Servitization is clearly more than a management fad. It is an important indicator of the way in which many industries are likely to develop. It is a movement along the trajectory of economic development that could enable the bulk of value capture to remain in developed economies, even when manufacturing itself moves to less developed economies. However, what seems to be clear, even at this stage, is that servitization is not without its challenges. These include coping with the differences between 'efficiency' and 'value-creating' drivers, recognizing the difficulty of reconciling 'purchaser' and 'provider' requirements, adapting technology development trajectories to changed risk characteristics, and above all, updating the mindset of the firm to make the most of a service dominated environment.
One recent investigation Slack, into the patterns of servitization presents the results from a study that investigated some of the emerging conceptual and practical opportunities as well as the threats that are associated with the servitization challenge in companies featuring servitization a variety of sectors.
It reached the following conclusions. The main motivation behind the strategy of moving towards servitization is largely based on revenue generation. This is especially true for organizations with a large installed base of products, but applies more broadly, particularly because services are regarded as having higher margins than products.
In addition, services are regarded as providing a more stable source of revenue, less prone to less economic cycles, as well as having the ability to grow even in mature markets.
Customer motivation is primarily based on cost and to a lesser extent quality. By far the most important drivers for customer companies to outsourcing their services is to focus on their core business and reduce their overall cost base. There will be a limit as to how far suppliers of service can improve profitability, while customers simultaneously save costs.
Although most companies surveyed saw these two seemingly opposing factors being reconciled through the development of higher value services.
Stretch means the extent to which a company moves down the supply chain. Width means the number of service components offered to customers at each stage of the supply chain. It is likely that different patterns of servitization along these two dimensions will have implications for the nature of their implementation.
The concept of 'strategic fit' is a useful perspective in understanding the progress towards increasingly sophisticated integrated service packages. It also emphasizes some of the risks inherent in misaligned market requirements and service capabilities. Servitization involves new and ill-understood risks.
These include, the risks inherent in diverting financial resources away from other activities, the larger than expect cost of establishing service networks, and for some companies the cost of investing in market positioning. Servitization involves significant cultural issues. In particular there is some doubt that, notwithstanding explicit policies to embrace servitization, some companies still think of themselves primarily as manufacturers with 'add on' services, rather than service companies whose offerings include manufactured products.
Servitization involves designing services, a task that is significantly different to designing products. Services, by their nature, are fuzzy and difficult to define.
This has several implications particularly in the way services are perceived by customers, how service quality is defined, and how service innovation is managed. Servitization involves significant organizational structuring choices. Most organizations have evolved using an organizational structure that separates out service from manufacturing divisions.
But this structure may become increasingly inappropriate as the extent of servitization increases. Servitization exposes costing deficiencies. In particular life cycle costing was seen as a very approximate activity that would have to be improved significantly if servitization was to avoid unacceptable risks.
Servitization may be limited by the extent of strategic span in the supply chain. Moving down the supply to provide service will inevitably increase strategic span unless some upstream activities are abandoned. The dilemma is for companies that derive competitive advantage through the embedded knowledge of their upstream activities. Servitization emphasizes new relationship skills in the supply chain. Managing the supply chain where intangible services rather than physical products are traded requires a new set of supply chain relationship skills.
Servitization redefines risk management. There was significant anxiety regarding the unquantified but probably significant increase in risk in taking over activities previously performed by customers.
It may be that at some point the marginal extra risk incurred will outweigh the marginal benefits of increased profit potential. Servitization impacts technology strategy. The value of new but less reliable technologies is likely to decrease when servitization involves taking on more explicit risk. Servitization involves integrating service processes. It is generally recognized that the integration of service processes posed different challenges to those involved in the integration of physical process.
Servitization poses new opportunities for knowledge transfer mechanisms. Generating knowledge is a key task, especially for front line staff, yet most companies were dissatisfied with their ability to feed back this knowledge, especially into product design activities.
While some of these emergent points are treated within the broad business strategy area, not all of them receive sufficient attention from a purely operations strategy perspective.
So, there may be a case for arguing that not only is academic operations strategy failing to reflect the dominance of service activity in most economies, even when it treats manufacturing, it is ignoring the influence of service concepts within its traditional sector. It is not difficult to justify the importance of the strategic perspective of 'operations' on the business as a whole. No other functional strategy has such a direct impact on both revenue and cost.
The popularization of ideas such as TQM and lean production established in both practitioner and research arenas the idea that operations practice must pursue the twin objectives even if to different extents of improving aspects of service such as quality, variety, responsiveness etc.
