Lakota Group: Operations Management
Published: November 12, 2011
This hub examines the operations of a fictitious company the author named the Lakota group to present some of the fundamentals of operations management organizational strategy. The hub is a recreation of a term-paper written by the author to fulfill the requirements of a graduate-level course in business administration. The subject company is fictitious but based on the author's own experience.
From the firm’s inception almost 30 years ago, the Lakota Group continually strives to align the organization’s offerings with the demands of the local economy and the IT industry. Beginning as a computer reseller in the early 1980s, the company transitioned into a Value Added Retailer (VAR) in the 1990s and realigned the organizational strategy again in 2003 to fit the role of a system’s integrator. As a systems integrator, the Lakota Group acts as the IT department for a collective of client organizations.
This hub examines the operations management and process strategy of the Lakota Group. This examination includes the following components:
- a detailed description of the firm’s service offerings
- the service design strategy
- how departments coordinate functions to accomplish the strategy
- the employee process strategies
- the role of IT in fulfilling the strategy
As implied above, the direction of the Lakota Group has continually evolved over the past few decades. Some services, such as Personal Computer (PC) support, remain as legacy offerings to fulfill customer expectations. Other offerings, such as Backup and Disaster Recovery (BDR) solutions are relatively new offerings brought about by market demand.
PC and printer support
Providing support for PCs and printers has remained a staple offering of the company since inception. Nearly every organization maintains an operational inventory of PCs and printers that occasionally require service. Providing this service, in-house or on-site, has permitted the company to build customer loyalty and name recognition.
Phone System design, implementation, and support
The Private Broadcast Exchange (PBX) systems of many organizations are nearing end of life and need replacement. The Lakota Group formed an alliance with a telecommunications manufacturer to replace legacy phone systems with expandable Voice over IP (VoIP) and IP Telephony systems.
Hosted phone systems
Many organizations require phone systems but do not wish to manage the involved equipment or provide the real estate necessary to house the systems. Hosted phone systems provide a solution for those companies and the Lakota Group formed an alliance with another organization to provide those services.
Network Design, implementation and support
Stand-alone computers are more and more becoming a thing of the past and companies continue to build and upgrade computer networks. The Lakota Group will evaluate a customer’s needs, recommend and design solutions. Upon approval, the company will implement and support those solutions.
The rise of the Internet as a business tool created threats along with solutions. The need of companies to secure their information resources from outside threats provided the opportunity for the Lakota Group to provide security solutions. These solutions range from Intrusion Detection Systems (IDS) and Intrusion Prevention Systems (IPS) to firewalls and Virtual Private Network (VPN) solutions.
Backup / Disaster Recovery (BDR) and Business Continuity Planning (BCP)
The awareness brought about by disasters such as Hurricane Katrina and the terrorist attacks on 9/11 have given rise to the opportunity to provide BDR and BCP services to organizations. The Lakota Group assists organizations with the planning, design, implementation, and maintenance of those systems.
Providing a total solution for an organization’s IT needs is the most lucrative offering of the Lakota Group. Clients who contract for managed services receive support surpassed by no other organization. The Lakota Group takes a pro-active approach by remotely monitoring the PCs, printers, and network devices of those organizations and mitigating problems before the client experiences a large negative impact.
Service Design Strategy
As the previous sections demonstrated, continual change and locating new services to add to the organizational portfolio is a major portion of the Lakota Group's organizational strategy. The bottom fell out of the PC market, where profit margin is concerned, early in the organization’s history. Selling only hardware was no longer profitable enough to ensure an organization's continued survival so the company began searching for additional revenue streams. A strategy was needed to set the
company apart from the competition.
When you cut away the jargon, that's what strategy is all about: how you are going to do better by being different. The logic is straightforward: "When all companies offer the same products and services to the same customers by performing the same kinds of activities, no company will prosper" (Magretta, 2002, p.7). Focusing operations in the small to medium sized business market combined with Quality Function Deployment (QFD), provided the company a method to meet the strategic goals.
Clients who leverage managed service agreements receive regular visits from their systems engineers to help determine the client’s needs and desires. Quarterly customer satisfaction meetings also help determine the level of customer satisfaction and permit the Lakota Group to take corrective actions before annoyances become issues. This level of ensuring customer satisfaction is not actively pursued by the competitors in the region.
