Beruflich Dokumente
Kultur Dokumente
12384
ISSN 1059-1478|EISSN 1937-5956|15|2410|1513 2015 Production and Operations Management Society
Daniel Simonovich
ESB Business School, Reutlingen University, Alteburgstrae 150, D-72762, Reutlingen, Germany
Daniel.Simonovich@Reutlingen-University.DE
Wickham Skinner
Harvard Business School, Soldiers Field, Boston, Massachusetts 02163, USA, wskinner@maine.edu
ew unfocused factories outperform competitors, but focus is elusive because the environment is constantly evolving
F and this requires changes to a factorys key tasks. So how can focus be achieved and sustained? We present insights
derived from an historical analysis of the German Hewlett-Packard server plant which went through a series of focus
changes over the years. Using this example, we provide clues for the right timing of focus changes and discuss critical
structural and infrastructural changes required during the focus transitions, as well as cross-functional coordination and
leadership challenges. Our assertion is that production operations constitute a system that can adapt to disruptive change
by using the levers of manufacturing policies to stay focused on a limited but absolutely essential task which creates a
strategic advantage.
Key words: focused factories; manufacturing strategy; structural and infrastructural changes; innovation factory; operational
excellence factory; solutions factory
History: Received: October 2013; Accepted: March 2015 by Kalyan Singhal, after 1 revision.
1513
Brumme, Simonovich, Skinner, and Van Wassenhove: Factory Focus in Turbulent Times
1514 Production and Operations Management 24(10), pp. 15131523, 2015 Production and Operations Management Society
For certain industries in which a maturing move- Further, the opportunity for a solutions delivery
ment takes place such as the computer industry, three manufacturing mission is signaled when:
distinct missions for focusing may surface: innova- The industry has clearly moved into a com-
tion, operational excellence and providing solutions modity phase.
for customers. We set forth in Figure 1 how these The matured industry brings out different
three particular manufacturing missions evolved in types of buyers, including a critical mass of
that industry. those who perceive substantial value in a
An industrys maturity sometimes provides some broader, individualized problem-solving assis-
orientation as to when to reconsider the focus of its tance.
factories (Christensen 1992). In an innovation-thriving Outbound supply chain partnership opportuni-
industry, the moment to move from innovation mas- ties emerge, which provide additional revenue
tery to an operational excellence focusor at least potential.
complement innovation mastery with lower-cost IT systems have matured to take advantage of
manufacturing capacityhas arrived when: the outbound partnerships for total customer
Commodity
Hardly any intersection
Product performance
competitors point
and suppliers
Many
Competitors
Few and suppliers
competitors
and suppliers Time
Operational Innovation
Innovation mastery
excellence mastery
Agilent Stabilize quality for Improve costs, speed
Technology hard-to-produce innovations and reliability Operational
excellence
Spin-off low cost part and
innovate anew
matured, and where all three of our types of factory (Skinner 1969, Wheelwright and Hayes 1985). The
may rightfully coexist, the typology we propose may structural decision areas include make-or-buy, facility
help narrow discussions as to whether a plants main size and location, capacity, and the degree of automa-
task is to compete on innovation, operational excel- tion. The infrastructural choices incorporate product
lence, or customized solutions. novelty and variety, quality, workforce policies and
Let us be clear however, that we do not intend to organizational aspects. A focused factory is a plant
suggest that all industries change in the same manner that aligns all these choices with a clear manufactur-
or pattern as the computer industry appears to have ing mission. By analyzing the example of Hewlett-
changed, nor that these three specific stages we Packard and other firms, we found three distinct
observed at HP (and found labels for) are always focused factory types reflecting manufacturing mis-
present or useful for identifying focused factory sion evolution (Boddy et al. 2000, Frohlich and West-
issues. What we do suggest is that for a firm to sustain brook 2001), which we title: the innovation factory,
the competitive advantages of focused factories, its the operational excellence factory, and the solu-
management must consistently and continuously tions factory. Table 1 illustrates the findings of the
identify the key tasks required of its manufacturing HP plant with respect to changes in focus, structural
function for achieving competitive success as they and infrastructural choices over time, as well as the
inevitably change over time. achieved results.
