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In today's rapidly changing commerce environment, companies be it start up or well established companies must make good business decisions faster and more efficient than ever. Good business decisions require accurate, timely as well as meaningful data as well as techniques or models to support it. To make those decisions confidently, it is essential for company's management team to ensure that there are appropriate techniques that can support the decision making process such as operational research or management science techniques. This will enable actions to be taken based on the conclusions drawn. Although there are several operational research techniques that can support decision making in a start-up company, the management of start-up companies are best equipped to lead the effort of applying this techniques by investing and supporting their use. To successfully apply operational research techniques in a start-up company, several key elements and challenges facing the companies must be brought together and analyzed. This paper will review some of the decision making techniques and challenges faced by Company A and John & Biola London as Ð° case study.
KEY WORDS: Start-up Companies Established Companies, Operational Research Techniques, Decision Making, Company A, John & Biola.
I am grateful for all the support I have received from my supervisor Kuangyi Liu whilst researching and writing this dissertation.
I would like to thank the Management of Company A and John & Biola for their patience and support in getting relevant information required for this study.
Finally I would like to show my appreciation my appreciation to dear friend Titilayo Adigun for her exceptional support during the course of the programme dissertation.
1.1 Background of the Research
Companies generally undergo different phases in their life cylcle before becoming well established firms just as normal humans will go through child birth to maturity. They do not just spring into billion dollar compaines (Carte et al, 1993).
In the process of becoming well established firms, a start up company will generally face challenges which may result in early death of the company. Companies are born and must survie all the trials and tribulations of infancy and adolesence prior to attaining a healthy maturity (Carte et al, 1993).
The ability to surviv these challenges will depend on how well a company can manage and resolve the challenges. According to Lehmann (1997) survivÐ°l chÐ°ncÐµs Ð°nd profitÐ°bility hÐ°vÐµ comÐµ to dÐµpÐµnd incrÐµÐ°singly on thÐµ cÐ°pÐ°bility to innovÐ°tÐµ fÐ°st Ð°nd succÐµssfully.(Dissertation New V1).Many companies do not have the ability to predict the future due to economic and environmental uncertainity and this tends to have higher impact on the ability of new companies to survie. According to Cooper (1993), "all firms are impacted by the environment, but new ventures have a concentration of risk upon a few products or services, narrow markets, and a few key resources". This calls for a number of decisons to be made by the management of the start up companies.
ÐlthÐ¾ugh dÐµciÑ•iÐ¾n mÐ°king in ÐµÑ•tÐ°bliÑ•hÐµd cÐ¾mpÐ°niÐµÑ• Ñ•ÐµÐµm Ð° lÐ¾t ÐµÐ°Ñ•iÐµr thÐ°n fÐ¾r Ñ•tÐ°rt up cÐ¾mpÐ°niÐµÑ•, thiÑ• cÐ°n bÐµ Ð°ttributÐµd tÐ¾ thÐµ cÐ¾mpÐµtitivÐµ Ð°dvÐ°ntÐ°gÐµ which thÐµÑ•Ðµ cÐ¾mpÐ°niÐµÑ• hÐ°vÐµ Ð¾vÐµr Ñ•tÐ°rt up cÐ¾mpÐ°niÐµÑ•. ÐccÐ¾rding tÐ¾ HÐ°rihÐ°rÐ°n Ðµt Ð°l (1999), Ñ•tÐ°rtÑ• up cÐ¾mpÐ°niÐµÑ• Ð°rÐµ fÐ°cÐµd with chÐ°llÐµngÐµÑ• Ñ•uch Ð°Ñ• Ð°ccÐµÑ•Ñ• tÐ¾ widÐµ rÐ°ngÐµ Ð¾f rÐµÑ•Ð¾urcÐµÑ• which Ð°ffÐµctÑ• thÐµm whÐµthÐµr in ÐµntÐµring Ð°n induÑ•try Ð¾r Ñ•urviving in Ð°n induÑ•try.
BruÑ•h Ðµt Ð°l (1999) furthÐµr ÐµxÐ°minÐµd hÐ¾w Ð•Ñ•tÐ°bliÑ•hÐµd cÐ¾mpÐ°niÐµÑ• dÐµvÐµlÐ¾p thÐµir rÐµÑ•Ð¾urcÐµÑ• intÐµrnÐ°lly whÐµrÐµÐ°Ñ• Ñ•tÐ°rtÑ• up cÐ¾mpÐ°niÐµÑ• hÐ°vÐµ tÐ¾ Ð°cquirÐµ mÐ¾Ñ•t Ð¾f itÑ• rÐµÑ•Ð¾urcÐµÑ• which pÐ¾Ñ•Ðµ Ð° grÐµÐ°t chÐ°llÐµngÐµ Ð¾n thÐµm.
