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Vol. 24, No. 10, October 2015, pp. 15131523 DOI 10.1111/poms.

12384
ISSN 1059-1478|EISSN 1937-5956|15|2410|1513 2015 Production and Operations Management Society

The Strategy-Focused Factory in Turbulent Times


Hendrik Brumme
Reutlingen University, Alteburgstrae 150, D-72762, Reutlingen, Germany
Hendrik.Brumme@Reutlingen-University.DE

Daniel Simonovich
ESB Business School, Reutlingen University, Alteburgstrae 150, D-72762, Reutlingen, Germany
Daniel.Simonovich@Reutlingen-University.DE

Wickham Skinner
Harvard Business School, Soldiers Field, Boston, Massachusetts 02163, USA, wskinner@maine.edu

Luk N. Van Wassenhove


INSEAD, boulevard de Constance, 77300, Fontainebleau, France, luk.van-wassenhove@insead.edu

ew unfocused factories outperform competitors, but focus is elusive because the environment is constantly evolving
F and this requires changes to a factorys key tasks. So how can focus be achieved and sustained? We present insights
derived from an historical analysis of the German Hewlett-Packard server plant which went through a series of focus
changes over the years. Using this example, we provide clues for the right timing of focus changes and discuss critical
structural and infrastructural changes required during the focus transitions, as well as cross-functional coordination and
leadership challenges. Our assertion is that production operations constitute a system that can adapt to disruptive change
by using the levers of manufacturing policies to stay focused on a limited but absolutely essential task which creates a
strategic advantage.
Key words: focused factories; manufacturing strategy; structural and infrastructural changes; innovation factory; operational
excellence factory; solutions factory
History: Received: October 2013; Accepted: March 2015 by Kalyan Singhal, after 1 revision.

achieved and sustained? This is inherently chal-


1. Introduction lenging because factory operations are stubbornly
The basic idea of focused manufacturing facilities resistant to change as processes, equipment, capac-
is not new. With over half a million reprints, The ity capability, and infrastructures such as informa-
Focused Factory (Skinner 1974) and closely tion systems, scheduling, worker skills and
related articles in the Harvard Business Review, gave attitudes all tend to be resilient and complex to
birth to the field of manufacturing strategy forty change (DSouza and Williams 2000, Hendricks
years ago (Boyer et al. 2005, Skinner 2007). The and Singhal 2003, Zhang et al. 2003). This is a
objective of a focused factory is to make produc- serious dilemma for managers of strategy-focused
tion strategy-centric by focusing a plants physical factories and it is to that dilemma that this opin-
features, processes, technology, and infrastructure ion article is addressed: when, why, what, and
each strictly on the same competitive business pri- how to change with respect to focus with a mini-
ority. Few unfocused factories outperform competi- mum of disruption and a maximum competitive
tors because they attempt to do well in a too success.
broad mix of products, markets and technologies We present new ideas and understandings about
at the same time and fail to fulfill the specific key focused production operations developed from
tasks required for competing successfully. insights derived from an historical analysis of the evo-
But focus is elusive simply because markets, lution of Hewlett-Packards (HP) award winning
products, technologies, and corporate strategy are plant for computer servers in Germany, which went
constantly evolving and thereby demand changes through a series of focused factories over 20 years
to a factorys key tasks. So how can the focus be (Brumme 2008).

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Brumme, Simonovich, Skinner, and Van Wassenhove: Factory Focus in Turbulent Times
1514 Production and Operations Management 24(10), pp. 15131523, 2015 Production and Operations Management Society

