Business Development: Initiatives for improvement HOD (298) Business Development: Initiatives for improvement

Themes Business Improvement Platts Gregory tool Maintaining alignment with market requirements Balanced Scorecard Application of Lean principles

Common Themes of Business Improvement Approaches Emphasising improvements to productivity and profitability. Emphasising the importance of striving for zero defects (consistent conformance). Aligning processes and people with the strategic aims of the organisation. A continuous journey of improvement. Utilising various tools to help analyse, choose, implement and monitor decisions.

Problem solving steps based on Deming’s PDCA cycle Recognise the problem and establish priorities. Form quality improvement teams. Define the problem. Develop performance measures. Analyse the problem / process. Determining possible causes. Select and implement the solution. Evaluate the solution: Follow-up. Ensure permanence. Continuous improvement. Plan Do Check Act Fitzsimmons & Fitzsimmons, 2014

The key module theme What you HAVE What you NEED What you WANT in terms of operations capabilities What you NEED to ‘compete’ in the market Operations Resources Market Requirements What you WANT from your operations to help you ‘compete’ What you DO to maintain your capabilities and satisfy markets Strategic Reconciliation / Alignment Slack & Lewis, 2008 & 2011

Basic questions addressing Where do we need to be? What does the market tell us that it wants? Where are we now? What capabilities do we have now? Where are the performance gaps between what we have and what the market wants? How do we get to where we need to be? Can we / how do we align our capabilities as closely as possible to what the market wants?

The Platts-Gregory procedure Opportunities and threats? The existing operation Facilities Capacity Span of process Processes Human resources Quality Control policies Suppliers New Products What the market wants? Features Quality Delivery Flexibility Price What do we need to do to improve the revised operations strategy? How the operations performs Features Quality Delivery Flexibility Price Platts, K.W. & Gregory, M.J. (1990) Manufacturing Audit in the process of Strategy Formulation International Journal of Operations & Production Management, Vol10, No. 9, pp. 5 - 26

Uses of profiling in the Platts-Gregory procedure Market requirements Achieved performance Delivery lead-time: Ex-stock Short Not significant Long Reliability: Into stock point Variable Critical: Project delay Good Features: Fit for purpose Few features Many features/ High absolute level Quality: Acceptable at price Acceptable Total reliability essential High Flexibility design: Standard range only Standard only All designs customer specified All products customised Volume: Stable market Little variation required Volume variations low Highly cyclic variable market Volume variations high Price / cost: Price competition dominant Low Non-price competition dominant High

Two views You can ‘fit’ operations resources to market requirements: You can do this with a new business concept (brand) or with radical change. Establish your existing capabilities and ‘fit’ the market position to them: You generally need to do this with a particular brand or established business with expensive fixed assets. You can carry out incremental change to adapt to changes in the market.

‘Fit’ operations resources to market requirements Market Segmentation Operations Strategy Decision Areas Operations Performance Objectives Operations Capabilities Market Positioning Competitor Activity State market requirements in terms of operations performance objectives … to enhance core capabilities Make strategic operations decisions Define competitive position Understand markets

‘Fit’ market positioning to operations resources capabilities Tangible and Intangible Resources Operations Strategy Decision Areas Potential Market Positioning Operations Capabilities Operations Performance Operations Processes Make appropriate strategic operations decisions Define market potential of operations performance Understand resources and processes Determine competitive position Identify core capabilities

Alignment = change Tools for identifying need for change, e.g. Market research. SWOT analysis. Gap analysis (see capabilities lecture). Process mapping and analysis (see process improvement lecture). Ishikawa (fishbone) diagrams. Tools for prioritising change, e.g. Order qualifiers and order winners (see capabilities lecture). Performance Importance matrix (see capabilities lecture). Organisational approaches, e.g. Balanced Scorecard. Investors in People (see developing people lecture). Lean (Six Sigma, Lean Six Sigma).

Ishikawa (Fishbone) Diagram Employee Customer Supplier Problem Equipment Materials Process Categories of cause are identified and possible causes within each category are identified and discussed. Action can then be taken to address the causes of failure. See next slide for four problem analysis examples

Problem Kimes, S. (2004) Revenue Management Implementation at Chevys Arrowhead Restaurant, CHRAQ

Balanced Scorecard Intro BSC developed in the 1980’s by Kaplan & Norton. Role to ensure a balanced view of performance measurement. Could include the use of business improvement methodologies. Key aim to align operations with the strategy of the organisation.

OR …… The measures used in the balanced scorecard Financial performance measures To achieve strategic impact how should we be viewed by shareholders? Internal process performance measures To achieve strategic impact what aspects of performance should business process excel at? Customer performance measures To achieve strategic impact how should we be viewed by customers? Overall strategic objectives Learning and growth performance measures To achieve strategic impact how will we build capabilities over time? OR …… https://youtu.be/M_IlOlywryw

Overall strategic objectives Financial performance measures To achieve strategic impact how should we be viewed by shareholders? Customer performance measures To achieve strategic impact how should we be viewed by customers? Internal process performance measures To achieve strategic impact what aspects of performance should business process excel at? Learning and growth performance measures To achieve strategic impact how will we build capabilities over time?

