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2. AN INTRODUCTION TO DIFFERENTIATED LEARNING TOOLS
Participants in flexible learning programs have limitations on the nature of the
time they can spend on learning. Typically they are employed fully or partially,
pursuing higher studies or have other social and familial responsibilities.
Availability of time is a great constraint to these students.
To aidthe participants,we have developedfour unique learningtools as below:
Bullet Notes : Helps in introducing the important concepts in each unit
of curriculum, equip the
student during preparation of
examinations and
Case Studies : Illustrate the concepts through real life experiences
Workbook : Helps absorption of learning through questions based on reallife nuggets
PEP Notes :Sharing notes of practices and experiences in the Industry will help the student to
rightly perceive and get inspired to learn concepts at the cutting edge
application level.placementinterviews
Why are these needed?
Adults learn differently from B. School or college going
students who spend long hours at campus.
Enhancing analytical skills through application related learning
kits trigger experiential learning
Availability of time is a challenge.
Career success increasingly depends on continuous learning
and success
What makes it relevant?
How is it useful?
Where does this lead to?
As and when you get 5 to 10 minutes you can read one of these and absorb and comprehend.
Spending more time is your choice.
You can use the time in travel, waiting for meetings, lunch time, small breaks or at home
usefully.
Through these tools, the learning bytes are right sized for ease of learning for time challenged
participants.
The content starts from practice and connect to precept making it easy to connect to industry
and retain.
They can be connectedto continuous assessment process of the academic program.
Practitioners can use their real life knowledge and skill to enhance learning skills.
Immediate visualization of the practical dimension of the concept will offer a rich learning
experience.
3. Easier to move ahead in the learning process.
Will facilitate the student to complete the program earlier than
otherwise.Helpsstay motivated and connected.
When is it useful?
6. INTRODUCTION
Participants in ICFAI University Programs are eager to apply theory to practice. They realize that
application orientation can enhance their learning and subsequent usage of management precepts and
practices. Picking out the principle behind real world events is critical to this learning. Towards this end
the institution has introduced the PEP Notes.
The PEP Notes (Practice, Experience and Perspective Notes) is a collection of annotative notes on
practices, experiences and perspectives from industry as appearing in articles from reputed sources such as
Harvard Business Review, Economist, Mckinsey Quarterly, Accenture, Bain Consulting etc.
Practice : Organizations follow practices based on their past learning
Experience: Based on changing context, they face fresh experiences
Perspective: Organization learns from the experience and the practice to gain fresh perspective
These notes connect the three dimensions of the real world to key concepts in the subject. Each note is
brief – about one to two pages and is adapted from the article referred to in the note. The concept
underlying the note is highlighted in a box. The concept is also connected to the article through an
introductory abstract in a boxat the beginning.
The learning outcomes expected are:
1. Real world Application based approach significantly enhances absorption and retention.
2. Exposure to the current trends,practices with illustrations connect back to theory.
3. Thoughts from leading sources.
The PEP Notes may be used for Assessment.
vii
7. CONTENTS
Block I:
Project Management – An Overview 11
1. Project Parameters 12
2. Community Focus in Critical Projects 13
3. Eco-Friendly Operations in China 14
4. SWOT Analysis 15
5. Dos and Don‘ts of Product Development 16
Block II:
Project Planning and Control 17
6. Changing Energy Systems 18
7. The IMAX Success Story 20
8. Next Shoring Trends in Operations Strategy 22
Block III:
Project Implementation and Closing 23
9. Risk Management 24
10. Risk Management in Global Supply Chains 26
11. Quality Circles 28
12. Total Quality Management (TQM) 29
Block IV:
Introduction to Operations Management 30
13. Jugaad Approach for Developing an Operations Strategy 31
14. A New Era for Manufacturing in China 33
15. Badge Engineering as a Competitive Operations Strategy 35
16. Creative Destruction as an Operations Strategy 37
17. Strategy Building 40
viii
8. 18. Circular Economy and Operations Strategy 42
19. Enterprises of Future 43
20. A Rewarding Operations Strategy for Hospitality Industry 45
21. Co-opetition and Competitive Landscape 46
22 . Water Stewardship Strategy 48
23. Urgency of Innovation in Auto Industry 50
24. SuccessfulFlywheel Strategy 52
25. Competing on Outcomes 53
26. Shale Gas Exploration- the Success of a New Process Design 54
Block V:
Designof Facilities and Operations Planning 56
27. Shifting Locations of Global Operations 57
28. Capacity Planning 59
29. Inventory Control Systems 60
30. BHEL‘s Supply Chain initiatives 62
31. New Approaches to Resource Management 63
Block VI:
Operations Control 64
32. Exemplary Supply Chain Strategy 65
33. Energy-Water Nexus 66
34. Carbon Efficiency in Supply Chains 67
35. Recall is now a Regular Call 68
36. Emerging Approaches in Supply Chain Management 70
37. Safety in Transportation Systems 73
38. Prevention is Better than Cure in Safety 75
39. Just-in-Time (JIT) Manufacturing System 76
40. Lean at Amazon 77
41. Quality Culture 78
42. Globalization through Quality Management 79
ix
9. Block VII:
Introduction to Operations Management 80
43. 3D Printing- the Disruptive Technology 81
44. Globalization and Partnerships 83
45. Future of Manufacturing 84
46. Emerging Era of Global Manufacturing 86
47. Green Apple 88
48. Indian Auto Industry- Mahindra & Mahindra (M&M)‘s global plans 90
49. Corporate Social Responsibility at ACC 92
50. Eco-Friendly Resource Management- Indian Success Stories 94
51. Eco-Tourism 96
52. Sustainability through Coastal Shipping 98
53. Sustainability and Operations Strategy 99
54. Ford‘s Successful Sustainability Practices 100
55. Eco-Friendly Resource Management in Florida Ice & Farm, Costa Rica 102
56. Equity Bank‘s Success Story 103
57. Collaboration for Sustainability 104
58. Climate Change and Kyoto Protocol 105
59. Resource Management as a Competitive Edge - Seven Principles 107
60. Vision and Sustainability Management 110
x
10. Block I:
Project Management – An Overview
1. Project Parameters
2. Community Focus in Critical Projects
3. Eco-Friendly Operations in China
4. SWOT Analysis
5. Dos and Don‘ts of Product Development
xi
11. PEP Notes: Project & Operations Management
1. Project Parameters
All the project parameters are equally important while executing mission critical projects.
For General Elections 2014, Election Commission planned to procure Electronic Voting Machines (EVMs)
to ensure hassle-free election process. To ensure voter confidence about vulnerability of the EVMs to
tampering, a new feature of paper trail was introduced calling for designing and validating the solution
through field trials.
The project parameters to be satisfied by the suppliers for this highly sensitive project were
zero-defect quality and reliable operations during all associated processes -voting, counting,
storage and transportation
delivery as per stringent schedules and speed of all associated operations
flexibility of operations to accommodate the changing requirements
meeting the budgetary constraints ofthe Election Commission
What are Project Parameters?
The major Parameters of a project are scope, quality, time, cost and resources. The primary aim of a
project is to deliver a product and/or service to a client within the specified time, budget (resources and
cost) and according to the quality and performance specifications.
Anticipating tight schedules, the two companies, viz., Electronics Corporation of India Ltd. and Bharat
Electronics Ltd. standardized most of the modules. Even if some changes were to be incorporated, entire
project was not disturbed. While implementing the necessary changes in them, project planning was done by
changing the priorities but meeting the overall requirements as committed. McKinsey study reiterated that
cost and time overruns were very common in major projects. It was possible to improve upon these and other
project parameters like speed, flexibility and delivery by resorting to modular standardization as adopted by
ECIL and BEL.
DiscussionQuestions:
1. In a project like a power plant, what are the important project
parameters? Hint: customer requirements
2. Identify some important infrastructure projects where speed of delivery is very
important Hint: Project parameters and delivery
Sources: Jeff Hart, NielsPhaf and Koen Vermeltfoort, Saving time and money on major projects, McKinsey & Company
article, December, 2013
Unit Ref. Topic Course
1.5 Project Parameters Project & Operations Management
12
12. Block I: Project Management - An Overview
2. Community Focus in Critical Projects
In critical infrastructure projects like power, community interests take a priority over the interests of all
otherproject stakeholders.
Kudankulam Nuclear Power Project was a very prestigious project of the Government of India. Public
outcry on safety concerns delayed the commissioning of the project by more than a year, causing immense
loss in terms of availability of additional power and the revenues thereof, and assuaging the fears of public
took priority over every other project stakeholder.
The Nuclear Power Plant built at a cost of Rs.14000 crore was ready for commissioning in 2011. After the
Fukushima (Japan) nuclear disaster, people launched protests, raising concerns about nuclear power as a
clean and safe alternative to fossil fuels. People‘s Movement Against Nuclear Energy( PMANE) filed a
Public Interest Litigation (PIL) in the Supreme Court, which gave it permission to start the plant after
reviewing the assurances given by the Government and safety clearance by the Atomic Energy Regulatory
Board.
All the individuals, institutions and communities who matter to an organization are called stakeholders.
Stakeholders influence or are influenced by the project operations of an organization. In the context of
Project Management, there are some specific stakeholders in addition to the generic stakeholders
mentioned above. They are: project manager, project team members, and the sponsor and parent
organization. Global warming and climate change concerns brought to focus, NGOs (Non-
Governmental Organizations), General Public, the society and the surrounding community as the most
important project stakeholders due to the impact the operations of an organization may have on their
health and wellbeing. It is important for any operations strategy to take note of its community as
important stakeholders and mitigate their concerns in areas such as pollution and rehabilitation.