As HP changed manufacturing missions, which In the early phase of the computer industry the
each demanded a different focus, changing the focus innovation factory1 was a low-to-mid-volume plant
was accomplished by using the levers of revising with a high degree of vertical integration, located
manufacturing policies. We now move to describing closely to R&D and skilled labor. The emphasis was
how the leverage of manufacturing policies can on the manufacturability of new products with a job
directly impact and modify a factorys focus. We shop or batch type production process. HPs German
noted that there were essentially three types of plant excelled at the hard-to-manufacture innovations
focused factories developed over 15 years, each with it received from an R&D program that absorbed
different manufacturing policies. between 10% and 15% of revenues.
Next in the evolution was the operational excellence
4. The What: Redesigning the Factory factory,2 which had lower levels of vertical integra-
tion than the innovation factory. The factory was
to Focus on Changing Missions entirely rebuilt to a large-scale plant. When Hewlett-
4.1. Focus Changes at the HP Herrenberg Plant Packard realized the necessary change in mission
Focus is achieved by making far-reaching structural from innovation mastery to operational excellence in
and infrastructural choices in manufacturing policies the 1990s, vertical integration was decreased through
inbound outsourcing while the production process pushed by R&D. Accounting and finance should
was substantially automated and standardized. HP enable a flexible allocation of resources. The human
split its process from a customer-pull principle to a resource management (HRM) function can help
push-and-pull approach, where parts and compo- attract high-skilled staff seeking non-hierarchical
nents were built-to-stock globally and only the final structures with IT supporting experimentation and
assembly remained a local build-to-order process. coordination.
The quality levels gained in the previous innovation For an operational excellence factory, sales activi-
factory stage were maintained, thus realizing a ties should be integrated into flawless, non-disruptive
cumulative capability buildup (Ferdows and de order handling at high transaction speed. Flexible
Meyer 1990). In this factory, only 15% of operators workforce models can be used to adapt to volume
were permanently employed as know-how keepers, fluctuations at limited cost. A formal and centralized
40% had time-flexible contracts, and the remaining organization should be reinforced through rigid
45% were temporal workers who could be called on financial controls with high levels of transparency. IT
demand. This resulted in a very flexible workforce should support cross-functional business process
model adapting to demand fluctuations. The new fac- automation.
tory focus was rewarded with steep sales growth and When the German plant of Hewlett-Packard
rising profits. To achieve a better cost position, HP worked on its transformation from an operational
could have off-shored its production. But it decided excellence factory to a solutions factory, it relied
against it, a move that secured the transition to the heavily on the support of non-manufacturing func-
next manufacturing focus: the solutions factory. tions. The purchasing function had to facilitate a gen-
HPs solutions factory3 in Herrenberg resulted eral contractors role by creating strategic supply
from outsourcing low-end production parts and using partnershipsnot only inbound but also outbound.
the freed-up managerial capacity to establish a prob- The re-training of engineers was essential, since
lem-solving competency. As put by Tom Viola, then employees needed broad problem-solving skills.
worldwide head of supply chain management at HP: Supply chain coordinators evaluated possible new
The company owning the customer experience will channel partner opportunities. Accounting began to
have the power. HPs German plant effectively emphasize long-term customer profitability rather
began to integrate activities hitherto carried out by its than transactional profit while the IT function pro-
customer support and channel partners. The new vided detailed and integrated customer data. Exhib-
focus was termed a solutions factory, which offered its 13 summarize those three generalized focused
turnkey computer systems ready to fully operate the factory types, including relationships between manu-
day after delivery to the clients sitea service most facturing decision areas and non-manufacturing func-
appreciated by banks and other service organizations. tions, in the form of holistic manufacturing strategy
Modularization was key to providing customized wheels, which we have created to provide over-
solutions. As a result HP created a new high-margin views.
business with a base of loyal customers. We note from In the German HP plant in Herrenberg, many func-
HPs experience that solutions factories are ideally tions were part of the facility: purchasing, accounting
located close to customers and sized for flexible, low- and finance, human resources and IT. Because of this
to-mid-volume production. A broad range of solu- physical proximity, coordination with these functions
tions is made possible through a job shop configura- was generally manageable. The marketing and sales
tion. Quality is understood as the satisfaction levels of functions, on the other hand, were dispersed globally
customers with individual solutions. The manufactur- and required more coordination effort. The change
ing focus transitions of the Herrenberg plant was also from the innovation to the operational excellence was
adopted by HPs factory in California. Based on their actually facilitated by marketing and sales as they
successes, the changes in focus eventually became a welcomed production to be faster and cheaper.
worldwide strategy. Likewise, marketing and sales were happy to see the
transition to the solutions factory as they previously
4.2. Focus Changes Require Cross-Functional had to improvise with local partners to provide cus-
Coordination tomized solutions. However, in both transition
When undertaking a major refocus of a plant, the endeavors it took considerable initial effort to con-
alignment challenge is not limited to the relation- vince these functions to view manufacturing as a
ship between business strategy and manufacturing. source for competitive differentiation.
