Unit III

Process Technology Strategy and

Product and Service Development
 What is ‘process’ technology
strategy?

What are suitable dimensions for

characterising process technology?
Key
Questions How do market volume and variety
influence process technology?

How can process technology be

evaluated strategically?
 Definition and Process technology strategy involves the selection, implementation, and management of
Importance technological processes that align with an organization's strategic objectives.

Role in It directly impacts the efficiency, quality, and flexibility of operations, serving as a key enabler
Operations for competitive advantage.
Strategy
Strategic The process technology must align with market requirements and the business strategy,
Alignment ensuring it supports customer expectations and business goals.

Types of Process Includes production technologies, information technologies, and enabling technologies that
Technology assist operations management.

Process Critical Decision

Areas
Choices include technology adoption, upgrading, standardization, customization, and
scaling based on operational needs.

Technology Evaluation
Criteria
Factors like cost, scalability, adaptability, and compatibility with existing processes are
crucial for selecting appropriate technologies.

Strategy Risks and

Challenges
High initial investment costs, rapid technological obsolescence, and integration issues pose
significant risks.

Dynamic Organizations must develop the ability to innovate and adapt their process technologies to
Capabilities maintain competitiveness in changing environments.

Technology Life Understanding and managing the stages of technology—from inception to decline—helps
Cycle optimize its contribution to operations.

Impact on A well-planned process technology strategy enhances cost efficiency, product/service

Competitive quality, delivery speed, and customization capabilities.
Dimensions
 Definition of Scale
• Scale refers to the size or capacity of a process technology to
handle a specific volume of production or service delivery
effectively.

Scalability Explained
• Scalability is the ability of process technology to adjust
capacity—up or down—based on demand fluctuations or
growth without losing efficiency.
Scale/scalability
Importance of Scalability
• Ensures operations remain cost-effective and responsive to
market demands, avoiding overcapacity or underutilization.

Types of Scalability
• Vertical Scaling: Upgrading individual process capabilities
(e.g., adding components or resources to existing technology).
• Horizontal Scaling: Expanding by replicating processes or
adding new units.
 Key Factors Influencing Scalability

• Compatibility with existing systems.

• Investment costs for scaling.
• Operational disruptions during scaling transitions.

Challenges in Scaling

• Balancing efficiency and flexibility.

• Ensuring the quality of output during scale adjustments.
• Managing the cost of redundant or idle capacity.

Strategic Decisions on Scale

• Determining the optimal initial scale during technology adoption.

Scale/scalability • Planning for future scalability to accommodate growth or contraction.

Economies of Scale

• Leveraging larger scales of operation to reduce average costs, but only when demand
justifies high-capacity utilization.

Dynamic Scalability

• Advanced technologies (e.g., cloud-based systems) enable dynamic scalability,

adjusting resources in real-time to meet demand changes.

Impact on Competitive Advantage

• Scalable process technologies provide organizations with the flexibility to innovate,

expand, and sustain operations in volatile markets efficiently.
 • The figure presents a continuum from high scale/scalability (few, large units of process
technology) to low scale/scalability (many, small units of process technology). This axis
emphasizes how process technologies vary in terms of unit size and adaptability.
• High scale involves higher capital costs, economies of scale benefits, vulnerability to
failures, and challenges with "all or nothing" changes. Low scale features lower capital
costs, easier demand matching, built-in redundancy against failures, and simpler
upgrading.
• High scalability presents challenges like legacy systems, idiosyncratic processes, and
reliance on in-house development, which requires specific expertise. Low scalability
includes requirements for reliable architecture, dispersed system skills, standardized
processes, and potential outsourcing.
From 'scale' to

• Organizations must balance scale and scalability based on operational needs, market
dynamics, and risk tolerance to optimize their process technologies.
'scalability'
Coupling/connectivity

Coupling refers to the degree of interdependence between systems, processes, or technologies in

an organization. Tightly coupled systems have high interdependence, requiring synchronized
operations, while loosely coupled systems allow for more independent functioning.

Connectivity is the seamless integration and communication between technologies or systems,

enabling efficient coordination, data sharing, and operational alignment.

Tightly coupled systems offer efficiency but can be vulnerable to disruptions due to dependencies,
whereas loosely coupled systems provide flexibility and resilience but may face challenges in
maintaining consistency.