DiscussionQuestions:
1. Why do you consider community as important stakeholders in infrastructure projects?
Hint: dislocation and expectations for livelihood
2. What are the issues to be addressed in project management to ensure compliance to environmental
framework?
Hint: community and project stakeholders
Sources: Ratan Tata, Stuart L. Hart, Aarti Sharma and Christian Sarkar, Why Making Money Is Not Enough?, Sloan
Management Review, September,2013
Unit Ref. Topic Course
1.12 Project Stakeholders Project & Operations Management
13
13. PEP Notes: Project & Operations Management
3. Eco-Friendly Operations in China
China, the workshop of the world was emphasizing on environment-friendly operations.
Global warming became a major concern foreverybodyin viewof its widespread ramifications.As the biggest
polluter in the world, China‘s challenges were more severe.The Kyoto Protocol (the protocol on
environment signed by the member countries of the United Nations including India) called for control of
emissions by various countries. Many countries initiated measures to reduce Green House Gas (GHG)
emissions. At the behest ofthe UN, Standards were developed for environmental management. China was
reported to be the world‘s biggest polluter (produced twice as much CO2 as the US).
Air pollution in Beijing was 40 times above the safetylevel; One tenthoffarmland was poisoned with chemicals
and heavy metals; Half of China‘s urban water supplies were unsafe even forwashing,leave alone
drinking; 40% mammals were threatened in 2004 it and average life expectancy reduced by 5 1/2 years in
the northern part.
The initiatives taken for reduction of GHG emissions and ensuring eco-friendly operations are;
Allocated $275 billion to improve air quality over the next 5 years.
Mandated reduction in the unit consumption of energy by the industry
Created impressive solar and wind power plants
Planned to introduce carbon tax
Ensured carbon capture and storage and reduce emissions from heavy vehicles
Enforced prosecution of environmental crimes
What is Environment? (Reference: ISO 14001)and what are Legal Influences?
Environment comprises of the surroundings in which an organization operates, including air, water, land,
natural resources, flora, fauna, humans, and their interrelations. Surroundings in this context extend from
within an organization to the global system. Environmental Management is governed by a legal
framework which is formulated by the central government. It includes compliances, consents, approvals,
licenses to operate and penalties for violations. Every aspect has individual legal influences and the
stipulated requirements are mandatory. The Ministry of Environment and Forests of Government of India
codified all legal requirements.
DiscussionQuestions:
1. What and who are major polluters in the
world? Hint: Industry generateswaste
2. What major initiatives are required to minimise
pollution? Hint: Pollution and environmental threats
Sources: The Economist, August,2013
Unit Ref. Topic Course
1.15 Environmental and Legal Influences Project & Operations Management
14
14. Block I: Project Management - An Overview
4. SWOT Analysis
SWOT analysisis an essential tool for scanning the environment and formulating project management
objectives and strategies.
Replay Plastics Company was engaged in recycling plastic waste into commercially viable products, using eco-
friendly methods. The company wanted to establish the western UnitedStates‘ first PET (polyethylene
terephthalate) recycling plant. PET waste was found in post-consumer beverage and water bottles. The
recycled material from the PET plant was then channelled into a new Replay Plas tics Packaging Division,
which produced extruded sheet plastic to sell to manufacturers. Following was its SWOT analysis in 2012.
Strengths:Experience, Relationship Management and Location
Weaknesses: High Start-up costs,construction time
Opportunities:Major Facility expansion and R&D
Threats: Environmental Protection Standards and Material Scarcity
SWOT analysis is a structured planning method used to evaluate the Strengths, Weaknesses,
Opportunities and Threats involved in a project. It can be carried out for a product, place, industry or
person. It involves specifying the objectives of the project and identifying the internal and external
factors that are favourable and unfavourable vis a vis the objective. Developed by Albert Humphrey.
Strengths and weaknesses are internal to the company (reputation, patents, location) and improve over a
period of time. Opportunities and threats are external (suppliers, competitors, prices). Organizations had to
combat threats and exploit opportunities. Setting the objectives should be done after SWOT analysis.
Environmental Scanning is one of the essential components of the business environment analysis. It
helps in defining project objectives and formulating operations strategy. For the purpose of scanning,
the environment may be divided into six broad sectors: economic, governmental, technological, socio -
demographic, competition and supplier sectors. Firms use their competitive strengths to exploit the
market opportunities.
Identification of SWOT is important as they provide inputs for strategy formulation. First, the decision
makers should consider whether the objective is attainable, given the SWOTs. Objectives should be SMART
(Specific, Measurable, Achievable, Relevant and Time-bound). Users of SWOT analysis need to ask and
answer questions that generate meaningful information for each category (strengths, weaknesses,
opportunities, and threats) to make the analysis useful and find their competitive advantage.
DiscussionQuestions:
1. Why SWOT is suggested forproject management?
Hint: exploiting the strengthsand overcoming the weaknesses
2. How SWOT helps in formulating strategies and objectives for a project?
Hint: SWOT analysisand project management
Sources: SWOT analysis examples, http://articles.bplans.com/business/swot analysis, 2012
Unit Ref. Topic Course
2.5 Scanning theEnvironment Project & Operations Management
15
15. PEP Notes: Project & Operations Management
5. Dos and Don’ts of Product Development
Right product development was the foundation for business success but the process of development could
not be taken for granted.
Based on personalexperience, with a failed product by Cohen, an entrepreneurand CEO of a start-up
facilitator, 10 rules were framed for successfulproduct development.
Always keep the focus on the customer. Customer discovery process involves achieving the right
product-solution fit.If this is not proved,give up product development
Positionthe rightbusiness model.Don‘t try to initiate product developmentwithoutthe support of
adequate monetary and technical resources
Don‘t equate innovation with value. Don‘t attempt to improve a product simply by adding more
features to it or making it more complex. Failed products have a poorly planned user experience
making the devices difficult to use.
Customer and the user are not the same. A product popular with the users might not be so with
customers. For example, IT users and IT decision makers may think differently.
Goal for a start-up should be a minimum viable product-one that can be introduced into the market
and then build on with successive versions.Lean approach is recommended for product
development by start-ups.
Iterative approach is the best approach for product development - first develop the kernel, test it
through potential users,incorporate feedback into the revisions of the prototype and repeat the cycle
until the product is ready for release
Don‘t test a product with people who are not representing the potential customer base because
candid feedback may not be forthcoming
On-boarding (the process by which a userbegins to use a product)should be easy and intuitive. The
customer should be familiarized with the product and its features.
Don‘t ruin simplicity as it is the biggest feature in any product development approach
Don‘t ape Apple approach. It is a unique and inimitable case.
What is Product Development?
Every product has a life cycle and goes through various stages of the life cycles namely, introduction,
growth, maturity and decline. The different stages involved in the development of new products are idea
generation, feasibility studies, prototype design, prototype testing, and initial design of produ ct model,
economic evaluation, market testing and final design of production model. The development process
continues even after the launch of the product. The new product is modified or improved to constantly
adapt it to the changing market conditions and/or to incorporate the latest technology in it. Sometimes
customer feedback also provides vital inputs for product design, development and improvements.
DiscussionQuestions:
1. What are the main reasons for inadequate product development in India?
Hint: R&D and Product development
2. Identify five most important rules for product development as a part of Make in India
Hint: Product development and sustainability
Source: http://knowledge.wharton.upenn.edu/article/beware-the-ismell-10-rules-for-successful-product-
development/Jan,2014
Topic of Interest:
Unit/Sec.no Topic Course
4.2 Product/Service Design & Development Project & Operations Management
16
16. Block II: Project Planning and Control
Block II:
Project Planning and Control
6. Changing Energy Systems
7. The IMAX Success Story
8. Next Shoring Trends in Operations Strategy
17
17. PEP Notes: Project & Operations Management
6. Changing Energy Systems
In the energy sector, environmental sustainability remains a major challenge to be addressed in the
management of project scope.
Energy access
And Security
Econom ic
Environmental
Growth and
Sustainability
Developm ent
Energy access
And Security
World Economic Forum, as a part of working on New Energy Architecture Initiative, undertook a study to
understand the emerging changes in the global energy system and explore the ways of effectively managing
them. There were some important findings about India. India witnessed reas onable economic growth and
industrialization over the past two decades. During the financial crisis of 2009, the Indian economy
continued to achieve a good growth and is expected to continue on a growth trajectory. As per the study, the
challenges faced by India to ensure sustainable growth and development in the energy sector are:
Economic Growth and Development: inefficient use of energy and energy subsidies are
hampering growth and development when compared to other BRICS countries
Energy Intensity performance (score of 0.29/1 against the global average of 0.45/1) highlights
need for energy efficiency measures
Subsidies: India scores lowest performance due to subsidies
Environmental Sustainability: India is more reliant on coal and otherfossil fuels making
environmental impact and economic growth, the key focus areas
Emissions Intensity: The predominance of coal in the energy mix of India ranks it among the
lowest globally for CO2 emissions with an average performance of 0.09/1 against the global
average of 0.54/1- showing an average 54 mg/m3 against 20 mg/m3 annual mean stipulated by
WHO air quality guidelines.
Energy Security and Access: India, the lowest performer, scores 0.54/1, driven by import
dependence and low electrification rates.
Growing Import Dependence: India imports 28% of net energy, making it the most energy-
dependent. Mitigation of energy security challenges can be supported by implementation of
efficiency improvements to curb demand and through diversification of energy sources. India is
rolling out low-carbon power generation through plans to increase nuclear capacity fromthe current
4.4 GW to 5.3 GW by 2016. India has launched a Remote Village Electrification programme that
includes targets for deploying off-grid renewables to rural communities. Further, Indian
Government set out a strategy for 2011-2017 targeting installed capacity from new renewables to
reach 21,700 MW.
