A Few Thoughts on

Paradigms and Strategies

Zbigniew J. Pasek

Zbigniew J. Pasek, Associate Professor

Department of Industrial and Manufacturing Systems Engineering
University of Windsor
1
Paradigm – What’s That?

Paradigm: A set of
assumptions, concepts,
values, and practices that
constitutes a way of viewing
reality for the community
that shares them, especially
in an intellectual discipline.
Paradigm has been used in
science to refer to a
theoretical framework. 1962

Zbigniew J. Pasek, Associate Professor

Department of Industrial and Manufacturing Systems Engineering
University of Windsor
2
Theory and Reality

Dominant paradigms guide accumulation of knowledge

Theory

Practice

Paradigm-driven or problem-driven?

Zbigniew J. Pasek, Associate Professor

Department of Industrial and Manufacturing Systems Engineering
University of Windsor
3
Manufacturing Paradigm

Usually explains relations between

Product
Process
Business model.

A business model is a strategic approach of creating

economic value (e.g., selling products) by utilizing the
competitive advantage of the company for benefiting the
customers.

Zbigniew J. Pasek, Associate Professor

Department of Industrial and Manufacturing Systems Engineering
University of Windsor
4
Paradigms and Strategies

• Paradigms help us
understand the past,
operate in the present,
and map the future.
• Strategies are the roadmaps
for transition to the future.

Zbigniew J. Pasek, Associate Professor

Department of Industrial and Manufacturing Systems Engineering
University of Windsor
5
Century-Old Paradigm: Mass Production

Ford Motor Company

Highland Park
Model T

Zbigniew J. Pasek, Associate Professor

Department of Industrial and Manufacturing Systems Engineering
University of Windsor
6
Are Old Paradigms Dead?

“The ‘mass market’ is dead.

Consumers look for either price or quality.
The middle is shrinking.”

Walter Robb
COO, Whole Foods
Investors Business Daily
06.20.05

Zbigniew J. Pasek, Associate Professor

Department of Industrial and Manufacturing Systems Engineering
University of Windsor
7
Old Habits (Paradigms) Die Hard…

• Auto Big-3 total labor hours per vehicle is low:

assembly + stamping + powertrain
24.33 [GM] – 35.85 [DCX] – 36.98 [Ford]
• Auto Big-3 assembly productivity is high:
23.09 [GM] – 24.48 [Ford] – 25.17 [DCX] [in hours]

• But then cars sit for 60-80 DAYS in dealers inventories…

• Manufacturing process becomes super-efficient, while
other parts of value-creation are neglected
• Disconnect from the customer, broken business model

Productivity data: Harbour report [www.harbourinc.com]

Zbigniew J. Pasek, Associate Professor

Department of Industrial and Manufacturing Systems Engineering
University of Windsor
8
Old Model Does Not Work Anymore
Time for a Model Change:
– “Time for a Model Change – Re-Engineering the Global Auto
Industry” by G. P. Maxton, J. Wormald , 2004
– Global car sales have been slowing for the past 30 years,
– The auto industry is badly organized (excess of redundancies)
– The car giants are hopelessly wasteful of resources
– The industry churns out an ever-greater number of models which
confuse consumers and make no economic sense
– Industry’s problems are structural, and go beyond the
challenges of shifting markets, environmental issues and new
technologies

Zbigniew J. Pasek, Associate Professor

Department of Industrial and Manufacturing Systems Engineering
University of Windsor
9
Same vs. Different

“The ‘surplus society’ has a surplus of

similar companies,
employing similar people,
with similar educational backgrounds,
coming up with similar ideas,
producing similar things,
with similar prices and similar quality.”

Kjell Nordström and Jonas Ridderstråle, Funky Business

Zbigniew J. Pasek, Associate Professor

Department of Industrial and Manufacturing Systems Engineering
University of Windsor
10
New Business Paradigms: What Are They?

NEW INSTANT COMPANIES:

Cheap Design Tools.
Offshore Factories.
Free Buzz Marketing.
How Today’s Startups
Are Going from Idea to $30
Million Hit—Overnight

Business 2.0, June 2005

Zbigniew J. Pasek, Associate Professor

Department of Industrial and Manufacturing Systems Engineering
University of Windsor
11
 Needed New Automotive Business Models
Built-to-Order:
– “The Second Century” by M. Holweg and F. K. Pil, 2004
– Benefits of Lean extend beyond just manufacturing
– Bring back customer needs into the picture!
– Demand-driven enterprise instead of built-to-forecast

"In the twentieth century, production efficiency and minimization of unit cost
were believed to be the core drivers of competitive advantage.
As we enter the second automotive century, the winners will not be those firms
that search for larger and larger scale, or those that run efficient factories,
or those that squeeze the last drop of profitability from their suppliers.