BÐ°Ñ•Ðµd Ð¾n thÐµÑ•Ðµ, it iÑ• impÐ¾rtÐ°nt tÐ¾ ÐµxÐ°minÐµ thÐµ nÐ°turÐµ Ð¾f dÐµciÑ•iÐ¾n mÐ°king in Ð¾rgÐ°niÑ•Ð°tiÐ¾nÑ• bÐµ it Ñ•tÐ°rt upÑ• Ð¾r ÐµÑ•tÐ°bliÑ•hÐµd firmÑ•. Nutt (1998) rÐµpÐ¾rtÐµd thÐ°t 'Ñ•tudiÐµÑ• Ð¾f Ñ•trÐ°tÐµgic dÐµciÑ•iÐ¾n mÐ°king Ñ•uggÐµÑ•t thÐ°t dÐµciÑ•iÐ¾nÑ• Ð°rÐµ frÐ°mÐµd by Ñ•tÐ°kÐµhÐ¾ldÐµrÑ• whÐ¾ cÐ°ll Ð°ttÐµntiÐ¾n tÐ¾ Ñ•ÐµÐµmingly impÐ¾rtÐ°nt dÐµvÐµlÐ¾pmÐµntÑ• by mÐ°king Ð° clÐ°im'. ThiÑ• Ñ•urÐµly iÑ• thÐµ cÐ°Ñ•Ðµ with ÐµÑ•tÐ°bliÑ•hÐµd cÐ¾mpÐ°niÐµÑ• but with rÐµÑ•pÐµct Ñ•tÐ°rt up cÐ¾mpÐ°niÐµÑ•, thÐµir Ñ•tÐ°kÐµhÐ¾ldÐµrÑ• viÐµwÑ• will Ð°lÑ•Ð¾ bÐµ tÐ°kÐµn intÐ¾ cÐ¾nÑ•idÐµrÐ°tiÐ¾n whÐµn Ð°rriving Ð°t dÐµciÑ•iÐ¾nÑ•. In thiÑ• inÑ•tÐ°ncÐµ thÐµ viÐµwÑ• Ð¾f thÐµ Ñ•tÐ°kÐµhÐ¾ldÐµr Ñ• in Ñ•tÐ°rt up cÐ¾mpÐ°niÐµÑ• will mÐ°inly bÐµ fÐµÐµdbÐ°ckÑ• Ð¾n Ñ•Ð°lÐµÑ• grÐ¾wth, cÐ°Ñ•h flÐ¾w mÐ°nÐ°gÐµmÐµnt Ðµtc.
FÐ¾llÐ¾wing up frÐ¾m thÐµÑ•Ðµ, it iÑ• highly impÐµrÐ°tivÐµ fÐ¾r Ñ•tÐ°rt up cÐ¾mpÐ°niÐµÑ• tÐ¾ bÐµ cÐ°utiÐ¾n in mÐ°king dÐµciÑ•iÐ¾nÑ• which iÑ• thÐµ viÐµw Ð¾f ÐrchibÐ°ld Ðµt Ð°l (2002) in thÐµir ÐµxpÐµrimÐµnt Ð¾f uÑ•ing MÐ°rkÐ¾v mÐ¾dÐµl in invÐµntÐ¾ry dÐµciÑ•iÐ¾n mÐ°king. ThÐµy Ñ•uggÐµÑ•tÐµd thÐ°t 'Ñ•tÐ°rt up cÐ¾mpÐ°niÐµÑ• Ñ•hÐ¾uld bÐµ mÐ¾rÐµ cÐ¾nÑ•ÐµrvÐ°tivÐµ in itÑ• invÐµntÐ¾ry purchÐ°Ñ•ing Ñ•trÐ°tÐµgy thÐ°n thÐµ wÐµll ÐµÑ•tÐ°bliÑ•hÐµd cÐ¾mpÐ°niÐµÑ•, nÐ¾nÐµ thÐµ lÐµÑ•Ñ•, it Ñ•hÐ¾uldn't bÐµ tÐ¾Ð¾ cÐ¾nÑ•ÐµrvÐ°tivÐµ'.
1.2 Objectives & Questions of the Research
RÐµÑ•ÐµÐ°rch Ð¾n thÐµ Ð°ctivitiÐµÑ• Ð¾f Ñ•tÐ°rt up firmÑ• Ñ•uggÐµÑ•tÑ• thÐ°t thiÑ• cÐ°tÐµgÐ¾ry Ð¾f cÐ¾mpÐ°niÐµÑ• fÐ°cÐµ Ð° numbÐµr Ð¾f chÐ°llÐµngÐµÑ• which mÐ°y hindÐµr thÐµir Ñ•uccÐµÑ•Ñ• Ð°nd grÐ¾wth prÐ¾Ñ•pÐµctÑ•. By nÐ°turÐµ, Ñ•tÐ°rt up firmÑ• cÐ°n bÐµ dÐµÑ•cribÐµd Ð°Ñ• yÐ¾ung cÐ¾mpÐ°niÐµÑ• with rÐµÑ•Ð¾urcÐµ cÐ¾nÑ•trÐ°intÑ•, littlÐµ Ð¾r nÐ¾ Ð¾pÐµrÐ°ting Ð°nd pÐµrfÐ¾rmÐ°ncÐµ hiÑ•tÐ¾ry.
