Company strategies cannot be executed well without a number of internal systems for business operations. Well-conceived state-of-the-art operating systems not only enable better strategy execution but also strengthen organizational capabilitiesâ€”enough at times to provide a competitive edge over rivals. For example, a company with a differentiation strategy based on superior quality has added capability if it has systems for training personnel in quality techniques, tracking product quality at each production step, and ensuring that all goods shipped meet quality standards. If these quality control systems are better than those employed by rivals, they provide the company with a competitive advantage. Similarly, a company striving to be a low-cost provider is competitively stronger if it has an unrivaled benchmarking system that identifies opportunities to implement best-in-the-world practices and drive costs out of the business faster than rivals. Fast growing companies get an important assist from having capabilities in place to recruit and train new employees in large numbers and from investing in infrastructure that gives them the capability to handle rapid growth as it occurs, rather than having to scramble to catch up to customer demand.
INSTALLING INFORMATION AND OPERATING SYSTEMS
â€¢ LO 11-4
Recognize the role of information systems and operating systems in enabling company personnel to carry out their strategic roles proficiently.
Company strategies canâ€™t be executed well without a number of internal systems for business operations. American Airlines, Delta, Ryanair, Lufthansa, and other successful airlines cannot hope to provide passenger-pleasing service without a user-friendly online reservation system, an accurate and speedy baggage-handling system, and a strict aircraft maintenance program that minimizes problems requiring at-the-gate service that delays departures. FedEx has internal communication systems that allow it to coordinate its over 100,000 vehicles in handling a daily average of 12.1 million shipments to more than 220 countries and territories. Its leading-edge flight operations systems allow a single controller to direct as many as 200 of FedExâ€™s 659 aircraft simultaneously, overriding their flight plans should weather problems or other special circumstances arise. FedEx also has created a series of e-business tools for customers that allow them to ship and track packages online, create address books, review shipping history, generate custom reports, simplify customer billing, reduce internal warehousing and inventory management costs, purchase goods and services from suppliers, and respond to their own quickly changing customer demands. All of FedExâ€™s systems support the companyâ€™s strategy of providing businesses and individuals with a broad array of package delivery services and enhancing its competitiveness against United Parcel Service, DHL, and the U.S. Postal Service.
Amazon.com ships customer orders from a global network of some 707 technologically sophisticated order fulfillment and distribution centers. Using complex picking algorithms, computers initiate the order-picking process by sending signals to workersâ€™ wireless receivers, telling them which items to pick off the shelves in which order. Computers also generate data on mix-boxed items, chute backup times, line speed, worker productivity, and shipping weights on orders. Systems are upgraded regularly, and productivity improvements are aggressively pursued. Amazon has been experimenting with drone delivery in order to lower costs and speed package delivery; more recently it has begun marketing a pilot project called â€œSeller Flexâ€ as part of its effort to develop its own delivery service.
Otis Elevator, the worldâ€™s largest manufacturer of elevators, with more than 2.6 million elevators and escalators installed worldwide, has a 24/7 remote electronic monitoring system that can detect when an elevator or escalator installed on a customerâ€™s site has any of 325 problems. If the monitoring system detects a problem, it analyzes and diagnoses the cause and location, then makes the service call to an Otis mechanic at the nearest location, and helps the mechanic (who is equipped with a web-enabled cell phone) identify the component causing the problem. The companyâ€™s maintenance system helps keep outage times under three hoursâ€”the elevators are often back in service before people even realize there was a problem. All trouble-call data are relayed to design and manufacturing personnel, allowing them to quickly alter design specifications or manufacturing procedures when needed to correct recurring problems. All customers have online access to performance data on each of their Otis elevators and escalators.
Well-conceived state-of-the-art operating systems not only enable better strategy execution but also strengthen organizational capabilitiesâ€”enough at times to provide a competitive edge over rivals. For example, a company with a differentiation strategy based on superior quality has added capability if it has systems for training personnel in quality techniques, tracking product quality at each production step, and ensuring that all goods shipped meet quality standards. If these quality control systems are better than those employed by rivals, they provide the company with a competitive advantage. Similarly, a company striving to be a low-cost provider is competitively stronger if it has an unrivaled benchmarking system that identifies opportunities to implement best-in-the-world practices and drive costs out of the business faster than rivals. Fast-growing companies get an important assist from having capabilities in place to recruit and train new employees in large numbers and from investing in infrastructure that gives them the capability to handle rapid growth as it occurs, rather than having to scramble to catch up to customer demand.
