Strategy is the framework that helps guide the choices company executives make as they move toward their vision. These choices often guide critical decisions relating to capital, capacity, vertical integration, resources, IT and the other components of operations strategy.
The Five Frames
In manufacturing companies, there are five potential strategic frames, and while many companies want them all, only one (with a potential secondary) should be chosen to drive the company. They are:
Many manufacturers try to become the low cost producer and either sell cheap or force their competitors out of business. Lean initiatives are often driven by cost reduction, and at times purchasing will try to beat up their suppliers to lower costs. Low cost strategy frames drove many of the off-shoring initiatives of the 1990s and early 2000s.
Making the best of the best can be a very effective strategy, especially for markets driven by prestige or highly technical products. BMW, Mercedes, Lexus and other high-end car makers developed high quality strategies and used them to approach a higher-priced market.
Speed to market is also a key driver in manufacturing. Short delivery cycles, quick manufacturing techniques and high levels of service can drive competitiveness. Amazon, Dell and Federal Express all built highly successful companies using this driver.
Companies that can roll out new innovative products can drive competition crazy. The primary example of this is Apple.
The ability to quickly customize products can also drive competitors crazy. Toyota says it can deliver any car, customized to your liking (from their assortments of accessories) in twelve days or less.
For strategy to be useful, it has to provide the clarity and guidance that people need for decision making. The five frames can prioritize activities in a way that’s more influential than the rest of your business. Picking more than one (or two) confuses the issue and often results in lack of implementation, which is why strategy fails.
© 2017 – Rick Pay – All Rights Reserved