Principles and Practice
by Jan A. Van Mieghem and Gad Allon
Dynamic Ideas, Belmont, Massachusetts, 2014.
Operations Strategy: Principles and Practice - 2nd Edition provides a unified framework for operations strategy. The book shows how to tailor the operational system to maximize value and competitive advantage. Conceptual thinking and financial optimization yield guidelines for implementation. This dual emphasis on principles and practice is reflected by analytical models that are illustrated with detailed examples and a dozen case studies of real business situations.
The book uses three complementary views of operations—the capability, asset and process view--and contains integrating case studies. Consequently, the book has four parts:
Part 1 Value and Capabilities View
Describes the concept of operations strategy, quantifies the value creation through operations, and illustrates how trade-offs among operational capabilities (such as cost, quality, responsiveness, and flexibility) can provide competitive advantage.
Part 2 Resource View
Introduces the resource view and shows how to tailor real assets to business strategy. Four chapters analyze four important asset decisions: sizing (how much capacity is appropriate?), timing (when to expand or contract?), type (what kind of flexibility is needed?), and location (where do we place assets in a global network?)
Part 3 Process View
Shows how to tailor activity networks to business strategy. Four chapters analyze four important processes in any operation: strategic sourcing (managing inputs), demand and revenue management (managing outputs), risk management and operational hedging, and improvement and innovation management (preparing for the future).
Part 4 Case Studies
Presents three business cases that integrate various elements of the book. The Harley-Davidson case investigates the four asset decisions, the Seagate Technology case studies operational hedging, and the Peapod case illustrates the need to link operations and value creation (as well as provides a setting to discuss demand and revenue management and mass customized services).
What’s new in the second edition?
This second edition contains changes along various dimensions. First, Professor Allon has joined this ongoing book project as second author. In 2010, Gad started teaching the MBA elective course, Operations Strategy , that Jan began designing and teaching in 1998. Second, while the first edition followed a “leading strategy,” in the sense that it contained material that hadn’t been taught yet, this second edition reflects how our MBA elective course has evolved over the last 7 years. It thus contains “class-room tested content.” These two changes led to a new chapter 2; majorly revised chapters 1, 3, 4, 5, 6, and 7 and appendix A; and minor revisions of the remaining chapters. While we believe significant progress has been made, this book project remains a process of continuous improvement. It never ends, as better ways always exist. If you have any suggestions for improvement, we welcome hearing about them.
Educational Philosophy of the Book
This book explains the principles of operations strategy and describes how companies can apply these principles in practice to increase value. Designing and implementing a successful operations strategy require judgment, experience, creativity, and luck, all of which cannot be taught. What can be taught, however, are the concepts, principles, and tools to help you in that process---and therein lies the purpose of this book.
“Principles and practice” is the guiding motto throughout this book. Going beyond telling war-stories, the author describes the practice of operations strategy while revealing its driving principles in a structured manner.
Each chapter opens with a description of how a real company practices some aspect of operations strategy and then reviews the concepts behind that practice. Tools are provided to analyze the concepts, distill their principles, and suggest guidelines for implementation and improvement. When appropriate, state-of-the-art research findings are integrated in the discussion. Each chapter closes with a mini-case that asks you to explore how you would apply the principles and tools in practice. The last part of the book contains a set of “full-blown” cases to integrate the chapters and emphasize the relevance of our topic to practice.
To increase accessibility, most analysis is described in words and is exhibited with minimal notation and mathematics. For example, equations are stated only if they capture a relationship better than words alone can. To increase usefulness and illustrate implementation, a particular example of each analysis is worked out in a spreadsheet (all spreadsheets can be downloaded from www.vanmieghem.us). More advanced analysis or spreadsheet implementations are relegated to appendices for those who are interested.
Operations strategy evaluation is as much art as it is science. The book adopts a dual perspective that combines qualitative analysis with a financial evaluation of the value created by the operations strategy. Throughout this book, value is our yardstick and our guide to assess and improve operations strategy. Merging the strategic and financial perspective should be natural to the intended reader:
This book is written with a specific focus on MBA and engineering management students, and on their instructors. While the book naturally follows a core course in operations and supply chain management and adopts basic financial evaluation, all concepts are explained “from scratch” to make the book accessible to every business or engineering management student. The book should also be of interest to consultants and practitioners as a reference for concepts, principles, and tools.
This book presents a novel structured approach of using analysis to build intuition inOperations Strategy and reveal improvement levers within a coherent framework, which facilitates learning and instruction. Reviewers at world-leading institutions provide distinguishing characteristics for the book:
"This book provides a new pedagogical foundation for courses in operations strategy, by developing key concepts through analytical models and intuition within a coherent framework. Professors Van Mieghem and Allon seemlessly integrate basic knowledge in the area with the latest academic research and their own business cases. The result is a truly outstanding book that chronicles the frontier of thought in the area."
