PLN 0305 Core Competence an Enterprise Analysis

8/6/2019 PLN 0305 Core Competence an Enterprise Analysis

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Core Competence: An EnterpriseAnalysis

Developments from the

UK Lean Aerospace Initiative

Dr Glenn ParryUniversity of Warwick


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2005 Dr G.C. Parry, Dr C.E. Turner, UK Lean Aerospace Initiative, University of Warwick

CORE COMPETENCE

Agenda

Introduction

Case Study

Conclusions


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THE FIVE LEAN PRINCIPLE

The lean principles are now common within the manufacturing process, for lean to

add further value an enterprise wide approach is required but what should we

target?

Based on the Toyota Production System, they were first published by Womack &

Jones in The Machine That Changed The World

Specify value is the first and, we believe, the most overlooked principle

- only the customer can specify value

- time and again we hear people say they know what the customer wants, but have neveractually listened to them

The next three principles involve process excellence

The final principle reminds us we are never perfect

Source: Lean Thinking, Womack & Jones (1996); WMG Analysis

Pursue

perfection

Let the

customer pull

Specify

value

Identify the

value stream

Make the

value flow


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INTRODUCTION

The question of the value added by any enterprise transformation is fundamental

and we believe is centred around core competence

Companies will have numerous value streams

Only limited resources are available to change managers

Focus of lean change initiatives needs to be on those functions that will

deliver greatest value to the business

Core competences need to be identified to target effort in areas that

deliver greatest return, and to ensure we do not destroy value

We established a working party of industry professionals who meet quarterly

to discuss these issues and develop a methodology for analysis


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INTRODUCTION

Firms have core competencies or skills that they must defend at all costs if they are to

survive and prosper in a market-place

Correctly identifying and protecting core competence is key to survival

- IBM effectively outsourced two of its core competencies - writing software to Microsoft, andmicrochip technology to Intel - and concentrated instead on what it believed to be its core

competence, producing hardware

A companys true assets lie in those areas which generate wealth

Asset specificity can be defined in relation to whether or not the specific skills or knowledge of the

organisation contribute to the maintenance or creation of sustainable positions for profit within specific

supply and value chainsA. Cox, European J. Purchasing & Supply Man., Vol 2, No. 1, 1996

Core competence and assets can only be created or sustained by entrepreneurial

activity

An entrepreneur is any person or firm who is alert to untapped or undeveloped possibilities fortransactions that will generate a margin or profit

M. Ricketts The Economies of Business Enterprise, Harvester Wheatsheaf

Source: WMG analysis


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INTRODUCTION

Core competence identification, evaluation and protection forms the foundation

stone for all businesses, though what it was remained ethereal

Core competences need to be protected to maintain a business

Work focussed on core competence definition and methods to identify and analyse them

Products /

ServicesCustomer /

supplier

Relationships

Core

CompetenceThreshold

Competence

Bid and

proposalInvestment

Strategy

Whilst we agree Core Competence is a cornerstone for the business we

did not have an agreed definition for what it wasSource: WMG Analysis


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INTRODUCTION

A definition for core competence was agreed by the UK LAI working party at Warwick

Core Competence is a

skill/asset/technology that

underpins the

growth of the business anddifferentiates the business from

its current and future

competitors

Source: UKLAI Working Party; WMG analysis



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INTRODUCTION

Management must maintain and manipulate the complex link between strategy and core

competence to drive growth

Both competence and strategy need to be consideredsimultaneously

- strategies may identify development needs in corecompetence

- core competences need to be exploited when planningstrategy

This leads to the virtuous circle where competence

and strategy drive each other towards continuous

improvement Strategy is the management of competences

NPI Working Party member, 23rd May 2002

Threshold

Competency

Strategy

Core

Competency

Source: UKLAI Working Party; WMG analysis



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CORE COMPETENCE

Agenda

Introduction

Case Study

- The Company- Our Analysis

Conclusions



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CASE STUDY

Dowty Propellers produce and service propellers and systems for military and civil

aviation

We focused on the composite blades business which has many skill areas

Blades

The main blade is a foam core covered with

carbon fibre, EVA and finally a painted finish

The leading edge guard [LEG] is a metal

leading edge protector

The overshoe is an electronic heater mat

fitted to prevent the blade icing up during

flight

The root is the metal insert which attaches

the blade to the propeller

Dowty R-352 propeller (Fokker F50) Composite C-130J blade

Source: WMG Analysis (2002); Fokker Corporate Website (2002)



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CORE COMPETENCE

Agenda

Introduction

Case Study

- The Company- Our Analysis

Conclusions



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CASE STUDY

To analyse core competence we agreed a structure around which to work, and this

image was used to communicate our approach

CORE COMPETENCE

COMPANY STRATEGY

COMPANY LTD

Source: WMG Analysis

CASE STUDY



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CASE STUDY

Extensive customer interviewing was used to identify value

Anonymous Customer Calling was used to get an unbiased customer viewpoint

- what does the customer value (Market)?

- what do they pay for?

- what do they like?

- what might be done differently?

Customer written questionnaires direct from the company gave greater insight to

how the customers viewed the target companys product

- what does the customer value from your company?



