Beyond world-class: The new manufacturing strategy

Beyond world-class: The new manufacturing strategy (Hayes/Pisano)

Harvard Business Review jan/feb 1994, pp 77

During the 1980s, manufacturing companies adopted improvement programs, to pursue the goal of superior manufacturing. Nevertheless, many of these programs failed. This is because simply improving manufacturing is not a strategy for manufacturing to achieve competitive advantage. The essence of competitive strategy are the skills and capabilities that enable a factory to excel and make it possible for these improvements programs to achieve their goal. The key to long term success is being able to do certain things better than your competitors, and these organizational capabilities are much more sustainable than something you can make or buy.

By adopting improvement programs, or outsourcing projects the company is not encouraged to learn and develop capabilities. The theory of the focused factory, centered at a narrow set of tasks, enhances the development of skills, the creation of routines, competencies and better operating skills. The same with vertical integration and sourcing, organizations can forget how things are done. There is no learning potential anymore.

Long-term success requires that a company continually seek new ways to differentiate itself from competitors, and transform their manufacturing organizations into sources of competitive advantages. Two important points to look after are:

• Start with the idea that the primary way manufacturing adds value to an enterprise is by enabling it to do certain things better than its competitors can. Grate manufacturing strategies are built on unique skills and capabilities, not on investments, systems or practices that can be easily imitated.

• The company has to develop a plan for building the capabilities it wants to acquire. Providing guidelines and programs for this, enables managers to be more focused on the tasks, which enables and enhances the development of these capabilities.