LECTURE #6 -Process Innovation, Value Chains & Organization UPDATED

8/6/2019 LECTURE #6 -Process Innovation, Value Chains & Organization UPDATED

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Prepared by S. L. WhittlePrepared by S. L. Whittle 11

MANAGEMENT OFMANAGEMENT OF

INNOVATION &INNOVATION &TECHNOLOGYTECHNOLOGY

Process innovation, Value Chains &Process innovation, Value Chains &

OrganizationOrganization

LECTURE # 6


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Technological changes are

transforming the value chain

configurations of firms. As a result, afirms success is derived not merely

from new products, but also from

strategic management of internalprocesses, organization, and

operations.

SUMMARYSUMMARY


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Process innovations enable firms to introducechanges in value chain, which in turn affect thedesign of work, organizational structure, and

processes. These changes may be eitherhardware or software dominant to enhance theircompetitiveness in an industry. Advantagesinclude enhanced speed of operations andcustomer responsiveness, reduced cost positionof firms relative to competitors, incorporatedproduct features, and increased workplaceflexibility.

SUMMARYSUMMARY


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The mode of value chain configuration,whether it be craft production, massproduction, lean production, or mass

customization, shape process innovationstrategies. When organizational changesare triggered by technology, value chainconfiguration determines theorganizational structure and functioning.These impacts further affect the design ofwork and careers within an organization .

SUMMARYSUMMARY


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WHAT IS VALUE CHAIN?WHAT IS VALUE CHAIN?

Can be described as the firm as a setof inter-related activities.

Every firm is a collection of activitiesperformed to design, produce, market,develop, and support its product.

Value chains consist of two sets ofactivities Primary activities

Support activities


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DRIVERS OF CHANGE INDRIVERS OF CHANGE IN

VALUE CHAINVALUE CHAIN Process Innovation and Value

Chain

Drivers of Change


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Process Innovation andProcess Innovation and

Value ChainValue Chain Hardware dominant process innovationsinfuse a higher level of technology in terms

of equipment or other physical

characteristics

Software dominant process innovations

require a firm to create not only new skills

but also new attitudes


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Process innovations reconfigure the valuechain in three ways:

a) New technologies change the wayfirms actualize the primary value chain.

b) Process innovations can be used tochange the conduct of secondary value

chain activities.c) Process innovations also enable firms to

redefine their scope.

Process Innovation andProcess Innovation and

Value ChainValue Chain


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Drivers of ChangeDrivers of Change

Product-market and strategic

considerations dictate market-pull

innovations.

a) Phases of technology evolution

b) Characteristics of competitive domains

c) Changes in productsd) Other strategic reasons


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Two major factors impededadoption of innovations

a) Long-term future benefit

b) Resulting changes often metwith organizational resistance

Drivers of ChangeDrivers of Change


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MODES OF VALUE CHAINMODES OF VALUE CHAIN

CONFIGURATIONCONFIGURATION Craft production

Mass production

Lean production

Mass Customization


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Craft productionCraft production

utilized human sources of energy,

and the skills, knowledge, andattitudes of the craftsman rather than

physically embodied technology


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Mass productionMass production

Based on five major principles of value

chain configuration:

a) Interchangeable partsb) Specialized machines

c) Focus on the process of production

d) Division of labore) Flow


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Involved seven major principles of management:

a) Focus on low cost and low prices

b) Economies of scale

c) Product standardization

d) Degree of specialization

e) Focus on operational efficiency

f) Hierarchical organization with professionalmanagers

g) Vertical integration

Mass productionMass production


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Lean productionLean production

Four major ideas in lean production:

a) Team organization

b) Training

c) Continuous improvement

d) Just-in-time manufacturing system


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Mass CustomizationMass Customization

Based on five major production principles:

a) Flexible manufacturing systems

b) Computer-aided design/computer-aided manufacturing

c) Computer-integrated manufacturing

d) Use of information andtelecommunication technologies


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Relies on several principles of

management

a) Just-in-time deliveryb) Reducing setup and changeover times

c) Compressing cycle times

d) Production to ordere) Use of computerized databases

Mass CustomizationMass Customization


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MODES OF VALUE CHAINMODES OF VALUE CHAIN

CONFIGURATIONCONFIGURATION Craft production

Mass production

Lean production

Mass Customization


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Differences among the four modesDifferences among the four modes

of value chain configurationof value chain configuration

1. Linkage between a firm and its market

2. Product-process linkage

3. The relative mix of labor and capitalcontent in the production process

4. The mix of software and hardware

elements of new technology5. The nature of the social system in the

workplace


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VALUE CHAIN CONFIGURATIONVALUE CHAIN CONFIGURATION

AND

ORGANIZATIONALAND

ORGANIZATIONALCHARACTERISTICSCHARACTERISTICS

A. Organization Structure

1. Basis of subunit formation 2. Degree of decentralization

3. Degree of hierarchy

B. Organizational Process

C. Role of the Manager


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DESIGN OF WORK ANDDESIGN OF WORK AND

CAREERSCAREERS

Design ofWork :

1. Task characteristics

a) Variety refers to the number of exceptions in

the task, or the frequency of unexpectedand novel events that occur during thenormal course of doing the task.

b) Analyzability refers to the potential forproduction processes to be reduced to

mechanical steps.c) The four types of major tasks are routine, craft,

engineering, and non-routine.


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Design ofWork :

2. Interdependence among tasks.

3. Requisite skill levels.


CAREERSCAREERS


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Careers in Organizations

1. Adaptive capabilities

2. Flexibility

3. Employment contracts


CAREERSCAREERS


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INFLUENCE OFINFLUENCE OF

ENVIRONMENTAL TRENDSENVIRONMENTAL TRENDS

Globalization

1. Potential of process innovations isincreasingly spread all over the world.

2. The geographic scope of both the value

chains and value constellations of firmsis now truly global.


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Time Compression:

has resulted in increased industry clockspeeds and in turn the need for increasing

the speed of internal operations and

customer responsiveness in organizations.




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Technology Integration

1. Developing different relationships withsuppliers

2. Developing organizational mechanisms to

absorb process innovations fromoutside




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REVIEW QUESTIONSREVIEW QUESTIONS

1. What desired outcomes may resultfrom process innovations oftechnology?

2. What factors explain why craftproduction results in slow value chainoperations?

3. W

hen and why did mass productionevolve from craft productionprocesses?


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4. What are the five major principles of

value chain configuration?

5. W

hat two major innovations havetransformed the basis of subunit

formation in lean production and

mass production?

6. How has the influence of technology

impacted the design of work?

REVIEW QUESTIONSREVIEW QUESTIONS


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WEB EXERCISESWEB EXERCISES

Go to the American Society for Quality (ASQ)

(http://www.asq.org/) for an overview of quality

management issues. Review the background

and history of ASQ to understand how quality isframed as a process innovation. Further review

the numerous certifications that are possible to

have an in-depth understanding of the types of

training that are available.Prepare a 1 pagereport on your findings.


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Go to the Center for the Study of Work

Teams Web site

(http://www.workteams.unt.edu/). The site

offers professional and academic

information regarding the effectiveness of

teams in organizations. Any of a number

of links could be utilized to augmentcourse discussion

WEB EXERCISESWEB EXERCISES

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