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356 The proCess oF operaTIons sTraTegy – monITorIng and ConTrol

is increasing as firms try to protect their reputations from the harm caused by faulty goods,
according to Reynolds Porter Chamberlain, a London law firm.
‘Corporate reputations have become more fragile as consumers increasingly use the internet and other
media to share and publicise information about faulty products. The Sony laptop battery debacle,
which saw nearly 10m battery packs recalled, is a perfect example. The growth of sites such as You-
Tube meant millions of consumers saw videos of a computer spontaneously catching fire due to the
fault. The legal costs and compensation paid out can be colossal, so the need to recall quickly is vital,
and so is insurance cover. With consumers becoming ever more litigious, companies are playing it
safe and recalling even where the risk of a liability is slight. They know the courts and the press will
punish them if they are seen as dragging their feet.’

adjustment cost risk

It is worth emphasising that any implementation methodology will need to account
for the costs of implementation. These costs include both the direct and/or invest-
ment costs of providing whatever additional resources the strategy requires, and also
what could be termed the adjustment cost of making any changes. By adjustment costs
we mean the losses that could be incurred before the new strategy is functioning as
intended.
Calculating the true costs of implementing any strategy is notoriously difficult. This
is particularly true because, more often than not, Murphy’s Law seems to prevail. This
law is usually stated as, ‘if anything can go wrong, it will’. This means that most imple-
mentations will incur ‘adjustment costs’ before the strategy works as expected. This
effect has been identified empirically in a range of operations, especially when new
types of process technology are involved. Specifically discussing technology-related
implementation (although the ideas apply to almost any implementation), Bruce
Chew of Massachusetts Institute of Technology argues that adjustment costs stem from
unforeseen mismatches between the new technology’s capabilities and needs and the
existing operation. New technology rarely behaves as planned and as changes are made,
their impact ripples throughout the organisation. Figure 10.9 is an example of what
8
Chew calls a ‘Murphy Curve’. It shows a typical pattern of performance reduction (in
this case, quality) as a new process technology is introduced. It is recognised that imple-
mentation may take some time; therefore, allowances are made for the length and cost
of a ‘ramp-up’ period. However, as the operation prepares for the implementation, the
distraction causes performance to deteriorate. Even after the start of the implementa-
tion, this downward trend continues and it is only weeks, indeed maybe months, later
that the old performance level is reached. The area of the dip indicates the magnitude
of the adjustment costs, and therefore the level of vulnerability faced by the operation.

Intervention risk – getting performance back on track

Monitoring involves tracking how an implementation is progressing and interpreting
the tracking data. Control requires decision and intervention. Decisions are needed as
to whether to intervene or not, as well as how to intervene. Intervention means not
only doing something to bring the implementation closer towards its objectives but
also learning from the intervention, so that future interventions will be better targeted.

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