MGT 3501 Exam 1

Prioritizing Product Design

Criteria firms use to prioritize which ideas to move forward: • Market Size • Profit • Cost • Urgency • Timing Companies have limited resources, capital, and time

Strategic Decision: Peloton

Make PROACTIVE strategic decisions, NOT REACTIVE

What is Management of Technology?

Manage a firm's resources, strategy, processes, and marketing to facilitate successful innovation under rapid conditions of change Development Process: Idea -> New Product/Service Deployment Process: Choosing projects -> Management Strategy -> Managing Processes -> Protecting Innovation -> Going to Market -> Making $$$

Finished Goods Inventory

Material that has been removed from inventory, finished the production process, but not yet shipped

WIP (Work in Process)

Material that has been removed from inventory, put into the production process, but not yet finished or shipped.

Converting waste into $$$

Nerds example

Throughput Rate

Number of units going through a process per unit time

What is Operations Management?

Operations Management is the management (design, operation, improvement) of the processes that transform material, labor, energy and information into goods and services. -Operations turns Sales into Profit! -Operations is the foundation of any company.

Productivity

Productivity = Ratio of inputs to outputs Inputs - Materials & Labor Outputs - Products produced & Customers served • Productivity measurement is relative (must check in context)

Process Improvements

Serial - Step 1 must be performed before Step 2 begins Parallel - Steps can be performed at the same time to reduce total process time

Process Analysis Methods

Six Sigma - Eliminate defects in processes using data driven decisions Lean Management - Eliminate waste, then simplify what is left Lean Six Sigma - Combination that uses Six Sigma methods to eliminate defects and waste • Customers determine what is a defect and what is waste!!

Technology Value

To successfully overthrow an existing dominant technology, new technology must either: • Offer dramatic technological improvements • Compatibility with existing installed base and complements

Buffer

a storage area between stages where the output of one stage is placed prior to being used in a downstream stage

Starving

occurs when the activities in a stage must stop because there is no material to work on

Bottleneck

stage in the process that limits the performance or capacity of the entire system (the longest part in a process)

Cycle Time

the time required to complete a function, job or task from start to finish.

Process Analysis

• A process is a series of independent tasks that transforms an input into an output that is of higher value • We analyze processes to identify inefficient (useful but can be improved) & ineffective (a waste, need to get rid of what you don't need) tasks • Process improvements can provide enormous value to companies

Importance of Complimentary Products

• A product's desirability is a function of the availability of complementary goods • Products that have large installed bases are likely to attract more developers of complementary goods • This cycle is self-reinforcing (Virtuous Cycle)

Strategies for Growth

• Concentration - focus on what you're doing • Integration Vertical - Suppliers (inputs) or Distributors (outputs) Horizontal - Combining with competitors • Diversification - move into another industry, business type, product, etc.

The Importance of Timing

• Consumers may not fully understand it • Ecosystem may not exist to support it • Is the quality good enough

Implementing Process Improvements

• Create the urgency • Form a coalition • Answer "why do we need to change?" • Answer "what's in it for me?" • Communicate • Remove obstacles • Create small wins • Reevaluate and improve

Competitive Strategy Options

1. Cost Leader - make it cheaper 2. Differentiator - make a great/unique product/service, deliver it quicker 3. Combination (excel at both) The firm must: • Decide on a competitive strategy • Understand the order qualifiers, order winner, and switching cost criterion • Execute better than their competitors!!!

Importance of Operations (Holy Grail of Operations)

1. Short lead time / On Time 2. Low Cost 3. Performance / Quality -Most companies achieve 2 out of the 3 -Amazon is a good example of achieving all three -Sears was stuck in the middle and died

Decision Making Steps

1. Understand exactly what you are deciding 2. List all the potential options available 3. List the impact if you move forward with each option (pros/cons, trade-offs, etc.) 4. Select the option to move forward with 5. Understand why you picked the option you did, and why you did not pick the other options 6. Execute it Never lock into one option, without exploring the others!

Competitive Strategy Building Blocks

Four factors that companies must address to build and sustain competitive advantage through operations: 1. Superior Quality 2. Superior Efficiency 3. Superior Innovation 4. Superior Customer Responsiveness (MOST IMPORTANT) Trade-Off: Which to excel at Which to be "okay" at

Process Variability cont.