Non-manufacturing functions must play their part
too. At an innovation factory, the role of market- 4.3. Install Regular Manufacturing Policy Reviews
ing and sales is to prepare markets through cam- Remarkably, HP was able to adjust to turbulent com-
paigns and educate customers about novel products petitive changes in technology and markets. This was
Brumme, Simonovich, Skinner, and Van Wassenhove: Factory Focus in Turbulent Times
1518 Production and Operations Management 24(10), pp. 15131523, 2015 Production and Operations Management Society
High
Low
Purchasing
Finance
R&D
Marketing
Sales
HRM
Cross-functional coordination
Brumme, Simonovich, Skinner, and Van Wassenhove: Factory Focus in Turbulent Times
Production and Operations Management 24(10), pp. 15131523, 2015 Production and Operations Management Society 1519
The demand for technology engineers diminished. period of mindset change efforts that started months
Many of them retrained to become process engineers before any physical transformation. These efforts
for mature products and layoffs could be avoided consisted of clearly communicating the new mission,
because of the relatively small initial factory. As for the changed circumstances and the new expectations
the operators, they had been, in a way, tinkerers in set for engineers and operators. One purpose of this
the innovation factory and came to face the transition communication was to create a sense of urgency. For
to a much stricter organization relabeled as a distri- example, prior to the first transformation to an oper-
bution center. However, the increased factory capac- ational excellence plant, it was communicated that a
ity and high volume production brought them a failure to follow would potentially result in an offsh-
substitute opportunity for maintaining some auton- oring scenario of production. Thus communication
omy and privilege: as knowledge carriers and as pro- was aimed at influencing collective emotions (Huy
moted team supervisors of lower skilled temporal 1999). When completing the structural and infra-
operators in a more formal organization. Such opera- structural factory changes, another important aspect
tor prospects would have been chanceless had Hew- was the motivation system. In the innovation factory,
lett Packard chosen to relocate the factory to a low engineers were rewarded according to the number of
cost region. new product introductions, without any time con-
The transition from the operational excellence fac- straint for each development. When moving to the
tory to the solutions factory brought very different operational excellence factory, rewards were tied to
challenges. The forward integration into solutions short product introduction cycles and efficiency
delivery reinforced the importance of the facility and gains. When re-focusing on the solutions factory,
did not entail the sense of loss the previous transition engineers compensation was tied to additional reve-
represented to engineers (an increase in vertical inte- nues generated from services and supply chain inte-
gration is usually more motivating for employees gration. However, the visibility of the newly desired
than outsourcing). However, engineers had to face ways of working was as important as the final
once again another paradigm shift as the need for net- changes in rewards. In each focus transition, it was
working with a previously unknown multitude of those engineers who were known as the top per-
external partners became crucial. Likewise, the work formers throughout the organization, who were
of operators became less structured, more complex given the visible privilege of working in the new
and more uncertain than before with every new client ways first. This made clear to everyone what it
request potentially becoming a new solutions configu- would look like to thrive in the factory in the future.
ration. Both engineers and operators were asked to When transitioning to the solutions factory, for
fundamentally change their self-conception and were example, the top performing engineers were the first
assisted with training support. While many engineers to join sales staff in client problem-solving. Likewise,
and operators could be re-educated, others could not operators who demonstrated the ability to embrace
adapt to new roles. Those who could not kept on the more complex ways of working received man-
working on the more narrow tasks and were comple- agements praise. All these communication and moti-
mented with new hires capable of carrying out a vational activities started prior to the actual physical
solutions approach (as illustrated in Table 1, produc- plant transformation and the introduction of a new
tion was split in part creating standard modules and a formal reward scheme and continued until the tran-
part for solutions integration). sitions completion. Part of this initial leadership
work was the early involvement of employees and
5.2. Communication and Motivation the workers council. Figure 3 summarizes the
A transition in manufacturing strategy is usually a approach taken at Hewlett Packards Herrenberg
complex endeavor of large-scale nature. At Hewlett plant in both major focus transitions.