Forming strategic alliances with providers who specialize in services that clients identify as high interest areas enabled the organization to branch into offering services that would otherwise be out of reach. These alliances include the following:
- ShoreTel, Inc. to provide IP Telephony
- Star-to-Star to provide hosted VoIP services
- Zenith Infosys to provide local/online BDR solutions
Customers participated in developing the requirements for the solutions and those requirements
helped locate the organizations with which to form the alliances.
Designing and delivering service offerings require the cooperation and coordination of organizational resources. These activities do not occur in a vacuum so the interactions between departments can be of major importance.
Documentation received from the IT department and the results of customer satisfaction meetings form the basis for the services offered by the marketing department. Lead generation is a responsibility of all organizational employees so communication determines what as well as who. In other words the marketing department receives direction covering what to market from the IT department who provides the services and all employees develop marketing leads.
Procuring replacement parts on a just in time basis for current jobs and systems to maintain a critical spares inventory is a major function of the financial resources. Input from the technicians and engineers in the IT department form the basis for generating purchase orders. Some services use leased equipment or outside services paid over time. Charges for these leases and services are billed to the Lakota Group and the finance department then bills customers for the required amounts.
The IT department of the Lakota Group fills a dual function: support the internal operations of the organization and provide the services that the organization markets. The engineers and technicians who comprise the IT department adhere to strict documentation guidelines. This documentation is then used by finance to place and reconcile purchase orders and generate customer invoices.
Service organizations often rely on a strategy of process focus, as is the case with the Lakota Group. A process focused organizational strategy involves high variety and low volume. The scope of services dictate high variety because no one can predict what types of services may be needed from one day to the next. Low volume, although not particularly desirable, is a result of the variety; engineers and technicians can perform a limited number of specific tasks per day so repetition of tasks is not a frequent occurrence neither is the utilization of the tools required for those tasks.
The mediating technology model provides the basis for organizational strategy and provides for a great deal of functional independence among employees. Employees at all levels are free to make decisions involving customer satisfaction issues. Engineers and technicians can direct purchasing to order spares without approval and the finance department can waive fees and lower labor charges to settle disputes. Communication across departmental lines is required and encouraged to meet the business goals of the organization.
The Role of IT
For a service organization, like the Lakota Group, IT is both part of the product as well as support for the organization providing the product. Maintaining the internal systems that support marketing and finance occupy idle portions of engineering time. These activities, however, add little to the bottom line of the organization. Client’ needs are the priority concern and internal staff adapt to the difficulties imposed when internal needs get pushed back.
The recent acquisition of a Customer Relationship Management package is in the implementation stage and the implementation processes occur as engineers’ time permits. Effective communication between organizational entities permits this type of sporadic activity to occur without adversely affecting company operations. Systems engineers monitor client systems, report anomalies as they occur and take corrective action when required.
The managed services model permits clients to budget their IT expenditures over the term of the contract. This type of arrangement provides an advantage over the competition operating on a time and material basis. Many organizations prefer the ability to predict the IT expenditures and this ability leads to an exclusion of derogatory surprises.
Many of the current service offerings of the organization are the result of alliances with specialized manufacturers or service providers. In these cases, the IT department provides the engineering and implementation services for the provider and the provider receives contracts for monthly service. The Lakota Group receives the engineering charges for the implementation and a percentage of the recurring revenue streams.
The Lakota Group, as a service organization, employs an organizational strategy that differs from most product oriented firms. An emphasis on customer satisfaction sets the firm apart from the competition as does more recent service offerings like managed service accounts. These offerings were developed in concert with customers who participate in the design of services.
Some services were designed for deliverance through alliances with other firms. For instance, the hosted phone service was designed to compete with local cable providers who now offer hosted phone services using their IP networks. The Lacota Group could not compete with the cable providers with a single PBX solution so a hosted phone service provider was located who could effectively compete with the cable provider services.
The Lakota Group receives the installation fee for design and implementation of the service and a residual revenue stream from the monthly charges for marketing the services. Empowering employees at all levels with the ability to make strategic decisions is a mark of the mediating technology model and is the business strategy model employed by the organization. Effective organizational management and process strategy are achieved using a mix of open communication and employee trust.
Magretta, J. (2002). Why business models matter. Harvard Business Review. 80(5).