Strong connectivity enhances process efficiency, reduces redundancies, and supports adaptability,
but organizations must carefully manage dependencies and data security in interconnected
systems.
 • Coupling represents the level of integration between technologies. High coupling
ensures better synchronization and system efficiency but comes with higher capital
costs and potential rigidity. Low coupling provides flexibility and system robustness but
may lead to fragmentation issues.
• Connectivity refers to the ability of systems to communicate and integrate efficiently.
High connectivity leverages platform independence, reliable middleware, and sufficient
bandwidth, enabling seamless communication across boundaries. Low connectivity
often involves customized, legacy systems with limited flexibility and restricted access.
• High coupling and connectivity require robust infrastructure and offer significant
efficiency benefits, but they introduce concerns like high costs, security risks, and
reduced adaptability.
• The shift toward platform-independent, highly connected systems (e.g., client/server

From
systems, web technologies) reflects advancements in hardware and software, allowing
integration across organizational boundaries and enhancing operational precision and
flexibility.

'coupling' to
'connectivity'
 Characteristics of
process technology
• The horizontal axis highlights the trade-off between high scale (few, large units of
technology) and low scale (many, smaller units of technology). High scale focuses
on efficiency, while low scale prioritizes agility.
• The second arrow represents the degree of automation. High automation
indicates lower dependence on human judgment, while low automation relies on
human acuity and decision-making.
• The third arrow emphasizes the integration of technology. Highly coupled
systems are tightly integrated, increasing efficiency but reducing modularity. In
contrast, loosely coupled systems are more flexible and adaptable.
• The bottom chart illustrates the trade-off between cost and flexibility. As you
move from low to high scale, automation, and coupling, cost efficiency increases,
but flexibility decreases.
• Organizations must balance these dimensions based on their operational strategy,
choosing high scale and automation for cost-driven processes (e.g., mass
production) and low scale for flexibility and innovation (e.g., custom production).
 Product Process Matrix

Framework Alignment Process Types: Cost and Flexibility Strategic Fit: Dynamic Nature:
Trade-off
The matrix aligns product Project: High customization, As you move from project to Businesses operating off the As products evolve in their
lifecycle stages (variety and low volume (e.g., building continuous flow, production diagonal (e.g., high lifecycle (e.g., from niche to
volume) with process types construction). cost per unit decreases, but customization using a mass-market), businesses
(project, job shop, batch, Job Shop: Moderate process flexibility also continuous process) risk may need to shift their
assembly line, continuous customization, low volume reduces. inefficiency or mismatch in process to match.
flow). (e.g., custom furniture). capabilities.

Batch: Moderate variety and

volume (e.g., bakery items).
Assembly Line: Low variety,
high volume (e.g., car
manufacturing).
Continuous Flow: No variety,
very high volume (e.g., oil
refining).
 Trade-offs in Process Technology:
• The figure highlights key trade-offs between cost efficiency (low flexibility, high scale,
automation, coupling) and flexibility (high adaptability but at a higher cost).

Coupling, Automation, and Scale:

• Each arrow (Coupling, Automation, Scale) shows a continuum:
• Coupling: From integrated systems (efficient but rigid) to separated systems
(flexible but less synchronized).

Creating • Automation: From high technology reliance (low human intervention) to low
technology reliance (high human involvement).
• Scale: From large units (cost-efficient, low variety) to smaller units (flexible, high

Product variety).

Market Requirements and Process Fit:

Process • The X-axis in the matrix represents market requirements, moving from low
volume/high variety (customized) to high volume/low variety (standardized).

Matrix
Diagonal Fit:
• Processes aligned on the diagonal balance flexibility and cost efficiently.
Misalignment (off-diagonal) leads to inefficiencies like high costs, insufficient
capabilities, or redundant capacity.

Process Evolution:
• Points A, B, and C represent different scenarios where processes can evolve:
• A: Overly flexible, costly, redundant.
• B: Balanced flexibility and cost.
• C: Cost-efficient but rigid and low flexibility.
 Background

• Challenge: Decline in paper-based transactions (e.g., cheques), but total volumes remain substantial,
leading to high clearing costs.
• Evolution in Banking:

Case
• Banks merged and standardized operations, reducing activity variety while increasing processing
volume.