2. The Strategic Demands of an 3. The When and Why: Changes in


Evolving Technological and Manufacturing Missions as the
Marketing Environment Industry Develops
Through the 1980s, Hewlett-Packard had a reputation Key manufacturing tasks change for many reasons.
for leading-edge technology of the highest quality, For HP, they changed as the computer industry
especially for its servers and workstations manufac- matured. Before the 1990s, technological leadership,
tured in its German plant in Herrenberg. The markets product performance, and quality were typical com-
thirst for new technology and more functionality was petitive priorities in a still immature industry. Getting
insatiable and functionality-seeking customers hap- control over the hard-to-manufacture products at full
pily accepted order cycle times of three months innovation speed was all that mattered. But when the
despite an on-time delivery failure of almost 40%. industry ripened, the HP factory in Herrenberg had
Such a situation is typical for an industrys early to redefine its mission, from what might be labeled as
stage. innovation mastery to operational excellence
The first customers testing out novel products with cost and dependability as the new critical manu-
sought the best functionality performance they could facturing goals.
get. Thriving on an R&D culture, companies such as For Hewlett-Packard the story did not end with an
HP supplying these products were devoted to their operational excellence focus. In the early 2000s HP
innovation activities. Profit margins were high, as few executed changes in key strategic tasks to move man-
competitors existed to bring the new product features ufacturing goals from cost efficiency to cost effi-
to the market. Supply chain management had little ciency and revenue generation through new services.
significance, because hardly any suppliers familiar The computer industry matured from competition
with the innovative products existed. on product innovation to a near-commodity game.
For Hewlett-Packard, the situation then changed Once the commodity stage was fully entered, the
radically in the early 1990s when Dell and Compaq overwhelming power of customers made innovation-
entered the computer industry and created a cost based product differentiation a dream of the past in a
pressure momentum. Customers began to demand market dominated by price-based competitors. But
better prices and later also shorter delivery times. This there was now a payoff for customized configuration
dynamic is typical in an industrys maturing phase: of products and services because customers sought
as more and more competitors enter, product perfor- new and different ways for gaining further value.
mance standards escalate. At some point the product While some customers only cared about buying
performance of most competitors in the computer ser- cheap, others sought effective assistance for broader
ver market surpassed the expectation of the majority problems they tried to solve.
of customers. Customers then no longer required In the computer industry, business customers were
leading-edge products and became more price-sensi- looking for a ready-to-turn-on business IT solution
tive. We label this turning point the commodity inter- rather than just computer workstations. The opportu-
section point. With falling prices and margins, nity-grabbing move of HP towards solutions deliv-
competitors standardized products and their compo- ery was mirrored by Fujitsu Siemens Computers,
nents and seized outsourcing opportunities arising which became Fujitsu Technology Solutions as a
from the increasing presence of capable suppliers. result of Fujitsu acquiring Siemens share in 2009. Dell
Entering the new millennium, the HP factory in and Compaq kept on competing on price. The
Herrenberg was once again faced with a transforma- computer network manufacturer Agilent however,
tion of its environment. Despite industry-wide gains provided another piece of the focus puzzle. In its pho-
in manufacturing cost reduction, margins further tonic test and measurement business, Agilent had to
eroded as products became commodities. There was change in 2001 (after the burst of the dot.com bubble)
very little potential to differentiate on product innova- from competing with new technology to commodity-
tion. The good news was, however, that the increas- based competition, resulting in an operational
ingly picky customer behavior resulted in a broader excellence focus. When its products were clearly
spectrum of needs. While some customers only chose becoming commoditized, Agilent took two parallel
price, others required intelligent solutions or keenly routes: on one hand it continued supplying commodi-
waited for the next innovation breakthrough. These tized products for Asian mass customer manufac-
described changes in the industrys evolution shaped turers by offshoring its production to lower labor
successive new competitive missions and thereby a costs. But on the other hand, it started to create novel
steady parade of different manufacturing tasks essen- and unique products for R&D specialists, thereby
tial for HPs success. kicking off its next technology life cycle.
Brumme, Simonovich, Skinner, and Van Wassenhove: Factory Focus in Turbulent Times
Production and Operations Management 24(10), pp. 15131523, 2015 Production and Operations Management Society 1515

For certain industries in which a maturing move- Further, the opportunity for a solutions delivery
ment takes place such as the computer industry, three manufacturing mission is signaled when:
distinct missions for focusing may surface: innova- The industry has clearly moved into a com-
tion, operational excellence and providing solutions modity phase.
for customers. We set forth in Figure 1 how these The matured industry brings out different
three particular manufacturing missions evolved in types of buyers, including a critical mass of
that industry. those who perceive substantial value in a
An industrys maturity sometimes provides some broader, individualized problem-solving assis-
orientation as to when to reconsider the focus of its tance.
factories (Christensen 1992). In an innovation-thriving Outbound supply chain partnership opportuni-
industry, the moment to move from innovation mas- ties emerge, which provide additional revenue
tery to an operational excellence focusor at least potential.
complement innovation mastery with lower-cost IT systems have matured to take advantage of
manufacturing capacityhas arrived when: the outbound partnerships for total customer

Customers expectations move away from per-


solutions.
formance features to value for money and The above can only be general orientation criteria
dependability. and cannot replace situation-specific analysis.
Low-cost providers enter and create a momen- However, we believe that the commodity intersec-
tum for commoditization. tion point and its relation to the focus constellations
Capable suppliers emerge who meet the stan- we observed provides a useful starting point for
dards of reliable inbound partnerships. reviewing factory focus and restoring the easily
IT systems are capable of implementing those blurred link to competitive business strategy. For the
supply-side partnerships. many industries or technologies that are well

