pln 0305 core competence an enterprise analysis
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Core Competence: An EnterpriseAnalysis
Developments from the
UK Lean Aerospace Initiative
Dr Glenn ParryUniversity of Warwick
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2005 Dr G.C. Parry, Dr C.E. Turner, UK Lean Aerospace Initiative, University of Warwick
CORE COMPETENCE
Agenda
Introduction
Case Study
Conclusions
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2005 Dr G.C. Parry, Dr C.E. Turner, UK Lean Aerospace Initiative, University of Warwick
THE FIVE LEAN PRINCIPLE
The lean principles are now common within the manufacturing process, for lean to
add further value an enterprise wide approach is required but what should we
target?
Based on the Toyota Production System, they were first published by Womack &
Jones in The Machine That Changed The World
Specify value is the first and, we believe, the most overlooked principle
- only the customer can specify value
- time and again we hear people say they know what the customer wants, but have neveractually listened to them
The next three principles involve process excellence
The final principle reminds us we are never perfect
Source: Lean Thinking, Womack & Jones (1996); WMG Analysis
Pursue
perfection
Let the
customer pull
Specify
value
Identify the
value stream
Make the
value flow
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2005 Dr G.C. Parry, Dr C.E. Turner, UK Lean Aerospace Initiative, University of Warwick
INTRODUCTION
The question of the value added by any enterprise transformation is fundamental
and we believe is centred around core competence
Companies will have numerous value streams
Only limited resources are available to change managers
Focus of lean change initiatives needs to be on those functions that will
deliver greatest value to the business
Core competences need to be identified to target effort in areas that
deliver greatest return, and to ensure we do not destroy value
We established a working party of industry professionals who meet quarterly
to discuss these issues and develop a methodology for analysis
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INTRODUCTION
Firms have core competencies or skills that they must defend at all costs if they are to
survive and prosper in a market-place
Correctly identifying and protecting core competence is key to survival
- IBM effectively outsourced two of its core competencies - writing software to Microsoft, andmicrochip technology to Intel - and concentrated instead on what it believed to be its core
competence, producing hardware
A companys true assets lie in those areas which generate wealth
Asset specificity can be defined in relation to whether or not the specific skills or knowledge of the
organisation contribute to the maintenance or creation of sustainable positions for profit within specific
supply and value chainsA. Cox, European J. Purchasing & Supply Man., Vol 2, No. 1, 1996
Core competence and assets can only be created or sustained by entrepreneurial
activity
An entrepreneur is any person or firm who is alert to untapped or undeveloped possibilities fortransactions that will generate a margin or profit
M. Ricketts The Economies of Business Enterprise, Harvester Wheatsheaf
Source: WMG analysis
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2005 Dr G.C. Parry, Dr C.E. Turner, UK Lean Aerospace Initiative, University of Warwick
INTRODUCTION
Core competence identification, evaluation and protection forms the foundation
stone for all businesses, though what it was remained ethereal
Core competences need to be protected to maintain a business
Work focussed on core competence definition and methods to identify and analyse them
Products /
ServicesCustomer /
supplier
Relationships
Core
CompetenceThreshold
Competence
Bid and
proposalInvestment
Strategy
Whilst we agree Core Competence is a cornerstone for the business we
did not have an agreed definition for what it wasSource: WMG Analysis
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2005 Dr G.C. Parry, Dr C.E. Turner, UK Lean Aerospace Initiative, University of Warwick
INTRODUCTION
A definition for core competence was agreed by the UK LAI working party at Warwick
Core Competence is a
skill/asset/technology that
underpins the
growth of the business anddifferentiates the business from
its current and future
competitors
Source: UKLAI Working Party; WMG analysis
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INTRODUCTION
Management must maintain and manipulate the complex link between strategy and core
competence to drive growth
Both competence and strategy need to be consideredsimultaneously
- strategies may identify development needs in corecompetence
- core competences need to be exploited when planningstrategy
This leads to the virtuous circle where competence
and strategy drive each other towards continuous
improvement Strategy is the management of competences
NPI Working Party member, 23rd May 2002
Threshold
Competency
Strategy
Core
Competency
Source: UKLAI Working Party; WMG analysis
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2005 Dr G.C. Parry, Dr C.E. Turner, UK Lean Aerospace Initiative, University of Warwick
CORE COMPETENCE
Agenda
Introduction
Case Study
- The Company- Our Analysis
Conclusions
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CASE STUDY
Dowty Propellers produce and service propellers and systems for military and civil
aviation
We focused on the composite blades business which has many skill areas
Blades
The main blade is a foam core covered with
carbon fibre, EVA and finally a painted finish
The leading edge guard [LEG] is a metal
leading edge protector
The overshoe is an electronic heater mat
fitted to prevent the blade icing up during
flight
The root is the metal insert which attaches
the blade to the propeller
Dowty R-352 propeller (Fokker F50) Composite C-130J blade
Source: WMG Analysis (2002); Fokker Corporate Website (2002)
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2005 Dr G.C. Parry, Dr C.E. Turner, UK Lean Aerospace Initiative, University of Warwick
CORE COMPETENCE
Agenda
Introduction
Case Study
- The Company- Our Analysis
Conclusions
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CASE STUDY
To analyse core competence we agreed a structure around which to work, and this
image was used to communicate our approach
CORE COMPETENCE
COMPANY STRATEGY
COMPANY LTD
Source: WMG Analysis
CASE STUDY
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CASE STUDY
Extensive customer interviewing was used to identify value
Anonymous Customer Calling was used to get an unbiased customer viewpoint
- what does the customer value (Market)?
- what do they pay for?
- what do they like?
- what might be done differently?
Customer written questionnaires direct from the company gave greater insight to
how the customers viewed the target companys product
- what does the customer value from your company?