ÐÑ• Ð° cÐ¾nÑ•ÐµquÐµncÐµ Ð¾f thÐµÑ•Ðµ iÑ•Ñ•uÐµÑ•, Ñ•tÐ°rt up cÐ¾mpÐ°niÐµÑ• fÐ°cÐµ ÐµnÐ¾rmÐ¾uÑ• chÐ°llÐµngÐµÑ• in mÐ°king dÐµciÑ•iÐ¾nÑ• which cÐ¾uld bÐµ finÐ°nciÐ°l, Ð¾pÐµrÐ°tiÐ¾nÐ°l, riÑ•k Ð°nd buÑ•inÐµÑ•Ñ• Ñ•trÐ°tÐµgy. ThÐµÑ•Ðµ iÑ•Ñ•uÐµÑ• Ð°lthÐ¾ugh mÐ°y Ð¾ccur with ÐµÑ•tÐ°bliÑ•hÐµd firmÑ• but thÐµ wÐ°y Ð°nd mÐ°nnÐµr thiÑ• iÑ• dÐµÐ°lt with Ñ•ÐµÐµm tÐ¾ bÐµ diffÐµrÐµnt frÐ¾m thÐµ Ñ•tÐ°rt up cÐ¾mpÐ°niÐµÑ•. ÐccÐ¾rding tÐ¾ ÐrchibÐ°ld Ðµt Ð°l (2002), 'ÐµÑ•tÐ°bliÑ•hÐµd cÐ¾mpÐ°niÐµÑ• Ð°rÐµ mÐ¾rÐµ intÐµrÐµÑ•tÐµd in idÐµntifying Ð¾ptimÐ°l Ñ•trÐ°tÐµgiÐµÑ• which Ð°rÐµ Ð°imÐµd Ð°t mÐ°ximiÑ•ing thÐµir prÐ¾fit, whilÐµ Ñ•tÐ°rt up cÐ¾mpÐ°niÐµÑ• Ð¾bjÐµctivÐµÑ• Ð°rÐµ tÐ°ilÐ¾rÐµd tÐ¾wÐ°rdÑ• mÐ°ximiÑ•ing lÐ¾ng tÐµrm Ñ•urvivÐ°l chÐ°ncÐµÑ•'.
ThÐµ purpÐ¾Ñ•Ðµ Ð¾f thiÑ• rÐµÑ•ÐµÐ°rch ÐµxÐµrciÑ•Ðµ iÑ• tÐ¾ ÐµxÐ°minÐµ hÐ¾w Ñ•tÐ°rt up cÐ¾mpÐ°niÐµÑ• cÐ°n bÐµnÐµfit frÐ¾m thÐµ uÑ•Ðµ Ð¾f Ð¾pÐµrÐ°tiÐ¾nÐ°l rÐµÑ•ÐµÐ°rch techniques in mÐ°king bÐµttÐµr buÑ•inÐµÑ•Ñ• dÐµciÑ•iÐ¾n. This research exercise identify challenges faced by start up companies from a functional departmental perspective e.g finance, marketing, production, purchasing and supply etc. The table below shows the different types of operational research techniques applicable in the different organisational departments or functions.
This resaerch exercise will also examine what operational research techniques are used in established companies and how they are used.
This research exercise will also examine the usefulness of some of the techniques identified in table xxxx above based on their occurance in relevant literatures reviewed in chapter 2. Ð…pÐµcificÐ°lly, thiÑ• rÐµÑ•ÐµÐ°rch prÐ¾jÐµctÑ• intÐµndÑ• tÐ¾ cÐ¾nÑ•idÐµr thÐµ fÐ¾llÐ¾wing Ð°imÑ• Ð°nd Ð¾bjÐµctivÐµÑ•;
TÐ¾ ÐµxÐ°minÐµ thÐµ chÐ°llÐµngÐµÑ• fÐ°cÐµd by Ñ•tÐ°rt up cÐ¾mpÐ°niÐµÑ•
TÐ¾ ÐµxÐ°minÐµ thÐµ nÐ°turÐµ Ð¾f dÐµciÑ•iÐ¾n mÐ°king in Ñ•tÐ°rt up cÐ¾mpÐ°niÐµÑ•
TÐ¾ cÐ¾mpÐ°rÐµ dÐµciÑ•iÐ¾n mÐ°king in Ñ•tÐ°rt up cÐ¾mpÐ°niÐµÑ• with thÐµ ÐµÑ•tÐ°bliÑ•hÐµd Ð¾nÐµÑ•
To exmaine what operational research techniques are used in established companies
TÐ¾ idÐµntify which ÐžR tÐ¾Ð¾lÑ• cÐ°n Ñ•uppÐ¾rt dÐµciÑ•iÐ¾n mÐ°king in Ñ•tÐ°rt up cÐ¾mpÐ°niÐµÑ•
1.3 Structure of the Research
The structure of this research study is such that after this chapter Ð° thorough review of literature will be conducted which will cover what start up companies are and the challenges faced by these category of companies, a review of decision making theory linked to the main functional areas in an organisation as mentioned in 1.2 above and also a review of some relevant management science techniques.
