Tonight, we start Week 3 of the Fall Semester at Augusta University and that also means my third column related to my Operations Management class. In the third session of the course, we will do two very important things. First and foremost, we provide the key foundation of the course, which demonstrates how operations enable a firm to compete effectively in its markets. This is a critical lesson in that as the semester continues, we will examine how various aspects of a firm’s operations empower it to better compete in its markets. The second thing we will do in class this evening is something you can do with us at home or at work. That is, find “real-time” examples that demonstrate what we are discussing in class. Therefore, for tonight’s class, a group of students is responsible for presenting examples of how companies use operations to compete effectively in their markets. However, before I send you off to find examples you can emulate, we must first discuss the role of operations in a firm’s competitiveness.
I began teaching Operations Management (OM) for the first time as a Ph.D. student at Georgia Tech in the mid-1990’s and have taught it on and off for the past thirty years to undergraduates, MBA students, and executives. I learned very early on that the best way to start the course is to discuss operations at its most strategic level: how a firm competes. For a firm to compete successfully in its markets, it must provide its prospective customers, or “target market,” a compelling reason to buy its products rather than those offered by its competitors. Therefore, it must provide products that its target market values more than the other available products.
There are many different characteristics customers might value. These include lower price, higher performance quality, more consistent quality, speed, flexibility/customization, and customer service. Clearly, a single firm cannot produce a product that is best at all of these characteristics. Rather, a firm needs to identify what their potential customers value most and if it can deliver that to the customer, it will be able to successfully compete.
In last week’s column, I indicated that the most natural connection among business disciplines within a firm is between marketing and operations. It is marketing’s responsibility to identify what the firm’s target market values and work with operations to determine if the firm can provide a product with the desired characteristics. If so, then it is marketing’s job to develop and communicate a “value proposition.” A value proposition lets the customer know how its product is better than others on the market in a way that appeals to what their target customers’ value. Firms typically provide their value proposition in their advertising and other marketing, such as their tag lines. For instance, Wal-Mart has always competed on low prices, and for many years, its tagline was “Everyday low prices.” Wal-Mart’s tagline today, “Save Money, Live Better, “still reflects its better pricing value proposition.
Therefore, through its value proposition, a firm’s marketing makes a promise about its products to customers. It is then the job of the operations part of the firm to deliver on that promise. That is why it is critically important for marketing and operations to work together to develop the firm’s value proposition. If the marketing develops a value proposition that operations cannot deliver, the firm will quickly bleed customers. So, it is important that operations have the capabilities or develop the capabilities to deliver on those promises. In Wal-Mart’s case, they have traditionally done everything in their power to develop its operations to support its value proposition. As a retailer, this has been done primarily by reducing the costs in its supply chain, by buying in large quantities, negotiating lower prices with its suppliers, creating an efficient transportation and distribution network, and managing inventory with technology such as radio-frequency identification (RFID). While Wal-Mart may make large initial investments, it attains significant return on investment (ROI) by ensuring those investments lead to lower prices to improve its competitiveness in the marketplace.
Hopefully, by the end of this evening’s class, my students will have a good grasp of the interaction between marketing and operations that enables firms to better compete in their markets. I look forward to their real-time examples to further our discussion by examining how various firms today are delivering on their value propositions. In the following week, I challenge you to do the following:
- Examine your value proposition. Make sure that it communicates to your target market that you are providing them with what they value and that you do it better than your competition.
- Review your operations to ensure that it can deliver on your value proposition. If not, you will need to either change your value proposition or improve your operations.
- Search for real-time examples of firms who have similar value propositions as yours. Then, see if you can find what they are doing with their operations to see if you can emulate those things. While they may be in totally different markets, they may provide you with ideas to lower prices, improve your quality, or improve your speed.
Starting next week, we will begin looking at various aspects of operations and how you might design your goods and/or services to help make you more competitive in your markets!
