WEEK 7
CHAPTER 15
15.1 - Why is improvement so important in operations management?
-> Perceived increase in the intensity of competitive pressures - for
improvement it doesn’t matter but owners of operations are less likely to
tolerate poor returns
-> The nature of the world trade is changing - emerging economies are
becoming important as both consumers and producers -> introduced cost
pressures in countries with relatively expensive labour and infrastructure
costs + new challenges for global companies e.g. managing complex supply
chains + accelerated demand for resources pushing up their prices
-> New technology has introduced opportunities to improve operations
practice and disrupt existing markets
-> The interest in operations management has resulted in the development
of many new ideas and approaches to improving operations
-> The scope of operations management has widened from mainly
manufacturing to one that embraces all types of enterprises and processes
in all functions of the enterprise -> so operations managers can learn from
each other
The Red Queen effect
-> From Leigh Van Galen: established that no matter how long a family of
animals had already existed, the probability it will become exist is
unaffected (survival never gets easier)
-> In business: improvements and innovations may be imitated or countered
by competitors
– Even if there is improvement, a company’s relative competitive position
may not changed
– For the ones that have improved their competitive position, they have
improved their operations performance more than competitors
– When improvement matches competitors survival is the main benefit
(a) Radical/Breakthrough innovation
= a philosophy that assumes that the main way of improvement is major
and dramatic change in the way the operation works (e.g. introduction of a
,new, more efficient factory machine, total redesign etc)
● Impact: relatively sudden, abrupt, represents a step change in practice
and performance
● Expensive (usually high investment of capital), often disrupts ongoing
working of the operation, involves changes in the product/service or
process technology
● Values creative solutions, encourages free thinking and individualism
● Typical principles: “starting with a clean sheet of paper”, “going back to
first principles”, “completely rethinking the system”
(b) Continuous/Incremental improvement (kaizen)
= assumes many small incremental improvement steps (e.g. simplifying
question sequence in a reservation system, modifying the way a product is
fixed to a machine to reduce changeover time etc)
● No guarantee that small steps towards better performance will be
followed by other steps, but this philosophy ensures there will be
● Momentum of improvement important (not rate) - important that every
month (or week, quarter etc) there is some improvement happening
● Also means improvement in personal, home, social and work life
● In the workplace: it involves everyone (managers, workers etc)
(a) Exploitation
= the activity of enhancing processes (and products) that already exist in
the firm
● Focus on creating efficiencies
● Emphasis on tight control of the improvement process, standardising
processes, clear organisational structures, organisational stability
● Benefits are immediate, incremental, predictable, better understood by
the firm and fit into its existing strategic framework
(b) Exploration
= Concerned with the exploration of new possibilities
● Searches for and recognises new mindsets and ways of doing things
● Involves experimentation, taking risk, simulation of possible
consequences, flexibility, innovation
● Benefits are more long term, relatively hard to predict, may be different
from what the firm is familiar with so it may not find it easy to take
advantage of them
Organisational “ambidexterity”
,= the ability of a firm to both exploit and explore as they seek to improve
● To be able to compete in mature markets where efficiency is important,
by improving existing resources and processes, while also competing in
new technologies and/or markets where novelty, innovation and
experimentation are required
● Although both exploitation and experimentation are beneficial, they may
compete for resources and managerial attention
The structure of improvement ideas (four aspects of improvement)
. The elements contained within improvement approaches
○ Fundamental ideas of what improves operations - “building blocks”
of improvement
. The broad approaches to improvement
○ Underlying methodologies or beliefs that form a coherent philosophy,
shaping how improvement should be accomplished
○ Some have been used for over a century, others are more recent
○ Many common elements in several approaches
. The improvement techniques
○ “Step-by-step” techniques, methods and tools that can be used to
help find improved ways of doing thins (can use quantitative or
qualitative modelling)
. The management of improvement
○ How the process of improvement is managed (very important)
○ Improvement activity must be organised, resourced, controlled in
order to be effective at actually achieving demonstrable improvement
, 15.2 - What are the key elements of operations improvement?
(1) Improvement cycles
= never-ending process of repeatedly questioning and re-questioning the
detailed working of a process
. PDCA/PDSA cycle
○ P(plan) stage: involves an examination of the current method or
problem studied -> collecting and analysing data to formulate a plan
of action to improve performance
○ D(do) stage: implementation stage where plan is tried out in the
operation -> may involved a mini-PDCA cycle as problems of
implementation are being resolved
○ C/S(check/study) stage: the new implemented solution is evaluated
to see if it has resulted in the expected performance improvement
○ A(act) stage: change is consolidated or standardised if successful /
if unsuccessful, the lessons learned from the “trial” are formalised
before the cycle starts again
. DMAIC cycle
○ D(defining) stage: problem is define to understand the scope of what
needs to be done + define the requirements of the process
improvement -> usually a formal goal or target is set
○ M(measurement) stage: involves validating the problem to make sure
it is worth solving -> data used to refine the problem and measure
exactly what is happening
CHAPTER 15
15.1 - Why is improvement so important in operations management?