Energy Access in India: continues to face lower rates for rural and low-income groups with only
75% access to modern energy
18
18. Block II: Project Planning and Control
Table below shows average scores across for India and the average for the otherBRICS cluster
Table : EAPI Performance (Source: World Economic Forum)
BRICS EAPI 2014 Economic Growth Environmental Sustainability Energy Security and Access
and Development basket Basket
basket
Country Score Rank Score Rank Score Rank Score Rank
Name
India 0.48 69 0.49 54 0.41 79 0.54 98
BRICS(AV) 0.55 0.51 0.44 0.68
The EAPI highlighted performance of each country across the key dimensions of the energy triangle,
measuring the extent to which a country‘s energy architecture adds or detracts from the economy, the
environmental impact of energy sources and consumption, and how secure, accessible and diversified is the
energy supply. The status of India as seen against the challenges listed above made it clear that
sustainability, eco-friendliness and energy independence can only accelerate sustainable economic growth
and development of India.
The Energy Architecture Performance Index (EAPI) employs a set of 18 indicators to assess and
rank the energy architectures of countries, grouped under 3 baskets- growth and development,
environmental impact and security, and accessibility of energy:
Economic growth and development basket: energy intensity, distortions to gasoline, diesel and
electricity pricing, value and cost of energy imports
Environmental sustainability basket: efficiency of electricity production from CO2, NO, CH4,
emission intensity and fuel economy, alternative sources of energy
Energy Access & Security basket: Diversity of supply,electrification, quality of supply,s olid
fuel use, import dependence and diversification of import counterparts
a common framework for debate, and draws out opportunities foe tool
DiscussionQuestions:
1. Why do you consider environmental sustainability as important in the energy
sector? Hint: Energy and Sustainability
2. What conclusion could be drawn from the EAPI for
India? Hint: Energy and Sustainability
Source: Global Energy Architecture Index 2014 -Reports-World Economic Forum.
Topic of Interest
Unit/Sec.No. Topic Course
6.5 Environmental Sustainability Project &Operations Management
19
19. PEP Notes: Project & Operations Management
7. The IMAX Success Story
Innovation and Flexibility in project management ensures huge success.
Overview: The IMAX format was known for being the world‘s best immersive motion picture
entertainment. From 1970 till 2000, IMAX was famous for its documentary type education and science films
at museums and science centers. Entertainment cinema and even the legendary persons associated with it,
kept away from IMAX format because of huge costs associated with shooting and screening the film. But
the company‘s iterative experimentation with business models ultimately positioned it as a Hollywood
Powerhouse. When Rich Gelford, current CEO of IMAX bought it in 1994, he visualized tremendous
opportunity for commercial cinema. With mathematical and engineering applications, he drastically cut the
costs of IMAX format film. The rest is a box office success story.
Highlights of IMAX’s innovative and flexible operations strategy: IMAX grew from its modest roots in
nature documentaries into a major player in multiplexes around the world. Over the past five years,
registered impressive performance as shown below:
The Vision and the Challenges forced Innovation: The promoters recognized that movie-going experience
had great business potential. However the journey proved more difficult than anticipated due to:
Technology constraints of the pre-digital era
Problems in making it easy and cost-effective to showIMAX movies due to huge upfront cost and
the very expensive print cost
Cultural challenges due to Hollywood‘s traditional mind set
Reluctance of theatre owners to convert to IMAX
The Innovative Strategic Responses
Bringing down the cost of the technology from $2 million to $1.2 million
Retrofitting existing multiplexes for IMAX
Deploying computer technology to convert existing movies into the IMAX format
Innovating on the business model and installing IMAX without upfront charges
Shifting to digital re-mastering technology enabling replacement of $30,000 film prints by $150
plug-and-play hard drives
The Outcomes of innovation and flexibility: Film in IMAX format became cheaper and easy to screen and
renowned directors accepted IMAX format and more filmmakers, studios and exhibitors started using the
format to deliver thrilling experiences to the viewers
The number of theatres increased from 351 to 738 @ 150 to 200 new theatres a year
Improved attendance at multiplex theatres created a large base of enthusiastic viewers
The number of movies released increased phenomenally from 8 to 27 during 2013
IMAX became a globally recognized and sought-afterbrand
20
20. Block II: Project Planning and Control
The Lessons Learnt
Any company had to be flexible about its business model
Attention to detail was important and professional experience provides that focus
Trade-off was necessary between an entrepreneurial culture and a corporate culture
Commitment to quality, cutting-edge entertainment combined with differentiation through
continuous innovation and experimentation led to business excellence
What is Innovation?
Innovation is the application of better solutions that meet new requirements, in-articulated needs, or
existing market needs. This is accomplished through more effective products, processes, services,
technologies, or ideas. It can be defined as something original and, as a consequence,new, that "breaks
into" the market or society. While something novel is often described as an innovation, it is generally
considered a process that brings together various novel ideas with an impact on society. Innovation
differs from invention in that innovation refers to the use of a better and, as a result, novel idea or
method, whereas invention refers more directly to the creation of the idea or method itself. Innovation
differs from improvement in that innovation refers to the notion of doing something different rather
than doing the same thing better.
DiscussionQuestions:
1. Why do you consider innovation as very important in project
management? Hint: Innovation and Project Success
2. Name a few projects where innovation led to their successfulcompletion in India
Hint: Innovation and Project Management
Source: Harvard Business Review., Richard Gelfond,” the CEO of IMAX on How itBecame a Hollywood
Powerhouse, http://www.bbc.co.uk/news/business-RichGelfond:
Topics of interest
Unit/Sec.no Topic Course
10.3 Innovation in Project Control Project &Operations Management
21
21. PEP Notes: Project & Operations Management
8. Next Shoring Trends in Operations Strategy
Global trends in next shoring provided meaningful inputs for operations strategy.
Operations strategies were undergoing radical changes as forerunners of next shoring:
Dow Chemicals, BASF and GM 0 who were using low-cost locations elsewhere started creating
new manufacturing capacity to leverage energy situation in the US
GE started running advanced factories through iPads for employees
Amazon.com was employing growing numbers of smart warehouse robots
Fiat reduced the number of physical prototypes needed to introduce a new product
Auto manufacturers slashed prototyping cycle time from eight months to one week
Advanced robotics and 3-D printers, cloud computing, mobile communications and the Internet of
Things were combining with advanced analytics to create intelligent data – to communicate with
one other inside factories and with customers and suppliers.
Next-shoring,the emerging trend, mandated two priorities for operations strategies:
Proximity to demand due to consumption patterns and diversity of regional preferences.
Volkswagen moved from vehicle platforms to modular architectures that provided greater
flexibility for manufacturing several product variants or derivatives.
Proximity to innovation,especially innovative supplier base.Responsive, collaborative and tech-
savvy supplier-ecosystems will be required to partner with main manufacturers.
Next-shoring was not shifting of manufacturing from one place to another but adapting to and preparing for
the changing nature of manufacturing everywhere. This demanded agility to adapt design, production and
supply chains and locations rapidly to fluctuating conditions.
Developing an Operations Strategy
The operations strategy should always be in tune with the organizational strategy which in turn should be
based on the corporate vision and mission. Operations strategy aims at accomplishing the long -termgoals
established by the business strategy. The selection of markets is the key to any strategy. Operations
managers should develop appropriate processes and design to achieve the organizational objectives after
analyzing the markets based on their attractiveness. By utilizing its strengths and identifying ways to
improve its competitive position, an organization can achieve its corporate objectives.
DiscussionQuestions:
1. What are important issues in developing an operations strategy for a solar power
project? Hint: Renewable Sources and operations
2. What trends are visible in the area of outsourcing in
future? Hint: Next shoring and Operations Strategy
Source: Next-shoring: A CEO‟s guide, Katy George, SreeRamaswamy and Low Rassey, McKinsey Quarterly,
January, 2014
Topic of Interest:
Unit/Sec. No Topic Course
10.8 Developing an Operations strategy Project & Operations Management
22
22. Block II: Project Planning and Control
Block III:
Project Implementation and Closing
9. Risk Management
10. Risk Management in Global Supply Chains
11. Quality Circles
12. Total Quality Management (TQM)
23
23. PEP Notes: Project & Operations Management
9. Risk Management
A KPMG survey established that risk culture was an important requirement for effective risk management
to ensure operational performance.
KPMG launched a survey on Enterprise Risk Management across Europe, Middle st, Africa and India to
understand the current trends and practices and the imperatives for more effective risk management in
future. Some important findings of the survey were:
Risks are on the rise and becoming more complex
CEOs view risk as an opportunity whereas others want ‗safety first‘ approach
Boards are responsible to ensure alignment between strategy and risks. They doubt the reliability of
risk information as companies do not have confidence in the board‘s ability
Organizations are trying to improve riskmanagement systems and processes but the issue of embedding
risk into the organization‘s culture andmaking it an integral part of the business is not
getting adequate attention.
Information sources are largely inward focused but not forward looking and external focused.
Sustainability and climate change issues are not covered
Organizations are developing responses at individual process level but not at higher levels and are
not aware of the interdependence between various risks
Risk management encompassed constant and consistent communication about risk, ethics and values,
practices, behaviours, considering risk factors in decision making, clearly defined roles and
responsibilities, clearly documented policies, procedures and systems.
