Home | Current Issue | About Us | Subscribe | Advertise
Contact Us
| Feedback
| 4Ps TEAM
| 4Ps Archives
International Column : Exclusive

Special Columns
Arindam Chaudhuri, Editor-in-Chief, 4Ps B&M Chief Consulting Editor's Desk
Rajita Chaudhuri
K.K.Srivastava Guest Column
K.K.Srivastava
Share |
Go to Page Number - 1   2   
SAID BUSINESS SCHOOL
“Operations can be a source of competitive advantage”
Huge cost-overruns & functionality shortfalls have plagued firms for years. But what can be done about these problems and the way they can damage a firm’s operations?
Issue Date - 08/09/2011
 
Operations were once considered the bane of the truly ‘strategic’ manager’s life: a necessary evil in a world in which operations’ only purpose was not to mess things up too badly. A focus on short-term financial results and cost-minimisation served only to reinforce this mindset – and we still see many stumbling relics of this world-view today. Operations, however, have become a primary engine of competitive advantage in successful twenty-first century firms; the ability to generate new revenue, because you can actually do something that others can’t, is a powerful capability.

A number of research projects at Saïd Business School have begun to explore how this powerful idea can be exploited in environments far away from the factory floor; in the world of information technology and knowledge work, for example, and even in the fields of some of the poorest farmers in India.

Making software projects work
Software projects are notoriously late, over-budget and bug-ridden. Huge cost-overruns and functionality shortfalls have plagued companies for many years. FoxMeyer Drug Company – the fourth-largest pharmaceutical distributor in the US – was put out of business by their IT disaster. Even small start-up companies are not immune: Foremostco – a family-run Miami-based distributor of plants for nurseries - almost lost their precious company because of a new IT system that did not allow them to deliver their great products on time. We have all heard of similarly infamous problems. But what can be done about these problems and the way they can damage the heartbeat of any company – their operations?

As part of research collaboration with Wipro – a major Indian software producer – we have been able to test some new ideas to improve performance in software projects, using many of the principles developed by Toyota and others (collectively know as ‘lean’ techniques). Wipro’s cost advantage in software production had long become eroded. The quality of their software was as good as any in the world; yet even so, competitors at home and abroad were catching up. This challenged Wipro to develop new sources of competitive advantage: to be faster, cheaper and better – and to improve performance every single day.

We were able to work with Wipro as they began to mould lean principles to their own peculiar knowledge-based environment. Several hundred of their thousands of projects were singled out for the experiment. Some would use the new lean principles, and others would continue using traditional techniques. What we discovered was quite remarkable: dramatic improvements in project cost and predictability and comparably significant leaps in lead-time and responsiveness for the ‘lean’ projects. Quality, strangely, was unaffected. This was an unexpected result, but such puzzles are what make business research so interesting and important. Wipro have now begun to roll-out these lean ideas to many other projects, and have been able to sell their new-found capability to their global clients to help them improve their own, often larger, software projects. This is now an operational capability that delivers and captures genuine economic gains.

 
Building new operations
Japan’s Shinsei bank was built on the ashes of the failed Long Term Credit Bank of Japan. By building innovative operations, the relaunched company was able to rise to become the best bank in Japan – in terms of customer service – and build capabilities that were the envy of those around them. Some of the operational ideas were deceptively simple. For example, to encourage customers to do their banking more cheaply online, Shinsei built double-sided screens for their tellers. The customers’ side showed the simple web interface that the teller was using to perform the transaction and customers quickly realised that they could carry out mundane banking transactions themselves – at first using Internet terminals in the bank, but ultimately in the convenience of their own homes.

Many such operational capabilities fuelled Shinsei’s improvement. More cleverly, when building their new systems, Shinsei relied on lower-cost IT operations around the world, and subcontracted much of the work. But they maintained control of the architecture of their new operations, and avoided giving any single company too much of the work. By doing so, they protected the secrets of their competitive advantage. Ultimately, the new bank systems were built at one-tenth the cost, and a third of the lead time of the standard, off-the-shelf solutions. What’s more, they had built a distinctive operations-based competitive advantage, and had protected it by not outsourcing the keys to the kingdom.

Operations bringing power to the poor
Small soy farmers in India have been squeezed and cheated into poverty for many, many years. After the British left, to avoid any abuse of monopsonistic power by large corporate buyers, a set of laws mandated that all sales of agricultural products be carried out in competitive marketplaces called mandis. The marketplaces, however, had become corrupt and anything but competitive. Buyers would collude to depress the prices paid to farmers, and farmers would be forced to accept because there was no alternative, and because the prospect of carrying their produce many miles back to a farm with no storage capacity was even less appealing than the meagre price they were offered.

          
Share |
 
Go to Page Number - 1   2        Next
 
 
 
 
Home | Current Issue | About Us | Subscribe | Advertise | Contact Us | Feedback | 4Ps TEAM | 4Ps Calendar | 4Ps Archives
 
4Ps Business and Marketing is also associated with :
Copyright © Planman Media Pvt. Ltd. 2004-2007 All Rights Reserved