BSC Steps Organisational SWOT analysis Development of business strategy Decomposition of strategy into objectives Creation of strategy map to identify linkages between objectives Development of performance measures Identification of initiatives. http://balancedscorecard.org/

http://balancedscorecard.org/

Strategy Maps (Step 4) Is a ‘cause and effect’ diagram that is developed, using objectives derived from strategies, to show how the four business dimensions can contribute to strategy achievement. Desired outputs & Outcomes are derived Measures, targets and initiatives follow

Strategy Maps Improve Returns Improve Revenue Improve Operating Efficiency FINANCIAL Increase Customer Satisfaction Maintain Price Competitiveness CUSTOMER INTERNAL PROCESSES Understand Customer Segments Develop New Products Reduce Quality Defects Reduce Process Costs Reduce Utilities Costs Reduce Cost of Sales Improve Employee Productivity Hire Key Technical Talent Implement Cross- Training Provide Access to Transaction Information Align Personal Goals LEARNING & GROWTH (EMPLOYEES)

Airline example http://www.youtube.com/watch?v=lBolz48uMtA

Lean Operations A business philosophy with its roots in Japanese manufacturing that aims to improve quality, reduce cost and speed throughput. ‘The key principle of lean operations is relatively straightforward to understand: it means moving towards the elimination of all waste in order to develop an operation that is faster and more dependable, produces higher quality products and services and, above all, operates at low cost.’ Slack (2010)

Lean Manufacturing as Performance Improvement Origins: Manufacturing, especially the Toyota Production System (TPS). See Womack, J.P. et al (1990) The machine that changed the world. http://youtu.be/qcWEr2gh0Sg http://youtu.be/KtTQff7Uf_w Lean also includes Just In Time (JIT) inventory. Aims: Eliminate waste (adds cost and time). Continuous improvement. Involve everyone.

Eliminate Waste. Eliminate Waste: Waste can be defined as any activity which does not add value. Identifying waste is the first step towards eliminating it. What types of waste might occur in service operations ?

influencing the throughput efficiency Waste (muda) Activities: Types of waste: operation over-production waiting time movement transport process inspection inventory delay motion defective goods storage influencing the throughput efficiency http://www.youtube.com/watch?v=XukxCM57xfU Slack (2010)

Kaizen Continuous improvement - usually, but not always, applied to improving manufacturing performance through the elimination of waste. The philosophy of kaizen is to make gradual improvements at little or no cost - use your knowledge, not your money. Those who do the job are best placed to identify improvements. Encourage all employees to find ways to improve performance. http://www.youtube.com/watch?v=Q89qAbAAR3Q (the ten commandments of continuous improvement).

The Five S’s Sort (Seiri) Eliminate what is not needed and keep what is needed. Straighten (Seiton) Position things in such a way that they can be easily reached whenever they are needed. Shine (Seiso) Keep things clean and tidy; no refuse or dirt in the work area. Standardize (Seiketsu) Maintain cleanliness and order – perpetual neatness. Sustain (Shitsuke) Develop a commitment and pride in keeping to standards. http://youtu.be/cNb28wpi-Nw http://youtu.be/Ui-Lk6gK7m8 Slack (2010)

Six Sigma “The primary means to achieving six sigma quality level is to eliminate the causes of quality or process related problems before they are transformed into defects. The focus of “six sigma” is not on counting the defects in processes, but the number of opportunities within a process that could result in defects.” JIJU, A. (2006) Six Sigma for Service Processes Business Process Management Journal Vol. 12 No. 2 pp. 234 - 248

Six Sigma Developed in 1980’s and Copyrighted by Motorola (www.motorola.com/motorolauniversity.jsp ) Disciplined data driven approach and methodology for eliminating defects in a process Defect is anything outside of customer expectations Focuses on process improvement Uses two sub-methodologies, DMAIC & DMADV www.isixsigma.com

Sub-methodologies DMAIC Define, Measure, Analyse, Improve, Control

DMAIC Tool Examples Define: Brainstorming, Importance Performance matrix, Pareto. Measure: Data collection. Analyse: Data analysis, 5-whys, cause and effect diagrams, process map. Improve: Process redesign. Control: SOPs and performance objectives.

Lean or Six Sigma? Lean: Six Sigma: Waste elimination, quality improvements are a factor here. Immediate benefits, not copyrighted. Six Sigma: Defect identification and minimisation. Involves significant upfront training of ‘guru’ staff. Approaches are being combined by some to create Lean Six Sigma. http://youtu.be/LnE8_V8jT00 (Summary of all three).