Productivity Improvement and Competitiveness
Why is Productivity Improvement Important to An Organization?
Cost reduction and increased profits Global competition Pricing and financial pressures Rising customer expectations More effective use of resources Market share increase /market expansion
Does Productivity Improvement Guarantee Financial Success?
Competitive Strategies Specific performance criteria associated with the competitive priorities are used to evaluate an organization’s performance: Cost (initial, life cycle) and availability Quality (performance, features, reliability, etc.) Flexibility (product, process, & volume) Delivery (speed, dependability) Service (types)
Competitive Strategies (Continued) Competitive priorities are usually ranked according to their importance to the overall organizational strategy. Different organizational strategies place different demands on the operations of the organization.
Competitive Strategies (Porter’s Model) Lower Cost Differentiation BroadTarget NarrowTarget CostLeadership CostFocus Differentiation FocusedDifferentiation Competitive Advantage Competitive Scope
Competitive Strategies Examples Lower Cost Differentiation BroadTarget NarrowTarget Competitive Advantage Competitive Scope
Strategic Directions (Value Disciplines) – Treacy & Wiersema Operational Excellence – Wal-Mart, Southwest Airlines, Toyota, Dell, USAA Customer Intimacy – Home Depot, Nordstrom, Ritz-Carlton, Kraft Product Leadership – Johnson & Johnson, Merk, Nike, Apple Computer, Toyota
Customer Requirements for the Strategic Directions Operational Excellence Customer Intimacy Product Leadership Price Convenience Accessibility Consistency Timeliness Accuracy Flexibility Responsiveness Empathy Innovation Performance Features
Which of the Strategic Directions is Most Effective?
What Are the Major Strategies to Improve Productivity?
Productivity Improvement Strategies Downsizing/ Outsourcing Technology (hardware & software) Re-organization Product and process innovation Merger & acquisition Motivational & incentive programs Training & development
How Effective Are Each of Those Strategies?
How To Achieve Long-Term Success in Productivity Improvement?
Productivity Improvement Portfolios Investments in leadership development Investments in facilities and equipment Investments in programs and systems Investments in people (Note: These alternatives are not mutually exclusive. All are important.)
Productivity Improvement Strategic Approaches Are not limited solely to operations Do not focus solely on direct labor Do not only seek out quick cost reductions Do not throw together unconnected projects Are linked explicitly to business needs through the strategic planning process People are the real key to success
What Could be the Barriers to Effective PI?
Barriers to Effective Productivity Improvement Poor Leadership Flawed measurements Flawed HR management systems Bureaucracy Lack of a long-term business strategy Short-term focus Ineffective execution