Given the business maxim that "profit is a very small number made up of the difference between two very big numbers", any subject that claims to increase revenue and reduce costs must demand the attention of companies that can appreciate its potentially disproportionate effect on profitability. It is not surprising then that the cumulative contribution of operations strategy's conceptual development has been significant, especially since the inclusion of resource based theory RBT into some parts of its research stream.
In fact, interest in operations strategy has paralleled the growth of interest in resource-based Wernerfelt, ; Barney, ; Mahoney and Pandian, or capability-based Teece and Pisano, ; Teece et al. The overlaps between operations strategy and resource-based driven views of general strategy are often explicit. Prahalad and Hamel , for example, defined their 'core competencies' as "collective learning especially how to co-ordinate diverse production skills and integrate multiple streams of technologies".
If operations are to play a serious role in helping the firm to stay 'ahead of the game' Wheelwright and Bowen, it is vital that operations strategy concepts explore the utility of frameworks, like the RBT, that are increasingly central to mainstream strategic management.
However, given that a great deal of operations strategy thought remains functionally defined and subject to within field fragmentation Skinner a; b there has also to be further reflection on the comparative insights generated by extant constructs. There has perhaps been insufficient reflection on the underlying conceptualizations and motivations of important models like the order-winning, qualifying model, especially when pragmatic operations strategy frameworks seeks to use them.
It is perhaps because of the tension between operations management's unavoidable responsibilities for day-to-day activities and their strategic role that there appears to be some confusion regarding the nature of strategy in an operations context. Unlike some management functions, operations management and strategy tasks are principally defined by pragmatism and immediacy.
Operations must be able to cope with the day-to-day production of goods or delivery of services. This requires practitioners to continually make decisions and implement changes. Similarly, academic operations management and strategy also claims to focus on 'real' managerial preoccupations Wilson, and regularly rededicates itself to the needs of practitioners e. Hayes, Also, the theoretical underpinnings of the operations management and strategy field are somewhat different from other academic management subjects like strategy, marketing or finance.
Whereas these fields of study are more-or-less directly connected to base theoretical disciplines such as economics, sociology, psychology and mathematics, OM's underpinnings are more fragmented. Indeed it could be argued that the specific genealogy of 'modern' OM is a mixture of very different academic inputs for example, systems theory and practical fields of application for example, production engineering. Yet despite the apparently overwhelming practical focus of academic operations management and strategy, it also appears to have a history that demonstrates anxiety about how 'helpful' to operations practice it is really being Buffa, ; Voss, The question therefore is whether this pragmatic and practitioner influenced subject can raise itself to the level of abstraction required of any area of study if it is to be truly strategic.
But to accept this is to accept that abstraction and aggregation, both of which characterize strategic thinking, is necessarily in conflict with the practical constraints of dynamic and uncertain business life. In fact a stronger argument is that, in dealing with the practicalities of creating services and product, operations strategy of all functions is best placed to reconcile strategic and operational perspectives. Following Mintzberg's concepts of emergent strategy for example, see Mintzberg, , the operation function should be ideally placed to exploit the day-to-day operational experience that can be the origin of emergent strategies.
The implication of this is not that operations, because of its operational role, is unsuited to strategy thought, but rather that it is well positioned to reconcile 'top-down' and 'bottom-up' perspectives on strategy.
It also means that the conceptual 'gap' between operations strategy and operations management may be smaller than in other functional areas.
Related, but separate, from the 'top-down' or 'bottom-up' debate is the 'internal orientation' or 'external orientation' debate. Put simply, this is essentially a conflict between operations strategy as a functional strategy, and operations strategy as a driver of the business.
The increasingly common shorthand for these two perspectives is the 'outside in' as opposed to the 'inside-out' role of operations strategy. The first perspective is perhaps best characterized by the well-known work of Terry Hill, while the second perspective is encapsulated in the more resource-based view of Hayes, Wheelwright and Pisano.
The 'external orientation' of operations strategy starts by identifying existing market requirements and then align operational resources with them Adam and Swamidass, ; Anderson et al. This 'outside-in' approach has a number of practical advantages, not least of which is the sheer availability of tools and techniques for classifying and identifying market requirements. Hill's methodology, for instance, clarifies market order-winners and qualifiers before moving on to discussion of operational processes and infrastructure.
These models also fall neatly into a 'traditional' hierarchy of strategies i. However, such 'reactive' operations strategy models have much less explanatory power when discussing long-run competitive advantage based upon pro-active operational excellence Ferdows and DeMeyer, Alternatively therefore, operations strategy can begin with the strengths and weaknesses of the operational resources and only then seek market opportunities that fit well with them Hayes, ; Cleveland et al.
