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Business models cannot materialize without appreciating the concepts of facilities management which is continuous improvement through constant adaptation and empowerment. Facilities management and business models are two different terms; however, similar, simply because these two refer to the entirety of the company and how will it be successful. It was once discussed and made realized to us by Mr. Louie San Juan that “facilities management is everything and pertains to the company itself!” Likewise, the business model of the organization becomes the guideline in distinguishing the company in its own unique way.

 

First, let us relate the business model to facilities management. The business model serves as the guiding principle of how an organization should operate. As Joan Magretta (2002) noted in her article entitled Why Business Models Matter:

“A business model’s great strength as a planning tool is that it focuses attention on how all the elements of the system fit into a working whole.”

As reflected in the line “how all the elements of the system fit into a working whole”, business models observe the full picture of the business. In relation to facilities management, business models similarly look into all aspects of the company: the products/services it provides, its available resources, the market and consumers, the industry and the competition, etc.

 

Second, business models of the companies create differentiation – competitive advantage, from which the company is identified for its “trademark” of doing things. As Chris Zook and James Allen (2011) conversed in their article entitled The Great Repeatable Business Model:

“The power of repeatable model lies in the way it turns the sources of differentiation into routines, behaviours, and activity systems that everyone in the organization can understand and follow…”

The statement above show how repeatable business model works. It is about focusing on the company’s competitive advantage and its continuous improvement. Making it materialize for the organization, means adapting and incorporating it to the culture of the company.

 

Lastly, an effective business model is not created and implemented by CEOs alone; rather, it is realized and achieved through the collective effort of all the members in an organization. As Chris Zook and James Allen (2011) discussed in their article entitled The Great Repeatable Business Model:

“When people in an organization deeply understand the sources of its differentiation, they move in the same direction quickly and effectively, learning and improving the business model as they go.”

Human resource is one of the most important factors in running a business. Without the appropriate talent, the CEOs’ 3 boxes as discussed by Vijay Govindarajan and Chris Temble in the article entitled The CEO’s Role in Business Model Reinvention (“Manage the present, selectively forget the past, create the future”) will not materialize. Hence, by empowering your employees, letting them grow by knowing what their purpose and contribution to the organization gives them a sense of importance to what they are doing for themselves and the company. This will eventually result to the success of the firm.

 

To sum it up, business models cannot materialize without appreciating the concepts of facilities management which is continuous improvement through constant adaptation and empowerment. This is through: (1) looking into all aspects of the company and making it work; (2) realizing company’s differentiation by integrating it to the philosophy of the company; and (3) empowering the people which comprises the organization. No matter how good the business model nor the CEO of the firm, it will not materialize, if employees do not appreciate it and implementation is not observed accordingly. Likewise, the practice of facilities management can only be observed by knowing what and for whom the company stands for. In the end, both the facilities management and the business model make everyone thinks: “How will I become better?”

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THE FLAW OF ENTREPRENEURIAL MODE

Posted: January 14, 2016 in Uncategorized

Managers handling small/starting businesses do not have to always rely in entrepreneurial mode; rather, they can also employ the adaptive and planning modes as their view in strategy- making immediately. Why? It is because growth (the dominant goal of entrepreneurial mode) can also be achieved through either careful planning or constant adaptation to the environment of the industry the firm belongs to. Bold decisions, usually associated with high-risk consequences, are not actually ‘practical’ simply because we are not certain of its outcome. And the ideas of innovation may take part through the adaptive mode by continuously adjusting to the varying demands of consumers. Furthermore, growth and/or expansion, decision-making, and innovation are all can be realized via the combination of the two other modes: adaptive planning.

 

First, managers may improvise and adjust as to what they see best in organizing the firm. As Henry Mintzberg and Joseph Lampel (1994) cited in their article entitled Reflecting on the Strategy Process:

“The evolution of strategic management obeys different principles because it is driven by ideas and practices that originate from qualitatively different sources… Strategy is pushed along by sheer creativity of managers, because they explore new ways of doing things.”

This statement could pertain to entrepreneurial mode since it show that the power/decision lies with the manager. However, the “new ways of doing things” may refer to unconventional approach such as planning or adaptation. This could lead to discovery of new things: innovation.

