Page 349 - Operations Strategy

324 CHAPTER 9 • THE PRoCEss of oPERATions sTRATEgy – foRmulATion And imPlEmEnTATion
obvious how certain assets are dedicated to specific tasks and not readily transferable,
but more broadly the whole profile of an organisation’s operations strategy can cre-
ate inertial forces. For instance, IBM’s vertically integrated production system made
it the largest chip manufacturer in the world. This technological independence had
an inevitable influence upon its delayed decision to purchase Intel’s market-leading
80386 chip. Similarly, the agreement with Microsoft that overlooked Windows was
internally justifiable because at that time the software was just a prototype and it had
its own system in development.
● Investment bias – Operations will tend to invest further in those resource/ requirement
intersections that have proved successful. Regardless of whether this takes the form
of extra capacity, additional R&D expenditure or staff recruitment etc., investment
here appears to offer a more reliable return. Given a finite resource base to draw upon,
other aspects of the operation can easily suffer comparative neglect.
● History – Organisations become constrained by their own history. Once systems and
procedures and ‘ways of working’ are established, it becomes difficult and expensive
to change them. So, for example, even though IBM invented both floppy disk and
hard drive technology, the firm saw itself as ‘a supplier of integrated systems’ and
therefore it did not sell these components – effectively leaving other firms to make
a fortune from their invention.
● Organisational structures/political forces – Often overlooked in rational discussions
of operations management, political forces have an enormous influence. In all
operations there are individual managers and influential groups who compete for
resources with their different priorities, opinions and values. In an organisation the
size of IBM (in the mid-1980s), the combination of a cumbersome organisational
structure (a single hierarchy for the whole business) and political machinations
effectively killed off its entry into the PC market. Its first model, in 1981, had been
very successful but the supposedly mass-market PC Jr. model (intended for launch
in July 1983) was delayed by senior management interference. The company intro-
duced an inferior keyboard, scrapped plans to sell it in department stores, missed the
crucial Christmas sales period and gave it too high a price. A year later, IBM dropped
the price, sold through different outlets and realised it was too late – its competitors
had developed new, more appealing models.

how do we know when the formulation process is complete?

Back in Chapter 1 we introduced the idea of the operations strategy matrix. We sug-
gested that, because it emphasised the intersections between what is required from
operations (in terms of the relative priority that should be given to each performance
objective) and how the operation tries to achieve this through the choices made in each
decision area, it was a useful device to describe any organisation’s operations strategy.
At least, it could act as a checklist to ensure that the organisation had been reasonably
comprehensive in considering different aspects of its operations strategy. In fact, we can
use the matrix to go further than merely describe an operations strategy. We can use it
to question, develop and even formulate strategies. Indeed, using the matrix to check
for comprehensiveness could be considered the first step in a formulation process. Here
we will use the matrix to explore some of the most basic aspects of operations strategy
formulation (see Figure 9.5):

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