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CASE STUDY


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CASE STUDY

Initially, the repair shop was not convinced that mapping their process would be

useful as they claimed considerable variability in incoming repairs

0

25

50

75

100

A B C D E F G

Repairs per

propeller

(Percent)

F50 Propeller Repairs

Core competence in

deep damage repair

The repair shop had 54 repair schedules for

blades and a similar number for hubs

The shop layout was set to allow all of these

to be handled

Pareto analysis of a history of repairs

revealed that only 7 occurred regularly

- of these 3 were carried out on over 25% ofpropellers

As lean practitioners we like demand

levelling

- the repair shop has been reconfigured forrepeaters and strangers

- prediction of required maintenance is nowimproved

CASE STUDY


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CASE STUDY

A skills matrix of employees and their roles in the value stream flow gave visibility

of individuals competences

CASE STUDY


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CASE STUDY

We completed global market analysis on DPROs competitors

OEMCOMPETITOR

PROFILES

Who?

What?

Where? Size?

SERVICE

COMPETITOR

PROFILES

Who?

What?

Where?

Size?

MarketFINANCIALTRENDS

MARKET

COMPETITORS

- REVENUES- ROCE


CASE STUDY


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CASE STUDY

Detailed cost modelling stripped out overhead and identified profit drivers linked to

product streams and cell activity

Labour

Material

Direct labour

1650 hrsIndirect labour

costs

Stationary,

audit, software

etc

Staff levelProduct

Product

Product

No. of

people

Cost Sq ft

All overhead was reattributed to cellactivity, using real data where possible

Cost

sSub con

Product

OverheadAdmin

Shareholder

valueProfit

marginProduct

ProductRevenue

Product

Product

Consultancy


CASE STUDY


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The model allowed us to select and deselect cells, platforms and customers and

view the predicted financial effect this would have on the business

0

10

20

30

40

50

60

1stQtr

2ndQtr

3rdQtr

4thQtr

Cost Revenue Margin

Select

Platform

Select

Cell

Select

customer

F50

Tornado

Typhoon

Cessna

Lynx

A320

747

Metal fabrication

Metal finishing

Paint shop

Composite layup

Composite finishing

Metal polishing

NDT

Big Airlines

Dutch Airlines

MOD

Africa Air

Belgium Air

Output displayControl Panel

CASE STUDY


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High on Customer Value was right first time costing. Using the model, costs can be

better analysed and quotation accuracy improved

Product

Cumulative distribution

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1

8000 8500 9000 9500 10000 10500

Basic Overhaul

Historic data is inputted and

uncertainty values are assigned to the

material, sub con and labour values

This gives a guide as to where the

quote falls against the expected curve

and what action needs to be taken

Shareholder

value

Profit

margin

Cost

s

Revenue

Labour

MaterialProduct

Product

Overhead

Product

Admin

Sub con

Product

Product

Product

Product

Consultancy


CASE STUDY


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Dowty Propellers Repair and Overhaul now believe they have a good understanding

of their core competence and understand the risks inherent in their future strategy

Competitors and Markets profiled

Process and capabilities mapped

Appreciation of customer value

Tractability of cost and revenue

Visibility of costs, and probability analysis of achieving costs

The company has greater confidence in decisions for future growth

and have increased market share & profitability


CORE COMPETENCE


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Agenda

Introduction

Case Study

Conclusions

CONCLUSIONS


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Conclusions

We have an agreed definition for core competence:

Company strategy is defined as the management of our competences

We have developed a four step enterprise analysis which identifies core competences

- customer, value stream, market, finance

Completing this analysis has added to the profits and market share of a company

Core Competence is a skill/asset/technology that underpins the growth of the business;

differentiates the business from its current and future competitors

When transforming our enterprise we will focus on what we do well, protecting and

investing in the activities that are core to the business

CONCLUSIONS


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In the Rorschach ink-blot test individuals project their interpretations onto meaningless

shapes

Are your core competences just a projection of what you want to see?


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For More Details Please Contact

Dr Glenn Parry

Senior Research Fellow


International Manufacturing Centre

University of Warwick

CoventryCV4 7AL

Tel: +44 (0)24 7657 2651

Email:[email protected]

Dr Celine Turner

Senior Research Fellow


International Manufacturing Centre

University of Warwick

CoventryCV4 7AL

Tel: +44 (0)24 7652 4604

Email:[email protected]


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Disclaimer

This document was produced by researchers from the UK Lean Aerospace Initiative (UK LAI) at

Warwick Manufacturing Group, University of Warwick. The UK LAI is a consortium of four

universities lead by the University of Warwick and consisting of some 40 participating company

members of the Society of British Aerospace Companies (SBAC). The initiative is jointly funded by

participating SBAC members and the Engineering and Physical Sciences Research Council.

Members should reference UK LAI and the University of Warwick whenever any information is used

or disclosed relating to this work or any other by the UK LAI at the University of Warwick.

It may not be copied, used or disclosed to non-members in whole or in part except with the prior

written permission of the author. The copyright and foregoing restriction on copying, use and

disclosure extends to all media in which this information may be embodied, including magnetic

storage, computer printout, visual display, etc. In addition to such written permission to copy,

reproduce, or modify this document in whole or part, an acknowledgement of the author of the

document and all applicable portions of the copyright notice must be clearly referenced. The

document is supplied without liability for errors and omissions.

All rights reserved. This document may change without notice.

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PLN 0305 Core Competence an Enterprise Analysis