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Process View&
StrategyPart 2- Competitive Space and
Strategy
Based on the Book: Managing Business Process Flow.
2Ardavan Asef-Vaziri August , 2013 Process View & Operations Strategy
Competitive Product Space: PQVR/CQFFQ
ualit
y
Variety
H
L H
B
A C
D
Qualit
y
Cost
H
L H
B
A C
D
Qualit
y
Cost Efficiency =1/Cost
H
L H
D
C B
A
Qualit
y
Flow Time
H
L H
D
C B
A
Qualit
y
Responsiveness =1/Flow Time
H
L H
A
B C
D Competitive Product Space: A for dimensional space representation of the Product Attributes PQVR or Process Competencies CQFT.Moving outward is better.
3Ardavan Asef-Vaziri August , 2013 Process View & Operations Strategy
Competitive Product Space
One firm: low cost and standardized products
Another firm: expensive and customized products.
Low
Variety
B
A
Cost Efficiency =1/Cost
High
Low
High
4Ardavan Asef-Vaziri August , 2013 Process View & Operations Strategy
Strategic Positioning
Defines those positions that the firm wants to occupy in its competitive product space. The current position and direction. A firm must ensure that its competitors are not able to imitate its chosen position. A sculpture, not a block. It is harder for competitors to imitate an array of interlocked activities.
Price Efficiency = 1/Price
Responsiveness
B
A
Low High
Low
High
5Ardavan Asef-Vaziri August , 2013 Process View & Operations Strategy
Zara: timely yet limited variety at modest cost and quality.
Aravind and Shouldice: low cost, high quality, minimal variety, average to long response time.
Corolla: flow shop, decentralized assembly plants close to market, short flow time, low cost.
Ferrari: job shop, only a single plant in Italy, longer flow time, high cost.
McMaster-Carr: a materials, repair, and operations (MRO) product distributor, a process with high flexibility, high quality, short response time, but at a high price
WalMart: Short flow times, low inventory, low cost, average quality.
What is the Best Strategy
6Ardavan Asef-Vaziri August , 2013 Process View & Operations Strategy
Focused Strategy, Efficient Frontier
Cost
Resp
on
siv
en
ess
World-classEmergency Room
World-class(non-emergency)Hospital
One general
facility
Efficient frontier
Low
Low
High
High
Efficient frontier: the minimal curve covering all the current positions in an industry.
7Ardavan Asef-Vaziri August , 2013 Process View & Operations Strategy
Focused Strategy, Focused Operations
Focused Strategy: Committing to a limited, congruent set of objectives in terms of demand (product, market) and supply (input, technologies, and volumes).
A focused process is not limited to a few products. Focused process: one whose products all fall within a
small region of the 4 dimensional product space. Plant Within Plant(PWP): The business strategy is
diverse. But the entire business is divided into several mini-plants each with focused processes. One PWP may focus on low cost, the other on quick response.
8Ardavan Asef-Vaziri August , 2013 Process View & Operations Strategy
Strategic Positioning and Operational Effectiveness
Resp
on
siv
en
ess A
B
C
Price EfficiencyLow High
Firms located on the same ray share strategic priorities. World class firms are on the efficient frontier. Efficient frontier is the minimal curve covering all the current positions in an industry.
Strategic positioning: the direction of the improvement from current position; the position on the EF the company wants to occupy.
High
Low
Efficient operationsfrontier
Firms not on the EF, are not on strict trade-off, they can make simultaneous improvement on more than one dimension. They do not need to trade-off. Firms on EF need to trade-off.
9Ardavan Asef-Vaziri August , 2013 Process View & Operations Strategy
Trade-off: decreasing on one dimension to increase on the other dimension. World class firms also try to push the EF outward. As technology and management practices advance, the EF moves upward. But the impact is not the same in all industries. If I have one more line to define Operations Management
Understand Trade-off. Different companies intentionally choose different
processes to accomplish the same goal. McDonald vs. In & Out.
Different processes lead to different advantages and disadvantages. We always facing trade-offs.
It is not difficult to deliver books very fast. It is not difficult to deliver books at a very low cost. But, it is difficult to deliver book fast and at a low cost.
Efficient Frontier
10Ardavan Asef-Vaziri August , 2013 Process View & Operations Strategy
Operational effectiveness: developing operations strategy (resources, processes, values, competencies) that support the strategic positioning (customer value proposition) better than the competitors.
How does effective differ from efficient?Conventional Management Definition: Effectiveness;
doing right things. Efficiency; doing things right. Operations Management Definition:
Cost Efficiency: achieving an output with minimal level of input and resources. Low cost Operations.
Effective Process: supports execution of company’s strategy in the four dimensions of C/Q/F/T. Synchronized process does good in all 4 dimensions.
Operational Effectiveness
