May 31, 2008

Operation Strategy Lesson 8 Exercise

Within IBM I work for the Services (Global Business and Software) Customer Fulfilment (CF from now on). We deal with all the contractual & administrative relationship with IBM customers (from the contract acceptance to invoices payment) and with all the financial analysis / economic report of the contracts.

Being a supporting structure (not directly producing revenue) its main objectives deal with cost saving, accuracy and auditability (picture 1 for result in 2006).

lesson_8_picture_1.jpg

Nowadays a continuous struggle between Corporate Operation Strategy and the Local (Italian) one occurs. The Corporate require as much operations’ commonality as possible in order to reduce cost creating centre (operating in low cost country – Picture 2) that support several Countries. Through commonality all Countries perform the same request to CF centre.

lesson_8_picture_2.jpg

The Italian Operation function “fights” to make Corporate understand the peculiarity and uniqueness of some customers (the Public Sector ones for instance) that do not accept common process.

Sometimes these requests are accepted by headquarters, sometimes we’ve to change our way of facing customers.

The “moving to centres” strategy is common, clearly defined and followed by the entire Countries. It’s providing a strong cost saving but it still has to improve in terms of internal support and customer requirements satisfaction.

In a contest of competition growing this strategy needs to be remodelled and adjusted by local Operation Managers.

In my opinion the attention on creating fit, sustainability and the attention on risk is present both at Corporate and Local level.

The Corporate tries to align operations resources with the market while the Local Managers (especially in the protectionist Italian labour market) try to align the market (customers/internal stakeholders) with operations resources.

Cost leadership is the ‘generic’ type of competitive strategy that describes how CF presents itself. It’s seen now as a strategy to earn a higher profit margin and in the long term to reduce IBM selling prices.

As highlighted by Slack and Lewis (but not enough considered by IBM in my opinion) it would be:

  • Important to develop a dynamic sustainability

  • Helpful to create a double-loop learning system

Within the CF a planned strategy, more then and emerging one, exists. Actually this is true if we focus on the strategy decided at Corporate level, while if we deal with Local decisions they seems to me more emerging.

CF operation has to face both internal and external stakeholders. Its declared aim is to support the reaching of these directions (picture 3)

lesson_8_picture_3.jpg

The direction, purpose and an opportunity to be creative in these complex tasks is present.

Analyzing the Hayes and Wheelwright ‘four-stage’ model and trying to understand where the CF is now, in my opinion, the stage is 3 in fact the following occur:

  • Frequent discussion with internal and external customers

  • Improvement of relationship

  • Explicit link between strategy and operations practice

  • Continuous improvement of operations practice

I’ve to affirm that it’s hard to recognize the ‘lower status’ associated with operations in the CF. Both corporate and local operations managers actually seems to have a strategic role even if sometimes the lack of strategy formulation experience is present. What is surely missing is the senior executives’ awareness about CF capabilities. We’ve seen that it’s difficult, in this condition, to direct an organization towards fitting within key business objectives.

References:

  • Slack, Nigel and Lewis, Michael (2008), "Operations Strategy", 2nd Edition, Prentice Hall, Great Britain

  • University of Warwick(2008), The Warwick MBA: Operations Strategy", Lesson 6, Warwick Business School.

  • University of Warwick(2008), The Warwick MBA: Operations Strategy", Lesson 8, Warwick Business School.

  • Customer Fulfillment Operation Communication Meeting (http://w3-05.ibm.com/isc/customerfulfillment/emea/csoemea.nsf/bef928bbebab9e43c12566fd00429f10/ddfd9e141fb5538f802573d00034f3d6/$FILE/CF%20Comm%20Meeting%20260207_Parte%20I.pps)


- One comment Not publicly viewable

  1. Desmond Yarham

    Chiara,
    You analysed the question from the perspective of IBMGBS – Customer Fulfillment. Looking at the sections 2006 results, they appear to have been almost exclusively on target.
    You explained that the section is a Cost Centre, it helps other sections to create revenue. The means by which it has saved operating cost (Low Cost Competency Centres) does appear to have caused some dissatisfaction.
    Prompting Operations Commonality is a good means of reducing cost, standard solutions are to be used wherever possible but I do not believe that aligning the market to fit operational resource is a sustainable strategy. Most organisations will require an amount of customisation, others will require a lot. Organisations gain competitive advantage by being different!
    You were quite generous with your positioning on the Hays & Wheelwright 4 stage model, most people have selected the second stage.
    A good blog written with an amount of passion.
    rgds
    Des

    03 Jun 2008, 21:39


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