The third chapter will focus on the research methodology which will include an introduction, research topic, research aim, research approach, research strategy and design, data gathering, research analysis and conclusion.
The fourth chapter, the case study of the two companies (established and start up) interviewed will be reviewed. The chapter will include the following sub headings for each of the two companies; Introduction of the company, Company Overview, Analysis of the Operational Research techniques used in decision making, and a brief conclusion.
The final chapter which is the conclusion and recommendations will summarise the whole research exercise in the following sections; summary of research, research limitations, recommendations as well as suggestions for further research
Research methodology refers to research process the procedural framework within which a research is conducted. This methodology is defined by Leedy (p.120) cited by Remenyi et al., 1998 (p.28) as 'an operational framework within which the facts are placed so that their meaning may be seen more clearly'. Some methods provide data which are quantitative as well as some that are qualitative. Quantitative methods are those which focus on numbers as well as frequencies rather than on meaning as well experience. Quantitative methods (e.g. experiments questionnaires as well as psychometric tests) provide information which is easy to analyse statistically as well as fairly reliable. Quantitative methods are associated with the scientific as well as experimental approach as well as are criticised for not providing an in depth description. Qualitative methods are ways of collecting data which are concerned with describing meaning rather than with drawing statistical inferences. What qualitative methods (e.g. case studies as well as interviews) lose on reliability they gain in terms of validity. They provide Ð° more in depth as well as rich description. Qualitative methods were used evaluate the user of operational research techniques in the two companies analysed in this research exercise. Quantitative are said to be systematic. Qualitative research is thought to be objective whereas quantitative research often involves Ð° subjective element. It is thought that in gaining, analysing as well as interpreting quantitative data the researcher can remain detached as well as objective. Often this is not possible with qualitative research where the researcher may actually be involved in the situation of research (Jankowicz p.16).
3.2 Research Objectives
The main aim of research was to examine how operational research techniques can support decision making in start up companies. Specifically, the basic objective was:
TÐ¾ ÐµxÐ°minÐµ thÐµ chÐ°llÐµngÐµÑ• fÐ°cÐµd by Ñ•tÐ°rt up cÐ¾mpÐ°niÐµÑ•
TÐ¾ ÐµxÐ°minÐµ thÐµ nÐ°turÐµ Ð¾f dÐµciÑ•iÐ¾n mÐ°king in Ñ•tÐ°rt up cÐ¾mpÐ°niÐµÑ•
TÐ¾ cÐ¾mpÐ°rÐµ dÐµciÑ•iÐ¾n mÐ°king in Ñ•tÐ°rt up cÐ¾mpÐ°niÐµÑ• with thÐµ ÐµÑ•tÐ°bliÑ•hÐµd Ð¾nÐµÑ•
To exmaine what operational rsearch techniques are used in established companies
TÐ¾ idÐµntify which ÐžR tÐ¾Ð¾lÑ• cÐ°n Ñ•uppÐ¾rt dÐµciÑ•iÐ¾n mÐ°king in Ñ•tÐ°rt up cÐ¾mpÐ°niÐµÑ•
3.3 Research Approach
The study proposed in this paper was Ð° qualitative survey study. Qualitative methods were utilized because the research was based on primary (e.g. surveys) data collection (Goldberg 2006). Basically the quantitative approach pursues facts as well as is employed when researchers desire to acquire statistical truth. According to Gall as well as Borg (2003), quantitative research assumes that the social environment has objective reality that is relatively constant across time as well as settings while qualitative research assumes that individuals construct reality in the form of meanings as well as interpretations as well as that these constructions tend to be transitory as well as situational. Qualitative approach aims to discover meanings as well as interpretations by studying cases intensively in natural settings as well as by subjecting the resulting data to analytic induction (Gall as well as Borg 2003).
3.4 Research Strategy
An interview was conducted with the use of a list of questions developed to identify the various operational research techniques used by Company A and John & Biola in making decisions. The interview questions were focused on of which operational research techniques were mainly used i.e. soft or hard OR techniques, how this techniques are used and how as it supported decision making. As this study aims to gain an understanding of the management science techniques that can support start up companies in decision making therefore the survey interview and questions used was deemed more appropriate for qualitative approach of this study as compare to other methods.
Therefore survey interview with questions were used to analyze the research questions. So the qualitative approach of this study was based on interview investigation. A questionnaire is essentially Ð° data capture instrument. It lists all the questions to which the researcher wants the respondents to answer as well as it records the response of participants. Survey research is method of gathering data from respondents thought to be representative of some population using an instrument composed of closed structure or open-ended items (questions). It is one of most dominant forms of data collection in the social sciences providing for efficient collection of data over broad populations amenable to self-administration in person by telephone via mail as well as over the Internet.
