliver Operational Excellence
• (3) Achieve Enduring Profitable Growth
• Customer Benefit Package Design and Strategy
• Strategy Development for McDonalds

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McDonalds Customer Benefit Package
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Applying the Hills Strategy Development
Framework to McDonalds (slide 1)
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Applying the Hills Strategy Development
Framework to McDonalds (slide 2)