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OPSM 501: Operations Management
Session 2:
Process Positioning
Strategic Fit
Koç University Graduate School of BusinessMBA Program
Zeynep [email protected]
Firms compete on product attributes.This requires process capabilities.
Price (Cost) P Quality Q
– Customer service– Product quality
Time T– Rapid, reliable delivery– New product development
Variety V– Degree of customization
“order winners”
To deliver we need “capabilities”
Fit between Strategy and Processes
Processes must fit the operations strategy of the firm:Competing on
-Cost (Southwest Airlines)-Quality (Toyota)-Flexibility (HP)-Speed (McDonalds)
all require different process designs and different measures to focus on.
Corporate StrategyKey Performance Indicators Operations StrategyProcess Design& Improvement
Order-Winners and QualifiersOrder-Winners and Qualifiers
PerformancePerformance
LowLow HighHigh
Com
petit
ive
Ben
efit
Com
petit
ive
Ben
efit PositivePositive
NegativeNegative
NeutralNeutral
OrderOrderWinnerWinner
LessLessImportantImportant
OrderOrderQualifierQualifier
Source: Slack and LewisSource: Slack and Lewis
Order Qualifiers and WinnersDefined
Order qualifiers: the basic criteria that permit the firms products to be considered as candidates for purchase by customers– Screening criteria– Standard, expected performance
Order winners: the criteria that differentiates the products and services of one firm from another – The more, the better– Customer chooses based on this criteria
Mission/Strategy
Mission - where you are going
Strategy - how you are going to get there; an action plan
Strategy Process
MarketingDecisions
OperationsDecisions
Fin./Acct.Decisions
CompanyMission
BusinessStrategy
Functional AreaFunctional AreaStrategies
Strategy vs. Operational Effectiveness: The Operations Frontier as the minimal curve containing all current
positions in an industry
Value/ Responsiveness
operations frontier
A
B
C
CostHigh Low
Low
High
Increasing Customer Value
Value
A
B
C
CostHigh Low
High
Low
Operations Frontier
Increasing value
Lowering Costs
Value
A
B
C
CostHigh Low
HIgh
Low
Operations Frontier
Lowering Costs
Shouldice HospitalVideo Case
Shouldice Business Model
Medical– Simple hernias– Optimized process– Check-ups and follow-up
Social– Club Med like experience– Co-production at individual
and cohort level– A network for life
Shouldice Patient Experience
COST
QUALITY
SPEED
FLEXIBILITY
Low, both real and opportunity
Low recurrence, satisfaction with experience
Fast operation and recovery
The process rules; only simple hernias
Comparison to General Hospital
Hernia complexity
Shouldice: preparesfor the simplest
General Hospital: prepares for the most complex
A product/process matrix
General Hospital:
Variety & flexibility
High cost
Low margins
Low Cost
High margins
Shouldice Hospital:
Standardization
Cost, speed, quality
Process
Flexible job
Rigid line flow
ProductHigh customization
Low volumeHigh unit margin
High standardizationHigh volume
Low unit margin
Industrialization
Shouldice as a lean enterprise
Shouldice General Hospital
Focus on low risk cases No focus, multiple goals
Clear single value prop. Confusion of value prop.
Predictable process Unpredictable process
Strive for perfection Strive for threshold perf.
Eliminate waste Tolerate some excess
Manage patient flows View patients as functional tasks
Pull patients into process Push patients through process
Womack and Jones (2000) From Lean Production to Lean Enterprise, HBR March-April 1994
Focus at Shouldice: the results
Breakthrough service High customer and employee satisfaction Industrial approach
Shouldice Process Life Cycle
Birth of the Shouldice formula Process selection, design,
and improvement Innovation at the interfaces Process overtaken (when?)
For next week
Read the two cases: Vestel Elektronik and Marks & Spencer Zara
Assignment 1 due (you can work in groups of 2 or individually)– For each company determine their value proposition
by exploring the four product attributes (P, Q, T, V)– Place each company on a Product-Process matrix,
briefly explain your choice– For Vestel Elektronik: what are major operational
decisions that have been taken to support the value proposition