Professor of Operations Management
Graduate School of Business, University of Chicago
“Van Mieghem and Allon are the world’s leading authorities on operation strategy. Their new book provides the definitive source for essential knowledge on how to use operations to drive long-run value creation. Through their highly inter-functional and coherent framework, concepts and tools are clearly illustrated, allowing a manager to immediately and effectively implement these learnings into actual practice. This book is unquestionably a must read for anyone who needs to know how to use operations for competitive advantage.”
Gerard P. Cachon
Fred R. Sullivan Professor of Operations and Information Management
The Wharton School - University of Pennsylvania
“This textbook provides a seminal contribution to the teaching
of operations strategy. Thoughtful discussions of fundamental
strategic choices, facing the twenty-first century global enterprise
are artfully combined with insightful analytical models.”
Charles E. Exley Professor of Management
Graduate School of Business, Columbia University
“This is an impressive book that provides a totally new perspective on operations strategy and how to teach it. The authors do a marvelous job at developing a model basedframework for understanding operations strategy; the book draws heavily on operations management research to extract principles for operations strategy and then demonstrates how these principles guide and apply to practice through illuminating real-world examples and cases. This is an outstanding contribution for our community and our students.”
Stephen C. Graves
Abraham J. Siegal Professor of Management Science
Sloan School of Management, MIT
"Van Mieghem and Allon’s book shows us forcefully and insightfully how companies can structure their operations strategy to build overall business value. It is such a beautiful and complete treatment that it is a book for all operations managers and students, as well as for practitioners in all functional areas."
Hau L. Lee
Thoma Professor of Operations, Information, and Technology
Graduate School of Business, Stanford University
“Many firms adapt product strategy to changing markets but keep operational processes unchanged. This book provides a novel, integrated, yet easily accessible approach to link operations with the strategic view of the CEO. Highly recommended.”
Professor of Technology and Operations Management
“Operations Strategy does an excellent job in providing a nonoverwhelming description of the underlying theory and then illustrating it with case studies and examples. The book contains many fascinating topics which are simply not covered elsewhere:
capacity timing, capacity flexibility and operational hedging, to name just a few. Students, practitioners and academics alike will appreciate the easy-going approach of the book and the wealth of managerial insights that it offers.”
The Timken Chaired Professor of Global Technology and Innovation
“Insightful and fun! Van Mieghem and Allon have done a masterful job of covering the important issues in operations strategy in a structured and engaging manner. This book introduces each topic in a separate chapter with a current example from a well-known
company or industry, and wraps up each chapter with a more detailed case study after reviewing the relevant concepts in depth. Any instructor who plans to teach a course on operations strategy, should consider using this book as the text.”
UPS Foundation Professor of Business Logistics
Harvard Business School
About The Authors
Jan A. Van Mieghem
Dr. Van Mieghem is the Harold L. Stuart Distinguished Professor of Managerial Economics and Professor of Operations Management at the Kellogg School of Management of Northwestern University. He serves as the Academic Director of the Executive MBA Program. Previously he served as Senior Associate Dean of the Kellogg School and as chairman of the Managerial Economics and Decision Sciences department. He teaches courses in operations management and operations strategy in MBA, Ph.D. and executive programs and advises firms on those topics.
His research focuses on manufacturing, service and supply chain operations. His articles have appeared in leading journals, including Annals of Applied Probability, Journal of Economic Theory, Management Science, Manufacturing and Service Operations Management and Operations Research. He is past editor of the operations and supply chain area of Operations Research and has served on the editorial board of several journals.
Professor Van Mieghem is the co-author of the MBA textbook Managing Business Process Flows: Principles of Operations Management. He received his Ph.D. from the Graduate School of Business at Stanford University in 1995. Born in Belgium, he currently lives in Evanston, Illinois, with his wife and four children.
Dr. Gad Allon is Professor of Managerial Economics, Decision Science, and Operations Management at the Kellogg School of Management at Northwestern University. He received his PhD in Management Science from Columbia Business School in New York and holds a Bachelor and a Master degree from the Israeli Institute of Technology.
His research interests include operations management in general, and service operations and operations strategy in particular. His articles have appeared in leading journals, including Management Science, Manufacturing and Service Operations Management and Operations Research. Professor Allon won the 2011 Wickham Skinner Early-Career Research Award of the Production and Operations Management Society. He is the Operations Management Department Editor of Management Science and serves on the editorial board of several journals.
Professor Allon teaches courses in operations management and operations strategy in MBA and executive programs. Professor Allon won the 2009 Outstanding Professor of the Year Award at Kellogg, the 2014 Alumni Professor of the year, and was recently named among the Worlds Top 40 B-School professors under the age of 40. Professor Allon regularly consults firms both on service
strategy and operations strategy.