Global financial crisis brought the discipline of risk management to the agenda of all enlightened
organizations throughout the world. It is against this backdrop that creating a robust risk culture in the
organization assumes importance. The study revealed that risk culture was inadequate even in well-
established and reputed organizations. Primarily there are three main actors/factors inrisk management:
Attitude at the top insisted on compliance with the risk policies and appetite was independently
presented and reviewed by the board; personnel reward structures are aligned to risk adjusted
measures; organization committed sufficient resources to risk management
Risk ownership: clarity on the risk appetite from senior management and the board; ERM is
integrated into management‘s risk management processes
Risk facilitation: CROs (Chief Risk Officers) have a role to play in strategic decisions -M&A, new
products, entering new markets etc. and Risk management training covering the policy,
methodology, tools and practices
The key challenges faced by the surveyed organizations in the area of risk culture were:
Risk was practiced in silos and companies still view it with a compliance mind set
Risk owners were unclear about the organization‘s risk appetite
Risk responsibilities delegated authority limits and compensation structures are not seamlessly
integrated with risk appetite/tolerance
The study established the following imperatives towards ensuring effective risk management:
Enhancing board governance of risk: effective risk oversight by the board
Linking objectives, strategy and risks to Key Risk Indicators
Instilling robust risk culture by settling the conflict between organizational and individual decision
maker‘s appetite and attitude towards risks
Position the CRO as a strategic business advisor
Integrating risk management at the enterprise level
24
24. Block III: Project Implementation and Closing
The study alsosuggestedundertaking a riskculture surveybefore implementing riskmanagement.This was
necessarytoassessthe currentlevel of understanding of the organization‘s objectives, risk concepts andthe
attitude towards risk taking. A poorly integrated and forced risk management will not yield anticipated
results and dynamically respond to risks on a continuous basis.
What is Risk Management?
Risk management is the identification, assessment, and prioritization of risks (defined in ISO 31000 as the
effect of uncertainty on objectives, whether positive or negative) followed by coordinated and economical
application of resources to minimize, monitor, and control the probability and/or impact of unfortunate
events or to maximize the realization of opportunities.
DiscussionQuestions:
1. Do you consider Risk Management as important in project
management? Hint: Time and Cost Overruns
2. How do you explain risk culture of an organization?
Hint: Risks and Project Management
Source: Risk Management, A Driver of Enterprise Value in the Emerging Environment, kpmg.com
Topic of Interest:
Unit/Sec. no. Topic Course
12.7 Risk Management Methodology Project& Operations Management
25
25. PEP Notes: Project & Operations Management
10. Risk Management in Global Supply Chains
Increasingly vulnerable global supply chains call for effective risk management strategies.
Maruti-Suzuki India Ltd. (MSIL)‘s supply chain strategy proved vulnerable when a unit was shut down
due to labor unrest. It disrupted the entire supply chain, impacted stock price, market share, capacity and
reputation. It had to plan for one more units to mitigate such risks.
Toyota‘s fragile nature of supply chains due a single supplier strategy was fully exposed when a natural
disaster in Fukushima closed its operations and paralyzed the entire supply chain. The company incurred
huge losses, forcing it to reengineer its single-vendor strategy to prevent such risks and to regain customer
loyalty.
The growing complexity of supply chains due to competitive compulsions and outsourcing shifted risks to
unprecedented levels posing challenges for risk management
low-impact risks (demand fluctuations,supply delays) affecting operational efficiency
high impact disruptive risks (strikes, political unrest,regulatory shifts, natural disasters)
However there cannot be a universal mantra for such a unpredictable happening as any risk management
strategy had to be contextualized to an organization‘s performance goals.
Following Risk/Performance matrix profiles the scenario to evolve a risk management strategy:
Fully control risk Win-win by
Q1
by sacrificing containing
Q2
some supply-chain
performance scope
Q3 Performance at Q4
any cost
Risk Low Performance High
i. Organizations may trade-off
Block III – Project Implementation and Closing
some performance to significantly reduce risk by
overestimating the likelihood of a disruption (Q2)
ii. May contain the supply-chain scope through segmentation or regionalization (Q3)
iii. If performance at any cost was the operations strategy,organizations were be exposed to
more risks as exemplified by the above two cases(Q4)
More elegant risk management strategy may emerge when organizations build capabilities to respond better
to disruptions through detecting disruption, designing appropriate solutions and through deploying them
more effectively by
Implementing IT for monitoring flow of materials and ensuring on- line information for timely
alerts
26
26. Block III: Project Implementation and Closing
Companies and suppliers jointly developing contingency recovery plans for different types of
disruptions.Li & Fung switches to suppliers in different countries.
Improving communication and coordination among all supply chain partners
Derailment in supply chains were reduced through effective risk management by
containing the impact of disruptions through segmentation (for high volume low demand,
specialized supply chains with decentralized capacity and low volume high demand situations,
centralized pools)
regionalizing (to restrict the risk to specific regions)
estimating the costs ofdisruptions and building necessary redundancies into the supply chains
What is Risk Management?
The successful completion of a project depends on the ability of the project manager to deal with
different types of risks. It is important for a project manager to develop a risk management strategy at
the beginning of the project. The risk management strategy should be incorporated into the process of
project implementation. The steps involved in the process of risk management are – risk identification,
risk quantification, risk response and risk control.
DiscussionQuestions:
1. What risks Tatas ignored while planning its Nano project in West
Bengal? Hint: political implications
2. Why it is not possible to ensure that a project is totally risk
free? Hint: Risks in Automobile sector
Source: Sunil Chopra and Manmohan S. Sodhi., Protecting your Global Supply Chain from Costly
Disruptions, Kellogg School of Management/aspen Institute Business and Society leadership Summit (2014)
Topic of Interest:
Unit/Sec.no Topic Course
12.7 Risk Management Methodology Project& Operations Management
27
27. PEP Notes: Project & Operations Management
11. Quality Circles
Quality Circles brought a host of advantages in operations management.
Quality circle implementation by Tata Power received accolades and awards for successfulimplementation
in its operations:
Process management was perfected
Quality improvement across the board
Inventories came down with optimization of spares inventory
Cycle time improvement in various operations and processes like issue of materials, chute
discharges,coal firing, extinguishing fire, disposalof waste rubber
Quality of work-culture improved many fold
Industrial harmony through enhanced team spirit and effective safety management
Customer satisfaction improved
Quality Circles originated in Japan and more than a million circles were reported to be actively working in
Japan. Through the use of quality circles, Japanese industries achieved improvements in quality, process
management and engineering and scaled up to the level of challenging and even overtaking US companies in
many areas like automobiles, electronics etc. US companies like IBM, Westinghouse and Xerox also
implemented quality circles, but failed to generate the kind of passion as in Japan. In India too, some leading
public and private companies initiated quality circles but could not reach expected levels. BHEL was the
first to introduce them in 1981 followed by BEL, Tata group companies, Kirloskars etc. In India, quality
circles are in a state of dormancy perhaps due to increasing automation in the organized sector.
What is a Quality Circle?
Quality Circle is a small group of employees doing similar or related work and meeting regularly to
identify, analyze and solve product quality and production problems and to improve general operations.
It is a positive and humanistic approach to productive management. It has some major attributes-
voluntary participation, employee development, problem solving and process improvement. It is not
restricted to shop floor but may be extended to any process where a number of employees are deployed.
DiscussionQuestions:
1. Do you consider quality circles as relevant in Indian industrial
scenario? Hint: collective wisdom
2. What are essentialfor successfulimplementation of quality
circles? Hint: Quality Circles and problemsolving
Source: Tata Power‟s achievements in Quality Circles, http://www.tata.com
Topic of Interest:
Unit/Sec.No Topic Course
13.10 Quality Circles Project & Operations Management
28
28. Block III: Project Implementation and Closing
12. Total Quality Management (TQM)
By adopting TQM philosophy, many organizations achieved business excellence.
Tata Steel was one of the Indian MNCs, frequently quoted for successfulTQM implementation. It was the
first integrated steel company in the world to win the world‘s highest award of quality, the Deming
Application Prize.Through effective implementationofTQM,Tata Steel
Realized significant reductions in defect rates and fall in customer returns
Recorded Improvements in customer satisfaction,new product development, all round and
breakthrough achievement in business results
Won the JRD QV Award and eyed a quantumjump in performance
Won the Deming Application Prize (2008) and Deming Grand Prize (2012) for distinctive
performance improvement through the application of TQM
TQM journey in Tata steel started in late 1980s through several activities-quality circles, ISO Certification,
quality improvements using Juran methodology etc. with stretch goals for quality.
What is TQM?
Total Quality Management (TQM)is a philosophy and a set of guiding principles that represent the
foundation of a continuously improving organization. It is the application of quantitative methods and
human resources to improve all the processes within an organization and exceed customer needs now
and in the future. TQM integrates fundamental management techniques, existing improvement efforts
and technical tools under a disciplined approach.
Basic concepts of TQM are:
Commitment and participation of top management, acting as role models for the rest of the
stakeholders
Total customer-focus at all levels
Continuous improvement across the board
Partnerships with suppliers
Effective performance management
DiscussionQuestions:
1. Do you consider TQM still a relevant philosophy in Indian industry?
Hint: Quality is everybody‟sresponsibility
2. What are the five esse3ntials for successfulTQM
implementation? Hint: TQM and Sustainability
Source: Dr. K.K. Garg, Pranav Mishra and SumitSehrawat., The Quest for Excellence: A Case Study of TQM Practice
in Tata Steel, Opinion Vol.3, No.1, June 2013
Topic of Interest:
Unit/Sec.no Topic Course
13.12 TotalQuality Management Project & Operations Management
29
29. PEP Notes: Project & Operations Management
Block IV:
Introduction to Operations Management
13. Jugaad Approach for Developing an Operations Strategy
14. A New Era for Manufacturing in China
15. Badge Engineering as a Competitive Operations Strategy
16. Creative Destruction as an Operations Strategy
17. Strategy Building
18. Circular Economy and Operations Strategy
19 Enterprises of Future
20 A Rewarding Operations Strategy for Hospitality Industry
21. Co-opetition and Competitive Landscape
22. Water Stewardship Strategy
23. Urgency of Innovation in Auto Industry
24. Successful Flywheel Strategy
25. Competing on Outcomes
26. Shale Gas Exploration- the Success of a New Process Design
30
30. Block IV: Introduction to OperationsManagement
13. Jugaad Approach for Developing an Operations Strategy
Jugaad was a means of innovation in a world of increasing constraints and complexity.Frugality was at
the heart of it.
