Introduction to Hospitality Operations Development (298)

Today UCB Online: No more printed notes. MDRS, aim of module Assignments: Seminar hour, launch of both assignments week 2. General advice Start reading immediately Think about what you read Read even more than you think you need to

Seminar groups All MAIHM go to room 222 All MSc go to 115

HOD is really about Operations Strategy. What is operations strategy about? http://youtu.be/ZRcDVm6G50Y (Slack talks about Operations Strategy) Its about building capabilities to get competitive advantage. Its about applying process management principles to all operations, not just production operations. Bottlenecks, capacity, loading, variability, benefits of standardisation

What is this module about? “The emphasis of this module is about examining strategic level operations management issues through an evaluation of how operations may have to develop or change to meet the future needs of the market. This evaluation will be carried out within the context of the corporate strategy and the external global business environment.” The focus is on operational development and operations management theory. It is about shaping operations to fit strategy and influencing strategy to fit operational experience. It is about shaping operations to meet the requirements of selected market segments.

To achieve this better than competitors Operations strategy reconciles the requirements of the market with the capabilities of operations resources To achieve this better than competitors Tangible and intangible resources Operations capabilities Operations processes Operations strategy decision areas Customer needs Market positioning Competitors’ Actions Performance objectives Understanding how resources and processes can be configured Understanding resources and processes Strategic decisions Capacity Supply networks Process technology Development and organisation Required performance Quality Speed Dependability Flexibility Cost Understanding markets Focus on evaluating how operations aligns with the market need. Slack & Lewis, 2008 & 2011

What do we mean by ‘operations’? All organisations consist of operations such as production, finance, HR and marketing. This module focuses on the part of the organisation that creates and delivers the products and services to the customers. It consumes most of the resources of hospitality businesses. It is where most money is invested and where most people work. It puts the business concept and plans into action. It ‘operationalizes’ strategy. It is where value is created for the customer and where all sales revenue is generated.

Operations Strategy (Anupindi et al) “configures and develops business processes (activities and resources) that best enable a firm to produce and deliver the products specified by the business strategy” (p23) The firm selects a strategic position (cost, quality, speed, etc) that must be differentiated. Requires the development of process competencies that support the chosen strategic position.

Strategic Operations Management (Brown et al., 2013) “world-class firms are able to out-perform other organizations and satisfy customer requirements by virtue of their remarkable operational capabilities which are aligned to market requirements.” (p31). “operations must be managed in a way that will enable the firm to compete successfully against ever increasing levels of competition from around the world.” (p44). “operations capabilities were then able to be utilized in the market in order to ward off competitive advances. However it is futile to assert a strategy if operations capabilities are not in place.” (p50)

Operations Strategy, Hill & Hill (2012) “Operations strategy concerns developing the capabilities of the function to match or surpass the order-winners or qualifiers for which it is solely or jointly responsible. (…) Functional strategies prioritize developments and investments in line with the needs of agreed current and future markets. (…) The strategic task for each function is consistently to meet or improve its support for relevant performance criteria.” (p46) It is a job of all functional areas (operations, marketing etc)

Operations strategy is ….. ‘… the decisions which shape the long-term capabilities of the company’s operations and their contribution to overall strategy through the on-going reconciliation of market requirements and operations resources …’ Decisions about making changes to resources and processes so that the operation continues to satisfy profitable market segments. Slack & Lewis, 2008 & 2011

The relationship between the concepts of ‘the business model’ and the ‘operating model’ Business strategy The business model Functional strategies ….sets the overall purpose and objectives for…… ….defines how the business model will be achieved…… Marketing strategy Operations strategy Finance strategy Technology strategy Operational Marketing Operational Operations Operational Finance Operational Technology The operating model Slack & Lewis, 2008 & 2011

How is operations strategy different from operational management? Short-term Long-term Timescale, e.g. capacity decisions Demand Demand 1–12 months 1–10 Years (Slack & Lewis, 2011)

Where operations development decisions are made Does the decision change the design of the product or service? Does the decision change the target markets? Does the decision impact on more than one function or department? Does the decision affect more than one business unit? Does the decision impact on the brand specification? Does the decision require capital investment?

Example decisions by level Features Bedrooms Food Suppliers Operational Management Short term Department Customer facing Cleaning Maintenance Quality Cost Scheduling Order Delivery Storage Payment Operations Strategy Mid term Across departments or business units Design Equipment Refurbishment Menu design Service method Selection Contracting Strategy Long term Business model Conceptual Target markets Room concept Food concept Policy

Decisions by area and type Capacity Supply networks Process technology Development and organisation Infrastructural Structural “Structural decisions require significant investment and have a long-term impact. They refer to decisions about capacity, location, technology and vertical integration/ relationships with suppliers. They have a significant effect on physical assets, and once they have been implemented, they cannot be modified in the short term.” “Infrastructural decisions have a short-term impact and serve to support the production processes. They include the organizational structure; work force management; and the systems for planning, stock control and quality management.” Espino-Rodríguez, T.F., Gil-Padilla, A.M. (2015) ‘The structural and infrastructural decisions of operations management in the hotel sector and their impact on organizational performance’ Tourism and Hospitality Research Vol 15, Issue 1, p5

Marketing and Service Operations Operations are the physical realisation of the ‘business idea’. Tangible facilities communicate something about the product and brand to the customers. Operations enact the ‘brand image’: Product and service creation and delivery in front of the customer.

Capabilities and Competitive Advantage Developing capabilities is about developing resources and processes to be very good at something that the market values, for example, excellent service quality. Ideally we want to be better than our competitors at what is important to the market. Achieving and maintaining this position can be a source of competitive advantage. This is linked to an area of theory called the Resource Based View (RBV).

Reconciliation / Alignment Major (step) change: Developing (changing) resources, processes and capabilities so that they are attractive to customers that you want. Adaption (incremental): Pursuing markets that have needs that match your capabilities, but adapting to changing market requirements, or needs of new markets. Top down: Top management’s view of strategic direction, the business model. Bottom up: Adapting operations to achieve performance targets more efficiently and effectively.

The key module theme What you HAVE What you NEED What you WANT in terms of operations capabilities What you NEED to ‘compete’ in the market Operations Resources Market Requirements What you WANT from your operations to help you ‘compete’ What you DO to maintain your capabilities and satisfy markets Strategic Reconciliation / Alignment Slack & Lewis, 2008 & 2011

Key topic areas What is operations management? What is the theory behind ‘capabilities’? Why is it important to understand processes? Decisions about location and capacity. What is the role of facilities in hospitality operations strategy? What methodologies can we apply to business improvement? How does the management of people fit into operations development?

Summary HOD module focuses on knowledge and tools to develop operations strategy. It is based around the analysis of operational resources and processes and their development to meet needs of existing or new customers. Operations strategy ‘operationalizes’ business strategy and combines it with ‘bottom-up’ internal and external feedback. Business strategy can only be enacted through functional strategies such as operations strategy. Next week: What exactly is operations management?