Whilst this 'internal' or 'inside-out' model has obvious appeal to operations strategy practitioners and academics, terminological confusion, conceptual ambiguity and a predominantly theoretical orientation have limited its impact on practice Porter, ; Scarborough, ; Lewis and Gregory, Today this 'internal' paradigm, arguing that firm-specific factors are as important Rumelt, as industry market factors in determining advantage over time, occupies a central part of the competitive strategy landscape Foss and Knudsen, The overlaps between the fields are often explicit, with 'core competencies' defined as "collective learning especially how to co-ordinate diverse production skills and integrate multiple streams of technologies" Prahalad and Hamel, , and various operational 'behaviours' Barney and Zajac, Although exploitation of strategic resources makes theoretical sense in defining a sustainable competitive advantage, these disparate conceptual elements are still characterized by conceptual and terminological ambiguity.
Consider for instance, the notion of a set of unique or scarce or imperfectly mobile, substitutionable etc. This might appear, at a suitable level of abstraction, to define a very specific set of operational resources, yet there are degrees of scarcity.
Equally, such a categorization is prone to market variability: some resources are scarce in a new market without well-defined routes to value creation, whereas established margins enable rivals to justify expenditures that can rapidly eliminate scarcity. The whole issue of the different dynamics associated with each conceptual category in the RBT, a factor that will be crucial in any practical prescription, remains underdeveloped. By definition, even the most explicitly 'outside-in' operations strategy frameworks do not simply analyse the external environment; they also offer a discussion of how this analysis should influence the operations resource base.
The Hill methodology for instance follows its order-winning, qualifying analysis with a discussion of stage 4 the correct model of manufacture for specific products e. It is perhaps unfair to characterize any author's work as belonging to either the outside-in or the inside-out perspectives exclusively.
Most authors do, to some extent, recognize both perspectives even if their work tends to be based in one or the other usually the outside-in perspective. Indeed, many authors attempt to reconcile both perspectives. Slack and Lewis go as far as to define operations strategy as the reconciliation between market requirements outside-in and operations resource capabilities inside-out. However, even they make the point that, whereas all businesses have some kind of market to service and therefore must include an outside-in analysis, not all businesses have operations capabilities worth exploiting in a market the outside-in perspective.
Although the above discussion presents a number of challenges to the way operations strategy is being researched and practiced, it is possibly one of the most exciting areas of research in business management at the moment. The dynamics of markets and technologies place continual demands on operations strategies. Furthermore, well-known and often cited examples such as Dell, IKEA, South West Airlines, Amazon, and so on, all provide evidence that fresh, new, and sometimes radically different operations strategy models can have a huge impact, not only on individual businesses but on whole industries also.
Yet, if operations strategy is to continue to provide the intellectual context for the development of such practical models, it must address some of the challenges posed here. Connected Products. Conversational AI. Conversational UI. Convolutional Neural Network. Core Modernization. Corporate Banking. Customer Experience. Customer Experience Journey.
Customer Experience Strategy. Customer Intelligence. Cyber Security. Cloud Computing. Debt collection process. Digital Identities. Dark Data. Data Aggregation.
Data Analytics. Data Ecosystem. Data Efficient Learning. Data Ethics. Data Governance. Data Hygiene. Data Ingestion. Data Lake.
Data Migration. Data Mining. Data Platform. Data Privacy. Data Science. Data Transformation. Deep Learning. Deep Neural Networks. Design Thinking. Digital Banking. Digital Contact Center. Digital Engineering. Digital Experience Platform. Digital Platform. Digital Product Development. Digital Transformation. Digital Wealth Management.
Edge Computing. Embedded Engineering. Energy Data Analytics. Energy Management. Enterprise Application Services. Enterprise Information Management. Experience Design. Experience Transformation. Facial Recognition. Field Force Management. Fraud Detection. Game Theory. Genetic Programming. Gesture Recognition. Heuristic Search Techniques. Hybrid Cloud. Image Recognition. Industry 4. Infrastructure Management.
Intelligent Automation. Intelligent Enterprise Strategy. Internet of Things. Integrated Workplace Management System. Innovation Product Development. An order winner is a characteristic that causes customers to choose it over competitors. Specific strategies depend on your specific business. Here are strategy tips that apply to many companies, whether they are producing goods or services. Now, our seven pros weigh in with their tips for creating and implementing effective operations strategies.