Figure 1 Computer Industry Evolution and Changing Manufacturing Missions


C O M P U T E R I N D U S T R Y E VO L U T I O N

I Immature II Maturing III Matured

Commodity
Hardly any intersection
Product performance

competitors point
and suppliers

Many
Competitors
Few and suppliers
competitors
and suppliers Time

CHANGES INMANUFACTURING MISSION


Hewlett
Packard Operational
Innovation mastery Solutions delivery
excellence
Fujitsu
Siemens Stabilize quality for Improve costs, speed Solve problems and
hard-to-produce innovations and reliability configure-to-order

Operational Innovation
Innovation mastery
excellence mastery
Agilent Stabilize quality for Improve costs, speed
Technology hard-to-produce innovations and reliability Operational
excellence
Spin-off low cost part and
innovate anew

Dell Operational Operational


excellence excellence
Compaq
Dominate costs, speed Dominate in costs, speed
and reliability and reliability
Brumme, Simonovich, Skinner, and Van Wassenhove: Factory Focus in Turbulent Times
1516 Production and Operations Management 24(10), pp. 15131523, 2015 Production and Operations Management Society

matured, and where all three of our types of factory (Skinner 1969, Wheelwright and Hayes 1985). The
may rightfully coexist, the typology we propose may structural decision areas include make-or-buy, facility
help narrow discussions as to whether a plants main size and location, capacity, and the degree of automa-
task is to compete on innovation, operational excel- tion. The infrastructural choices incorporate product
lence, or customized solutions. novelty and variety, quality, workforce policies and
Let us be clear however, that we do not intend to organizational aspects. A focused factory is a plant
suggest that all industries change in the same manner that aligns all these choices with a clear manufactur-
or pattern as the computer industry appears to have ing mission. By analyzing the example of Hewlett-
changed, nor that these three specific stages we Packard and other firms, we found three distinct
observed at HP (and found labels for) are always focused factory types reflecting manufacturing mis-
present or useful for identifying focused factory sion evolution (Boddy et al. 2000, Frohlich and West-
issues. What we do suggest is that for a firm to sustain brook 2001), which we title: the innovation factory,
the competitive advantages of focused factories, its the operational excellence factory, and the solu-
management must consistently and continuously tions factory. Table 1 illustrates the findings of the
identify the key tasks required of its manufacturing HP plant with respect to changes in focus, structural
function for achieving competitive success as they and infrastructural choices over time, as well as the
inevitably change over time. achieved results.
As HP changed manufacturing missions, which In the early phase of the computer industry the
each demanded a different focus, changing the focus innovation factory1 was a low-to-mid-volume plant
was accomplished by using the levers of revising with a high degree of vertical integration, located
manufacturing policies. We now move to describing closely to R&D and skilled labor. The emphasis was
how the leverage of manufacturing policies can on the manufacturability of new products with a job
directly impact and modify a factorys focus. We shop or batch type production process. HPs German
noted that there were essentially three types of plant excelled at the hard-to-manufacture innovations
focused factories developed over 15 years, each with it received from an R&D program that absorbed
different manufacturing policies. between 10% and 15% of revenues.
Next in the evolution was the operational excellence
4. The What: Redesigning the Factory factory,2 which had lower levels of vertical integra-
tion than the innovation factory. The factory was
to Focus on Changing Missions entirely rebuilt to a large-scale plant. When Hewlett-
4.1. Focus Changes at the HP Herrenberg Plant Packard realized the necessary change in mission
Focus is achieved by making far-reaching structural from innovation mastery to operational excellence in
and infrastructural choices in manufacturing policies the 1990s, vertical integration was decreased through

Table 1 Changes in Focus and Manufacturing Strategy at Hewlett-Packards Herrenberg Plant

Hewlett Packards Herrenberg Plant

Before 1990s Early 1990s Early 2000s


Focus chosen Innovation mastery: stabilize quality for Operation excellence: improve costs, Solutions delivery: solve customer problems
hard-to produce innovations speed and reliability and configure-to-order
Major structural Small scale plants Large scale plant Splitting of production in a part creating
decisions High vertical integration in the absence Low vertical integration to minimize standard modules and a part for solution
and changes of capable suppliers costs integration
Job shop environment Standardized equipment, automated Factory includes space for channel partners to
General purpose equipment processes build a common integration center
Avoidance of excess capacity
Major infrastructural New product introduction Mature products Individualized, affordable customer solutions
decisions and Production technology experts, Rigidly defined groups and task, Collaboration with channel partners
changes highly skilled and flexible operators tight supervision Re-training of engineers for working
Emphasis on stabilizing new Pools of low-skilled operators, with customer
product quality callable with short notice to Low-skilled operators for standard part and
Non-hierarchical, autonomous teams adapt to order fluctuations high-skilled for solutions part
Results Strong market position due to Cycle time and cost reduction Solutions flexibility while improving costs further
leading-edge product and Availability, adaptive capacity and Competitiveness through meeting individual
production technology velocity needs
Long lead times and high cost Competitiveness through Differentiating levels of customer satisfaction
of production in-bound supply chains High margins
High margins Steep sales growth
Brumme, Simonovich, Skinner, and Van Wassenhove: Factory Focus in Turbulent Times
Production and Operations Management 24(10), pp. 15131523, 2015 Production and Operations Management Society 1517