Transition in Process Technology

Study: Position 1 (Fragmented Operations):

Voucher
• Each branch had a standalone voucher processing system.
• Customer service staff spent significant time operating manual systems.

Processin
Drawbacks:

• Low economies of scale.

• Fragmentation led to inefficiencies and underutilized capacity.

g Retail Position 2 (Centralized Technology):

• Standardization within banks' operations.

Banking
• Reduced variety and higher processing volumes.

Position 3 (High-Volume Automation):

• Adoption of centralized voucher processing centers.

• Use of advanced technologies (e.g., Optical Character Recognition) for automated, high-speed cheque
processing.
• Benefits:
• Economies of scale.
• Higher efficiency and cost savings.
 Implementation of Product-Process Matrix
•Initially, each bank branch handled its own voucher processing with manual systems.
•These systems were fragmented, operated at low capacity, and required customer service staff to allocate time for
Position 1: Individual Branches: this task.
•This represents low coupling, low automation, and small-scale operations in the matrix.

•Banks began consolidating their operations, standardizing processes, and reducing the variety of tasks performed
Position 2: Centralized across branches.
Standardization: •Centralization improved efficiency but still retained some manual processes, leading to moderate automation and
increased coupling.

Position 3: High-Volume, •Technology advancements enabled fully automated voucher processing centers.
•These centers utilize technologies like Optical Character Recognition (OCR), processing thousands of vouchers per
Automated Voucher Processing minute at low cost and high efficiency.
Centers: •This marks a move towards high scale, high coupling, and full automation in the matrix.

•Moving diagonally down the matrix demonstrates a transition towards greater cost efficiency and economies of scale.
Efficiency Gains: •Centralized and automated systems allow banks to process vouchers at significantly lower costs while maintaining
high accuracy and speed.

•This movement reflects the operational strategy of banks adapting their processes to reduce costs and improve
productivity.
Strategic Implication: •The diagonal path shows how banks balance market requirements (volume and variety) with process capabilities
(automation, scale, and coupling).
 Ensure the technology supports
Alignment with strategic objectives like cost
Business Goals: reduction, quality improvement,
flexibility, or speed.

Evaluate if the technology can

handle future increases in
Scalability: demand or production volume
without excessive costs.

Evaluating Compare the upfront investment

process
and operating costs of the
Cost-Benefit Analysis: technology against the expected
benefits, such as efficiency gains
or reduced downtime.

technology Assess whether the technology

Flexibility and can adapt to changes in product
Adaptability: design, customer requirements,
or market conditions.

Check if the technology integrates

Integration and seamlessly with existing systems
and processes, minimizing
Compatibility: disruptions and maximizing
productivity.
Product and Service Development as a Process
Idea Generation Identify opportunities through market analysis, customer feedback, and innovative brainstorming.

Concept Translate ideas into viable concepts with defined value propositions.
Development

Design and Create prototypes to test functionality, usability, and feasibility.

Prototyping

Testing and Assess prototypes and concepts through market testing and feedback to ensure market fit.
Validation

Launch and Bring the final product or service to market with aligned marketing and operational strategies.
Commercialization

Iteration Continuously improve based on customer feedback and performance metrics.

Importance of Sustainable Alignment
Environmental Economic
Social Responsibility:
Responsibility: Sustainability:
• Use eco-friendly • Address customer • Balance cost efficiency
materials and needs inclusively and with long-term
processes (e.g., ethically. profitability.
renewable resources, • Ensure fair labor • Align product
energy-efficient practices and supply development with
manufacturing). chain transparency. evolving regulatory and
• Minimize waste market demands.
generation through
design optimization
and circular economy
principles.
Integration of Sustainability in Product/Service Development

Early-Stage Integration: Life Cycle Thinking: Assess

Embed sustainability goals in and optimize the product's
the design phase to avoid environmental and social
costly rework later. impact across its life cycle.

Collaboration Across Leverage Technology: Utilize

Stakeholders: Engage tools like digital twins,
designers, engineers, simulation models, and AI to
marketers, and sustainability predict and mitigate
experts to align goals. environmental impacts.
 •Patagonia, has integrated environmental and social responsibility into its business
Introduction model. The company's initiatives encompass fair labor practices, sustainable
sourcing, and environmental activism.

