Hybrid model: focus and centralize based on operations synergy

Abstract

Ever since Skinner s pioneering work that suggested organizing operations as Focused Factories[1] for better productivity and thus be competitive, organizations have changed to focus their operations either based on product mix or market segment. There are numerous success stories of focused factories even as there are few other examples of success by not focusing at all. This leads to the question if there are certain drivers and environments where focus may not be the right choice. This work is an attempt to prove the hypothesis of Hybrid Model that brings fresh perspective to the way operations are Focused and Centralized. This model supports Skinner s theory to focus while at the same time deviates to define focus based on operations synergy rather than product mix or market segments. All operations of a business can be classified either as core activities or as peripheral activities and they should be organized differently for better productivity and quality. The model describes how higher margins can be achieved by centralizing the operations of core activities and focusing operations of peripheral activities as focused factories. The economies of scale by centralization of core activities bring down the overall cost of operations as well as better quality due to learning curve effects from higher volumes. Improved quality warrants premium pricing even as it attracts further demand. Peripheral activities operating as focused factories ensure exclusivity and cost optimization for the particular segment. Thus irrespective of the target market segments or product mix of the business, the hybrid model helps the organization position itself to cater to segments beyond the traditional definition of focused factories.