How can firms reduce variability? • Backup machinery/equipment • Cross train employees • Automation • Backup suppliers What does reducing the amount of variability do to process output? • Makes it predictable (Levels the output) What is the best solution: • Inventory buffers (helps hide variability and continue production) • Reduce variability

Innovation

Incremental Disruptive: makes existing product obsolete • New features or functions • Superior performance • Superior quality • Convenience • Physical characteristics • Revenue stream

What is Operations Strategy?

The goal directed ACTIONS a firm intends to take in its quest to gain and SUSTAIN a competitive advantage. -Strategy is not fixed; revisit strategy becuase change happens quickly (constantly adjust/adapt) -Must EXECUTE!! -Solid business strategy is not enough -Operations is where execution happens

Product Development

The process beginning with the perception of a market opportunity and ending in the production, sale and delivery of a product • Without innovation, the firm will not survive • Someone else will come along and do it better, faster, or cheaper

Utilization

The proportion of available time that a piece of equipment or system is operating

Process Flowcharting

The use of a diagram to present the major elements of a process • First step in analyzing a process • Can include tasks or operations, flows of materials or customers, decision points, and storage areas or queues. • Visually allows you to analyze a process, identify bottlenecks, redundant tasks, worker overloads, parallel tasks, etc. Swim Lane: Great for cross-functional processes Flow Diagram: Great for analyzing process statistics

Process Variability

Variation is the difference between the actual output of a process and the designed output No Buffers between Workstations => Stations are DEPENDENT upon each other. Variability in ONE station effects the output of the ENTIRE process. Buffers between Workstations => Stations are INDEPENDENT upon each other. Minimizes the impact of Variability on the ENTIRE process BUT does not reduce variability.

Customer Led Product Design

VoC is better for incremental product improvements

Cycle Time = (Setup Time + (Batch Size x Production Time))/Batch Size

Ways we can decrease Cycle Time: - Reduce the Setup time or Production time - Increase the Batch size

Deployment Strategy

• Development does not end with a working product/service • We must manage the deployment of the technology to the market to give ourselves the greatest chance of success • What is "Deployment Strategy"? - Influence/Set the customer expectations - How to distribute the technology - How to manage complimentary goods - Who is our initial target market - How will we generate revenue - How will we create production capacity • Deployment strategy can impact the success/failure of your innovation - Backward compatible? - First mover, or wait and learn - Self-create complimentary products vs Allow 3rd party - Cannibalize existing technology?

Market Entry

• First Mover • Early Follower • Late Entrants Each has it's pros and cons • First movers often have higher returns and survival rates • Other research says the first firm to market is often the first firm to fail • And other research says the higher returns outweigh the survival risk How you manage the technology > timing

Deployment Strategy Reality

• Innovators and Early adopters seek disruptive innovations and are risk-seeking • Mainstream majority seeks proven solutions with no risk • Crossing the Chasm requires penetrating ONE market segment before diversifying

What real world events can cause production variability?

• Machine downtime • Human attendance/performance • Quality defect rate • Raw material supply issues • Natural disasters

Success Factors

• Order Qualifiers (bare minimum to consider) • Order Winners (criteria to win you over) • Both must be constantly updated (winners eventually become qualifiers) • Switching Costs (keep customers loyal & prevents you from switching)

Product Designs Faling

• Quality • Inability to Scale • Timing • Marketing (set unrealistic expectations, forecast was flawed)

Keep It Simple

• Simple strategy that is executed well is better than a grand strategy poorly executed • Better to improve execution of the basics Basic metrics: • Customer Satisfaction • Customer Retention • Defect Rate • On-Time Delivery

Innovation Adoption: Technology S-Curve

• The rate of a technology's improvement, and its rate of diffusion to the market typically follow an s-shaped curve • Technology improves slowly at first because it is poorly understood • Then accelerates as understanding increases • As the tech reaches its limits the cost of each improvement outweighs performance gains • Introduction of new technology may have lower performance than incumbent technology!

Stage Gate: Validate the Innovation

• There is no one "standard" stage gate process • They all have iteration loops to ensure alignment • At each gate, continuation is decided by stakeholders (Diversity of Knowledge) Stage Gate - Allows for review, validation and changes at every stage

Every second counts!

• When it comes to Process Improvements, every second counts • Serve more customers per unit time = More Revenue • Quicker service = Higher customer satisfaction • Higher customer satisfaction -> Customer loyalty