inbound outsourcing while the production process pushed by R&D. Accounting and finance should
was substantially automated and standardized. HP enable a flexible allocation of resources. The human
split its process from a customer-pull principle to a resource management (HRM) function can help
push-and-pull approach, where parts and compo- attract high-skilled staff seeking non-hierarchical
nents were built-to-stock globally and only the final structures with IT supporting experimentation and
assembly remained a local build-to-order process. coordination.
The quality levels gained in the previous innovation For an operational excellence factory, sales activi-
factory stage were maintained, thus realizing a ties should be integrated into flawless, non-disruptive
cumulative capability buildup (Ferdows and de order handling at high transaction speed. Flexible
Meyer 1990). In this factory, only 15% of operators workforce models can be used to adapt to volume
were permanently employed as know-how keepers, fluctuations at limited cost. A formal and centralized
40% had time-flexible contracts, and the remaining organization should be reinforced through rigid
45% were temporal workers who could be called on financial controls with high levels of transparency. IT
demand. This resulted in a very flexible workforce should support cross-functional business process
model adapting to demand fluctuations. The new fac- automation.
tory focus was rewarded with steep sales growth and When the German plant of Hewlett-Packard
rising profits. To achieve a better cost position, HP worked on its transformation from an operational
could have off-shored its production. But it decided excellence factory to a solutions factory, it relied
against it, a move that secured the transition to the heavily on the support of non-manufacturing func-
next manufacturing focus: the solutions factory. tions. The purchasing function had to facilitate a gen-
HPs solutions factory3 in Herrenberg resulted eral contractors role by creating strategic supply
from outsourcing low-end production parts and using partnershipsnot only inbound but also outbound.
the freed-up managerial capacity to establish a prob- The re-training of engineers was essential, since
lem-solving competency. As put by Tom Viola, then employees needed broad problem-solving skills.
worldwide head of supply chain management at HP: Supply chain coordinators evaluated possible new
The company owning the customer experience will channel partner opportunities. Accounting began to
have the power. HPs German plant effectively emphasize long-term customer profitability rather
began to integrate activities hitherto carried out by its than transactional profit while the IT function pro-
customer support and channel partners. The new vided detailed and integrated customer data. Exhib-
focus was termed a solutions factory, which offered its 13 summarize those three generalized focused
turnkey computer systems ready to fully operate the factory types, including relationships between manu-
day after delivery to the clients sitea service most facturing decision areas and non-manufacturing func-
appreciated by banks and other service organizations. tions, in the form of holistic manufacturing strategy
Modularization was key to providing customized wheels, which we have created to provide over-
solutions. As a result HP created a new high-margin views.
business with a base of loyal customers. We note from In the German HP plant in Herrenberg, many func-
HPs experience that solutions factories are ideally tions were part of the facility: purchasing, accounting
located close to customers and sized for flexible, low- and finance, human resources and IT. Because of this
to-mid-volume production. A broad range of solu- physical proximity, coordination with these functions
tions is made possible through a job shop configura- was generally manageable. The marketing and sales
tion. Quality is understood as the satisfaction levels of functions, on the other hand, were dispersed globally
customers with individual solutions. The manufactur- and required more coordination effort. The change
ing focus transitions of the Herrenberg plant was also from the innovation to the operational excellence was
adopted by HPs factory in California. Based on their actually facilitated by marketing and sales as they
successes, the changes in focus eventually became a welcomed production to be faster and cheaper.
worldwide strategy. Likewise, marketing and sales were happy to see the
transition to the solutions factory as they previously
4.2. Focus Changes Require Cross-Functional had to improvise with local partners to provide cus-
Coordination tomized solutions. However, in both transition
When undertaking a major refocus of a plant, the endeavors it took considerable initial effort to con-
alignment challenge is not limited to the relation- vince these functions to view manufacturing as a
ship between business strategy and manufacturing. source for competitive differentiation.
Non-manufacturing functions must play their part
too. At an innovation factory, the role of market- 4.3. Install Regular Manufacturing Policy Reviews
ing and sales is to prepare markets through cam- Remarkably, HP was able to adjust to turbulent com-
paigns and educate customers about novel products petitive changes in technology and markets. This was
Brumme, Simonovich, Skinner, and Van Wassenhove: Factory Focus in Turbulent Times
1518 Production and Operations Management 24(10), pp. 15131523, 2015 Production and Operations Management Society

