EIN 6133Enterprise Systems Engineering Chin-Sheng Chen Florida International University
T5: Enterprise facets • Element facets • Strategy • Competency • Capacity • Structure
Readings & References • Readings: • HEA: Chapters 4, 6, & 8 • Reference • “What is strategy?,” by Michael Porter, HBR, Nov-Dec, 1996. • Strategy Maps by Kaplan and Norton, HBS, 2004 • Strategic management, 4th edition, by Burgelman, etc. , McGraw-Hill, 2004
Enterprise facets – strategy (1) • Definition • Michael Porter,1996, HBR • Creating fit among a company’s activities • Selecting the set of activities in which an org. will excel to create a sustainable difference in the marketplace. • The sustainable difference can be to deliver greater value to customers than competitors or to provide comparable value but at a lower cost than competitors • Differentiation arises from both the choice of activities and how they are performed. • A long-range plan in a hierarchical structure of goals and objectives, and a selected way of creating a fit between external environment, and internal resources and capabilities • Kaplan and Norton (in Strategy Maps, 2004) • Strategy describes how an org. intends to create sustained value for its shareholders.
Enterprise facets – strategy (2) • Alternative views of strategy (classic) • One ideal competitive position in the industry • Benchmarking of all activities and achieving best practice • Aggressive outsourcing and partnering to gain efficiencies • Advantages rest on a few key success factors, critical resources, and core competencies. • Flexibility and rapid responses to all competitive and market changes.
Enterprise facets – strategy (3) • Alternative views of strategy (sustainable competitive advantage) • Unique competitive position for the company • Activities tailored to strategy • Clear trade-offs and choices vis-à-vis competitors • Competitive advantage arises from fit across activities • Sustainability comes from the activity system, not the parts. • Operational effectiveness is a given.
Enterprise facets – strategy (4) • Reconnecting with strategy by identifying company’s core uniqueness: • Which of our product or service varieties are the most distinctive? • Which of our product or service varieties are the most profitable? • Which of our customers are the most satisfied? • Which customers, channels, or purchase occasions are the most profitable? • Which of the activities in our value chain are the most different and effective?
Enterprise facets – strategy (5) • Strategy hierarchy • Possible layers • Corporate vision and goals • Business unit strategy • Functional tactics • Purpose: • To ensure consistency up and down the organization • Danger: • Being viewed as an elitist view of management from top down • Opportunity • Develop ways to harness the “wisdom of anthill” such as QCC (quality control circles)
Enterprise facets – strategy (6) • Dominant schools of strategic mgt. • Pragmatic knowledge • A rational process of deliberate calculation and analysis designed to maximize profit by setting goals and cascading them down to actions and resources • Conceptual knowledge • A question-answer process to understand the nature of competition and make business decisions accordingly. • Resource-based view • A process that focuses on exploiting and deploying resources to sustain superior performance.
Enterprise facets – strategy (7) • Schools of pragmatic strategic mgt. • Design school • A deliberate process of conscious thought • Planning school • Formalize the deliberate process into a formal planning methodology with techniques and checklists • Positioning school • Shifting focusing on a strategy formation to strategic content
Enterprise facets – strategy (8) • Positioning school of pragmatic strategic mgt. • Five forces that determine the inherent profit potential of an industry and thus help a firm to find a product/market position • Entry barriers • Threat of substitution • Bargaining power of suppliers • Bargaining power of buyers • Rivalry among industrial incumbents • Decision making process • Pick an industry based on its structural attractiveness • Choose an entry strategy based on conjectures about competitors’ rational strategies. • if not already possessed, acquire or otherwise obtain necessary resources to compete on the market. • Decision is usually reduced to choosing a generic strategy such as cost leadership, differentiation, and focus to avoid being caught up in between (in the transition stage).
Enterprise facets – strategy (9) • Schools of conceptual strategic mgt. • To answer the following questions • Why do firms differ? • How do firms behave? • What explains the success and failure for firms? • How does the strategy making process affect strategic outcomes? • How do differences persist?
Enterprise facets – strategy (10) • Schools of conceptual strategic mgt. • Transaction cost economics • Efficiency is the only comparable advantage • Managers must concentrate on their cost, especially the transaction costs of organizing and coordinating • It is the force behind make-or-buy decisions, mergers, acquisitions, and strategic alliances. • Chaos theory • To address the issues of unpredictable, intense, and high-velocity-changes nature of modern industry • Focus on internal response to chaos such as time pacing, continuous flow of competitive advantage and organizational structure • Remain flexible in an uncertain world • Game theory • Use game theory tools to analyze the nature of competitive interaction between rival firms and to reveal how a firm can influence the behavior and action of rival firms and thus the market environment, viewing business as a series of moves and counter moves. • Make decisions about marketing variables, capacity expansion, and reduction, entry and entry-deterrence, acquisitions, bidding, and negotiation.
