Koç University
OPSM 301 Operations Management
Class 2:
Operations management strategy
Strategic fit
Zeynep Aksin
zaksin@ku.edu.tr
Firms compete on product attributes.
This requires process capabilities.
 Price (Cost) P
 Quality Q
– Customer service
– Product quality
“order winners”
 Time T
– Rapid, reliable delivery
– New product development
 Variety V
– Degree of customization
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, Arçelik)
-Flexibility (HP)
-Speed (McDonalds)
all require different process designs and different
measures to focus on.
Corporate StrategyKey Performance Indicators
Operations StrategyProcess Design& Improvement
Strategic Fit:
Desired Capabilities
Processes
Match processes with desired capabilities
Competitive Benefit
Order-Winners and Qualifiers
Order
Winner
Positive
Less
Important
Neutral
Order
Qualifier
Negative
Low
Source: Slack and Lewis
High
Performance
Order Qualifiers and Winners
Defined
 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
Company
Mission
Business
Strategy
Functional
Functional Area
Area
Strategies
Marketing
Decisions
Operations
Decisions
Fin./Acct.
Decisions
Strategy vs. Operational Effectiveness:
The Operations Frontier as the minimal curve containing all current
positions in an industry
Responsiveness
A
B
operations
frontier
C
High
Low
Cost
Increasing Customer Value
Value
Increasing Value
High
Operations Frontier
A
B
C
Low
High
Low
Price
Lowering Costs
Value
High
Operations Frontier
A
B
Lowering Costs
C
Low
High
Low
Price
Shouldice Hospital
Video 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
Shouldice: prepares
for the simplest
General Hospital:
prepares for the
most complex
Hernia complexity
A product/process matrix
Process
High customization
Low volume
High unit margin
Flexible job General Hospital:
Variety & flexibility
Rigid line
flow
Low Cost
High margins
Industrialization
High standardization
High volume
Low unit margin
Product
High cost
Low margins
Shouldice Hospital:
Standardization
Cost, speed, quality
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?)