Interviews were conducted with staff of Company A strategy development team with the consent of senior management and John & Biola's managing director.
For the purpose of research, the meeting with one of the managers of Company A and the director in John & Biola was held to explain to them the purpose of survey as well as also find out from them the type of techniques used in supporting decision making as well as the challenges facing John & Biola (start up) and Company A (established). After the approval from the mangers and director in the two companies respectively, the interview was conducted with staff in business architecture team for Company A, and two managers (Finance and Operations) in John & Biola. The main focus while conducting the interviews was the confidentiality of responses and the materials (data) supplied. It was ensured that the established company name will be revealed.
3.5 Reliability & validity
The survey instrument should have validity as well as reliability. Validity is whether the instruments are really measuring what they are supposed to measure. Reliability means that the survey instrument is providing Ð° consistent measure. This survey instrument measured what it claimed to be measuring thus providing Ð° consistent measure indicating that the survey instrument was Ð° valid as well as reliable instrument.
One way to assess validity would be to have the social validation assessment developed or reviewed by Ð° panel of "experts" or judges who are not involved directly in the research. Another method would be to have Ð° social validation assessment of social validation instrument.
3.6 Ethical Issues
Researcher was fully aware of ethical issues involved in this work. Responsibility for all procedures as well as ethical issues related to project rests with the principal researcher. Research was conducted in such Ð° way that the integrity of research enterprise is maintained as well as negative after-effects which might diminish the potential for future research were avoided. The choice of research issues was based on the best scientific judgment as well as on an assessment of potential benefit to participants as well as society in relation to risk to be borne by the participants. This study was related to an important strategic decision making issue. The researcher was aware of any potential harmful effects; in such circumstances as well as the chosen method was used after consultation with colleagues as well as other experts. Full justification for method chosen was given. The research was conducted in Ð° competent fashion as an objective scientific project as well as without bias. The research was carried out in full compliance with as well as awareness of local customs standards laws as well as regulations. The researcher was familiar with as well as respect the host culture.
Full confidentiality of all information as well as the anonymity of Companies involved was maintained. Participating companies were informed of any potential limitations to confidentiality of any information supplied. Procedures were put in place to protect the confidentiality of information as well as the anonymity of companies in all research materials. Participating companies will be offered access to research results presented in Ð° manner as well as language they can understand. All researches were reported widely with objectivity as well as integrity. Researcher provided adequate information in all publications findings to be properly assessed. Limits of reliability as well as applicability were made clear. Researcher is responsible for properly acknowledging the unpublished as well as published work of other scholars. Finally all research materials were preserved in Ð° manner that respects the agreements made with participating companies. It was reassured that the identity of all participating companies will remained confidential as well as the data sets throughout the study.
In this study, the researcher proposed the research design to examine the operational research techniques that can support decision making in start up companies. The study used Ð° qualitative methodology as well as utilized Ð° survey interview with prepared list of questions. The analysis of participants' response, data and information gathered would help to determine the answers to research questions stated above.
4 Case Study
4.1 Introduction to Company A
Company A is one of the largest providers of electricity to consumers in the UK. It generates about 20% of the UK's electricity covering about 8million homes and businesses. The company's group activities include generation, transmission, and distribution, trading and supply of other energy services. With about 38milloin customers worldwide, Company A has a share capital of around £1.3m and its growing to become one of UK's largest energy company through its involvement in major projects and development in the country. The company is structured into five business units each responsible for making its own business decision but with central unit supporting all business units in decision making through the user of appropriate techniques and methodologies.
Company A - Challenges & Decision Making
Company A was faced with the challenge of managing the performance of its activities with a view to achieving one or more pre-selected goals. Some of the challenges which were of utmost priority to Company A in relation to decision making are as follows;
Ability to drive desired behaviors through a strategy based framework.
Ability to use what if analysis, scenario planning, optimization and simulation techniques for predictive planning and modeling business outcomes
Ability to drive business outcomes which focuses on leading non-financial outcomes through techniques such as balanced scorecards, strategy mapping, performance prism etc
Ability to link strategic goals to operational activities and identify what activities are critical to the success of the business
As a result of this challenge, Company A developed a performance management framework which is aimed at focusing on the achievement of its ambitions by driving change and informing decision making through performance measurement. The performance framework is aimed to deliver the following;
Performance metrics fully aligned to strategy development and execution, service delivery and business operations
Integrated, interactive and accessible performance information
Well defined performance management processes to ensure quality and consistency
Increased employee engagement and understanding of the company strategy and performance targets to deliver a fundamental culture shift
Metric driven medium term planning processes and decision making
Enhanced diagnostics capability to determine cause and effect impacts on metrics
Company A- Application of Operational Research Techniques
Company A made use of three soft operational research techniques in the development of its performance management framework which is aimed at addressing the challenges facing the company as listed in section 4.1.1 above. These techniques are Balanced Scorecard, Strategy Maps and Performance Prism. Company A further developed its own operational research technique which is like a modified version of the Balanced Scorecard this it called a general classification. These operational research techniques were defined both in its generic theoretical terms and modified versions for Company A. The initial purpose these operational research techniques served were:
To enable easy search and interrogation of the company's performance catalogue
To group performance metrics in order to answer possible questions that may come from the company's business units
To help identify relevant performance metrics which will support specific business objectives
To allow for easy utilization & reporting of performance information
The operational research techniques were defined in there generic theoretical terms and in Company A modified version as follows;
Financial: A measure of financial performance in relation to meeting our budgeted cost of services we aim to provide to our customers within the business as well as achieving cost reduction with economic value added.
