Function Strategy PDF

Functional Strategy
STRATEGIC BUSINESS UNIT
Strategy
Formulation:
Functional Strategy
and Strategic
Choice
FINANCE
R&D
PRODUCTION
INVENTORY
MARKETING
/SALES
PURCHASING
How do we coordinate?
Professor Robert R. Wiggins
MGMT 7160
Functional Strategy
Functional Strategy
Functional Strategy
Production Manager
Product Design
Models
Production Run
Produce to:
STRATEGIC BUSINESS UNIT
FINANCE
R&D
PRODUCTION
INVENTORY
MARKETING
/SALES
PURCHASING
MGMT 7160
MGMT 7160
Functional Strategy
Functional Strategy
Levels of Strategy
Marketing/Sales Manager

Functional Strategy
Product Design
Models
Production Run
Produce to:
1.
2.
3.
4.
5.
6.
Functional Strategy
Business Unit Strategy
Corporate Strategy
Enterprise Strategy
Cooperative Strategy
Hypercompetitive Strategy
MGMT 7160

Functional Strategy
MGMT 7160

Functional Strategy
Sourcing
Generic Model of Core Processes and Systems

Your Organization
Activitys Total Value-Added

High
Low
High
Activitys
Potential for
Competitive
Advantage
Low
Suppliers
Organization
Taper Vertical
Integration:
Full Vertical
Integration:
Produce Some
Internally
Produce All
Internally
Outsource
Completely:
Outsource
Completely:
Buy on Open
Market
Purchase with
Long-Term
Contracts
MGMT 7160
Capital
Information
Human
Resourcing Resourcing Resourcing
Customers
Organization
PRODUCT DEVELOPMENT PROCESS

DEMAND MANAGEMENT PROCESS
ORDER FULFILLMENT PROCESS
Control Systems
MGMT 7160
Functional Strategy
The Full Model of Core Processes and Systems

Your Organization
Capital
Information
Human
Resourcing Resourcing Resourcing
Suppliers
Organization
Three Levels of Strategy-Operations Fit
Customers
Organization
P1
PRODUCT DEVELOPMENT PROCESS
DEMAND MANAGEMENT PROCESS
P1
P1
Organizational Supply Chain
MGMT 7160
P2
P3
Operating Processes
Customer Retailer Distributor Factory
Casting
Process
Third-Order Fit:
Second Order +
Optimization of Effort
Clay
Supplier
Technology Supply Chain

Valve Lifters
P3
Supply Chain Volatility

vs. Product Life Cycle Volatility
Mapping the Supply Chain
Engines
P2
STRATEGY/COMPETITIVE ADVANTAGE
Control Systems
Casting
Supplier
Second-Order Fit:
First Order +
Processes
Reinforce Each Other
Operating Processes
ORDER FULFILLMENT PROCESS
Eaton
P3
PRODUCTION PROCESS
Chrysler
P2
Operating Processes
PURCHASING PROCESS
MGMT 7160
First-Order Fit:
Processes Consistent
with Strategy
Supplier Equipment
Clay
Chemistry
Business Capability Chain

Plant Management
Metal-Machining
JIT
Supply Chain Management Plant Management Delivery
MGMT 7160
Chemical
Process
Control
Web Site
Developer
MGMT 7160
PC Maker
Chip Maker
Equipment
Maker
Principles of Reengineering
The mission of a business is to create value for
its customers
It is a companys processes that create value
for its customers
Business success comes from superior process
performance
Superior process performance is achieved by
having a superior process design, the right
people to perform it, and the right
environment for them to work in
MGMT 7160
TQM
versus
CPR
Incremental
Level of Change
Radical
Reengineering Defined
The fundamental rethinking and
radical redesign of business
processes to achieve dramatic
improvements in critical,
contemporary measures of
performance, such as cost, quality,
service, and speed.
-- Hammer & Champy (1993),
Reengineering the Corporation
MGMT 7160
TQM and CPR Emphasize Complementary

Elements of Operations Improvement
Existing Process
Starting Point
Clean Slate
One-Time/Continuous
Frequency of Change
One-Time
Short
Time Required
Long
Bottom Up
Participation
Top Down
Narrow, Within Functions
Typical Scope
Broad, Cross-Functional
Moderate
Risk
High
Statistical Control
Primary Enabler
Information Technology
Cultural
Type of Change
Cultural/Structural
Improvement
MGMT 7160
Source: Davenport, Thomas (1993), Process Innovation, Harvard Business School Press
Prevention
Fix as
Fail
Innovation
Goal
Kaizen vs. Reengineering

Process Capabilities
Level of Improvement
Anticipation
Steps
Tasks
Activities
Core
Demings PDCA Cycle

