1、1245 Outlines Outlines Background Introduction Operational Effectiveness Operation Effectiveness VS Strategic PositioningStrategy Rests on Unique Activities3 Productivity Frontier For almost two decades,managers have been learning to play by a new set of rules:v Companies must be flexible to respond
2、 rapidly to competitive and market changes.v They must benchmark continuously to achieve best practice.v They must outsource aggressively to gain efficiencies.v They must nurture a few core competencies in the race to stay ahead of rivals.Background Introduction Background Introduction BarriersCopym
3、arket positionGlobalizationv Positioning-once the heart of strategy-is rejected as too static for todays dynamic markets and changing technologies.v According to the new dogma,rivals can quickly copy any market position,and competitive advantage is,at best,temporary.v Some barriers to competition ar
4、e falling as regulation eases and markets become global.v Companies have properly invested energy in becoming leaner and more nimble.Background Introduction v But those beliefs are dangerous half-truths,and they are leading more and more companies down the path of mutually destructive competition.v
5、In many industries,however,what some call hyper-competition is a self-inflicted wound,not the inevitable outcome of a changing paradigm of competition.v The root of the problem is the failure to distinguish between operational effectiveness and strategy.Operational EffectivenessStrategyWhy?The proba
6、ble answer：v The quest for productivity,quality,and speed has spawned a remarkable number of management tools and techniques:total quality management,benchmarking,time-based competition,outsourcing,partnering,reengineering,change management.v Although the resulting operational improvements have ofte
7、n been dramatic,many companies have been frustrated by their inability to translate those gains into sustainable profitability.v And bit by bit,almost imperceptibly,management tools have taken the place of strategy.As managers push to improve on all fronts,they move farther away from viable competit
8、ive positions.Background Introduction Operational Effectivenessv Operational Effectiveness(OE)and strategy are both essential to superior performance,which after all,is the primary goal of any enterprise.But they work in very different ways.Create comparable value at a lower costBoth greater value&l
9、ower costDeliver greater value to customersA company can outperform rivalscharge higher average unit pricesgreater efficiency results in lower average unit costs Operational EffectivenessOthersTraining employeesDeliverSellProduceCreateOverall advantage Or disadvantagevUltimately,all differences betw
10、een companies in cost or price derive from the hundreds of activities(e.g.the right chart)vCost is generated by performing activities,and cost advantage arises from performing particular activities more efficiently than competitors.vSimilarly,differentiation arises from both the choice of activities
11、 and how they are performed.Activities,then,are the basic units of competitive advantage.vOverall advantage or disadvantage results from all a companys activities,not only a few.v Differences in OE among companies are pervasivev Such differences in OE are an important source of differences in profit
12、ability among competitors because they directly affect and.Operational Effectivenesseliminate wasted effortemploy more advanced technologymotivate employees betterhave greater insight into managing particular activities or sets of activitiesv Imagine for a moment a productivity frontier that constit
13、utes the sum of all existing best practices at any given time.v Think of it as the maximum value that a company delivering a particular product or service can create at a given cost,using the best available technologies,skills,management techniques,and purchased inputs.v The productivity frontier ca
14、n apply to individual activities,to groups of linked activities such as order processing and manufacturing,and to an entire companys activities.v When a company improves its OE,it moves toward the frontier.Doing so may require capital investment,different personnel,or simply new ways of managing.Pro
15、ductivity Frontierthree-dimensional productivity frontierplanar productivity frontierv The productivity frontier is constantly shifting outward as new technologies and management approaches are developed and as new inputs become available.v Laptop computers,mobile communications,the Internet,and sof
16、tware have redefined the productivity frontier for sales-force operations and created rich possibilities for linking sales with such activities as order processing and after-sales support.v Similarly,lean production,which involves a family of activities,has allowed substantial improvements in manufa
17、cturing productivity and asset utilization.*We can use Matlab to draw multidimensional situations*We also can use multidimensional linear regression to calculate different influences from different factors Productivity Frontierv For at least the past decade,managers have been preoccupied with improv