The need for frugal innovation: The structured approach to innovation usually favoured by well
established companies did not ensure agility and differentiation. Both qualities were critical to business
success. Innovative business models generally emerge out of adverse circumstances. Plans to develop a new
product, deliver a service or a business model called for a resilient mind set. This helped in harnessing
limited resources, inventiveness and perseverance to transforma scarcity into an opportunity.
What is Jugaad Innovation? Jugaad is a colloquial Hindi wordmeaning ―an innovative fix for business, an
improvised solution born from ingenuity andcleverness‖. As citedby the authors, it is basedon six
operating principles:
1. Seek opportunity in adversity
2. Do more with less
3. Think and act flexibly
4. Keep everything about the business simple
5. Tap the margins of society for employees and customers
6. Follow your heart
Historically, Jugaad innovation is more prevalent in emerging markets such as India, China, and Brazil than
in the US or the West. However, the latter two are also getting attracted by its relevance to attain and
maintain global competitiveness.
Limitations of western approach to innovation: The traditional approach to innovation in most Western
companies is capital intensive, which is scarce today. Booz & Company‘s Global Innovation 1000 study
notes that ‗pumping more money into R&D doesn‘t necessarily buy more innovation‘.
Many Western firms became risk averse in view of their size and level of investments in R&D,
forcing them to implement standardized business processes which are more appropriate in stable
environments
The R&D systems designed and driven by the top managements, common in the West are unable to
integrate inputs from other stakeholders like employees and customers.
Companies competing in the current business environment need a different approach to innovation and
growth-one that, like Jugaad, which is economical, elegant and participative. The benefits of Jugaad
approach are reported to be many:
Economies of scope when companies want to cater to the specific needs of many customer
segments in heterogeneous markets
Unleashing the passion of employees, business partners and customers
Enhancing flexibility to effectively combat unexpected challenges and harsh constraints through
more efficient ways of using limited resources
How to combine Jugaad with existing R&D systems?
1. Evaluate, select and order the principles
2. Implement the chosen principles in small, manageable stages
Companies aspiring to position themselves for success in today‘s volatile and complex competitive
markets need to strike balance between low-volatility, resource-rich settings and high-volatility, resource-
constrained settings through a judicious mixof the traditional structured capability and the Jugaad capability.
31
31. PEP Notes: Project & Operations Management
What is Innovation?
Innovation is the application of better solutions that meet new requirements, in-articulated needs, or
existing market needs. This is accomplished through more effective products, processes, services,
technologies, or ideas that are readily available to markets, and society. In economics, management
science, and other fields of practice and analysis it is generally considered a process that brings together
various novel ideas in a way that they have an impact on society. Innovation differs from invention in
that innovation refers to the use of a better and, as a result, novel idea or method, whereas invention
refers more directly to the creation of the idea or method itself. Innovation differs from improvement in
that innovation refers to the notion of doing something different rather than doing the same thing better.
DiscussionQuestions:
1. What is the interdependence of Jugaad and Innovation?
Hint: Innovation for Cost reduction
2. Why Jugaad approach is essentialfor the
industry? Hint: Jugaad and Innovation
Source: NaviRadjou, JaideepPrabhu and Somone Ahuja., What the West Can Learn from Jugaad, Strategy+Business,
Issue 70, SPRING 2013
Topics of Interest
Unit/Sec.No Topic Course
16.4 Innovation Project &Operations Management
32
32. Block IV: Introduction to OperationsManagement
14. A New Era for Manufacturing in China
Loss of competitive advantage compelled Chinese manufacturers to recast operations management
decisionsin theirstrategy.
China‘s ascendancy to the top position as a manufacturing powerhouse was awesome. In this journey, it
overtook the US in 2011, became the workshop of the world with the associated benefit of boosting the
living standards in the country. Low salaries, strong supply base, high investment in infrastructure, solid
engineering and technical skills provided competitive advantage for exports and internal consumption.
But China faced new challenges as
Economic growth slowed
Wages and other factor costs started raising
Value chains became more complex and
Consumers became more sophisticated and demanding
The decline in manufacturing competitiveness of China was also attributed to the reality that China was
becoming richer. The country was losing new factory investments to lower-cost locations. The McKinsey
report summarized four key challenges and prescribed competitive priorities, emphasizing that Chinese and
MNCs operating in China had to move up the value chain by recasting their management decisions and
reinventing their strategies.
The Challenges:
Rising wages and appreciating renminbi affected China‘s exports in recent years, doubting its
future viability as a manufacturing centre. Many MNCs are already seeking locations outside
China. Chinese manufacturers are also trying to relocate to low-cost locations preferably in China
and even outside the country
Rising consumer sophistication: By 2020, more than 50% of urban households may join the upper
middle class, which demands innovative products calling for higher engineering and manufacturing
capabilities. Regulatory compliance and best-in-class practices are still lacking
Rising Value-chain complexity: Consumer growth necessitates increasingly diverse and
customized products. This along with booming e-commerce complicated the value-chain further for
manufacturers of labour-intensive goods and regional processors
Heightened volatility: Falling demand growth leading to lower capacity utilization, cut-throat
competition and drastic decrease in profit margins, posing difficulties in planning
The Imperatives
Strive for global levels of operational excellence
- Improving energy efficiency
- Addressing the mind sets and behaviour of workforce
- Enhancing efficiency throughout the value-chain
- Implementing a robust performance management system
Harness innovation and product development efforts
- To overcome ‗faster, cheaper‘ approach and ‗copying mind-set‘ that pervade R&D
- MNCs located in China to promote their units as intellectual property creators and not as cost-
saving satellites
Tame supply-chain complexity
- Tiered approach to planning, differentiating basic appliances and high-end goods to
improve forecast accuracy, controlling inventories and ensuring on-time deliveries
- Making work more interesting to ensure lower employee turnover
- Creating nimbler ‗splinters‘ of supply chains from traditional monolithic structures
33
33. PEP Notes: Project & Operations Management
- Developing logistics hubs and assets to support on-line purchases
- Expanding operations to the developed world, closure to customers
These are the imperatives to create an enduring competitive edge both for Chinese-owned companies and
MNCs operating in China.
What is Competitive Advantage?
Competitive advantage occurs when an organization acquires or develops an attribute or combination
of attributes that allows it to outperform its competitors. These attributes can include access to natural
resources, such as high grade ores or inexpensive power, or access to highly trained and skilled
personnel human resources. New technologies such as robotics and information technology can
provide competitive advantage, whether as a part of the product itself, as an advantage to the making
of the product, or as a competitive aid in the business process.
DiscussionQuestions:
1. Why China started losing its competitive
advantage? Hint: increasing standards of living
2. What precautions Indian industry should take to ensure sustainable competitive
advantage? Hint: Development and sustainability
Source: www.mckinsey.com/insights/manufacturing/a_new_ers_for_manufacturing_in_china
Topics of interest
Unit/Sec.No Topic Course
16.6 Competitiveadvantage Project &Operations Management
34
34. Block IV: Introduction to OperationsManagement
15. Badge Engineering as a Competitive Operations Strategy
Badge Engineering as an innovative operations strategy provided competitive advantage.
The Concept behind the Innovative badge engineering strategy
The practice of marketing a motor vehicle undertwo or more brand names or badges.
Also called ‗Re-badging‘.
It is the application of a different brand or trademark to an existing product and subsequently
marketing the variant as a distinct product.
The term originated with the practice of replacing an automobile‘s emblems to create an
ostensibly new model. Badge engineering is innovation in ideation.
Badge engineering is not same as platform sharing where only the structural, power train and
engineering components are shared but not the body parts or interiors. For example, Skoda Laura
and JM Jetta share platforms but are not badge engineered.
The Process of badge engineering strategy: Badge engineering occurs when
a. Car maker (say, GM) owns a portfolio of different brands and markets the same car under different
brands without developing new models Chevrolet, GMC or Cadillac.
b. The car maker sells the same model in different regions and markets simply under a different name.
GM owned Daewoo badged its cars as Chevrolets and rebadged them as Holden in Australia and
New Zealand
c. Two separate companies trade off products that each brand lacks in its line-up. Honda Odyssey
rebadged as ISUZU Oasis.
d. One company allows another company to market a revised version of their product. Volkswagen
marketing a re-skinned version of the Dodge Caravan or Chrysler town and Country as the
Volkswagen Routan. Renault and Nissan using the same model under different names - Pulse and
Micra.
e. Two different automakers can also pool resources by operating a joint venture to create a product
and then selling it each as their own. GM and Toyota formed NUMMI
f. A car maker licenses models to be produced by other companies, typically in other countries (
British Hillman Hunter as Paykan in Iran )
Badge engineering occurs more in Luxury type market segments.
The manufacturer uses a model from its mainstream brand, upgrades it with more features -technology or
style, then markets it as a more expensive model (Ford Taurus as Mercury Sable and Ford Expedition as
Lincoln Navigator)
Badge engineering process is innovational. Innovation is customer-centric and offering a brand win over
customers by matching the tastes of customer segments. Study shows that Polo is for men and Micra is for
women as far as looks are concerned. Technical features are almost same.