accomplished by regularly auditing its manufacturing 5. The How: Managing


strategy. Having achieved an effective factory focus,
it is all too easy to lose it over time, and often because
Manufacturing Strategy Transitions
of sticking with it for too long. Focused factories can Recognizing the need for adjusting factory focus and
move away from focus for example, because manu- knowing what to change in manufacturing is crucial.
facturing managers fill excess capacity with all sorts However, making it all actually happen is the most
of products or when fashionable techniques are demanding and risky part. From a practical point of
adopted by functional experts without attention to view, there are some pressing questions when taking
overall coherency. Previously aligned elements of a on the challenge of strategically transforming produc-
manufacturing policy become out-of-kilter with the tion: which changes are easy and which are wrench-
other elements and can even contradict the overall ing? How must one divide the overall task? What
manufacturing mission. should be done first?
But HP counterbalanced these tendencies through
regular yearly manufacturing policy reviews (Skinner 5.1. Introducing New Ways of Working
1985)just as corporate strategists usually perform Looking at the manufacturing strategy canvas in
regular reviews. In these reviews manufacturing Figure 2 in the example of HP, one might assume
managers worked with corporate strategists to that the greater the sketched change in a policy
answer two questions: What is our manufacturing area, the more difficult the task. While this is true
strategy today? And which parts of it need adjust- within a policy area, the visualized difference in
ment? For reviewing and re-shaping manufacturing the two curves does not translate directly into a
strategy in a systematic and holistic way, we propose ranking of policy areas by change task difficulty. In
a so-called manufacturing strategy canvas that visual- fact, the physical changes were significant but
izes the current and desired state in each key decision doable, as sufficient funds were secured prior to
area, as well as links to non-manufacturing functions each factory transformation. To understand the true
that need to be coordinated. The visualization in the challenges better, we need to review the impact of
form of curves is inspired by the business strategy structural and infrastructural changes on the
canvas developed by Kim and Mauborgne (2002). But engineers and operators for each of the focus
instead of depicting a customer value curve, we visu- transitions.
alize manufacturing policy choices and introduce In Herrenberg, the first re-focus from the innova-
cross-functional links. In Figure 2 we have visualized tion factory to the operational excellence factory
the re-focusing of HPs Herrenberg plant from opera- brought a reduction in vertical integration and in the
tional excellence to solutions delivery. facility space designated to product development.
Figure 2 Manufacturing Strategy Canvas Visualizing the Second of the Factory Focus Changes at Hewlett Packards Plant in Herrenberg

Manufacturing Strategy Canvas for Hewlett Packard


FROM operational excellence ( ) TO solutions factory ( )
STRUCTURE INFRASTRUCTURE

High

Low

Purchasing
Finance
R&D
Marketing
Sales
HRM

Cross-functional coordination
Brumme, Simonovich, Skinner, and Van Wassenhove: Factory Focus in Turbulent Times
Production and Operations Management 24(10), pp. 15131523, 2015 Production and Operations Management Society 1519

