The New York Times had an interesting article ( “In Detroit, Is There Life After the Big 3?“) on the shift Detroit is going through as its automotive industry is slowly fading. The article brings interesting perspectives, and I find it of particular interest as I prepare for my Operations Strategy class. The articles describe the shift many industries go through, in the post-automotive era of Michigan:
Much of the new work … is limited to machining and developing prototypes. Mass production will most likely head elsewhere to save costs or to be closer to end customers. “What we really are talking about is R&D, pilot projects and early-stage production,” says Peter Adriaens, a University of Michigan entrepreneurship professor tracking the trend. “There is virtually nothing we can do to keep large-scale production here.”
How is that related to operations strategy? Tim Laseter (“An Essential Step for Corporate Strategy“) defines operations strategy as one that “should guide structural decisions and the evolution of operational capabilities needed to achieve the desired competitive position of the company as a whole”. (My definition is slightly but not significantly different). For many years the automotive industry focused on large-scale production with the goal of achieving cost reduction at a certain quality. As it was evident in the last several years, cost cutting was not Detroit’s competitive advantage. The goal of the operations strategy is then to guide decisions that will allow firms to support a more appropriate competitive strategy. And indeed:
Why does Detroit make sense: the main allure of the Detroit area is its ability to quickly turn designs into workable products that can be economically mass-produced. The region remains the country’s premier precision manufacturing base, with 2,500 auto suppliers and tens of thousands of highly skilled, underemployed mechanical engineers, machinists and factory managers.”
One may call it operations strategy, but one may also call is business model change or business model innovation. The key here is that the talent is there, but this talent is best utilized to generate value where it can align its competencies and strengths with what firms and customers value.