Packard, the plants structural and infrastructural
transformations were broken down into project 6. The Steps to Achieve and Sustain
streams that corresponded broadly to manufacturing
policy areas shown in Exhibits 13, except for the
Focus
quality decision area, whose nature was more of an The ideas presented so far about sustaining a strat-
ongoing process. These projects were not executed in egy-focused factory as firm strategy evolves can be
sequence, but in parallel. Nonetheless, there was an summarized into five steps for focusing manufactur-
important sequencing logic within the overall transi- ing to become a dynamic competitive weapon.
tion program that may help explain the unlikely suc- Step 1 Analyze the dynamic business environment:
cess of repeated radical factory changes: the assess the maturity of your industry by understand-
leadership work that preceded the execution of the ing customer expectations, the degree of commoditi-
structural and infrastructural projects. There was a zation and evolving supplier capabilities.
Brumme, Simonovich, Skinner, and Van Wassenhove: Factory Focus in Turbulent Times
1520 Production and Operations Management 24(10), pp. 15131523, 2015 Production and Operations Management Society
Figure 3 The Approach Repeatedly used in Refocusing Hewlett Packards Herrenberg plant
Phase I: Phase II:
Developing Strategy Managing the Transition
Accounting, Finance
Job shop
High vertical or batch
integration in process
STRUCTURAL
the absence with high
of many portion of
suppliers manual work
FOCUS 1:
innovation
factory
Emphasis on Focus on
stabilizing INFRASTRUC- new product
the quality of TURAL introduction
new products
Step 2 Define the manufacturing mission: based on Step 4 Manage manufacturing strategy transitions:
the previous step and perhaps more importantly, Work on mindset change through exhaustive
your competitive product or service positioning, communication and involve engineers and operators
choose a corresponding manufacturing mission for early, before carrying out the structural and infra-
each plant, such as innovation mastery, operational structural changes alongside a changed incentive
excellence or solutions delivery. scheme.
Step 3 Design strategy-focused factories: for each Step 5 Regularly audit manufacturing strategy: Insti-
plant, create the right factory focus by aligning all tutionalize yearly manufacturing policy reviews for
structural and infrastructural policies strictly on the checking if the focus has been diluted or needs a
manufacturing mission. Also align cross-functional revision to realign with competitive strategy
policies. Frameworks such as the manufacturing strat- imperatives.
egy wheels or the manufacturing strategy canvas help For clarity purposes, we turn to addressing seven
facilitate discussions about the array of focus changes. myths sometimes held by manufacturing managers,
Brumme, Simonovich, Skinner, and Van Wassenhove: Factory Focus in Turbulent Times
Production and Operations Management 24(10), pp. 15131523, 2015 Production and Operations Management Society 1521
Accounting, Finance
the consultants who advise them or colleagues, which Myth 5: Focused factories are more capital intensive. It
have frequently dissuaded firms from using the can be argued that because focused factories may
power of focused factories (Skinner 1996). employ special purpose equipment and processes
rather than general purpose, more capital investment
may be required. This of course is possible, but it
7. Seven Myths about Focused depends on various factors. Many firms have reduced
Factories operating costs by using equipment that is special
Myth 1: Focused factories cannot respond to changes in purpose and therefore more efficient and requiring
technology and the competitive environment. The success- fewer changeovers. Focus is typically less expensive
ful experiences of HP directly disprove this notion. than combining an incompatible set of products and
Myth 2: Focused factories can only be green-field plants. process technologies.
Green-field plants are more easily designed to be Myth 6: Focus is impossible in a fast-changing world.
focused than existing plants but by changing manu- The HP data proves exactly the opposite. Sometimes
facturing policies any plant can be focused. the focus an organization builds into its operations is
Myth 3: Only small factories can be focused. Again, any simply to be flexible so as to adapt to frequent change
plant can be focused. Sometimes it is done by divid- including, for example, sudden volume changes in a
ing the facility into areas each with a different focus; cyclical industry.
or a large plant can have a single focus; or the focus Myth 7: Lean manufacturing and/or using best prac-
may be on a difficult but critical task, such as the abil- tices make the focused factory unnecessary. This is a mis-
ity to introduce new products quickly. conception because lean itself is essentially a focus
Myth 4: Focused factories are large-scale, big volume on productivity and efficiency and a firm can be effi-
plants. Once more, focus has nothing to do with size cient and low-cost and fail because successful compe-
but with clarity of mission and the manufacturing tition requires an entirely different focus. Best
task, that is, achieving performance on an essential practices may allow a firm to keep up with competi-
dimension which creates a unique competitive advan- tors instead of falling behind, but merely adopting
tage. best practices does not make firms clear winners.