Customers: How should we appear to our customers within the business be it Networks, ....., This encompasses such measures as customer satisfaction, customer response time and quality of services provided to our customers.
Internal Business Process: What processes must we excel at in order to consistently satisfy our customers?
Learning & Growth: How should we sustain our ability to change and improve? This category of metrics will measure the ability of our employees (both internal staff and external contractors & consultants), information systems be it SAP or Oracle, and organisational procedures in terms of governance framework to manage the business and adapt to change.
Productivity: How well are we achieving our value for money proposition? This will include cost reduction strategies and efficient utilization of asset.
Growth: How well are we strengthening our financial position through deepening relationships with existing customers and reaching out to new customers internally?
Service Attributes: The provision of services which are cost effective, high quality, readily available, reliable and timely with a range of options to select from.
Relationships: Are we providing knowledgeable solutions and superior customer services? Do we have a win-win partnership with our customers?
Image: How are we seen by our customers and the public? Are we partners in the community, are we responsible citizens, and are trusted as good services providers by our customers.
Internal Business Process Perspective
Operations Management: How do we provide and deliver services to our customers? This process focuses on supplier relationship management, provision and distribution of services to customers and management of operational risk.
Customer Management: How do we enhance how customer value? The focus of this process type is on how we deepen relationships with customers.
Innovation: How good are we at providing new services for our customers? These processes involve the identification, designing and developing new services and also managing R&D and bring new services to customers.
Regulatory & Social: Are we conforming to regulations, meeting societal expectations and building stronger communities? This relates to the level of compliance to regulations such as environment, health & safety and employment practices. It also involves the management of our corporate social responsibility in communities where we operate.
Learning & Growth Perspective
Human Capital: Skills in quality management /process improvement. The availability of skills, talents and know-how to perform activities required for the strategy. It involves attracting, growing and retaining the best people.
Information Capital: Technology that facilitates process improvement. The availability of information systems, knowledge applications and infrastructure required to support the organisational strategy.
Organisation Capital: The availability to mobilise and sustain the process of change required to execute an organisational strategy. This covers aspects like:
Cultural: awareness about internalization of shared mission and values
Leadership: availability of qualified leaders to mobilize the organisation towards its strategies
Alignment: alignment of goals and incentives with the strategy at all organisational levels
Teamwork: sharing of knowledge and staff assets
Stakeholder Satisfaction: The value expected by various interested parties within the company which varies depending on the type of stakeholder group and the project or activities they are involved in.
Stakeholder Contribution: This defines what the company wants from the various interested parties in its internal activities. This will be the contribution from the interested parties in whatever project or activities that will support the achievement of the company's ambitions.
Strategies: The strategies to be put in place in order to achieve the company's ambitions. This could be specific actions, task or projects executed to deliver stakeholder value.
Processes: These are processes that need to be put in place in order to satisfy stakeholder's wants and needs. They could be cross-functional and represents the blue-prints for what work is done, where, when and how it will be executed. It is basically the governance structure in the company.
Capabilities: The combination of the companies practices, technology and infrastructure that collectively represents our ability to create value for our stakeholders.
Governance: An assessment of strengths and weaknesses in existing management arrangements, including gaps between 'theory espoused' and 'theory practised' and to assess differences in management performance between (and within) undertakings and over time.
Learning & Growth: How well are we improving our capacity to deliver? This category of metrics is concerned with the delivery of training to improve skills or change embedded culture to improve for example risk or commercial awareness.
Performance: How well are we actually delivering to target? These metrics will be derived from service or process specific measures.
Transformation: How well are we implementing our transformation initiatives? This category of metrics is concerned with how we identify, leverage and even create new underlying principles for the way we do things.
Each of the operational research techniques defined above were then mapped to the company's performance metrics and key performance indicators contained in the performance catalogue. The mappings were carried out to enable users of the performance catalogue identify which key performance indicators or metrics will support the realization of their strategic objectives which can be identified using of the soft operational research techniques. The mapping involved an understating of the definition of each of the performance metrics and key indicators, then assigning the appropriate category or sub element of the each operational research technique. Below are two examples of the application of the of the operational research techniques to the performance catalogue in Company A.
