Operations Strategy

Dr. Partha P. Datta Operations Management Group E-mail: ppdatta@iimcal.ac.in

Route to the top of CEOs of S&P 500 companies

42% had Operations experience at some point in their career

31% were in Operations immediately before becoming CEO

Source: Spencer Stuart Route to the top Survey, 2008

Emerging Leaders of Tomorrow (The Week, 2011)

Who will lead tomorrows S&P 500?

Consumer discretionary (366 leaders) 41% backgrounds in Operations/Finance Consumer Staples (116 leaders) 50% Operations, 29% Sales& Marketing Energy (162 leaders) 54% Operations, Finance 31% Financials (322 leaders) 36% Operations, 20% Finance Healthcare (168 leaders) 25% Operations, 25% Finance, Engineering (12%), Management Consulting (12%) Industrials (362 leaders) Operations (40%), Finance (40%) IT/Telecom (294 leaders) Operations (55%), Sales & Marketing (15%), Finance (14%) Materials (126 leaders) Operations (43%), Finance (29%) Utilities (84 leaders) Operations 73%, Finance 27%

http://theweek.com/emergingleaders
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What is Operations?
Activity of managing resources and processes that produce and deliver goods and services Every organisation needs operations!!
All operations transform resource inputs into products and services Some resource inputs are actually changed Some resource inputs perform transformations

Operations Management Vs Operations Strategy

Timescale : Long term/Short term Level of Analysis: Macro or micro? Aggregation level: detailed or aggregated? Level of abstraction: concrete or philosophical?

Don't copy Tesla. Just learn from it

http://www.youtube.com/watch?v=8_lfxPI5ObM

Singapore Airlines Example

Became worlds largest carrier by market cap. In 06/07 Largest in Asia, among top 15 in world in $-passenger-km Consistent leader in novelty in service Sells Aircraft Provides numerous other services (cargo, local and tourist flights, ground services, maintenance) thru subsidiaries Alliances to enhance global reach for passenger ops.

CONSISTENT SUCCESS IS A RESULT OF RIGHT OM & OS

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What are some of the OM decisions SIA make?

Scheduling aircrew to flights Devising procedures and training to improve service Designing internal Service level agreements Increasing aircraft flying time Scheduling maintenance Managing third party deliveries

What are the OS decisions?

Number and type of aircrafts (Capacity) Timing purchase options with suppliers Relative balance of investment in aircraft and other facilities Defining the organisational structure, commercial relations Which non-core service to keep in-house and which to outsource Configuring maintenance hubs

Operations Strategy is
the total pattern of decisions that shape the long-term capabilities of any type of operation ... and their contribution to overall strategy through the on-going reconciliation of market requirements and operations resources so as to achieve a sustainable fit between the two

whilst managing the risks of misalignment.

Scope of Operations Strategy

Products or services?

Manufacturing or non-manufacturing? For profit or not-for-profit?

What is operations strategy about?

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1.

2. 3. 4.

Localisation China Entry o Formed JV, Saw China as many small markets o Designed Stores to suit Chinese customers o Store Manager run stores as a CEO o Hired Local People in Key Positions Direct Sourcing (direct working with farmers) Economical & Flexible SCM through electronic Linkages Decentralisation China Entry o Regional offices looking after regional stores o Compact and Mini Formats for hypermarkets (Taiwan success) 11

Made the product available Repackaging of variants Setting up a r-urban division to fortify B2C and B2B Tying up with carpenters and new channels

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Big-picture framework for operations strategy Principle of alignment

Competitive Strategy
How do we compete & provide value to our customers?

Prioritize our customer value proposition around price, responsiveness, quality, variety
Resource perspective

Market perspective

What must operations do particularly well?

Competencies

Prioritize our process competencies around cost, flow time, quality, flexibility

Resources & Processes

How do we configure and develop our operations?

Configure the activity network or processes Develop the bundle of real assets or resources

Operations strategy should develop resources and configure processes such that the resulting competencies are aligned with (and adapt to) the competitive position that the firm seeks over time
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Framework and key decisions of operations strategy

Competitive Strategy

Competencies

Resources
(Asset Portfolio)

Operations Strategy

Processes
(Activity Network)

Sizing
How much capacity to invest in?

Timing
When increase or reduce resources?

Type
What kinds of resources are best?

Location
Where should resources be located?

Supply
When outsource & how manage suppliers?

Technology
Coordination, product, process transportation

Innovation
How and when to improve and innovate?

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Goals & Approach of this course

Goal: by the end of this course you will be able to:

1. 2. Formulate an operations strategy
Understand the key elements and decisions Analyze key drivers/decisions for each element in an ops strategy Evaluate them qualitatively and financially Develop recommendations and implementation plans

Analyze, Value and Optimize an operations strategy

Approach:
1. Connect the strategic level with the operational level
Each session and case will have strategic level questions We will use detailed operational analysis to guide strategic decisions so they are grounded in reality Each week will focus on a key decision in operations strategy; each case will ask for a quantitative/qualitative analysis We will draw on concepts from operations as well as the basics from other disciplines and strategy

2.

Our metric is value maximization using qualitative and quantitative tools

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Evaluation

Case Quiz 30%, Class Participation 10%, Mid-Term 25%, End Term 35%. Case Quiz: On every case discussion day come prepared reading the case and bring the case handbook. Quiz questions will be handed out at the beginning and you have to answer within 20 minutes. After that case discussion will begin Class Participation: Every class day, apart from first week, there will be questions asked on previous class, case. Your responses will be collated. Also be prepared for cold calls.

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