Integrating the Lean Enterprise Lean as a Strategy Cory R A Hallam October 30, 2002 October 30 2002 Cory R A Hallam, MIT LAI/TMP
Cory R.A. Hallam, MIT LAI/TMP 1/25 October 30, 2002 Integrating the Lean Enterprise - Lean as a Strategy - Cory R. A. Hallam October 30, 2002
What is Strategy? a strategy is a plan, method, or series of actions designed to achieve a specific goal or effect (Wordsmyth, 2001) October 30 2002 Cory R A Hallam, MIT LAI/TMP 2/25
Cory R.A. Hallam, MIT LAI/TMP 2/25 October 30, 2002 What is Strategy? • A strategy is a plan, method, or series of actions designed to achieve a specific goal or effect (Wordsmyth, 2001)
Contextual Description of Strategy (Mintzberg, 1987) Military strategy is concerned with drafting the plan of war. shaping the individual campaigns within these plans and deciding on the individual engagements with the enemy Game Theory strategy involves a complete plan a plan which specifies what choices( the player) will make in every possible situation Management strategy is a unified comprehensive, and integrated plan designed to ensure that the basic objectives of the enterprise are achieved October 30 2002 Cory R A Hallam, MIT LAI/TMP 3/25
Cory R.A. Hallam, MIT LAI/TMP 3/25 October 30, 2002 Contextual Description of Strategy (Mintzberg, 1987) • Military strategy is concerned with drafting the plan of war...shaping the individual campaigns within these plans, and deciding on the individual engagements with the enemy. • Game Theory strategy involves a complete plan; a plan which specifies what choices (the player) will make in every possible situation. • Management strategy is a unified, comprehensive, and integrated plan designed to ensure that the basic objectives of the enterprise are achieved
Strategy and Business (oster, 1999) From a business perspective, strategy begins with the desire of an organization to outperform the market A strategy, in this context, is defined as a set of concrete plans to help the organization accomplish this goal Fundamentally, a strategy is a commitment to undertake one set of actions rather than another and this commitment necessarily describes the allocation of resources October 30 2002 Cory R A Hallam, MIT LAI/TMP
Cory R.A. Hallam, MIT LAI/TMP 4/25 October 30, 2002 Strategy and Business (Oster, 1999) • From a business perspective, strategy begins with the desire of an organization to outperform the market. • A strategy, in this context, is defined as a set of concrete plans to help the organization accomplish this goal. • Fundamentally, a strategy is a commitment to undertake one set of actions rather than another, and this commitment necessarily describes the allocation of resources
Strategy and Business (Porter, 1996) If there were one ideal position, there would be no need for strategy. Strategy is based on making trade-offs in a competitive environment The essence of strategy is thus choosing what to do and what not to do while creating fit among a company s activities October 30 2002 Cory R A Hallam, MIT LAI/TMP 525
Cory R.A. Hallam, MIT LAI/TMP 5/25 October 30, 2002 Strategy and Business (Porter, 1996) • If there were one ideal position, there would be no need for strategy. • Strategy is based on making trade-offs in a competitive environment. • The essence of strategy is thus choosing what to do and what not to do while creating fit among a company's activities
Two Primary Reasons for a Strategy First, if what you do is not unique in some respect and everyone can do it, then you cannot make money at it(Oster, 1999, pp. 11). Second, no advantage is permanently sustainable in a competitive market thus satisfaction with the status quo is a recipe for failure as competitors will eventually find a means to capture your market share (Hunter, 2000a) October 30 2002 Cory R A Hallam, MIT LAI/TMP 6/25
Cory R.A. Hallam, MIT LAI/TMP 6/25 October 30, 2002 Two Primary Reasons for a Strategy • First, if what you do is not unique in some respect and everyone can do it, then you cannot make money at it (Oster, 1999, pp.11). • Second, no advantage is permanently sustainable in a competitive market thus satisfaction with the status quo is a recipe for failure as competitors will eventually find a means to capture your market share (Hunter, 2000a)
Strategy and Competitive Advantage Empirical study of 6771 firms in 40 industries over 25 years was conducted to test whether businesses do sustain competitive advantage, as measured by sustained superior economic pertormance over time wggⅰ ns and ruel,2002) Only a small number of firms exhibit superior economic performance Of those that do exhibit superior economic performance, few sustain it for an extended time period(10 years), while an even rarer few sustain it for multiple decades Further, the group that makes up the superior performers experiences little composition stability(i.e. the performers change over time). October 30 2002 Cory R A Hallam, MIT LAI/TMP 725
Cory R.A. Hallam, MIT LAI/TMP 7/25 October 30, 2002 Strategy and Competitive Advantage • Empirical study of 6771 firms in 40 industries over 25 years was conducted to test whether businesses do sustain competitive advantage, as measured by sustained superior economic performance over time (Wiggins and Ruefli, 2002). – Only a small number of firms exhibit superior economic performance. – Of those that do exhibit superior economic performance, few sustain it for an extended time period (10 years), while an even rarer few sustain it for multiple decades. – Further, the group that makes up the superior performers experiences little composition stability (i.e. the performers change over time)
Strategy and Competitive Advantage There are numerous if not an infinite assortment of strategies available for firms to attempt to gain sustainable competitive advantage The dynamic nature of internal and external factors inherently necessitates the continual evolution and adaptation of strategies to maintain competitive advantage Firms will most likely experience a loss of competitive advantage after a brief period of having a competitive advantage October 30 2002 Cory R A Hallam, MIT LAI/TMP 8/25
Cory R.A. Hallam, MIT LAI/TMP 8/25 October 30, 2002 Strategy and Competitive Advantage • There are numerous, if not an infinite assortment of strategies available for firms to attempt to gain sustainable competitive advantage. • The dynamic nature of internal and external factors inherently necessitates the continual evolution and adaptation of strategies to maintain competitive advantage. • Firms will most likely experience a loss of competitive advantage after a brief period of having a competitive advantage
Strategy as it Applies to Levels of the Organization Hunter summarizes three types of strategy, namely Corporate, Business, and Functional (Hunter, 2000b) but is this the right wording? Porter argues that market competition only occurs at the business level (Porter, 1987) October 30.2002 Cory R A Hallam, MIT LAI/TMP 925
Cory R.A. Hallam, MIT LAI/TMP 9/25 October 30, 2002 Strategy as it Applies to Levels of the Organization • Hunter summarizes three types of strategy, namely Corporate, Business, and Functional (Hunter, 2000b), but is this the right wording? • Porter argues that market competition only occurs at the business level (Porter, 1987)
Defining Strategy at Organization Levels(Hunter 2000b, modified by Hallam) Corporate Strategy -how to link businesses for greater performance Business Strategy -what market to serve and how to serve the market Operational strategy -how to structure and organize activities within the organization to achieve business objectives Functional strategy- how to structure and execute functional activities to support business operations October 30 2002 Cory R A Hallam, MIT LAI/TMP
Cory R.A. Hallam, MIT LAI/TMP 10/25 October 30, 2002 Defining Strategy at Organization Levels (Hunter 2000b, modified by Hallam) • Corporate Strategy - how to link businesses for greater performance • Business Strategy - what market to serve and how to serve the market • Operational strategy - how to structure and organize activities within the organization to achieve business objectives • Functional strategy - how to structure and execute functional activities to support business operations