Genesis and Evolution of Badge Engineering Strategy
Badge engineering is almost a century old practice beginning in 1917 with Texan Automobile,
followed in 1926 by Nash Motors‘ Ajax.
The entire US industry has been using this practice rightfrom 1920s.GM‘s badge engineering
dates backto early 1970s when Chevrolet Nova was rebadgedas BuickApollo,Oldsmobile and Pontiac.
Japanese companies also followed this practice (Honda Accura, Nissan‘s Infiniti and Toyota‘s
Lexus)
35
35. PEP Notes: Project & Operations Management
In India too there are a handful of cases of Badge engineering- HM Ambassadorwas sold as British
Morris Oxford and Premiere Padmini was sold as Fiat 1100
The recent example is the Polo-Micra venture. The two cars are exactly same. Only cosmetic
differences. Future has to tell about the success orotherwise of badging.
Other examples in Badging:Dacia Logan (Mahindra Verito), Hyundai Atos(Santro),Suzuki Alto(Maruti
Alto),Suzuki Fronte (Maruti800),Suzuki Splash (Ritz), Suziki Swift (Maruti Swift), Daewoo Matiz
(Chevrolet Spark), Kalos (Chevrolet Aveo),Lacetti (Optra) etc.
Results: There are success stories as well as failures from badge engineering.
The primary advantage ofbadge engineering is to save development costs in design and basic
engineering, thereby expediting time to market.
However excessive badge engineering can be problematic if not implemented properly. Having
multiple car brands can greatly increase selling costs due to distribution networks. May also lead to
‗Cannibalism‘ between two or more brands. Failure of one brand may impact others.
The Junk Yards created by failed ventures include Cadillac Catera, Chevrolet sprint, Buick Encore,
ISUZU P‘up, Dodge Rider, Toyota Corolla Deluxe, Peugot 405s,Ford Mustang and a host of
other models.
The moment the expected windfall is not seen, the car makers discard badge engineering as is the
case with Renault and Nissan recently. Badge engineering is symptomatic of a policy of sales
competition between constituent organisations. For badge engineering to succeed, there must be
enoughloyalty fromcustomers.Indian carmarket is still very youngand is in the process of developing
brand alliances. Indian middleclass, the largest car market, still emphasises on ‗value for money‘.
Of late, two wheeler industry is also seriously contemplating badge engineering.
Innovation is the application of better solutions that meet new requirements, in-articulated needs, or
existing market needs. This is accomplished through more effective products, processes, services,
technologies, or ideas that are readily available to markets, and society. In economics, management
science, and other fields of practice and analysis it is generally considered a process that brings
together various novel ideas in a way that they have an impact on society. Innovation is different from
Invention and Improvement.
DiscussionQuestions:
1. Why do you consider badge engineering as
innovation? Hint: reinventing the wheel is a waste
2. Why badge engineering did not succeed as a
strategy? Hint: badge engineering and innovation
Source: Renault, Nissan decide to stop sharing Auto Models in India, live mint
Topics of Interest
Unit/section no. Topic Course
16.6 Innovation Project & Operations Management
36
36. Block IV: Introduction to OperationsManagement
16. Creative Destruction as an Operations Strategy
Innovation in operations strategy ensured sustainable business growth.
Creative DestructionIs the termused to describe the process ofchange thatleads to better results. According
to its famous advocate, Joseph Schumpeter, creative destruction is ‗the disruptive process of
transformationthat accompanies such innovation‟. Destroying an old production process and designing
a new one can be used as operations strategy to maintain competitive advantage.
Existing wealth needs to be destroyed to create new wealth. Old buildings are destroyed to raise
multi-storied buildings
From destruction, a new spirit of creation arises. Scarcity of wood forced the discovery of coal,
coke, whose scarcity caused discovery of gas and then electric heater etc. On-going search for
alternate sources of energy due to resource and environmental concerns is leading to focus on solar,
wind etc.
Creative destruction is not necessarily creation of a new thing. It is a new way of producing goods
and services
It is firmly linked to innovation in operations strategy
Creative destruction as an innovation in operations strategy
Speeds up industrial activity through inventions-steam engine, electricity, shipping,automobiles,
telecom network and agricultural mechanization, TVs, telecomm products etc.
Removes institutional deadwood-obsolete and unproductive assets such as technology,processes,
product lines, people and machines
Creates new products,new processes,newmarkets and new forms of industrial organization
Ensures inclusive growth in the long term.
Automobiles, Computers, Mobile phones,industrial and consumer product companies very frequently use
this innovation strategy to gain and retain competitive advantage.
Maruti Suzuki discontinued 800 to introduce Alto. Maruti, Hyundai and Toyota are reducing petrol
engine production lines and increasing diesel lines in view of changing customer preferences
Most revolutionary destructions happened in computer industry with the entry of every new
generation of technology.There has also been a transition to software from hardware
Microsoft, Nokia and Huawei are examples of just how businesses that dominated their industries
until five years ago, are now struggling in the market. Competitors like Apple, Samsung and the
rising wave of Chinese manufacturers are dominating the market with new products
iPhone changed the cell phone sector and three years later Apple introduced iPad and established
incumbents like Motorola, Nokia and Microsoft found themselves nowhere
Electronic Cigarette could grab a tenth of the entire tobacco market
A product that is 99% less harmful than cigarettes delivers a similar user experience and offers a
better economic bargain—this is the proposition of electronic cigarettes
LEDs (light emitting diodes) will dominate the lighting industry. Sales will reach $11 billion by 2015
with a compound annual growth rate of about 40% Will account for about 45% of the overall lighting
market and has the potential to reach over 60% penetration by 2020. Energy saving is the reason for
its overwhelming preference
37
37. PEP Notes: Project & Operations Management
3D Printing is cheaper and more customizable than regular manufacturing methods. Currently a $2.2
billion market, forecasts expect a compound annual growth rate of 23%, with revenues reaching $10.8
billion by 2021. The 3D printing industry operating within the design-to-manufacture value chain, is
estimated to be a $30billion opportunity.
As a part of operations strategy,companies started abandoning and shifting production facilities to
more competitive locations anywhere in the world
Internet acted as a catalyst for creative destruction.
- It has allowed businesses to compete globally, reach more consumers, create efficiencies
and cut costs in manual processes as well as pioneer new techniques for doing business.
- Business news is available Online and the print medium is declining.
Criticism
Economic distress through layoffs of workers causing severe hardships
Destruction of past investments and labor skills
Climate change concerns through e-waste, Greenhouse Gases etc.
Creation of large scale deadwood if skills and knowledge are not updated to rehabilitate the
displaced workforce.
Benefits
Simple and betterdesigns to conserve resources.Electronics reduced power consumption
when compared to the electrical and mechanical systems
Better utilization of space.Desk Tops and Lap Tops take less space than PCs
Rise in overall quality of life. In the long term-more comforts and user-friendly
Unlearning the old ideas and learning new things for self-renewal
Need for Creative destruction as an operations strategy in Indian industry: As creative destruction is
unavoidable and is necessary to make operations in Indian industry globally competitive, some initiatives are
required:
Adapting and implementing world class standards and practices in operations to establish ‗made in
India‘ as a global brand. This may call for existing practices and infrastructure.
As loss of jobs is an inevitable consequence,such workforce should be trained to help rehabilitation
in testing,servicing and customer care areas
In view of China‘s manufacturing operations becoming less competitive, there are opportunities for
Indian industry to become a preferred global manufacturing hub.
Innovation is the application of better solutions that meet new requirements, in-articulated needs, or
existing market needs. This is accomplished through more effective products, processes, services,
technologies, or ideas that are readily available to markets, and society. In economics, management
science, and other fields of practice and analysis it is generally considered a process that brings
together various novel ideas in a way that they have an impact on society. Innovation differs from
invention in that innovation refers to the use of a better and, as a result, novel idea or method, whereas
invention refers more directly to the creation of the idea or method itself. Innovation differs from
improvement in that innovation refers to the notion of doing something different rather than doing the
same thing better.
38
38. Block IV: Introduction to OperationsManagement
DiscussionQuestions:
1. Why do you consider creative destruction as an innovative strategy?
Hint: maximising the asset value
2. Give some examples of creative destruction from society point of
view Hint: Creative Destruction and Innovation
Source: Richard L.Nolan and David C. Croson, Harvard Business school,1995,„Creative destruction: a six-stage
process for Transforming the Organization‟.
Topic of Interest
Unit/Sec. No Topic Course
16.6 Innovation Project &Operations Management
39
39. PEP Notes: Project & Operations Management
17. Strategy Building
Developing an operations strategy in line with organizational strategy ensured effective implementation
and realization of strategic objectives.
The focus of any strategy is to make choices about combating competition. If unnoticed and unchecked ,
market forces continually deplete profits. Powerful business strategies can counteract those tendencies but
developing a strategy is a challenging task. There is no universal mantra for developing operations strategies
as each company operates in a unique business environment and its competitive advantage depends upon a
multitude of factors.
Developing an operations strategy called for identifying the elements that contribute to sustainable
performance
How to Develop an Operations Strategy?
Create a path for action and effective implementation.
Ensure roles of people and garner necessary resources.
Establish tangible goals that connect to the longer-term strategy
Follow a logical sequence such as the one suggested below
Bradley, Dawson and Montard introduced the building blocks of strategy as a generic requirement for any
strategy formulation. Building blocks of strategy shed fresh light on the do‘s and don‘ts of strategy
formulation:
Strategic refresh is an important recharging activity to keep the strategy contemporary and relevant
Strategies must be recreated every three to five years as the market demands
There is a need for constant monitoring of strategy,reallocation of resources, alignment of
management on strategic priorities, and the creation of targets, budgets,and operational plans.