 

Second, patterns affects the strategy-making of a manager who practice entrepreneurial mode. As Henry Mintzberg (1973) noted “Some organizations appear to develop cyclical patterns in which periods of entrepreneurship are alternated with periods of adaptiveness…” Due to the “cyclical patterns”, managers will eventually adapt to the changing atmosphere and perhaps, even create plans to guide the organization as it operates. Those patterns, once figured out, will eventually result to the continuous improvement of the organization: growth and development.

 

Lastly, risk is something that managers should avoid as much as he/she could possibly can, if not, minimize it. As stated by Henry Mintzberg (1973) in Strategy-Making in Three Modes:

“Formal planning follows a stepwise procedure in which particular attention is paid to the cost-benefit… the entrepreneur, but to avoid risk and move in incremental steps, like the adaptive strategy-maker.”

Executive officers/managers want the best for their companies. By observing the combination of adaptive planning, they could create a win-win situation where risks will be eliminated, if not minimize.

 

To sum it up, managers handling small/starting businesses do not have to always rely in entrepreneurial mode as their general view. Growth, opportunities (innovation), bold moves (risk-factor), and centralized authority are the chief characteristics of this concept. All these can also be accomplished, if not superior, through the use of adaptive, planning, and adaptive planning modes, respectively. Such measures will create innovation, promote growth, and minimize risks. In the end, only the strategy of the manager will dictate the outcome of the company and its stakeholders.

Facilities management is taken for granted by some companies nowadays. This often results to the company’s disadvantage, if not, closure. It was once discussed to us that Facilities Management defines the organization. It is all about what the company believes in (culture/philosophy), what does it provides (products/services), how does it avail the resources they need (raw materials/assets) and utilize it according to the needs/demands of the consumers. Yet, some firms tend not to understand the importance of this concept.

First, organizations must identify what their “Theory of the Business” is. As cited by Peter F. Drucker (1994) “… what company get paid for. They are what I call a company’s theory of the business.” Theory of the Business therefore is the reason why the business exist: revenue. It focuses on the product/service-perspective of the company. To relate this to facilities management, what you provide your consumers determines the identity of the company. Hence, your products/services IS the company; likewise, facilities management IS the company.

Second, organizations should understand the concept of “Resource-based View of the Firm”. As Birger Wernerfelt (1984) stated “By a resource is meant anything which could be thought of as a strength or weakness of a given firm… Examples of resources are: brand names, in-house knowledge of technology, employment of skilled personnel, trade contracts, machinery, efficient procedures, capital, etc.” Companies should understand that they cannot provide the outputs (products/services) without the necessary inputs (resources). It is what the company CAN do. In relation to facilities management, this concept is the proper utilization of the available resources of the company to deliver its output. Similarly, facilities management states the capacity of the firm to provide its services/products, in which will define the company’s ability to compete.

Lastly, when the organization is able to understand its “Theory of the Business” and the “Resource-based View of the Firm”, it does not mean that the company will not fail anymore. As mentioned in the article “Theory of the Business” by Peter F. Drucker:

“…, GM never suffered a loss while steadily gaining market share. But in the late 1970s, its assumptions about the market and about production became invalid. The market was fragmenting into highly volatile ‘lifestyle’ segments…”

This simply means that there is no fixed “Theory of the Business”. It is constantly changing according to the varying demands of the consumers. Due to such drastic circumstances, continuous improvement is the key and the resources of the company will be vital as it determines the capacity of the company to compete.

To sum it up, some companies tend to fail because they underestimate the importance of facilities management. Facilities management is incorporated with the “Theory of the Business” and “Resource-based View of the Firm” which refer to the input (resources) and output (products/services) factors of the company. Perhaps, some of them does not practice it at all as they do not know what it is all about or believed in an outdated “Theory of the Business”.

 

In attempt of expansion and growth, Toyota failed to live up to its culture, the “Toyota Way”. “Toyota Way” was the DNA of the company back then and it proven effective. It made Toyota one of the most successful car manufacturers in the world. But upon reaching its peak, they forgot their identity. Let us remember the Toyota Recall Crisis that occurred last 2008 and 2009 in the United States, Latin America, Europe, and China. Huge number of Toyota vehicles (Camry, Lexus, and Solara) was requested to be returned back to fix the alleged defects (either floor mats or the gas pedal) of the units. The factors that led to this are time, outsourced suppliers, and quality management.

