Week 3 (Semester 1) – Frameworks for the Analysis of Operations
Management
Chapter 2
Outline of the Lecture
Chapter 2 and week 3 examine:
1. The different perspectives from which operational management can be
analyzed.
2. The nature of value-adding.
3. The techniques and concepts of systems theory and their application to
operational situations.
4. The complexity involved in operations.
Topics involved
1. The nature of value-added and the primary and secondary activities that can
contribute to value-adding.
2. The history and evolution of general systems theory.
3. The main tenets and assumptions of the approach.
4. The application of systems theory to operations.
5. The advantages and disadvantages of applying systems theory.
6. An introduction to complexity theory and complex adaptive systems.
Suggested Visual Aids & Handouts
In this lecture we are building on the concept of operational management (introduced
in week 2, chapter 1) by demonstrating that operational systems can be analyzed in
three different ways. First, how they add value and the value chain and value system.
Second, the basics of systems theory with a hierarchy of systems and sub-systems as
well and input, transformation and output models. Third, as an alternative,
complexity and complex adaptive systems. Visual aids and handouts will cover these
elements.
Discussion Questions
What do you understand by the term ‘adding value’? How does such a concept
encourage an external orientation?
As we saw with Clipper Navigation Inc (chapter 1), adding value will relies upon
internal and external activities and the linkages between them (in Porter’s terms,
the value chain and value system). Consequently, operations and operations
strategy must have an external, supply network orientation. However, this is far
from easy to manage within the firm. It requires a particular culture and business
structure (how the system is organized and governed). It also impacts upon a
wide range of management and organizational theory disciplines.
What are the advantages and disadvantages of systems theory? In what way does this
approach force us to consider the relationship between an organization and its
environment?
As the text explains, systems theory has places as emphasis upon the holistic
nature of a system that cannot be understood by reductionism. However, this also
leads to disadvantages. By placing an emphasis upon the complexity of
interrelationships, we are left with an analytical approach that is unwieldy,
difficult to use, and often lacking in meaningful results. In some ways this leads
to the second downfall. In order to overcome the difficulty of application,
adherents will often dissect the system into subsystems and use rather simplistic
concepts such as input, transformation and output. In so doing, the subsequent
result is actually reductionism, but cloaked in, as Lilienfeld (1978) puts it,
‘statements of a vaguely benevolent, vaguely moralising nature’.
Certainly, systems theory quite rightly places an emphasis upon the environment
and the fact that the system is open to environmental influence. The degree of this
influence, and its direction, is open to some conjecture. For operations
management, systemic techniques do aid understanding. However, we have to be
wary of their occasional naiveté
In what ways could complexity theory aid our understanding of operations
management?
At this point we introduce complexity and the complex adaptive system (CAS).
This subject is covered in more depth in chapter 10. At this stage we merely want
to point to the role of complexity as an alternative method of analysis and
counterpart to systems theory.
As a discussion question, we would hope that, at this stage, students will begin to
realize the complexity and dynamism of our organizations. Further, complexity and
instability are an essential part of growth and development and should not be
disregarded as mere ‘noise’. As Levy (1994) suggests: ‘By understanding industries
as complex systems, managers can improve decision making and search for
innovative solutions.’
Case Exercise – The Taiwan Retail Sports Market
The aim of this exercise is to exemplify the analytical approaches of value adding and
systems theory. By using a retail sports sector as the focus of the case, it is hoped that
students can develop use their own knowledge and interests to bring added detail.
There should be sufficient information upon which to base an analysis, but should
additional material be needed, the discussion can be expanded to compare and
contrast different geographic sectors of the same market.
1 In the first question groups should analyze the case using the concepts of value
adding and value chain and value system. First, it might be wise to discuss how
we can assess what does or does not add value. Thereafter, value chains and
systems can be developed and an emphasis placed upon the important linkages
between activities.
2 The second task then approaches the same case using systemic techniques. This
can be done at both industry and organization level. When dealing with the latter,
models can be constructed for the three different sourcing strategies.
Finally, a discussion should conclude the debate that compares these two analytical
methods and then contrasts them with complexity thinking.