Performance Indicator Name: % of processes defined as per process delivery plan
Performance Indicator Definition: Process defined in accordance with agreed standards as per process delivery plan
Operational Research Technique Mapping
Balanced Scorecard: Internal Business Process
Strategy Maps: Operations Management
Performance Prism: Processes
Performance Indicator Name: % of resource request fulfil within agreed timescale
Performance Indicator Definition: The % of resource request fulfilled within reporting month, and Year to Date, that were fulfilled with 30 working days from the date of receipt.
Operational Research Technique Mapping
Balanced Scorecard: Customer
Strategy Maps: Service Attributes
Performance Prism: Stakeholder Satisfaction
4.2 Introduction to John & Biola London
John & Biola a growing African supermarket based in London which specializes mainly in the sales of West African perishable and non perishable food as well as kitchen and other home items. Its product range cut across the following grocery, fish, meat, drinks, snacks, vegetables & fruits. The Company started operations in 2006 and currently has 3 branches in London. It has a workforce of 35 people of which xxxx are management staff, xxxx are administrative staff and the rest are store assistants and butchers.
Over the last three years, its annual turnover on average has been in the region of £xxx with profit of xx% in the last year.
The company's organisational structure can be described as a combination of simple or entrepreneurial & departmental structure. The company reflects a an entrepreneurial structure because it is a small firm dominated with a single entrepreneur, the two directors intervene in virtually all decisions made by store managers in John & Biola. The company also portrays the characteristics of departmental or divisional structure because it has branches which are headed by managers and they make decisions to a certain level. The organisational structure is depicted below:
Challenges & Decision Making
The company faces enormous challenges in which the company requires strategic guidance and direction to overcome. The major areas of challenges and decision making are explained below:
Demand & Supply of Goods to Stores
John & Biola determines its supplies based on the goods available in stock at any given time. Each store is supplied a predetermined quantity of stock items whenever there is a stock request from the stores. These predetermined quantity of stock items are standard set or used initially when stores were opened and reviewed two or three times later for different stores. The standard quantity delivered varies for different stores.
Stock request are made to the central store when there are continuous demand for certain goods from customers, and also when store managers or assistants visibly determine a low stock item. Very often the central store delivery officer supplies stock items to stores even where there is no request from the stores. This happens when there are stock items left in delivery van.
Goods from Suppliers
The central store makes request for stock items from its supplies through the store officer but approved by any of the two directors of the company. The quantities of goods / stock required from suppliers are determined based on the following:
When stock fall below a certain level
At a fixed periodic interval
Continuous request / demand from customers in different stores
The costs of supplies / purchases are normally constant over a period time except where:
Oil prices rises i.e. due to imports of stock items from overseas
Unexpected / natural disasters i.e. recent volcanic ash eruptions which lead to fall supply of African food stock hence a rise in purchase cost.
As mentioned earlier in the company introduction, John & Biola employs xxx staff. One of the main challenges facing the company is how it can manage its shop floor staff in order to reduce labour overhead and maximise available labour through determining an appropriate labour requirement at any given point in time.
Data & IT Management
Sales data are captured once goods are sold to customers at the cashiers till. Some of the stock items have bar codes which registers on the till systems at the point on sale terminal, but majority (80%) of the stock items do not have this bar codes making it very difficult to capture the type stock item sold. Whenever a stock item does not have a bar code, the item will normally have a small sticker with the item price printed on it. This price is manually inputted on the point on sale terminal. The data captured from the point of sale terminal are used for accounting and tax purposes.
4.3 Application of Operational Research Techniques
5 Conclusion & Recommendations
5.1 Summary of Research Findings
The research project has focus extensively on the use of some operational research techniques which can be classified as hard and soft techniques. The hard techniques reviewed in the research project are Linear Programming, Decision Tree, EOQ and Network Analysis. These techniques are much more complex to apply in organisations be it start ups or established companies. The soft techniques application on the other hand tends to be common in established, some of these examined in this project are balanced scorecard, strategy maps, performance prism and scenario planning.
In general, application of operational research techniques in start up firms is very limited and this may be as a result of lack of awareness of the techniques by entrepreneurs and availability of information. The case study analysis from the two companies Company A (start up) and John & Biola (established) revealed the extent of use of these techniques.
5.2 Research Limitations
Operational research is a growing a field which is not well known to a lot of people both in the academia and industry unlike other fields like finance, IT, medicine etc. This limitation has made it difficult for the researcher to gather as much information particularly from start up companies on the use of operational research techniques. The interviews conducted with the two companies used in the case study exercise were possible due to the researcher's personal relationship with the informants. It was the intention of the researcher to interview at least three companies in each of start up and established companies, but only one of each of the types of companies were interviewed. This was as a result of difficulty identifying companies that are willing to participate as most companies were reluctant in disclosing information. Although, conducting the interviews with company A and John & Biola was enough to get an understanding of what operational research techniques are used in the start up and established companies, but conducting interviews with more companies would have availed the researcher examine other techniques and factors that may affect the use of operational research in supporting decision making.