Instituting Adequate Information Systems, Performance Tracking, and Controls
Accurate and timely information about daily operations is essential if managers are to gauge how well the strategy execution process is proceeding. Companies everywhere are capitalizing on todayâ€™s technology to install real-time data-generating capability. Most retail companies now have automated online systems that generate daily sales reports for each store and maintain up-to-the-minute inventory and sales records on each item. Manufacturing plants typically generate daily production reports and track labor productivity on every shift. Transportation companies have elaborate information systems to provide real-time arrival information for buses and trains that is automatically sent to digital message signs and platform audio address systems.
Siemens Healthcare, one of the largest suppliers to the health care industry, uses a cloud-based business activity monitoring (BAM) system to continuously monitor and improve the companyâ€™s processes across more than 190 countries. Customer satisfaction is one of Siemensâ€™s most important business objectives, so the reliability of its order management and services is crucial. Caesars Entertainment, owner of casinos and hotels, uses a sophisticated customer relationship database that records detailed information about its customersâ€™ gambling habits. When a member of Caesarsâ€™s Total Rewards program calls to make a reservation, the representative can review previous spending, including average bet size, to offer an upgrade or complimentary stay at Caesars Palace or one of the companyâ€™s other properties. At Uber, the popular ridesharing service, there are systems for locating vehicles near a customer and real-time demand monitoring to price fares during high-demand periods.
Information systems need to cover five broad areas: (1) customer data, (2) operations data, (3) employee data, (4) supplier and/or strategic partner data, and (5) financial performance data. All key strategic performance indicators must be tracked and reported in real time whenever possible. Real-time information systems permit company managers to stay on top of implementation initiatives and daily operations and to intervene if things seem to be drifting off course. Tracking key performance indicators, gathering information from operating personnel, quickly identifying and diagnosing problems, and taking corrective actions are all integral pieces of the process of managing strategy execution and overseeing operations.
Statistical information gives managers a feel for the numbers, briefings and meetings provide a feel for the latest developments and emerging issues, and personal contacts add a feel for the people dimension. All are good barometers of how well things are going and what operating aspects need management attention. Managers must identify problem areas and deviations from plans before they can take action to get the organization back on course by either improving the approaches to strategy execution or fine-tuning the strategy. Jeff Bezos, Amazon.comâ€™s CEO, is an ardent proponent of managing by the numbers. As he puts it, â€œMath-based decisions always trump opinion and judgment. The trouble with most corporations is that they make judgment-based decisions when data-based decisions could be made.â€17
Having state-of-the-art operating systems, information systems, and real-time data is integral to superior strategy execution and operating excellence.
Monitoring Employee Performance
Information systems also provide managers with a means for monitoring the performance of empowered workers to see that they are acting within the specified limits.18 Leaving empowered employees to their own devices in meeting performance standards without appropriate checks and balances can expose an organization to excessive risk.19 Instances abound of employeesâ€™ decisions or behavior going awry, sometimes costing a company huge sums or producing lawsuits and reputation-damaging publicity.
Scrutinizing daily and weekly operating statistics is one of the ways in which managers can monitor the results that flow from the actions of subordinates without resorting to constant over-the-shoulder supervision; if the operating results look good, then it is reasonable to assume that empowerment is working. But close monitoring of operating performance is only one of the control tools at managementâ€™s disposal. Another valuable lever of control in companies that rely on empowered employees, especially in those that use self-managed work groups or other such teams, is peer-based control. Because peer evaluation is such a powerful control device, companies organized into teams can remove some layers of the management hierarchy and rely on strong peer pressure to keep team members operating between the white lines. This is especially true when a company has the information systems capability to monitor team performance daily or in real time.
What key strategic performance indicators must be tracked?
A) Shipping, receiving, sales, service, and transportation data.
B) Customer, operation, employee, supplier, and financial performance data.
C) Customer, employee, audit, shipping, and receivables data.
D) Financial performance, employee training, sales, service, and logistics data.
E) Transportation, shipping, receiving, warehousing and logistics data.