Fair Trade and Labor

Social Responsibility
•Patagonia has over 90% of its products manufactured in Fair Trade Certified
factories, benefiting more than 85,000 workers. This commitment ensures fair
Environmental and Practices wages and safe working conditions throughout its supply chain. Patagonia

Product Repair and •In 2023, Patagonia's repair center in Reno, Nevada, repaired over 63,000 garments,
extending product lifecycles and reducing waste. This effort aligns with the
Circular Economy company's circular economy strategy, promoting product longevity and
sustainability. Patagonia

Regenerative Organic •The company supports over 2,000 farmers through its Regenerative Organic
Certified® Cotton program, promoting agricultural practices that rehabilitate soil,
Agriculture respect animal welfare, and improve farmers' lives. Patagonia

Recycling and Waste

Patagonia's

•Since 2021, Patagonia has repurposed over 1,400 tons of plastic waste, including
discarded fishing nets, into gear, contributing to ocean health and resource
Reduction efficiency. Patagonia
Initiatives

Climate Action and •Patagonia has set ambitious climate goals, including reducing absolute Scope 1 and
Scope 2 greenhouse gas emissions by 80% by fiscal year 2030 from a 2017
Emission Reduction baseline. The company also supports community-led efforts to transition away from
fossil fuels and protect nature. Patagonia

Environmental Activism •Through its self-imposed Earth tax, 1% for the Planet, Patagonia supports
environmental nonprofits working to defend air, land, and water globally. The
and Philanthropy company also engages in environmental activism, linking sports with activism to
drive positive social and environmental change. Patagonia

•Patagonia's comprehensive approach to environmental and social responsibility

Conclusion demonstrates a business model that integrates sustainability into its operations,
supply chain, and corporate ethos. These initiatives reflect the company's
commitment to minimizing environmental impact and promoting social equity.
 Problem Definition

• Patagonia faces the challenge of aligning its operations strategy with its
core values of environmental sustainability and social responsibility while
maintaining profitability and market competitiveness.

Alternatives

• Maintain Current Practices: Continue existing sustainability initiatives

without significant changes.
• Enhance Sustainability Efforts: Invest further in sustainable materials,
renewable energy, and fair labor practices.

Case • Expand Product Lines: Introduce new products to reach a broader market
segment.
• Increase Operational Efficiency: Implement cost-cutting measures and

Analysis streamline operations to improve profitability.

Criteria

• Environmental Impact: Degree to which the alternative reduces ecological

footprint.
• Social Responsibility: Effect on fair labor practices and community
engagement.
• Financial Performance: Impact on profitability and revenue growth.
• Brand Integrity: Alignment with Patagonia's mission and customer
expectations.
• Feasibility: Practicality of implementation considering resources and
capabilities.
Case Analysis
Analysis
• Maintain Current Practices: This approach sustains the status quo but may lead to stagnation in sustainability progress and could
disappoint stakeholders seeking continuous improvement.
• Enhance Sustainability Efforts: Investing in sustainable practices can strengthen brand integrity and appeal to environmentally
conscious consumers. However, it may require substantial capital investment and could impact short-term financial performance.
• Expand Product Lines: Diversifying products could attract new customers and increase revenue. Nonetheless, it risks diluting the brand's
focus on quality and sustainability, potentially undermining brand integrity.
• Increase Operational Efficiency: Improving efficiency can enhance profitability but may involve measures that conflict with the
company's commitment to employee welfare and environmental standards, potentially harming brand integrity.

Decision
• Enhancing sustainability efforts (Alternative 2) aligns most closely with Patagonia's core values and long-term strategic goals. While it may
require significant investment, this approach reinforces the company's commitment to environmental and social responsibility, potentially
leading to increased customer loyalty and differentiation in the market.

Implementation
• Sustainable Materials: Increase the use of recycled and organic materials in product manufacturing.
• Renewable Energy: Transition to renewable energy sources across operations to reduce carbon footprint.
• Supply Chain Transparency: Enhance transparency in the supply chain to ensure adherence to fair labor practices and environmental
standards.
• Stakeholder Engagement: Communicate sustainability initiatives to customers and stakeholders to build trust and brand loyalty.
• Performance Metrics: Establish metrics to monitor the environmental and social impact of operations, ensuring continuous
improvement.