Responding to Evolving Strategies, Markets and Technologies

Since the on-going task for an operations organization is to structure and manage itself so as to enhance its company’s competitive strategy as its environment and evolve it usually becomes necessary to make changes in a number of the operations decisions.  Again and again we have found that the root cause of an operations crisis is that a company’s operations, policies and people – both workers and managers – over time  have become  incompatible with its facilities, technology , sourcing and system choices. Even more subtly even though its structure may be consistent with its infrastructure the operations organization may no longer be serving the operating priorities demanded by the company’s evolving competitive strategy.

During the early part of its cycle, for example a product generally is offered in variety of configurations most of which sell in relatively low volumes. As the product matures, however, it typically evolves towards a smaller number of higher volume more standardized products.  This requires compensating adjustments in the way the company organizes its operations, suggesting that both the competitive strategy and the operating systems of a typical company in the industry might be expected to evolve in a relatively predictable manner over time. One can visualize that likely path, as well as other trajectories that a company might follow, with the help of a product–process matrix. This matrix also allows one to identify a number of the opportunities and pitfalls a company might encounter as it attempts to adjust (or often more damaging fails to adjust) to predictable market shifts.

Understanding the basic concepts of strategic fit and focus does not by itself, of course, ensure an effective solution to a specific competitive problems any more than understanding the basic laws of physics solves how to design an automobile. None of the structural and infrastructural decisions described above has a clearly delineated impact on all the different competitive dimensions so they can be made in a variety of imaginative ways. While certain choices may have quite clear cut implications for specific performance measures (e.g. cost or flexibility innovativeness or control /reliability), they may have relatively little effect on others, or the trade-offs among them. The adoption of an MRP system, for example, is unlikely to have much impact on the trade-offs between innovativeness and defect rates. It is generally possible therefore to achieve a given level of performance along any dimensions through different combinations of structural and infrastructural decisions. As a result, two different companies that are each trying to achieve a similar set of competitive priorities may make very different design choices as they configure equally effective operations organizations. One for example may rely primarily on structural elements (facilities and equipment choices say), while another may emphasize infrastructural elements) a just in time production scheduling system coupled with a TQM program say). Similarly German companies might configure themselves very differently from the Japanese companies they compete against head to head.

As a result, designing an effective operations strategy is still somewhat of an art form – constrained here and there by technological and organizational possibilities and guided by informed guesses just as is product design. This ambiguity does not however, suggest that anything goes. There are basic principles that underlie these kinds of decisions, and provide guidance as to the reasonable alternatives that managers should consider as they attempt to mold their organization in creative ways.

Focus provides both a means to achieve this fit and a discipline  for maintaining it in the face of the continual barrage of potentially distracting opportunities that confront most business organizations. And the product process matrix helps guide the adjustments in strategy and systems that are likely to be required in the changing world. This framework for operations strategy offered very different guidance to operations managers than did the mass production or lean production paradigms, but it contained important gaps. It could not explain, for example, why several competitors attempts to duplicate the low cost strategy of Southwest Airlines – to the point of using the same type of airplanes, flying to the same airports and offering a similar no frills service – ended in failure. Apparently by copying the strategy and best practices of their leading competitor they had achieved an appropriate fit between their strategy, their structure and their infrastructure. But good fit alone proved not to be sufficient for success.

The success of Japanese manufactures also presented problems for contingency theory advocates. Until the 1980s many western companies wrapped themselves in the straightjacket of industry practice as regards operations, preferring to compete instead through innovative marketing, new products or financial manoeuvres. The notion that operations if properly configured and managed could provide a powerful competitive advantage was essentially a theory in search of practitioners. The Japanese companies in a number of industries began a furious assault on world markets. Their success initially was ascribed to low wages and government assistance or protection. But as westerners studied Japanese management practices, and realized how vulnerable many western industries had become they begun to understand that Japan’s success was primarily a triumph of sheer manufacturing prowess.

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