The demand for technology engineers diminished. period of mindset change efforts that started months
Many of them retrained to become process engineers before any physical transformation. These efforts
for mature products and layoffs could be avoided consisted of clearly communicating the new mission,
because of the relatively small initial factory. As for the changed circumstances and the new expectations
the operators, they had been, in a way, tinkerers in set for engineers and operators. One purpose of this
the innovation factory and came to face the transition communication was to create a sense of urgency. For
to a much stricter organization relabeled as a distri- example, prior to the first transformation to an oper-
bution center. However, the increased factory capac- ational excellence plant, it was communicated that a
ity and high volume production brought them a failure to follow would potentially result in an offsh-
substitute opportunity for maintaining some auton- oring scenario of production. Thus communication
omy and privilege: as knowledge carriers and as pro- was aimed at influencing collective emotions (Huy
moted team supervisors of lower skilled temporal 1999). When completing the structural and infra-
operators in a more formal organization. Such opera- structural factory changes, another important aspect
tor prospects would have been chanceless had Hew- was the motivation system. In the innovation factory,
lett Packard chosen to relocate the factory to a low engineers were rewarded according to the number of
cost region. new product introductions, without any time con-
The transition from the operational excellence fac- straint for each development. When moving to the
tory to the solutions factory brought very different operational excellence factory, rewards were tied to
challenges. The forward integration into solutions short product introduction cycles and efficiency
delivery reinforced the importance of the facility and gains. When re-focusing on the solutions factory,
did not entail the sense of loss the previous transition engineers compensation was tied to additional reve-
represented to engineers (an increase in vertical inte- nues generated from services and supply chain inte-
gration is usually more motivating for employees gration. However, the visibility of the newly desired
than outsourcing). However, engineers had to face ways of working was as important as the final
once again another paradigm shift as the need for net- changes in rewards. In each focus transition, it was
working with a previously unknown multitude of those engineers who were known as the top per-
external partners became crucial. Likewise, the work formers throughout the organization, who were
of operators became less structured, more complex given the visible privilege of working in the new
and more uncertain than before with every new client ways first. This made clear to everyone what it
request potentially becoming a new solutions configu- would look like to thrive in the factory in the future.
ration. Both engineers and operators were asked to When transitioning to the solutions factory, for
fundamentally change their self-conception and were example, the top performing engineers were the first
assisted with training support. While many engineers to join sales staff in client problem-solving. Likewise,
and operators could be re-educated, others could not operators who demonstrated the ability to embrace
adapt to new roles. Those who could not kept on the more complex ways of working received man-
working on the more narrow tasks and were comple- agements praise. All these communication and moti-
mented with new hires capable of carrying out a vational activities started prior to the actual physical
solutions approach (as illustrated in Table 1, produc- plant transformation and the introduction of a new
tion was split in part creating standard modules and a formal reward scheme and continued until the tran-
part for solutions integration). sitions completion. Part of this initial leadership
work was the early involvement of employees and
5.2. Communication and Motivation the workers council. Figure 3 summarizes the
A transition in manufacturing strategy is usually a approach taken at Hewlett Packards Herrenberg
complex endeavor of large-scale nature. At Hewlett plant in both major focus transitions.
Packard, the plants structural and infrastructural
transformations were broken down into project 6. The Steps to Achieve and Sustain
streams that corresponded broadly to manufacturing
policy areas shown in Exhibits 13, except for the
Focus
quality decision area, whose nature was more of an The ideas presented so far about sustaining a strat-
ongoing process. These projects were not executed in egy-focused factory as firm strategy evolves can be
sequence, but in parallel. Nonetheless, there was an summarized into five steps for focusing manufactur-
important sequencing logic within the overall transi- ing to become a dynamic competitive weapon.
tion program that may help explain the unlikely suc- Step 1 Analyze the dynamic business environment:
cess of repeated radical factory changes: the assess the maturity of your industry by understand-
leadership work that preceded the execution of the ing customer expectations, the degree of commoditi-
structural and infrastructural projects. There was a zation and evolving supplier capabilities.
Brumme, Simonovich, Skinner, and Van Wassenhove: Factory Focus in Turbulent Times
1520 Production and Operations Management 24(10), pp. 15131523, 2015 Production and Operations Management Society

Figure 3 The Approach Repeatedly used in Refocusing Hewlett Packards Herrenberg plant
Phase I: Phase II:
Developing Strategy Managing the Transition

Recognition of the Exhaustive communication and assignment


urgency for change of the best to the new themes
Identification of the newly Definition of new roles
required factory focus Simultaneous orchestration of
Involvement of employees and
- Structural and infrastructural
Translation into structural the workers council
changes
and infrastructural choices Incentive: privilege of working - Cross-functional adjustments
Cross-functional buy-in in new ways first, visibility
Incentive: rewards based on a
and coordination and management attention
changed system for measuring
Securing of funds performance

Exhibit 1 The Innovation Factorys Manufacturing Strategy Wheel

Accounting, Finance

Allow placing big bets

Location chosen Low-to-mid volume


to be close to R&D production with high
and skilled labor volume flexibility

Job shop
High vertical or batch
integration in process
STRUCTURAL
the absence with high
of many portion of
suppliers manual work
FOCUS 1:
innovation
factory
Emphasis on Focus on
stabilizing INFRASTRUC- new product
the quality of TURAL introduction
new products

High skill, high Non-hierarchical,


wages workforce fluid organisational
with low spans structure with
of control autonomous
teams

Step 2 Define the manufacturing mission: based on Step 4 Manage manufacturing strategy transitions:
the previous step and perhaps more importantly, Work on mindset change through exhaustive
your competitive product or service positioning, communication and involve engineers and operators
choose a corresponding manufacturing mission for early, before carrying out the structural and infra-
each plant, such as innovation mastery, operational structural changes alongside a changed incentive
excellence or solutions delivery. scheme.
Step 3 Design strategy-focused factories: for each Step 5 Regularly audit manufacturing strategy: Insti-
plant, create the right factory focus by aligning all tutionalize yearly manufacturing policy reviews for
structural and infrastructural policies strictly on the checking if the focus has been diluted or needs a
manufacturing mission. Also align cross-functional revision to realign with competitive strategy
policies. Frameworks such as the manufacturing strat- imperatives.
egy wheels or the manufacturing strategy canvas help For clarity purposes, we turn to addressing seven
facilitate discussions about the array of focus changes. myths sometimes held by manufacturing managers,
Brumme, Simonovich, Skinner, and Van Wassenhove: Factory Focus in Turbulent Times
Production and Operations Management 24(10), pp. 15131523, 2015 Production and Operations Management Society 1521