 

First, Toyota was focused and persistent for global growth in a short period of time. As Washington Post’s Blaine Harden (2010) noted “Toyota sacrificed quality for global growth and got burned”. Though they produced more units than they ever did, the quality was sacrificed resulting to callbacks. This cost them billions of dollars and the image of the company was heavily affected.

 

Second, Toyota relied on ‘lean production’ (outsourcing the local suppliers). Since they opened new factories overseas, for faster chain of supplies and lesser cost of producing (import, freight, etc.), they depended on local suppliers. As cited by The Economist’s James Womack “meant working with a lot of unfamiliar suppliers who didn’t have a deep understanding of the Toyota culture”. As a result, it jeopardized the quality of the cars they were producing since the parts they were getting from their local suppliers were not as the same as with the suppliers they were getting from their original suppliers.

 

Lastly, Toyota failed to implement its best asset in addressing its constraints, the total quality management (customer focus, continuous improvement, teamwork) during its global expansion. As noted by Harden (2010):

There is an expert consensus that growth itself derailed the Toyota Way, blurring its focus on quality, thinning its stable of expert mentors and undermining its capacity to respond to consumer complaints.

This is a clear statement that Toyota prioritized in producing cars; however, failed to maintain the quality they were once known for.

 

To sum it up, quality was the main factor why Toyota could not prevent in making recalls. They failed to meet the standards they set due to its desire for global expansion (1) in just a short period of time; (2) practice of lean production by outsourcing unknown local suppliers; and (3) failure to observe total quality management, all, for the cost of faster production. Clearly, Toyota did not employ the ‘Toyota Way’ in the process of expanding. Now, it is up to them to regain the stature they had once.  

Improvement and existence are achieved, if and only if, constraints are to be addressed and fixed. Constraints are weaknesses, “pabigat” that hinder the company from its own growth. And we all know that continuous improvement is the key to existence. Let us face the reality; all firms in the industry have their own constraints. And if they fail in finding ways on solving these constraints, they may not continue to exist. To better understand this, let me use ‘the basketball world’ as an example as I discuss my evidences.

Balance is the key to a more efficient way of doing things. As Eli Goldratt (1996) cited “If you optimise already strong links without strengthening the weakest, all you do is heighten the imbalance – which translates into inventory”. In basketball, there are a handful of skills to be mastered that will gauge how good the player is. One of which is rebounding. Imagine a basketball player whose height is 6’11 but does not know how to position his self under the ring. No matter how tall he is, he won’t be able to grab the boards; hence, he is not effective.

Know your throughput. As what Ken Bell stated “if a department only needs to run for three days a week, then only run it for three days a week”. Either shortage or excess in any form of output or production is bad for the company. To relate this in the world of basketball, let us say a basketball player practice day and night. It will make him more competitive; however, over fatigue will become an issue. Come the day of the game and there’s a chance that he won’t be able to execute due to exhaustion.  

Lastly, one must find new ways on how to handle the existing constraints, if the previous solution did not work. The old dilemma says: “If people generate an improvement and redundancy is the outcome, then the process of improvement will be discontinued”. To better discuss this, let us talk about Lebron James of the Miami Heat. He is considered to be the greatest basketball player today. Why? Because at the start of each season, he seems to develop a new arsenal of his own, it could be the low-post move, outside shooting, defense, rebound, etc. He constantly adds new things to his play and that makes him to be a great threat to other teams. 

To end this article, I will combine the three examples I based from my evidences. First, the ‘tall player’: no matter how financially stabled and high-technology a firm is, if it does not improve its weakest link (other factors such as customer service, location, etc.), the company is not subject to improvement. Next, the ‘over-fatigue guy’: the company must know its capacity. The company must not try to pass the limit because it may produce more products but the demand for that product is less, resulting to surplus.  Lastly, ‘Lebron James’: a firm must not stop in solving the existing (or most crucial) constraint until it is fixed before the management goes to the next. In solving this constraint, the concept of creative destruction may be applied. Therefore, no matter how small or big the constraint is in one’s company, it must be addressed as quickly as possible because the mere fact it exist; there is a threat to one’s firm improvement and existence.

The role of TOTAL QUALITY MANAGEMENT to Operations Managers is to simply make them familiarize on what industry they are. Knowing the three focus of TQM (customer focus, continuous improvement, and teamwork) will eventually result to BETTER OUTPUT wherein the demands and needs of each stakeholder are met. 

