Focus on Fit in the Small

The notion of focus naturally, almost inevitably from the concept of fit. Just as a company must choose, train, and manage a sales force differently if its primary task is to sell expensive capital equipment to engineers, as opposed to selling inexpensive disposables to unsophisticated consumers a single operations organization is unlikely to be equally effective for businesses that compete in markedly different   ways. Different operations structures and infrastructures are required for different missions. Therefore, a single facility even if equipped with the most modern equipment and systems, will tend to experience both irreconcilable conflicts and low overall effectiveness if it attempts to serve multiple markets that demand different  competitive strategies. Such a facility, Skinner conjectured could only become an effective competitor if it were broken up into two or more focused factories, each of which is focused to accomplish the particular manufacturing task demanded by [its specific] strategy … This emphasis on simplicity clarity, and low overhead foreshadowed the later concept of lean production.

It is not of course, impossible for the same operations organization to produce and deliver two different kinds of products / services that compete for customers in two very different ways. Indeed, many companies operate this way. However, one cannot expect the organization to perform both tasks equally well, or as well as two different organizations could that each focused its attention on the needs of a specific type of product / service customer and form of differentiation.

Most managers argue that it is prohibitively expensive to break up a large facility, containing a variety of technologies and producing a number of products / services for different markets, into two or more separate facilities each devoted to a smaller number of relatively similar products and /or technologies. They argue that not only do multiple facilities usually require duplicate floor space, equipment investment and overhead structures, they lack scale economies. But many companies have found just the opposite to be true – that focusing their facilities often   causes operating costs to decrease. If, for example one’s original facility is situated in an expensive (in terms of construction, labour, or transportation costs) location, and a new business that seeks to compete on the basis of low cost can be operated in a less expensive location, then setting up a new facility to service that business may turn out to be cheaper in the long run continually piling more and more work into the original plant.

Similarly, equipment that is specialized to the needs of a specific kind of product or service is often less expensive (and /or cheaper to build internally)   and easier to operate than multipurpose equipment that has a broader range of capabilities and has to be switched frequently from one product to another. Moreover, adding products and services to a facility increases its complexity which usually necessitates additional overhead to coordinate production schedules resolve conflicts, expedite orders, and estimate product costs. As a result, companies that break up a big, complex organization into more focused smaller ones often find that their total overhead costs go down.

The advantages of focusing and thereby reducing the size of large, and complex operating units has come to be recognized in contexts far removed from manufacturing. The airline industry provides a case in point. Faced with declining revenues and growing competition from such upstarts as Southwest many major airlines have begun to recognize the tremendous costs their complexity has burdened  them with. At one time, for example, American Airlines had fourteen separate fleets of airplanes, each of which contained sub-fleets having different seating configurations and equipment that prevented them from being used interchangeably on its worldwide route structure. For example a 777 used on its Asian routes could not be substituted for a 777 used on its European routes. To complicate operations further,  it allowed its customers considerable flexibility to make last minute changes in itineraries and seating assignments and provided a variety of frills that were valued by ( or accessible  to)  only a portion of its total  passengers.

Other nonmanufacturing industries that have begun experimenting with the focus concept include health care and education. Such efforts, however, sometimes engender a storm of controversy. Some believe, for example, that focused niche hospitals essentially add to the complexity and cost of traditional hospitals (which offer a broad spectrum of services) by sending them only patients who have relatively complicated medical problems. A similar argument has been made against the concept of charter schools, which are claimed to increase the burdens placed on the traditional school system. An example, of how this dynamic played out in one company is provided.

A substantial portion of the advantages of focus can often be obtained through less drastic means, however, A company might, for instance, be able to achieve considerable simplification simply by eliminating products or options that are seldom requested by customers, or segmenting its operations and dividing a given facility into separated work areas – sometimes called plants within a plant. A manufacturing cell, composed of a relatively small group of people who are given responsibility for a related group of products is an extreme example of this approach. Each cell can have most if not all, if its own workers, its own work scheduling and performance measurement systems, and so on. The basic premise behind the concept of reengineering is rooted in a similar idea: that major increases in performance can be achieved by co-locating (or tying together electronically) the various groups and functions involved in performing a complete business process. These might include, for example, all the steps from materials procurement through production to physical delivery.