Enterprise facets – strategy (11) • School of resource-based strategic mgt. • A firm is conceptualized as bundles of resources and capabilities, with which the firm competes • They cannot be bought or sold in markets and must be developed rather than being taken as given. • Thus the source of sustainable superior performance lies internally in the capacity to exploit and deploy resources. • A firm must focus on its internal organization and place a focus on strategic positioning (for use of its resources) • There is a shift from traditional schools (a portfolio of products or a network of moves) to the resources based view (portfolio of resources and competencies)
Enterprise facets – strategy (12) • Strategy issues of system elements • Work strategy • Focuses vs. diversified products/services • Cost vs. lead time vs. quality • Decision strategy • Corporate culture • Organizational structure • Resource strategy • In-house vs. virtual resources • Cultivation vs. hiring/firing • Information strategy • In-house development vs. acquisition • Trade secret vs. patent
Enterprise facets –competency (1) • Definition, competency • The quality or condition of being legally qualified for or technically capable of. • Also known as capability • An attribute of a resource as skill, of information as know-how • A building block for work and decision • Common unit of elemental competency - operation • An operation is a business activity that has a duration, start event, and end event. • It requires resource(s), with a specific skill (ability) and following a fixed procedure, to perform the activity.
Enterprise facets – competency (2) • Competencies (in terms of operation types) (1) • Productive • Engineering operations • Engineering analysis, design, drafting, etc. • Manufacturing operations • Machining, forming, finishing, treatments, joining, assembly, etc. • Maintenance • Operational • Production/service operations • Operation planning, acquisitions (resources & service), accounting, etc. • Marketing/sales operations • Administrative operations • HR, PR, IT, IP, security, etc.
Enterprise facets – competency (3) • Competencies (in terms of operation types) (2) • Executive • Monitoring operations • Monitoring • Auditing • Control operations • Quality control (IQC/IPQC, etc.) • Shop floor control • Approval (work plans including changes) • Test
Enterprise facets – competency (4) • Definition, flow • A network of activities arranged in their logical sequence for a purpose, starting from one end and proceeding to the other. • A flow is an aggregation (or network) of competency units of a varying size • Each flow must have a system element that flows through the resources which perform an activity. The flowing element must be a resource or information. That is, a work (or decision) flow occurs via an agent of either material or information element.
Enterprise facets – competency (5) • Related flow concepts • Each system entity (element) has a life cycle of activities from birth to death (forming a flow). • An entity may have (or be associated with) a variety of flows in its life cycle • Workers may have flows of activities defined for going cafeteria, restroom, material retrieval, etc. • Flows can be nested • Competency analysis may start with decomposing work and flows existing in the company
Enterprise facets – competency (6) • Competency and flow of system elements • Work competency and flow • Work competency • Work flow (network of work activities) • Decision competency and flow • Decision competency • Decision flow (network of decision activities) • Resource competency and flow • Resources competency • Resources flow • Information competency and flow • Information competency • Information flow
Enterprise facets – competency and flow (7) • Work competency and flow • Work competency • Defined by productive competency units of a varying size • Work flow • Network of productive competency units • Substantiated via one or more material (and/or information) flow between resources.
Enterprise facets – competency and flow (8) • Decision competency and flow • Decision competency • Defined by managerial/executive competency units of a varying size • Decision flow • Network of managerial competency units • Substantiated via a material (or information) flow between resources. • A note on business process • A work flow nested with decision flow(s)
Enterprise facets – competency (9) • Resource competency and flow • Resource competency • Characterized with productive, managerial, or executive competency units of a varying size, which usually is “operation.” • Resource flows • Each resource may have its own flow(s) between other resources • Critical flows • Material flow • Work flow, rework flow, scrap flow • Human flows • Material handling (involving one or more resources), human maintenance • Cash flow • Utilities flow • Machine and tooling flow • Maintenance, etc.
Enterprise facets – competency (10) • Information competency and flow • Information competency • Characterized with productive, managerial, and executive competency units of a varying size, which usually is “operation.” • Information flow • Each information may have its own flow(s) between resources. • Information may flow between resources due to • its being worked on (similar to material and WIP) or • its being used in support for an activity (similar to labor and machine)
Enterprise facets – capacity (1) • Capacity, definition • The quantity (amount) required for an enterprise element
Enterprise facets – capacity (2) • Work capacity (requirement) • The amount of work required to be done • Depending on work forecast (or orders) in terms of its revenue, input, output, etc. • Decision capacity (requirement) • The amount of decision required to be made • Depending on decision needs as imbedded in the business process design • Resources capacity (requirement) • The amount of resources required to perform productive, operational, and executive activities • Information capacity (requirement) • The amount of information required to perform business activities with (which may be limited by duplicity, license, and serving agents)
Enterprise facets – structure (1) • Structure, definition • The relationship (or organization) of intra/inter elements of an enterprise system • The structure is shaped by company’s strategy, competency and capacity.
Enterprise facets – structure (2) • Work structure • Work hierarchy • Program (not a work order) • Project • Deliverable item • Task • Sub-task • Operation • Step • Work constraints • Hierarchical (managerial) • Lateral (technical)
Enterprise facets – structure (3) • Resources structure • Resources hierarchy • Company • Division • Factory (plant) • Department • Section • Group • Individual • Structure types • Functional • Pure-project • Matrix
Enterprise facets – structure (4) • Decision structure • Decision hierarchy • Strategic • Tactic • Operational • Decision processes are based on work and org. structure • Each productive operation may be followed by a decision process (or activity) • Thus each work hierarchy may be coupled with a hierarchy of decisions
Enterprise facets – structure (5) • Information structure • Production data • Organized by work order • Some production data may be translated into knowledge or engineering data after the work order is done. • Engineering data • Organized by: • Operation type or • Business process • Knowledge data • Organized by: • Operation type or • Business process
T5 Homework • Relate work structure to work flows and business processes. Explain and justify • Due date: next week