Source: WMG Analysis
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CASE STUDY
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CASE STUDY
Initially, the repair shop was not convinced that mapping their process would be
useful as they claimed considerable variability in incoming repairs
0
25
50
75
100
A B C D E F G
Repairs per
propeller
(Percent)
F50 Propeller Repairs
Core competence in
deep damage repair
The repair shop had 54 repair schedules for
blades and a similar number for hubs
The shop layout was set to allow all of these
to be handled
Pareto analysis of a history of repairs
revealed that only 7 occurred regularly
- of these 3 were carried out on over 25% ofpropellers
As lean practitioners we like demand
levelling
- the repair shop has been reconfigured forrepeaters and strangers
- prediction of required maintenance is nowimproved
CASE STUDY
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CASE STUDY
A skills matrix of employees and their roles in the value stream flow gave visibility
of individuals competences
CASE STUDY
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2005 Dr G.C. Parry, Dr C.E. Turner, UK Lean Aerospace Initiative, University of Warwick
CASE STUDY
We completed global market analysis on DPROs competitors
OEMCOMPETITOR
PROFILES
Who?
What?
Where? Size?
SERVICE
COMPETITOR
PROFILES
Who?
What?
Where?
Size?
MarketFINANCIALTRENDS
MARKET
COMPETITORS
- REVENUES- ROCE
Source: WMG Analysis
CASE STUDY
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2005 Dr G.C. Parry, Dr C.E. Turner, UK Lean Aerospace Initiative, University of Warwick
CASE STUDY
Detailed cost modelling stripped out overhead and identified profit drivers linked to
product streams and cell activity
Labour
Material
Direct labour
1650 hrsIndirect labour
costs
Stationary,
audit, software
etc
Staff levelProduct
Product
Product
No. of
people
Cost Sq ft
All overhead was reattributed to cellactivity, using real data where possible
Cost
sSub con
Product
OverheadAdmin
Shareholder
valueProfit
marginProduct
ProductRevenue
Product
Product
Consultancy
Source: WMG Analysis
CASE STUDY
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2005 Dr G.C. Parry, Dr C.E. Turner, UK Lean Aerospace Initiative, University of Warwick
The model allowed us to select and deselect cells, platforms and customers and
view the predicted financial effect this would have on the business
0
10
20
30
40
50
60
1stQtr
2ndQtr
3rdQtr
4thQtr
Cost Revenue Margin
Select
Platform
Select
Cell
Select
customer
F50
Tornado
Typhoon
Cessna
Lynx
A320
747
Metal fabrication
Metal finishing
Paint shop
Composite layup
Composite finishing
Metal polishing
NDT
Big Airlines
Dutch Airlines
MOD
Africa Air
Belgium Air
Output displayControl Panel
CASE STUDY
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High on Customer Value was right first time costing. Using the model, costs can be
better analysed and quotation accuracy improved
Product
Cumulative distribution
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
8000 8500 9000 9500 10000 10500
Basic Overhaul
Historic data is inputted and
uncertainty values are assigned to the
material, sub con and labour values
This gives a guide as to where the
quote falls against the expected curve
and what action needs to be taken
Shareholder
value
Profit
margin
Cost
s
Revenue
Labour
MaterialProduct
Product
Overhead
Product
Admin
Sub con
Product
Product
Product
Product
Consultancy
Source: WMG Analysis
CASE STUDY
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Dowty Propellers Repair and Overhaul now believe they have a good understanding
of their core competence and understand the risks inherent in their future strategy
Competitors and Markets profiled
Process and capabilities mapped
Appreciation of customer value
Tractability of cost and revenue
Visibility of costs, and probability analysis of achieving costs
The company has greater confidence in decisions for future growth
and have increased market share & profitability
Source: WMG Analysis
CORE COMPETENCE
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Agenda
Introduction
Case Study
Conclusions
CONCLUSIONS
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Conclusions
We have an agreed definition for core competence:
Company strategy is defined as the management of our competences
We have developed a four step enterprise analysis which identifies core competences
- customer, value stream, market, finance
Completing this analysis has added to the profits and market share of a company
Core Competence is a skill/asset/technology that underpins the growth of the business;
differentiates the business from its current and future competitors
When transforming our enterprise we will focus on what we do well, protecting and
investing in the activities that are core to the business
CONCLUSIONS
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2005 Dr G.C. Parry, Dr C.E. Turner, UK Lean Aerospace Initiative, University of Warwick
In the Rorschach ink-blot test individuals project their interpretations onto meaningless
shapes
Are your core competences just a projection of what you want to see?
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For More Details Please Contact
Dr Glenn Parry
Senior Research Fellow
UK Lean Aerospace Initiative
International Manufacturing Centre
University of Warwick
CoventryCV4 7AL
Tel: +44 (0)24 7657 2651
Email:[email protected]
Dr Celine Turner
Senior Research Fellow
UK Lean Aerospace Initiative
International Manufacturing Centre
University of Warwick
CoventryCV4 7AL
Tel: +44 (0)24 7652 4604
Email:[email protected]
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Disclaimer
This document was produced by researchers from the UK Lean Aerospace Initiative (UK LAI) at
Warwick Manufacturing Group, University of Warwick. The UK LAI is a consortium of four
universities lead by the University of Warwick and consisting of some 40 participating company
members of the Society of British Aerospace Companies (SBAC). The initiative is jointly funded by
participating SBAC members and the Engineering and Physical Sciences Research Council.
Members should reference UK LAI and the University of Warwick whenever any information is used
or disclosed relating to this work or any other by the UK LAI at the University of Warwick.
It may not be copied, used or disclosed to non-members in whole or in part except with the prior
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document is supplied without liability for errors and omissions.
All rights reserved. This document may change without notice.