 

Integrating TQM will make an organization more competitive over the others. In their article, Shin et. al. (1998) suggested “one of the factors for the TQM success is its fit with firms’ strategic priorities, the competitive environment and the organization’s goals”. In business, knowing what your priorities and goals are, and your competitors is very critical to the company’s success for it will determine the problems and probably, the solutions and improvements. It simply states that an operations manager, whatever the working condition is, must know what industry he/she is in, for when these things are familiar to him/her, he would know what to do to have a better output over the others. 

 

Applying TQM will result to the formation of the organizational culture of one’s firm that may lead to better output production. As described by Dean and Bowen of TQM “as a philosophy or an approach to management that can be characterized by its principles, practices, and techniques. Its three principles are customer focus, continuous improvement, and teamwork, and most of what has been written about TQM is explicitly or implicitly based on these principles” (p. 395). It is critical to the company because it will guide the employees on how must they behave and act while working. The organizational culture of the company will serve as the blueprint of their code (may pertain to family, social relationship, camaraderie, trust, etc.); hence, by determining this, there will be a more uniformed way of managing your workers. To an operations manager, knowing your employees and their behavior means a probability of better output that would be beneficiary for the company and its stakeholders.

 

Implementing TQM does not mean you are leading your firm to the right path and will eventually, result to automatic success. As noted by Hill and Wilkinson “TQM is contingent with different versions or manifestations in different sectors under different market conditions in organizations of different sizes and at different stages of quality development” (p. 12). In any industry, there are a lot of factors to be considered, both internally and externally. Internal factors are the things that the firms could control, such as production, management, employment, etc. while external factors are the things that are uncontrollable such as economy, weather, etc. A particular situation might be resolved by implementing TQM; however, the way TQM was implemented will determine whether it was effective or not. As the operations manager formulates his/her TQM, it will show how well-known he/she is about the industry they are working in.  

 

As a conclusion, TQM gives operations manager background on what they must know about the industry they are working for. Making O.M.s familiarize in their line of work would give them competitive advantage over the others. And more importantly, it will produce better output.

Sustainability is the key ingredient why firms continue to exist. But how would they sustain their market from patronizing the products/services they provide? The answer to this is innovation and creative destruction. Companies must know, and be able to adjust to the ever-changing demands of their customers whether they innovate or make a whole new process. Once they meet these demands, they will live another day. And the cycle goes on; they need to continue thinking and improving on how to satisfy their clients. Hence, sustainability comes with innovation and creative destruction, which is a continuous process until a company seizes to operate.  

 

A common interpretation nowadays is that to innovate is to pioneer where in a company initiates a new idea that no one has discovered yet, and apply it in the industry today. An example of this would be on Victory Liner, Inc., the leading bus company plying the Northern Luzon provinces. Upon introducing the free Wi-Fi service to its passengers, the demand for the service went up. This proves that bringing innovation within the company results to more profit and more importantly, consumers that your products/services will be providing for.

 

Creative destruction means changing an old process, improving it, to satisfy the customers better. As cited by Michael Castelluccio (2013):

Kodak, one of America’s legendary companies and the long-time manufacturer and manager of American photography. The 125-year-old institution was tipped over by digital photography – technology that captured images in files rather than on film – and is only just beginning to crawl out from under the remains of its collapse. (P. 59)

This quotation implies that a better process, simpler and easier, of using the camera capturing images was introduced and the consumers wanted it more than the Kodak provided. It proves that no matter how big a company is, if it failed to adjust to the trending demands of the consumers, it would fall.

 

Though, innovation will result to creative destruction, it is not always safe to assume that it will be for the betterment of the company’s products/services. In his article about creative destruction, Michael Castelluccio (2013) discussed “disruptive new technologies are rarely incremental in their impact. They can spin things completely around or even bury them” (p. 59). Hence, a company must always be careful in making decisions that will imply innovation which will lead to creative destruction.

 

To sum it up, a company must be able to sustain in order for it to continue its existence. Sustaining its existence means innovation and creative destruction. But it does not mean that upon doing such process, that the company is assured of success. All decision-making must be planned accordingly because every decision, innovation and creative destruction, is a step towards success or failure.