The winners will be those that build products as if customers matter."

Zbigniew J. Pasek, Associate Professor
Department of Industrial and Manufacturing Systems Engineering
University of Windsor
12
Need for a Model Change

CAR INDUSTRY SURVEY, The Economist, Sep. 4 ,2004

Zbigniew J. Pasek, Associate Professor

Department of Industrial and Manufacturing Systems Engineering
University of Windsor
13
New Automotive Business Models?
– Concept invented by A.T. Kearney (consulting company)
• Steve Young, VP ATK Global Automotive Practice
• Martin Leach, former Ford Europe pres.,
– Virtual enterprise
• Sales via internet
• Direct delivery to customers
– Sells mobility, not cars: New Business Model
– Bundled packages of services Don’t sell products;
– Lifetime relationships
– Daily cost: 6€
Sell Functionality!
– Expected profitability: 22% (Toyota: 7%)
– In 3 years can start delivering cars, in 3 more – become profitable
– Plans to launch in 2006 in UK

Manufacturing:
– 4 assembly plants, total volume of 250,000/year
– Plastic body panels, no paint job needed
– Suppliers develop & deliver powertrains

Zbigniew J. Pasek, Associate Professor

Department of Industrial and Manufacturing Systems Engineering
University of Windsor
14
New Automotive Business Models?
Tata Motor:
– Indian conglomerate
– Known for making sturdy trucks
– Developed first Indian passenger car Indica $6,600
– 60% of cost of a typical model launch
– Relied on low-cost engineering skills

Tata Motor “People’s car”:

– Targets very poor society segment
– Cost of $2,500 (100,000 rupees)
– Made of steel, composite parts, even reinforced wastepaper
– Based on spaceframe technology
– Held together by adhesive, rivets or nuts and bolts
– No airconditioning, perhaps even no windows
– Car is a commodity
– Available in 2008

Zbigniew J. Pasek, Associate Professor

Department of Industrial and Manufacturing Systems Engineering
University of Windsor
15
Tata Nano

Zbigniew J. Pasek, Associate Professor

Department of Industrial and Manufacturing Systems Engineering
University of Windsor
16
Evolution of Business Strategies - 1
• A distinct discipline only since mid-60s
• Strategies of position:
focus on market position & market share
• Static and stable
• Based on industry structures
• Strategic plans aimed at to occupying or acquiring strategic position
• Time horizon: 1- 5 years

• But…
• Advantages of market position quickly erode due to intensifying
competition
• Industry structures/boundaries continuously evolve
• Hard to anticipate outcomes in rapidly changing environments
• Need for a different approach

Zbigniew J. Pasek, Associate Professor

Department of Industrial and Manufacturing Systems Engineering
University of Windsor
17
 Evolution of Business Strategies - 2
• Strategies of movement: complex & rapidly changing environments
• Market opportunities can be exploited dynamically
• Profitability by staying a step ahead of competition/copycats
• Cannot plan; complex adaptive system planning usually fails
• New order emerges from a large number of distributed efforts
• Bottom up emergent order beats top-down imposed order

• But…
• Need some new tools:
– Real option theory
– Business dynamics
– Game theory
– Adaptive strategy based on closed-loop
• Speed alone is not enough, need a direction

Zbigniew J. Pasek, Associate Professor

Department of Industrial and Manufacturing Systems Engineering
University of Windsor
18
The Sustainable Edge

• The only sustainable edge companies will have by

combining the strategies of core competencies with
strategies of leverage.
• Enterprises need to work closely with other highly
specialized firms to get better faster. Enabled by the
emergence of global process networks,
firms will undergo a transformation to:
– deepen specialization within firms
– mobilize best-in-class capabilities across enterprises
– accelerate learning across broad networks of enterprises.

John Hagel III and John Seely Brown

The Only Sustainable Edge, 2005c
Zbigniew J. Pasek, Associate Professor
Department of Industrial and Manufacturing Systems Engineering
University of Windsor
19
 Competitive Advantage

• Corporate value comes from competitive

advantage
• All advantage comes from differentiation

• Differentiation comes from innovation

John Hagel III and John Seely Brown

The Only Sustainable Edge, 2005c

Zbigniew J. Pasek, Associate Professor

Department of Industrial and Manufacturing Systems Engineering
University of Windsor
20