Building blocks of strategy
Diagnose
Forecast
Search
Choose
Commit
Frame
Evolve
A deep insight into where and why it creates—or destroys—value
View on how the future may unfold
Develop and explore alternative ways to
win Decide which alternative to pursue
Create an action plan and reallocate resources to deliver it
Ensure that the strategists properly identify the real choices and constraints facing their
organizations and prioritize the building blocks.
Constant monitoring and refreshing of the strategy as conditions change and new
information becomes available.
Focus on strategic building blocks helps companies develop penetrating insights - an understanding of how
companies,competitors and othersin the value chain prosper.Globalcar manufacturers operatingin India
developed exclusive ‗India‘ strategies.Hyundai, followed a country specific strategy based on lowcostand
fuel efficiency and reached no.2 position in the market; Ford India focused on small car segment, with high
levels of localization; Mahindra &Mahindra’s strategy is to globalise its operations
40
40. Block IV: Introduction to OperationsManagement
Ansoff (Corporate Strategy, 1965) introduced the concepts of ‗gap analysis‘ and ‗synergy‘. Peter
Drucker introduced the concept of ‗Management by Objectives‘ (MBO), shifting the focus from
processes to goals. Michael Porter (Competitive Strategy, 1980) introducedthe ‗five forces‘ model,
the ‗value chain‘ concept andthe concept of ‗generic strategies‘, focusing on positioning the firmin
the customer‘s perspective. Boston Consulting Group created a framework called the BCGMatrix
to evaluate the strategic position of the business brand portfolio and its potential and to understand
which brands the firm should invest on and which ones should be divested.
The operations strategy should always be in tune with the organizational strategy which in turn
should be based on the corporate vision and mission. Operations strategy aims at accomplishing the
long-term goals established by the business strategy. The selection of markets is the key to any
strategy. Operations managers should develop appropriate processes and design to achieve the
organizational objectives after analyzing the markets based on their attractiveness. By utilizing its
strengths and identifying ways to improve its competitive position, an organization can achieve its
corporate objectives; which are its major focus.
DiscussionQuestions:
1. Identify logical sequence of developing an operations strategy for waste disposal in a big
city Hint: Life cycle approach
2. Why do you think that operational strategy aligned to organizational
strategy? Hint: Operations Strategy models
Source: Chris Bradley, Angus Dawson, and Antoine Montard, Mastering the building blocks of strategy,
Article|McKinsey Quarterly, October, 2013
Topic of Interest
S.No Topic Course
16.6 Developing an operations strategy Operations Management
41
41. PEP Notes: Project & Operations Management
18. Circular Economy and Operations Strategy
Operationsstrategy based on circulareconomy principles ensured more efficient value chain
management and competitive advantage.
Philips reengineered its operations strategy around circular economy principles and retained competitive
advantage through more efficient value chain management. Philips
started considering lighting as a service instead of lighting products
takes care of investments and risks and customers pay for only light
takes back the equipment for recycle or reuse after up gradation
The benefits realized were enormous:
50% -70% energy savings and customers could pay from the savings
Long-life LEDs reduced maintenance and operating costs
Handed over control to customer through IT networks to optimize energy use
85% of recovered lamps were recycled for reuse
This innovative operations strategy was implanted by Designing for Excellence- designing for upgradability,
serviceability and recyclability
Involving all players in the supply chain, with specific attention to customers and suppliers and
promoting co-creation, leasing agreements as in Healthcare business
Focusing on sustainability
Fixing targets for use of recycled materials- 10% by 2025 in Consumer Lifestyle Group
Embedding circular economy in all processes,metrics, and structures
Operations Strategy as a Competitive Weapon
Any business organization aims to attract more customers than its competitors. Organizations thus
identify their distinct competencies to gain a competitive advantage over others. The company‘s
operations function determines its choice of products and markets and its competencies.
DiscussionQuestions:
1. Why do you think that well engineered operations strategy can provide competitive advantage?
Hint: Optimising operationsmanagement
2. What are the advantages of circular economy in the context of operations strategy?
Hint: Circulareconomy as a strategy
Source: Thomas Fleming and Markus Zils, Toward a circular economy: Philips CEO Frans van Houten, McKinsey
Quarterly Interview, February 2014
Topic of Interest:
Unit/Sec.no Topic Course
16.6 Operations strategy as a competitive weapon Project & Operations Management
42
42. Block IV: Introduction to OperationsManagement
19. Enterprises of Future
Sustainable companies were those who focused on resource productivity in their product designs.
Based on imagining the likely industrial scenario over the next 20 years, McKinsey identified some future
companies. According to them, companies of future will focus on resource productivity in their product
design and development. The recipe suggests building insightful planning and innovative strategies based on
resource-productivityfundamentals to remain competitive.McKinseypredicts that thefuture companies will look
different from present leaders. In its article, ―Are you ready for the resource revolution?,‖ McKinsey
identifies twelve such companies leading the global industrial landscape in future:
i. MORE- Maximum Oil Recovery Enterprise- by deploying advanced sensor networks and
operating techniques, oil companies will be able to improve resource efficiency from the current
level of 20% to 70%.
ii. ERGO-Efficient Resilient Grid Operator-by shifting from analogy hub and spoke power-grid
towards integrated digital networks, which connects many distributed power generators. Overall
resource efficiency will improve through reduction in power losses and digital transformers
iii. HOUSE-Home Unified Services- houses use mobile devices for more comfort and convenience.
The technology would anticipate and recognize requirements of lighting, temperature, health
services, news, music etc. and optimize the resource utilization accordingly.
iv. COST- Convenient Organizer Service for Travel- by optimizing routing and inventory,travel
companies would provide total travel solutions
v. GROW- Global Recovery Of Waste- use microfluidic technologies to recover high value products
in waste streams like gold, silver, earth metals, lithium and would also provide heat, power and
fertilizer from organic waste
vi. WADE- Water Delight- use nonchemical purification techniques and mineralization technologies
to provide high quality water for agriculture and earth‘s best drinking water. Water
consumption is expected to come down to 20% with add on benefits of better health
vii. FOOD- Fresh Organic Opportunities Delivered- global organizations would locally produce high
quality, nutritious food using one tenth of the water and energy of existing methods
viii. LITE-Lightweight Innovation Technology Engineering- carbon fiber will be cheaper than
aluminium for application in all types of vehicles. Will be safer, more efficient with focus on
recycling and circular economy
ix. GOV- Government Operations Verified- low cost service providers help governments to use
technology platforms to deliver passports,driving licenses, health schemes etc.
x. SENSO- SensorNetwork Solutions- small companies will have access to big data for decision
making
xi. EASY- Equipment As Service for You- much larger scale than rentals of today. Everybody can
have access to the best infrastructure as a service
xii. BASIC- Basics All Supplied In Container- companies will have access to least privileged people
for providing infrastructure through containers- solar power, electric storage, cell-phone towers,
water pumping and servicing, LED lamps, Internet access etc. The initiative is expected to bring
low cost energy, water and communication to next billion consumers in developing markets,
heralding a new and innovative approach for inclusive growth.
43
43. PEP Notes: Project & Operations Management
Product/Service Design and Development
Every product has a life cycle and goes through various stages of the life cycles namely, design,
introduction, growth, maturity and decline. The different stages involved in the development of new
products are idea generation, feasibility studies, prototype design, prototype testing, initial design of
product model, economic evaluation, market testing and final design of production model. The
development process continues even after the launch of the product. The new product is modified or
improved to constantly adapt it to the changing market conditions and/or to incorporate the latest
technology in it. Sometimes customer feedback also provides vital inputs for product design,
development and improvements.
DiscussionQuestions:
1. What are the significant common characteristics of future
companies? Hint: Sustainable Growth
2. What are the stages in a product life cycle and how do they impact operations
performance? Hint: Operationsand Future Organizations
Source: Twelve companies of tomorrow. “Are you ready for the resource revolution?,” McKinsey Quarterly, March
2014
Topic of Interest:
Unit/Sec.no Topic Course
16.7 Product/Service Design and Development Project & Operations Management
44
44. Block IV: Introduction to OperationsManagement
20. A Rewarding Operations Strategy for Hospitality Industry
Innovation in service delivery model as an operations strategy proved to be highly rewarding.
Four Seasons Hotels and Resorts achieved remarkable results by adopting an operations strategy through
innovation in its service delivery system
Ranked among the 13 companies in the world on Fortune‘s listof the 100 BestCompanies to Work
Stood First in the JDPower and Associates‘ annual Hotel Guest Satisfaction Index
Routinely honoured in the Conde‘ Nast traveler readers‘ Choice Awards
These achievements were due to an innovative approach adopted by its Chairman and CEO, Isadore Sharp.
He redefined luxury as service and a support system to the guests to generate trust. To realize this outcome,
he followed an operations strategy of creating a context for all employees to empathize with guests through a
cascade of choices
to redress a customer complaint and fully meet the expectations of the guest
to treat the employees as they expect and treat their complaints with equal respect
to upgrade employee facilities
to disallow class discrimination in cafeterias and parking lots
to decentralize and delegate and inculcate a culture of discipline
setting high performance standards and establishing accountability
The operations strategy should always be in tune with the organizational strategy which in turn
should be based on the corporate vision and mission. Operations strategy aims at accomplishing the
long-term goals established by the business strategy. The selection of markets is the key to any
strategy. Operations managers should develop appropriate processes to achieve the organizational
objectives after analyzing the markets based on their attractiveness.