-> Perceived increase in the intensity of competitive pressures - for
improvement it doesn’t matter but owners of operations are less likely to
tolerate poor returns
-> The nature of the world trade is changing - emerging economies are
becoming important as both consumers and producers -> introduced cost
pressures in countries with relatively expensive labour and infrastructure
costs + new challenges for global companies e.g. managing complex supply
chains + accelerated demand for resources pushing up their prices
-> New technology has introduced opportunities to improve operations
practice and disrupt existing markets
-> The interest in operations management has resulted in the development
of many new ideas and approaches to improving operations
-> The scope of operations management has widened from mainly
manufacturing to one that embraces all types of enterprises and processes
in all functions of the enterprise -> so operations managers can learn from
each other
The Red Queen effect
-> From Leigh Van Galen: established that no matter how long a family of
animals had already existed, the probability it will become exist is
unaffected (survival never gets easier)
-> In business: improvements and innovations may be imitated or countered
by competitors
– Even if there is improvement, a company’s relative competitive position
may not changed
– For the ones that have improved their competitive position, they have
improved their operations performance more than competitors
– When improvement matches competitors survival is the main benefit
(a) Radical/Breakthrough innovation
= a philosophy that assumes that the main way of improvement is major
and dramatic change in the way the operation works (e.g. introduction of a
,new, more efficient factory machine, total redesign etc)
● Impact: relatively sudden, abrupt, represents a step change in practice
and performance
● Expensive (usually high investment of capital), often disrupts ongoing
working of the operation, involves changes in the product/service or
process technology
● Values creative solutions, encourages free thinking and individualism
● Typical principles: “starting with a clean sheet of paper”, “going back to
first principles”, “completely rethinking the system”
(b) Continuous/Incremental improvement (kaizen)
= assumes many small incremental improvement steps (e.g. simplifying
question sequence in a reservation system, modifying the way a product is
fixed to a machine to reduce changeover time etc)
● No guarantee that small steps towards better performance will be
followed by other steps, but this philosophy ensures there will be
● Momentum of improvement important (not rate) - important that every
month (or week, quarter etc) there is some improvement happening
● Also means improvement in personal, home, social and work life
● In the workplace: it involves everyone (managers, workers etc)
(a) Exploitation
= the activity of enhancing processes (and products) that already exist in
the firm
● Focus on creating efficiencies
● Emphasis on tight control of the improvement process, standardising
processes, clear organisational structures, organisational stability
● Benefits are immediate, incremental, predictable, better understood by
the firm and fit into its existing strategic framework
(b) Exploration
= Concerned with the exploration of new possibilities
● Searches for and recognises new mindsets and ways of doing things
● Involves experimentation, taking risk, simulation of possible
consequences, flexibility, innovation
● Benefits are more long term, relatively hard to predict, may be different
from what the firm is familiar with so it may not find it easy to take
advantage of them
Organisational “ambidexterity”
,= the ability of a firm to both exploit and explore as they seek to improve
● To be able to compete in mature markets where efficiency is important,
by improving existing resources and processes, while also competing in
new technologies and/or markets where novelty, innovation and
experimentation are required
● Although both exploitation and experimentation are beneficial, they may
compete for resources and managerial attention
The structure of improvement ideas (four aspects of improvement)
. The elements contained within improvement approaches
○ Fundamental ideas of what improves operations - “building blocks”
of improvement
. The broad approaches to improvement
○ Underlying methodologies or beliefs that form a coherent philosophy,
shaping how improvement should be accomplished
○ Some have been used for over a century, others are more recent
○ Many common elements in several approaches
. The improvement techniques
○ “Step-by-step” techniques, methods and tools that can be used to
help find improved ways of doing thins (can use quantitative or
qualitative modelling)
. The management of improvement
○ How the process of improvement is managed (very important)
○ Improvement activity must be organised, resourced, controlled in
order to be effective at actually achieving demonstrable improvement
, 15.2 - What are the key elements of operations improvement?
(1) Improvement cycles
= never-ending process of repeatedly questioning and re-questioning the
detailed working of a process
. PDCA/PDSA cycle
○ P(plan) stage: involves an examination of the current method or
problem studied -> collecting and analysing data to formulate a plan
of action to improve performance
○ D(do) stage: implementation stage where plan is tried out in the
operation -> may involved a mini-PDCA cycle as problems of
implementation are being resolved
○ C/S(check/study) stage: the new implemented solution is evaluated
to see if it has resulted in the expected performance improvement
○ A(act) stage: change is consolidated or standardised if successful /
if unsuccessful, the lessons learned from the “trial” are formalised
before the cycle starts again
. DMAIC cycle
○ D(defining) stage: problem is define to understand the scope of what
needs to be done + define the requirements of the process
improvement -> usually a formal goal or target is set
○ M(measurement) stage: involves validating the problem to make sure
it is worth solving -> data used to refine the problem and measure
exactly what is happening