Exhibit 2 The Operational Excellence Factorys Manufacturing Strategy Wheel

Accounting, Finance

Possibly chosen Mid-to-large plants,


to minimise cost of high capacity levels,
labor and capital excess capacity
avoidance

Low vertical Standardized


integration, equipment,
STRUCTURAL
Outsourcing automated
to minimize processes
costs FOCUS 2:
operational
excellence
factory
Tight quality Mature
control, INFRASTRUC- product
Scrap TURAL focus
avoidance

Low skill, low


wages workforce Centralized structure
with high spans with high degree of
of control formalization

the consultants who advise them or colleagues, which Myth 5: Focused factories are more capital intensive. It
have frequently dissuaded firms from using the can be argued that because focused factories may
power of focused factories (Skinner 1996). employ special purpose equipment and processes
rather than general purpose, more capital investment
may be required. This of course is possible, but it
7. Seven Myths about Focused depends on various factors. Many firms have reduced
Factories operating costs by using equipment that is special
Myth 1: Focused factories cannot respond to changes in purpose and therefore more efficient and requiring
technology and the competitive environment. The success- fewer changeovers. Focus is typically less expensive
ful experiences of HP directly disprove this notion. than combining an incompatible set of products and
Myth 2: Focused factories can only be green-field plants. process technologies.
Green-field plants are more easily designed to be Myth 6: Focus is impossible in a fast-changing world.
focused than existing plants but by changing manu- The HP data proves exactly the opposite. Sometimes
facturing policies any plant can be focused. the focus an organization builds into its operations is
Myth 3: Only small factories can be focused. Again, any simply to be flexible so as to adapt to frequent change
plant can be focused. Sometimes it is done by divid- including, for example, sudden volume changes in a
ing the facility into areas each with a different focus; cyclical industry.
or a large plant can have a single focus; or the focus Myth 7: Lean manufacturing and/or using best prac-
may be on a difficult but critical task, such as the abil- tices make the focused factory unnecessary. This is a mis-
ity to introduce new products quickly. conception because lean itself is essentially a focus
Myth 4: Focused factories are large-scale, big volume on productivity and efficiency and a firm can be effi-
plants. Once more, focus has nothing to do with size cient and low-cost and fail because successful compe-
but with clarity of mission and the manufacturing tition requires an entirely different focus. Best
task, that is, achieving performance on an essential practices may allow a firm to keep up with competi-
dimension which creates a unique competitive advan- tors instead of falling behind, but merely adopting
tage. best practices does not make firms clear winners.
Brumme, Simonovich, Skinner, and Van Wassenhove: Factory Focus in Turbulent Times
1522 Production and Operations Management 24(10), pp. 15131523, 2015 Production and Operations Management Society

Exhibit 3 The Solutions Factorys Manufacturing Strategy Wheel

Accounting, Finance

Location chosen Low-to-mid volume


close to customers production with high
volume flexibility

Job shop
process to
Virtual meet unique
integration STRUCTURAL
customer
through sub- needs
contractors
Modula-
FOCUS 3: rization
solutions
factory
Quality Unique
understood as INFRASTRUC- range of
service quality TURAL superior
services

High skill, high Decentralized,


wages workforce collaboration with
with low spans channel partners
of control and customers

who meet the standards of inbound outsourcing part-


8. Conclusions nerships. This plant type excels at cost control, avail-
In this opinion study, we have discussed how to ability and supply chain velocity. The opportunity for
achieve and sustain strategy-focused factories by a solutions factory has come when the matured indus-
using as an example Hewlett Packard, who success- try brings out buyers who perceive value in broader
fully refocused its German plant in Herrenberg twice problem-solving assistance.
in a 10-year time span. By also looking at other com- We have presented structural and infrastructural
petitors in the computer industry, we identified the changes throughout the factory focus transitions of
changing relationship between customer expectations HP, as well as the achieved business results. In order
and industry performance levels as a driver for to easily summarize the complex changes, we have
changing manufacturing missions over time. Thus we devised visualization aids: the manufacturing
observed that industry evolution, from product strategy canvas to track policy changes, and the
novelty to commodity, brings up innovation factories, manufacturing strategy wheels to exemplify the con-
operational excellence factories and solutions facto- tent of the three generic factory foci, including the
ries in that typical sequence, with all three factory cross-functional contributions necessary to make
types coexisting in the matured industry stage these foci happen.
whereas a technological breakthrough can restart that The Hewlett Packard case revealed that the main
sequence all over. In particular, we identified the challenge in successfully achieving focus change tran-
solutions factory as a possible way to avoid a com- sitions does not lie in a plants physical transforma-
modity-based trap. In framing factory focus as a func- tion, but in the management of engineers and
tion of industry evolution, we stated clues for the operators in regard of changing skills and capacity
right timing to go from one focus to the next in such a requirements. Factory managers face the challenge of
sequence. The operational excellence plant is called steering a mindset change and prepare people for
for when customer expectations move away from new ways of working.
product performance features and when low-cost Naturally, the case of Hewlett Packard and its com-
providers join the industry and suppliers emerge, petitors raises the question of generalization to other
Brumme, Simonovich, Skinner, and Van Wassenhove: Factory Focus in Turbulent Times
Production and Operations Management 24(10), pp. 15131523, 2015 Production and Operations Management Society 1523