DiscussionQuestions:
1. What is the importance of creating a context for all employees to ensure operations
excellence? Hint: Organizational pride and job security
2. What are the special features of service operations in hospitality
industry? Hint: Service Operations and context creation
Source: The Execution Trap, Spotlight on the Effective Organization, Harvard Business Review
Topic of Interest:
Unit/Sec.no Topic Course
16.8 Developing an Operations strategy Projects & Operations Management
45
45. PEP Notes: Project & Operations Management
21. Co-opetition and Competitive Landscape
Co-opetition, as an operations strategy had a significant impact on competitive landscape.
Co-opetition between Sony and Samsung had a tremendous impact on the firms, the LCD segment and the
entire TV industry,redefining the competitive landscape:
Created a substantialvalue for both the firms. The combined market share increas ed from 18.4% in
2004 to 40.9% in 2008
LCD segment‘s market share sharply raised from 13% (2005)to 68.4% in2009, thus taking a
clear lead in the flat panel TV segment
Sony received high returns through focused investment in LCD within a short period of time and
Samsung became the largest TV maker and panel producer
Impact on the industrial landscape:
Stirred technological development in the entire display industry by generating strong reactions from
other competitors and encouraged multiple co-opetitive relationships. Sony itself formed a joint
venture with Sharp for the 10th generation LCD panels
Sharp fall in the prices of flat-screen TVs
Better products with affordable prices, technological advancements and new market creation
Fuelled innovation in products and processes
What is co-opetition?
Gnyawali and Park (2008) defined it as simultaneous pursuit of collaboration and competition between a
pair of firms. For example, two arch rivals in consumer electronics, Sony and Samsung formed a joint
venture, S-LCD to develop and manufacture flat-screen LCD panels.
Co-opetition is more important in high-technology areas because of the challenging environment
such as shrinking product life-cycles, need for heavy investments in R&D, convergence of multiple
technologies and importance of technological standards
Because competing firms possess relevant resources and face similar pressures, collaboration
between them enables firms to acquire and create new technological knowledge, in turn fostering
innovation.
Drivers of co-petition in operations strategy:
Industry and technological challenges and opportunities-rapid rate of technological changes,
convergence of technologies investment in R&D
Superior and relevant partners‘ resources & capabilities, which are complementary
Firm strategies and aspirations for capturing larger market share and associated benefits
Factors enabling success of co-petition:
Firm capabilities- Sony had strengths in TV making and is a well-entrenched market leader with
technological superiority. These are required for Samsung. Sony needs Samsung‘s LCD
because 8th generation is the most popular
Win-win approach of open-minded executives
Appropriate Internal structure
Competitive culture for developing distinctive competencies
46
46. Block IV: Introduction to OperationsManagement
Operations Strategy as a Competitive Weapon
Any business organization aims to attract more customers than its competitors. Organizations thus
identify their distinct competencies to gain a competitive advantage over others. The company‘s
operations function determines its choice of products and markets and its competencies and
competitiveness as lion‘s share of resources are invested in operations.
DiscussionQuestions:
1. What is co-optition and what is its role in operations
management? Hint: Collaboration with Competitors
2. Identify the drivers for co-optition
Hint: Co-optition and OperationsManagement
Source: DeviGnyawali, Byung-Jin (Robert) Park. Co-petition between Giants; Collaboration with competitors for
technological innovation, Research Policy 40 (2011), ELSEVIER
Topic of Interest:
Unit/Sec.no Topic Course
16.8 Developing an operations strategy Project & Operations management
47
47. PEP Notes: Project & Operations Management
22. Water Stewardship Strategy
Water stewardship strategy helped Ford to strengthen its operations strategy.
Ford motor company launchedGlobalWaterManagement Initiative in 2000 as a part of its operations strategy to
reduce operating costs. Water was made a strategic sustainability objective. Ford‘s early focus on
water helped in controlling costs and adapt to water starved locations for its operations. Water is treated as a
scarce material and priority to water is aimed at achieving lower operational risk, better stakeholder relations
and a potential competitive advantage. All initiatives on water management culminated in an exemplary
water stewardship strategy. The operations strategy for water management was based on three aspects:
Water stewardshipstrategy
Preservation Engagement Innovation
a. Preservation- starting with percentage reductions in consumption and recharging water sources by
using runoff from the roof and ensuring that the water coming out of processes is cleaner than the
input water
b. Engagement- It is collective action by all stakeholders and Ford involved all of them in its
initiative. For water-starved places like Chennai, India, the company came up with special
programmes to engage every stakeholder right fromgovernment to NGOs, suppliers, customers and
employees.
c. Innovation-Ford partnered with organizations like the Georgia Institute of Technology to find new
ways in product development to develop technologies,processes and partnerships
Water concerns: Increasing demand for water, fuelled by global population growth and industrial
expansion, is placing constraints on water access and use everywhere. Risk-aware, environmentally
conscious consumers and investors are holding organizations increasingly accountable for the economic,
environmental and human consequences of water management. Many of the emerging markets that
multinationals are targeting for globalization and growth such as India and China are water-stressed and
therefore water practices receive intensive public and governmental scrutiny.
Risks and opportunities: Water scarcity can create both risks and opportunities and both should be
addressed by the company‘s water stewardship strategy, an integral part of operations strategy.
On the risk side, it should enable companies to anticipate, manage and mitigate potential
detrimental effects such as higher water costs, disruption to water-dependant operations, evolving
regulatory and pricing changes and loss of social-license to operate.
On the opportunity side, the strategy should help business leaders to identify and pursue value-
creating initiatives such as cutting operational water needs to more effectively manage costs and
risks; developing new products and services to meet marketplace demands driven by water scarcity
and publicizing the company‘s water stewardship efforts to enhance its reputation and
maintain its license to operate.
These risks and opportunities are contributed by a mix of three basic approaches to water management. To
make appropriate use of these approaches, leaders can examine water scarcity‘s business impacts from
multiple perspectives:regulatory, social, economic and operational and formulate operations strategy
accordingly.
48
48. Block IV: Introduction to OperationsManagement
The operations strategy should always be in tune with the organizational strategy, which in turn, should
be based on corporate vision, mission and objectives. Customer-focused and market oriented strategy
ensures sustainable performance. Accordingly operations managers should scan the business
environment, understand the changing customer requirements and then develop operations strategy in
line with the organizational endeavours. While globalization posed many challenges, it has also offered
immense opportunities for countries like India, which has specific advantages of skilled manpower and
demographic dividend. While developing operations strategies for natural resources like water, adequate
emphasis should be laid on reducing consumption, recycling, recharging and deploying technologies for
efficient water management
DiscussionQuestions:
1. What are the major aspects ofthe Global Waterstewardship Strategy of
Ford? Hint: Water Neutrality
2. What are the water concerns as perceived by Ford?
Hint: Water Stewardship asa global strategy
Source: Sarni William, Going ahead of the “ripple effect”, Deloitte University
Press, http:// dupress.com/articles/getting-ahead-of-the-ripple-effect/
Topic of Interest:
Unit/Sec.no Topic Course
16.8 Developing an Operations Strategy Project & Operations Management
49
49. PEP Notes: Project & Operations Management
23. Urgency of Innovation in Auto Industry
Developing Operations strategy in the auto industry called for a heavy dose of innovation.
Automobile market, in addition to intense competition was characterized by
Volatility in oil supply and prices coupled with global warming concerns
Consumer expectations of fuel efficiency, safety,high-technology and connectivity
Consequently,there was immense pressure to innovate at a rapid pace to develop operations strategies by
finding solutions to these concerns and requirements and maintain competitive advantage.This necessitates:
Capabilities in electronics and software
Thorough understanding ofthe dimensions of cost-competitiveness and the ways of achieving it
Choice of technologies right from materials, components to modules, assemblies, subsystems and
the final product
Post-delivery customer requirements until retirement of the product
Return, retention, reuse of parts and components,refurbishment and resale
A BCG study identified three priority areas for innovation for developing operations strategies:
Shift from mechanical to software-driven vehicles
Rapid product development by adopting a two-speed approach for concurrent development in
hardware and software
Role of tier one suppliers in innovation and technological development
Emerging advanced manufacturing processes were pointing towards automotive innovation-lightweight,
composite materials that enable fuel efficiency and performance.
Productive innovation by tier one suppliers should focus R&D efforts in major items like power
train, interior design and chassis components apart from connectivity and active-safety features.
Importance of innovation in process technology is obvious.
Innovation with a total life-cycle approach is a priority strategy for all automakers while developing
operations strategies.
Environmental concerns impose more responsibility on the automobile industry as it is the biggest
polluter and generator of Green House Gases, the focus of the entire world, industry and the public.
The operations strategy should always be in tune with the organizational strategy, and should be
customer-focused and market oriented. The strategy should ensure sustainable performance.
Accordingly operations managers should scan the business environment, unders tand the changing
customer requirements and then develop operations strategy in line with the organizational endeavours.
While globalization posed many challenges, it has also offered immense opportunities for countries like
India, which has specific advantages of skilled manpower and demographic dividend. The automobile
industry, the primary engine of growth in the post industrialization era (till the advent of IT industry)
calls for developing strategies which are eco-friendly, customer-centric and inclusive. Only innovative
operations strategies can ensure the sustainable growth of the automobile industry, which, at present is
performing below expectations.
50
50. Block IV: Introduction to OperationsManagement
DiscussionQuestions:
1. What are the competitive pressures encountered by the automobile
industry? Hint: low cost at high safety
2. Discussion therole ofinnovationin automobile industry
Hint:innovation and futureofautomobile industry
Source: bcg.perspectives-accelerating innovation: New challenges for automakers
Topic of Interest:
Unit/Sec.no Topic Course
16.8 Developing an Operations strategy Project & Operations Management
51