18、ing OE.:Hoping to keep up with shifts in the productivity frontier,managers have embraced continuous improvement,empowerment,change management.v The popularity of and the:reflect the growing recognition that it is difficult to perform all activities as productively as specialists.v As companies move
19、 to the frontier,they can often improve on multiple dimensions of performance at the same time.For example,manufacturers that adopted the Japanese practice of rapid changeovers in the 1980s were able to lower cost and improve differentiation simultaneously.benchmarkingtime-based competitionTQMelimin
20、ate inefficiencies improve customer satisfactionachieve best practice Productivity Frontierv Constant improvement in OE is necessary to achieve superior profitability.v However,it is not usually sufficient.Few companies have competed successfully on the basis of OE over an extended period,and stayin
21、g ahead of rivals gets harder every day.v The most obvious reason for that is the rapid diffusion of best practices.v The most generic solutions-those that can be used in multiple settings-diffuse the fastest.Witness the proliferation of operational efficiency techniques accelerated by support from
22、consultants.Productivity FrontierBarriersCopygeneric solutionsRapid diffusion of best practicesThe later-comers surpass the formers:Lower cost for the management techniques,new technologies,input improvements,and superior ways of meeting customers needs.v Operation Effectivenessv similar activities
23、better than rivals perform them.v includes but is not limited to efficiencyv refers to any number of practices that allow a company to better utilize its inputs by,for example,reducing defects in products or developing better products faster.Operation Effectiveness VS Strategic Positioningv Strategi
24、c Positioningv performing different activities from rivals v or performing similar activities in different ways.Notice the differences!Why operation effectiveness is insufficient?v OE competition shifts the productivity frontier outward,effectively raising the bar for everyone.But although such comp
25、etition produces in OE,it leads to v The second reason that improved OE is insufficient-competitive convergence-is more subtle and insidious.The more benchmarking companies do,the more they look alike.The more that rivals outsource activities to efficient third parties,often the same ones,the more g
26、eneric those activities become.As rivals imitate one anothers improvements in quality,cycle times,or supplier partnerships,strategies converge and competition becomes a series of races down identical paths that no one can win.Competition based on OE alone is mutually destructive,leading to wars of a
27、ttrition that can be arrested only by limiting competition.Operation Effectiveness VS Strategic Positioningv The recent wave of industry consolidation through mergers makes sense in the context of OE competition.Driven by performance pressures but lacking strategic vision,company after company has h
28、ad no better idea than to buy up its rivals.The competitors left standing are often those that outlasted others,not companies with real advantage.v After a decade of impressive gains in OE,many companies are facing diminishing returns.Continuous improvement has been etched on managers brains.But its
29、 tools unwittingly draw companies toward imitation and homogeneity.Gradually,managers have let OE supplant strategy.The result is zero-sum competition,static or declining prices,and pressures on costs that compromise companies ability to invest in the business for the long term.Operation Effectivene
30、ss VS Strategic Positioningv Competitive strategy is about being different.It means deliberately choosing a different set of activities to deliver a unique mix of value.v Case:Southwest Airlines Companyv offers short-haul,low-cost,point-to-point service between cities and airports in large citiesv a
31、voids large airports and does not fly great distances.v Its customers include business travelers,families,and students,who otherwise would travel by bus or car,and who would choose a full-service airline on other routes.Strategy Rests on Unique ActivitiesStrategy Rests on Unique Activitiesv Southwes
32、t Airlines Companyv Tailors all its activities to deliver,convenient service on its.v Through fast turnarounds at the gate of only 15 minutes,Southwest is able to keep planes flying longer hours than rivals and provide frequent departures with fewer aircraft.v Southwest does not offer meals,assigned
33、 seats,interline baggage checking,or premium classes of service.v Automated ticketing at the gate encourages customers to bypass travel agents,allowing Southwest to avoid their commissions.A standardized fleet of 737 aircraft boosts the efficiency of maintenance.v A full-service airlinev Configured
