The History and Future of Operations

It’s time to rethink what we mean when we talk about “operations.” Operations is not only about manufacturing. Operations is and has always been what gives an organization the power to act: to create value for its customers; to capture value for its shareholders; and to share value with its ecosystem. In the era of ubiquitous digital technologies, operations empowers an increasing variety of organizations, ever more modular, connected, and distributed, ever more centered on software and data.

The field of operations has gone through some major evolutions over its history. Growing out of the industrial revolution of the late 1800s, the field took off as the modern economy emerged from the new phenomenon of volume manufacturing. Innovators like Eli Whitney (he of the cotton gin) led the way with the popularization of manufacturing systems that transformed an artisan economy based on “filing and fitting” parts.

Newly popular notions of “interchangeable parts” were first applied to the design of muskets and enabled a new breed of industrialists to invent and hone a modular system of production, in which individual components could be manufactured independently and at scale. This gradually led to the concepts of logistics, supply chains, and assembly lines, and formed the foundations of the “American System of Manufacturing,” which grew during the first half of the 20th century and peaked during the 1950s and 60s. In the first half of the twentieth century, operations was focused only on manufacturing. (In fact, at one time Harvard Business School offered practical classroom demonstrations on the use of lathes and milling machines.)

In the 1960s, the field of operations research exploded, developing a broad variety of analytical methods to analyze and optimize the flow of goods and information in manufacturing systems. Use of these methods spread beyond manufacturing to a variety of service contexts, ranging from banks to electric utilities. This led to the establishment of service management and service operations as core subjects in the operations field. The evolution continued during the 1980s and 1990s, as new generations of digital technology began to revolutionize the fundamentals of operating excellence and extend the field to the management of companies delivering software-based products and services. Yes, Microsoft and Yahoo! needed operations too.

From its earliest days, digital technology has enabled operations. After all, the management of information has always been the key to operating excellence. Whether we optimize forecasts through operations research at Nike or order inventory through Toyota’s Kanban system, operating capabilities hinge on managing and optimizing digitized information. And from the days of the first commercial IBM mainframes in the late 1950s, computers have driven increasing efficiency in manufacturing and service institutions.

So, what is different now? The recent ubiquity of digital technology and its exploding range of applications in web services, mobile, and now the internet of things means that the development and delivery of software services is starting to transform the very fabric of our business and operating environments. If the essence of operations is providing economic agents with “the power to act,” digital technology is transforming the nature by which that power is defined and delivered. Increasingly, the design and delivery of software services is the entirety of a firm’s operating environment. Whether we design the new Ford Mustang, a new financial investment product, or the next version of Snapchat, the bulk of the organization’s operating capabilities are software-based. As such, the design, management, and deployment of software has become central to a firm’s operating model.

Digital technology is also enabling completely new operating models that are increasingly open, distributed, and shared across thousands of organizations and individual contributors. These new models have enabled close to 9 million independent developers to contribute apps to the iOS and Android mobile platforms. They’ve enabled Uber’s 2,000 internal employees to manage the complex logistics of 200,000 drivers. And they’ve enabled WhatsApp to grow to over 450,000 users with fewer than 30 employees. As such, the design of development tools, operating system APIs, or the user onboarding process for a mobile application have become as crucial to operating excellence as production planning or inventory theory.

And yet, as operating models rely increasingly on digital networks connecting people and organizations to enable their “power to act,” traditional notions of operations strategy and supply chain management are more crucial than ever. In a huge ecosystem of organizations, for example, supply chain management becomes increasingly critical to the buildup of data center infrastructure. Moreover, digital technology is becoming increasingly ubiquitous as the traditional analog and digital worlds merge. Not only do old firms need to understand relatively new digital technology, but relatively new firms (see Microsoft, Google, and Amazon) need to understand and master traditional operating concepts.

So let’s not equate the field of operations with the American system of manufacturing. Silicon Valley also needs the power to act.

SOURCE: Harvard Business Review

Lean and Your Top & Bottom Lines

Business Strategy and Delivering Your Value Proposition

Business Strategy and Delivering Your Value Proposition

As I mentioned in my previous article, “Are You Ignoring a Bad Business Strategy?,”your business strategy is a determining factor in whether your sales “will” or “will not” grow faster than your competition’s. Two key questions you need to ask annually as part of your strategic planning discussion are:
1. Does your business strategy encompass a clear value proposition that would be considered an “unusual offering” and is critical in your target client’s buying decision?
2. Are you delivering on the promises embedded in that offering?

The answers to those questions may be the primary reasons your sales force is not achieving their quotas.

“Unusual Offering” is not “Marketing and Positioning”

A key to the growth of your business is your ability to develop a business strategy that includes an unusual value proposition and become the best in the world at delivering on the promises in that value proposition. While every business owner recognizes the importance of “unusual offering” in helping a small business grow, many do not have one of their own. Many confuse “unusual offering” with marketing and positioning. A common mistake many owners make is to create their marketing before they really develop an “unusual offering.” Worse, some develop an “unusual offering” on paper that they cannot back up through operations. It should work in reverse. Once you develop and master your unusual offering, your target clients will easily choose you over your competition. Then you can create marketing campaigns that make it easy for people to notice you, and have salespeople that can convert the core clients as they walk into the sales process.

So How Do You Create An Unusual Offering?

In order to get your business strategy right, your unusual offering may not need to be a dramatic change from your current offering. You may already have an unusual offering that you have not isolated. You want a good bundle or aggregation of products and services that help solve clients’ needs in a special way that totally fits their situation. You may have the same mix of elements as your competition, but you can combine them differently or decide to add or subtract items from your offering in untraditional ways. You should also consider what your potential clients’ options are when configuring your bundle.

Elements That Add Value To An Unusual Offering

Depending on your core client and the options available to them, you need to consider how the following elements add value to your unusual offering:

• Price– What is their total cost today? Do they know what their total cost is? What would additional features, benefits, or services be worth to your prospect in terms of time, value to their clients, the growth of their business, reducing their stress, etc.? If you added new features, services, and benefits would they pay more for it, or would you just be increasing your cost of doing business?
• Cost/Risk Reduction– How can you modify your offering in a way that can substantially reduce client costs? How can the design of your product or service reduce risk for your client?
• Trends– What industry-wide trends are occurring technologically, economically, and environmentally that call for a new advancement in how your product or service is sold, delivered, distributed or marketed?
• Performance– What performance enhancement to your product or service is most valuable to your client? Would your client pay more for this enhancement? Would you lose clients to a competitor that made the enhancement while you did not? Is this enhancement necessary to keep up with minimum expectations? At what point does the performance improvement no longer make a difference in the client’s buying patterns?
• Customization– To what extent does customization to a product or service significantly enhance value?
• Design– To what extent does design make a difference in the usability of your product or service? Can design make your product more appealing or usable?
• Brand/Status– To what extent does brand or status influence the buyer?
• Accessible– Is there a way that you can make your offering more accessible to your target client?

Source