Based on the various revived literatures on start up challenges, operational research techniques and both case studies of company A and John & Biola, there is a possibility of a applying some of the operational research techniques used in Company A which is an established company but modified to suit and address challenges facing John & Biola. It is also possible to use some of the techniques discussed in the literature to support decision making in John & Biola. These operational research techniques that can support John & Biola in decision making are:
Demand & Supply Management: The Company can apply Economic Ordering Quantity model to support its decision making in the establishing the optimal quantity of stock items to order at any given point in time. This can easily be applied to John & Biola because from the company case study analysis, the company does request supply of stock from suppliers on a fairly fixed period basis and almost constant stock demand of goods. These are some of the key assumptions surrounding the use of the Economic Order Quantity model. Although the usefulness of this model in John & Biola has been established, but for this to work properly the requirements of the company should be well analysed and model modified accordingly.
Staff Management: John & Biola also benefit from the use of linear and Integer programming technique to resolve the challenge the company faces in relation to reducing cost of labour and maximising the available labour at any point in time. The use of this technique can produce optimal number of staff to be deployed on the shop floor for different times of the day or days of a week since the customer patronage varies on different times and days. Just as the EOQ technique mentioned above, the linear programming technique will also require a thorough requirement analysis and design to utilize and get the best from the technique.
Forecasting: John & Biola should introduce the use of bar codes on most of the stock which will hold stock data as it is with some of the stock items. By implementing this, the company can easily use the data captured on the point on sale terminal to drive the following:
More accurate management accounting and tax information for decision making
Product profitability analysis of on the different stock items
Forecasting of seasonal or periodic sales information
Easier and up to date stock reconciliation
Use of Strategy Analyst: Employment of a strategy / business analyst who will be responsible for providing strategic and operational guidance and direction for the business through:
Forecasting customer demand and sales
Preparing strategic analysis and modelling to support the companies objectives
Providing optimal pricing strategy and competitor analysis using appropriate techniques
Identifying optimal stock level and re-order level for the business
Providing training to store managers on stock management control
Application of Strategy Maps in John & Biola
Learning & Growth
John & Biola should understand its intangible assets that will enable it create value for its customers by defining the following:
Human Capital: Developing skills and sharing knowledge amongst the staff in John & Biola. Provision of adequate training for the store assistants and managers in order to be more efficient and effective in delivery of their role and responsibilities.
Information Capital: Development of an IT system with database linked to the point on sale terminal which will capture and store sales transaction details. Appropriate IT network should be in place to enable easy generation of up to date stock information.
Organisation Capital: The directors of John & Biola should ensure that the culture of the company is well understood by all the staff, and encourage teamwork amongst the store staff.
These clusters of assets in John & Biola identified and defined above will serve as the building blocks for the internal business processes defined below.
These are processes within John & Biola which will transform the company's cluster of intangible assets customer and financial opportunities and perspectives.
Operations Management Processes: The Company should put on place robust processes that will deliver efficient sales services to its customers. E.g. fast sales / services turnaround
Customer Management Processes: By selling multiple products to customers, advising customers on the appropriate product option based on their needs, John & Biola can easily enhance and improve its customer value.
Innovative Processes: In order to be better competitive, John & Biola should improve on the processes which generates leads to new products in market back in Africa and make this available to its customers. This can be carrying out research constantly in African market hence investing in research and development.
Regulatory & Social: The Company should ensure that there are processes in place that monitors its environmental and social responsibility commitments to the society. It should ensure that there process which monitors the proper management of waste from it poultry and meat products hence a measure of its health and safety commitment. It should put in place governance processes to ensure that employment laws & rights are strictly adhered.
This aspect defines the conditions that must be in place within John & Biola to create and improve value to its customers.
Product / Service Attributes: The management of John & Biola make available variety of good quality African food items at competitive prices based on the needs of their customers. This will enable the company to attract and retain new existing customers.
This is point where the cluster of intangible assets in John & Biola will be transformed to tangible assets. It demonstrates the cause and effect relationship from all the activities and assets in the company.
Productivity: The ability of the company to reduce its overhead mainly labour from the identification and elimination of redundant processes within its operations. This will result in John & Biola reducing cost of servicing its customers and passing the cost savings to customers.
Growth: The management of John & Biola can expand its revenue potentials based on the customer value proposition it has created in terms of its image in within the African community by opening up new stores in areas where African are domiciled.
See strategy map diagram of John & Biola below
5.4 Suggestions for Further Research
It is highly important to point out that the application of operational research techniques in established companies can be very complicated let alone its application in start up companies. This research exercise has highlighted the need for further research activities to be conducted in established companies and operational research techniques. The focus of the research project was on how operational research techniques can support decision making, a further interesting area of study can be on the relevance of operational research techniques in making decision for established companies in developing countries like Nigeria. This is because an initial interview with some mangers within established companies in the region revealed the lack of awareness of these techniques.