Brumme, Simonovich, Skinner, and Van Wassenhove: Factory Focus in Turbulent Times
1522 Production and Operations Management 24(10), pp. 15131523, 2015 Production and Operations Management Society
Accounting, Finance
Job shop
process to
Virtual meet unique
integration STRUCTURAL
customer
through sub- needs
contractors
Modula-
FOCUS 3: rization
solutions
factory
Quality Unique
understood as INFRASTRUC- range of
service quality TURAL superior
services
industries. Examples similar to the two focus transi- Boyer, K. K., M. Swink, E. D. Rosenzweig. 2005. Operations strat-
tions at HP can indeed be seen in other industries: egy research in the POMS journal. Prod. Oper. Manag. 14(4):
442449.
Wyeth Pharmaceuticals, for example, launched an
Brumme, H. 2008. Capability switching along the technology life cycle
operational excellence transformation program for its in local manufacturing within the high-tech electronics industry.
25 worldwide plants in regard of its industrys over- Doctoral dissertation, Erasmus University Rotterdam.
capacity and lack of patent protection (Goldberg Oli- Chick, S. E., A. Huchzermeier, S. Netessine. 2014. Europes solu-
ver and Landel 2009). Furthermore, Nissan Canada tion factories. Harv. Bus. Rev. 92(4): 111115.
(Hunter and Johnson 2007) and Schmitz Cargobull Christensen, C. M. 1992. Exploring the limits of the technology
S-curve. Part II: Architectural technologies. Prod. Oper. Manag.
(Chick et al. 2014) successfully transformed opera-
1(4): 358366.
tional excellence plants into solutions factories that
DSouza, D. E., F. P. Williams. 2000. Toward a taxonomy of
helped them regain a competitive edge. However, manufacturing flexibility dimensions. J. Oper. Manag. 18(5):
while the factory types and focus transitions we 577593.
described are observable outside the computer indus- Ferdows, K., A. de Meyer. 1990. Lasting improvements in manu-
try, identifying other focus types and sequences and facturing performance. In search of a new theory. J. Oper.
Manag. 9(2): 168184.
ways of handling focus changes in different industries
Frohlich, M. T., R. Westbrook. 2001. Arcs of integration: An inter-
and under different circumstances should be fruitful national study of supply chain strategies. J. Oper. Manag.
for providing advice to plant managersfor example, 19(2): 185200.
when a refocus requires a change of location or when Goldberg Oliver, R., R. D. Landel. 2009. Wyeth pharmaceuticals in
important non-manufacturing functions are not 2009: Operational transformation. University of Virginia
located at the plant. UV4302, Charlottesville, VA, Darden Business Publishing.
In the end our assertion remains this: production Hendricks, K. B., V. R. Singhal. 2003. The effect of supply chain
glitches on shareholder wealth. J. Oper. Manag. 21(5): 501522.
operations can remain a system which has the ability
Hunter, K., P. F. Johnson. 2007. Nissan Canada Inc. Richard Ivey
to adapt to disruptive change by using the levers of School of Business 907D18, The University of Ontario.
changing manufacturing policies so as to stay focused Huy, Q. N. 1999. Emotional capability, emotional intelligence, and
on a limited but absolutely essential task, which cre- radical change. Acad. Manag. Rev. 24(2): 325345.
ates strategic advantage. Establishing a focused fac- Kim, C. W., R. Mauborgne. 2002. Charting your companys future.
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product fulfillment system is the key. In that context, Skinner, W. 1969. Manufacturing missing link in corporate strat-
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Skinner, W. 1974. The focused factory. Harv. Bus. Rev. 52(3): 113
121.
Notes
Skinner, W. 1985. Manufacturing: The Formidable Competitive
1 Weapon. Wiley, New York, NY.
These are the authors terms used to broadly describe
HPs focus. We do not infer it to be universally applicable Skinner, W. 1996. Manufacturing Strategy on the S curve. Prod.
or useful elsewhere. Oper. Manag. 5(1): 314.
2 Skinner, W. 2007. Manufacturing strategy: The story of its evolu-
idem.
3
idem. tion. J. Oper. Manag. 25(2): 328335.
Wheelwright, S. C., R. H. Hayes. 1985. Competing through Manu-
facturing. Harv. Bus. Rev. 63(1): 99109.
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