34、to get passengers from almost any point A to any point B.v To reach a large number of destinations and serve passengers with connecting flights,full-service airlines employ a hub-and-spoke system centered on major airports.v To attract passengers who desire more comfort,they offer first-class or bus
35、iness-class service.v To accommodate passengers who must change planes,they coordinate schedules and check and transfer baggage.Because some passengers will be traveling for many hours,full-service airlines serve meals.Strategy Rests on Unique Activitiesv Strategic positions emerge from three distin
36、ct sources,which are not mutually exclusive and often overlap.producing a subset of an industrys products or servicesserving most or all the needs of a particular group of customerssegmenting customers who are accessible in different waysStrategy Rests on Unique Activitiesv It is also called variety
37、-based positioning because it is based on the choice of product or service varieties rather than customer segments.v Variety-based positioning makes economic sense when a company can best produce particular products or services using distinctive sets of activities.Strategy Rests on Unique Activities
38、v CASE:Vanguard Companyv Vanguard provides an array of common stock,bond,and money market funds that offer predictable performance and rock-bottom expenses.The companys investment approach deliberately sacrifices the possibility of extraordinary performance in any one year for good relative performa
39、nce in every year.Vanguard is known,for example,for its index funds.It avoids making bets on interest rates and steers clear of narrow stock groups.Fund managers keep trading levels low,which holds expenses down,in addition,the company discourages customers from rapid buying and selling because doin
40、g so drives up costs and can force a fund manager to trade in order to deploy new capital and raise cash for redemptions.Vanguard also takes a consistent low-cost approach to managing distribution,customer service,and marketing.Many investors include one or more Vanguard funds in their portfolio,whi
41、le buying aggressively managed or specialized funds from competitors.v The people who use Vanguard are responding to a superior value chain for a particular type of service.A variety-based positioning can serve a wide array of customers,but for most it will meet only a subset of their needs.Strategy
42、 Rests on Unique Activitiesv It is also called needs-based positioning,which comes closer to traditional thinking about targeting a segment of customers.v It arises when there are groups of customers with differing needs,and when a tailored set of activities can serve those needs best.Some groups of
43、 customers are more price sensitive than others,demand different product features,and need varying amounts of information,support,and services.v A variant of needs-based positioning arises when the same customer has different needs on different occasions or for different types of transactions.v A cr
44、itical element of needs-based positioning is not at all intuitive and is often overlooked.Differences in needs will not translate into meaningful positions unless the best set of activities to satisfy them also differs.If that were not the case,every competitor could meet those same needs,and there
45、would be nothing unique or valuable about the positioningStrategy Rests on Unique Activitiesv CASE:Bessemer Trust Company VS CitibankBessemer Trust Company targets families with a Bessemer Trust Company targets families with a minimum of$5 million in investable assets who want minimum of$5 million i
46、n investable assets who want capital preservation combined with wealth capital preservation combined with wealth accumulation.By assigning one sophisticated account accumulation.By assigning one sophisticated account officer for every 14 families,Bessemer has configured officer for every 14 families
47、,Bessemer has configured its activities for personalized service.Meetings,for its activities for personalized service.Meetings,for example,are more likely to be held at a clientexample,are more likely to be held at a clients ranch s ranch or yacht than in the office.Bessemer offers a wide or yacht t
48、han in the office.Bessemer offers a wide array of customized services,including investment array of customized services,including investment management and estate administration,oversight of management and estate administration,oversight of oil and gas investments,and accounting for racehorses oil a
49、nd gas investments,and accounting for racehorses and aircraft.Loans,a staple of most private banks,are and aircraft.Loans,a staple of most private banks,are rarely needed by Bessemerrarely needed by Bessemers clients and make up a s clients and make up a tiny fraction of its client balances and inco
50、me.Despite tiny fraction of its client balances and income.Despite the most generous compensation of account officers the most generous compensation of account officers and the highest personnel cost as a percentage of and the highest personnel cost as a percentage of operating expenses,Bessemeroper