industries. Examples similar to the two focus transi- Boyer, K. K., M. Swink, E. D. Rosenzweig. 2005. Operations strat-
tions at HP can indeed be seen in other industries: egy research in the POMS journal. Prod. Oper. Manag. 14(4):
442449.
Wyeth Pharmaceuticals, for example, launched an
Brumme, H. 2008. Capability switching along the technology life cycle
operational excellence transformation program for its in local manufacturing within the high-tech electronics industry.
25 worldwide plants in regard of its industrys over- Doctoral dissertation, Erasmus University Rotterdam.
capacity and lack of patent protection (Goldberg Oli- Chick, S. E., A. Huchzermeier, S. Netessine. 2014. Europes solu-
ver and Landel 2009). Furthermore, Nissan Canada tion factories. Harv. Bus. Rev. 92(4): 111115.
(Hunter and Johnson 2007) and Schmitz Cargobull Christensen, C. M. 1992. Exploring the limits of the technology
S-curve. Part II: Architectural technologies. Prod. Oper. Manag.
(Chick et al. 2014) successfully transformed opera-
1(4): 358366.
tional excellence plants into solutions factories that
DSouza, D. E., F. P. Williams. 2000. Toward a taxonomy of
helped them regain a competitive edge. However, manufacturing flexibility dimensions. J. Oper. Manag. 18(5):
while the factory types and focus transitions we 577593.
described are observable outside the computer indus- Ferdows, K., A. de Meyer. 1990. Lasting improvements in manu-
try, identifying other focus types and sequences and facturing performance. In search of a new theory. J. Oper.
Manag. 9(2): 168184.
ways of handling focus changes in different industries
Frohlich, M. T., R. Westbrook. 2001. Arcs of integration: An inter-
and under different circumstances should be fruitful national study of supply chain strategies. J. Oper. Manag.
for providing advice to plant managersfor example, 19(2): 185200.
when a refocus requires a change of location or when Goldberg Oliver, R., R. D. Landel. 2009. Wyeth pharmaceuticals in
important non-manufacturing functions are not 2009: Operational transformation. University of Virginia
located at the plant. UV4302, Charlottesville, VA, Darden Business Publishing.
In the end our assertion remains this: production Hendricks, K. B., V. R. Singhal. 2003. The effect of supply chain
glitches on shareholder wealth. J. Oper. Manag. 21(5): 501522.
operations can remain a system which has the ability
Hunter, K., P. F. Johnson. 2007. Nissan Canada Inc. Richard Ivey
to adapt to disruptive change by using the levers of School of Business 907D18, The University of Ontario.
changing manufacturing policies so as to stay focused Huy, Q. N. 1999. Emotional capability, emotional intelligence, and
on a limited but absolutely essential task, which cre- radical change. Acad. Manag. Rev. 24(2): 325345.
ates strategic advantage. Establishing a focused fac- Kim, C. W., R. Mauborgne. 2002. Charting your companys future.
tory or a focused service operation or a focused Harv. Bus. Rev. 80(6): 7685.
product fulfillment system is the key. In that context, Skinner, W. 1969. Manufacturing missing link in corporate strat-
focus is the very essence of manufacturing strategy. egy. Harv. Bus. Rev. 47(3): 136145.
Skinner, W. 1974. The focused factory. Harv. Bus. Rev. 52(3): 113
121.
Notes
Skinner, W. 1985. Manufacturing: The Formidable Competitive
1 Weapon. Wiley, New York, NY.
These are the authors terms used to broadly describe
HPs focus. We do not infer it to be universally applicable Skinner, W. 1996. Manufacturing Strategy on the S curve. Prod.
or useful elsewhere. Oper. Manag. 5(1): 314.
2 Skinner, W. 2007. Manufacturing strategy: The story of its evolu-
idem.
3
idem. tion. J. Oper. Manag. 25(2): 328335.
Wheelwright, S. C., R. H. Hayes. 1985. Competing through Manu-
facturing. Harv. Bus. Rev. 63(1): 99109.
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