Page 79 - Operations Strategy

54 CHAPTER 2 • OPERATiOns PERfORmAnCE
of the excellence of its operations managers in enhancing quality and delivery, revenue
increases by 5 per cent and costs reduce by 5 per cent. Revenue now is 1,050, 000 and
costs 855,000. So, profit is now 195,000. In other words a 5 per cent change in cost and
revenue has improved profitability by 95 per cent.

Operations affects the required level of investment
How an operation manages the transforming resources that are necessary to produce
the required type and quantity of its products and services will also have a strategic
effect. If, for example, an operation increases its efficiency so that it can produce (say)
10 per cent more output, then it will not need to spend investment (sometimes called
capital employed) to produce 10 per cent more output. Producing more output with the
same resources (or sometimes producing the same output with fewer resources) affects
the required level of investment.

Operations affects the risk of operational failure

Well-designed and run operations should be less likely to fail. That is, they are more
likely to operate at a predictable and acceptable rate without either letting customers
down or incurring excess costs. And if they ever do suffer failures, well-run operations
should be able to recover faster and with less disruption (this is called resilience).

Operations management affects the ability to build the capabilities
on which future innovation is based

Operations managers have a unique opportunity to learn from their experience of oper-
ating their processes in order to understand more about those processes. This accumu-
lation of process knowledge can build into the skills, knowledge and experience that
allows the business to improve over time. But more than that, it can build into what are
known as the ‘capabilities’ that allow the business to innovate in the future.

example novozymes 5

It’s not surprising perhaps that a company whose products help other firms to operate more
sustainably should itself be keen to stress its own environmental and social performance. This
certainly is true for Novozymes, the Danish-based company, whose worldwide production of
enzymes, microorganisms, and biopharmaceutical ingredients help their customers in the
household care, food and beverage, bioenergy, agriculture and pharmaceutical industries to
‘make more from less, while saving energy and generating less waste’. Novozymes is the world
leader in what it terms ‘bioinnovation’, particularly in the field of enzyme production and appli-
cation. Enzymes are proteins that in nature initiate biochemical reactions in all living organ-
isms. It is enzymes that convert the food in our stomachs to energy and turn the falling leaves in
the forest to compost. Novozymes’ operations find enzymes in nature and optimise them so that
they can replace harsh chemicals, accelerate their customers’ production processes and mini-
mise the use of scarce resources. These enzymes are widely used in many industries, including,

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