Plan
TQM improves
capabilities within each
generation of design
Develop
structured approach
to addressing
issues
Third-generation
process design
Act
Second-generation
process design
First-generation
process design
Subprocesses
Processes
Scope of Target Site
MGMT 7160
Do
Respond to
undesired outcomes
by repeating
cycle
Carry out
approach as
planned
Check
CPR replaces one generation of
process design with another
Evaluate
outcomes: are
they desirable?
Time
MGMT 7160
MGMT 7160
Typical Approach to Managing CPR
The Crazy Time in CPR
Strategy Formulation
Identifies Competitive
Advantage Sought
Study Generic
Process Improvement Principles for
Possible Adoption
Identification of
Needed Process
Execution Capability
Process
Capabilities
Use Benchmarking
to Identify Best
Practices for
Possible Adoption
Redesign of
Process
Short-term loss
in process
capability
associated
with changing
the system
Plan for Transition

to New Generation
of Process Designs
MGMT 7160
Transition to
New Generation
of Process
Approaches to Innovation
Internal Corporate Venturing
(Corporate Entrepreneurship)
Contracting for Innovation
Generation 1
Process
MGMT 7160
Investing Outside
(Acquiring Innovation)
MGMT 7160

Functional Strategy
Types of Innovative Activity

Invention
Creating or developing a new product, service

or process idea
Innovation
Extracting Value from Innovation

Barriers to Integration
Creating a commercializable product from an

invention
Different functional time orientation

(e.g., R&D and production)
Different functional language and
interpersonal orientation
Different goal orientation
Formality of structure
The adoption of innovation by a group

of similar firms, which typically
results in standardization of the
product or process idea
Time to
Market
Interfunctional
Integration -Cross-Functional
Design Teams
Imitation
Functional Strategy
Difficult for competitors to imitate

Provide significant value to customers
Timely
Capable of being exploited commercially
Utilize the firms existing capabilities
and core competencies to develop
competitive advantage and achieve
strategic competitiveness
Functional Strategy
MGMT 7160
Time
The period in which the

organization is developing
a new system while
maintaining the old one
Innovation and
Competitive Advantage
Strategic Alliances
Joint Ventures
MGMT 7160
Generation 2
Process
Product
Quality
Value
Appropriation
from
Innovation
Creation of
Customer Value
Facilitators of Integration
Shared values
New product vision provided by
leadership
Budget allocation to foster
integrated design
MGMT 7160

Functional Strategy
Strategic Alliances
R&D Expenditures and Patents

Before and After Acquisitions
Product-Link Alliances
Knowledge-Link Alliances
Advantages
0.032
0.030
Disadvantages
Patent Intenstity
Difficult for a single firm to keep up-to-date

Knowledge is increasingly specialized
International location advantages
Firm minus Industry

R&D Intenstity
0.000
-0.002
-0.004
-0.006
-0.008
-0.010
Partners actions increase legal liability

Partners diversification may distract them
May become overly dependent on others
MGMT 7160

Functional Strategy
0.028
0.026
0.024
0.022
0.020
-0.012
0.018
-4
-2
-4
Years Before and

After Acquisition
-2
Years Before and

After Acquisition
MGMT 7160

Functional Strategy

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Functional Strategy

STRATEGIC BUSINESS UNIT

STRATEGIC BUSINESS UNIT

Professor Robert R. Wiggins

Professor Robert R. Wiggins

Professor Robert R. Wiggins

Professor Robert R. Wiggins

Generic Model of Core Processes and Systems

Activitys Total Value-Added

PRODUCT DEVELOPMENT PROCESS

Professor Robert R. Wiggins

ORDER FULFILLMENT PROCESS

Professor Robert R. Wiggins

The Full Model of Core Processes and Systems

Three Levels of Strategy-Operations Fit

PRODUCT DEVELOPMENT PROCESS

DEMAND MANAGEMENT PROCESS

Organizational Supply Chain

Professor Robert R. Wiggins

Customer Retailer Distributor Factory

Technology Supply Chain

Supply Chain Volatility

Mapping the Supply Chain

ORDER FULFILLMENT PROCESS

Business Capability Chain

Professor Robert R. Wiggins

Professor Robert R. Wiggins

Professor Robert R. Wiggins

TQM and CPR Emphasize Complementary

Narrow, Within Functions

Kaizen vs. Reengineering

Demings PDCA Cycle

Professor Robert R. Wiggins

Professor Robert R. Wiggins

Typical Approach to Managing CPR

The Crazy Time in CPR

Plan for Transition

Professor Robert R. Wiggins

Professor Robert R. Wiggins

Professor Robert R. Wiggins

Types of Innovative Activity

Creating or developing a new product, service

Extracting Value from Innovation

Creating a commercializable product from an

Different functional time orientation

The adoption of innovation by a group

Professor Robert R. Wiggins

Difficult for competitors to imitate

The period in which the

Professor Robert R. Wiggins

R&D Expenditures and Patents

Difficult for a single firm to keep up-to-date

Firm minus Industry

Partners actions increase legal liability

Professor Robert R. Wiggins

Years Before and

Years Before and

Professor Robert R. Wiggins

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