Robin Speculand and Tim Lewko were interviewed by phone, and the five others submitted responses in writing. Speculand is the Founder and CEO of Bridges Business Consultancy and Creator of the Implementation Hub , a portal dedicated to strategy implementation and featuring more than resources. Paraphrased from a phone interview, Robin Speculand advises using the Triple A model of alignment, accountability, and assessment. Alignment: Keep the team focused on balancing long-term and short-term perspectives.
Many people trip up on this. You need consistent direction. Accountability: Introduce a culture of holding people accountable.
You need to measure with numbers. Define what an operations strategy means in your organization. Create a common definition because different definitions can cause communication breakdowns.
Operations should follow from the company strategy. An operations strategy is an investment in current and future capabilities underpinned by visible assumptions. What does the team see as the future for the business? When FedEx built a runway in China, some people questioned the move. But FedEx saw a future market there. She started her career as a BCG consultant, advising companies on strategy and operations.
When I first joined Fab. When shipments were late, customer complaints would pile in. Major caution on this one. This idea is actually much more complicated than it seems. As an operations strategist, my first step is to talk to key people on each team separately - not a VP or director-level necessarily, but a few people who are actually responsible for the day-to-day work.
I have them walk me through their process end-to-end, and, then, I map it out and review it with them. Once I do this with every team, I come up with a master list of issues and proposed solutions, along with the pros and cons of those solutions.
When you lease a car, you treat that car much differently than one you own. You probably don't clean the car as often, make hard starts and stops, etc. When you own a car, you are much more careful to treat it well, so it stays in good condition over the long term.
When employees own stock in a company, they make decisions that are better for the long term. More than one thing will fall through the cracks.
An example in our businesses is ensuring we assign each reservation to the appropriate bus company. We have centralized accountability for every trip with our operations manager. He can delegate the work but is the only one accountable. Toyota has a great system of doing just that to get to the root of any error. We have found that this works great in our business as well. This way, you can easily get to the true cause of any operational failure and create a system to prevent it next time.
Suresh Dalai has been implementing operations strategies for more than 20 years in Asia and the U. His views expressed in this article are his own and do not necessarily reflect the views of these companies.
Make it consumer-driven. Whatever operations strategies you develop, ask whether they help drive superior experience for the consumer — for example, accelerating production so that the consumer can get it faster, improving quality, etc. Make it end-to-end. Many people may think of operations as a back-office activity, such as production or logistics. However, an operations strategy focuses on the entire value chain, from plan to make to move and then ultimately, to sell.
Ensure that your operations strategy covers all four areas. Make it well-understood by your team. Educate your organization so that everyone understands that operations strategy is always about the consumer. I recommend not trying what first comes to your mind. Before putting something into practice, check that you have all the resources, adequate personnel, and enough time.
In some cases, assuming in advance that an idea is going to work can be as expensive as an unsuccessful test. Have a sole responsible person. It is important that tasks are well organized, and, for this reason, more than one person in one single activity can be problematic. For example, at elMejorTrato, I am the one in charge of link building, and I take for granted that any related activity depends on me.
Have an adjustable working guide. Although it is useful to have a guideline, we always have to be prompt in adapting it to new situations. The market is an environment affected by continuous change, and it is essential to follow the herd customers , modify rules, and make contributions. You need to make sure that you are playing to their strengths.
Otherwise, they'll never be able to implement your strategy. Second, know the process. Anybody can determine a bottleneck when they see it, for instance, but do you know the process well enough to know why it happened? Third, you can't assume you know everything. Don't be afraid to read articles on how your competitors tackle operations problems.
With the rapidly changing marketplace in recent years, some companies have excelled in part due to their strong operations strategies. Here a few examples:.
We can broadly categorize major operations decisions as structure or infrastructure. Structure means the physical attributes of operations, while infrastructure refers to the people, systems, and software.
Structural decisions include facilities, capacity to produce, process technology, and supply network. An example of a decision many companies face is how much to outsource vs. The structural decision on whether to build or expand a facility is an expensive one that could affect the company for years to come.
Infrastructure decisions include planning and control systems, quality management, work organization, human resources, new product development, and performance management of employees. Another way to categorize operations strategies is top-down or bottom-up.
That is, operations strategies might come down from business strategy, supporting it. Or, strategies might arise over time as a pattern of decisions within operations. Also, operations strategy can be market-led or operations-led. Operations strategy provides the ability to improve products, services, and processes.
To actually win more orders in the market, the factors change a bit. You need winning quality, price, speed of delivery, consistency of delivery, and reliability. These factors combine like this to provide an operations strategy framework, as outlined by lean transformation consultant Anand Subramanian:. In a similar vein, Slack and his co-authors outlined five performance objectives in their book, Operations Management :.
Authors Henry Mintzberg and James A.
0コメント