ENT 601 Week 5 Blog Assignment – Getting the Scope of the Business Right

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What is the essential core for sustaining business growth strategies with all the touch points that your customers can find and purchase your products/services? Customers will not buy your product unless it met their needs and affordable. At the same time, the challenges for the company are to what methods in use to fit in with demand, low cost, and time. Which activities required to design, produce, sell, and distribute your product should your company do internally? Will you build the product internally, hire a company to build it or buy a company that already has the basis of the product in place? This requires much more research and time for testing new markets and collecting customers’ feedback.

“Decision about what to in-source and what to procure from suppliers and partners have a powerful impact on a new-growth venture’s chance for success”, said the authors. As in the case of IBM, its’s decision in the early 1980s, to outsource the micro-processor for its PC business to Intel, and its operation system to Microsoft. IBM put into business the two companies that subsequently capture most of the profit in the industry.

A brilliant entrepreneur’s decision that his product fit perfectly the theory of “being in the right place at the right time”. William Levitt, a co-founder of Levitt & Sons, joined forces with his father, Abraham and brother, Alfred to form Levitt & Sons in 1929. Perfected the assembly-line approach to housing construction which followed high demand housing at that time. The Levitt’s purchased 1,000 acres of land on Long Island, 25 miles east of Manhattan and embarked on a bold venture to build 17,000 homes. They broke down the construction process into 27 separated tasks and assigned each task to a group of workers who would go from house to house repeating their specific task at each site. When the process was in high gear, houses were completed at the rate of 36 per day and during the first weekend, they sold more than 300 houses. To keep down lumber costs, the Levitt’s bought their own forests and built a sawmill in Oregon. They purchased appliances directly from the manufactures, cutting out the distributor’s markup. They even made their own nails. The Levitt’s’ methods kept costs so low that in the first few years, their cookie-cutter two-bedroom houses – which features fireplaces, radiant-heated floors, up-to-date kitchen equipment, laundry rooms and televisions – could be sold for just &7,900…a price that still allowed the Levitt’s a profit of about $1000, at that time. In 1949 alone, the Levitt’s built 4,600 houses and sold them for a total of more than $42 million.

Clearly their mass-production technique, cost-and time-cutting method were the keys to the company’s future. “If something fits your core competence, you should do it internally. If it’s not your core competence and another firm can do it netter, the theory goes, you should rely on them to provide it”, said the author.  The Levitt’s beat competitors with speed, responsiveness, and convenience.

Resources:

The Innovator’s Solution: Creating and Sustaining Successful Growth – by Christensen, Clayton M. and Michael E. Raynor, 2003

http://www.fao.org/docrep/007/y4532e/y4532e07.htm

Radicals & Visionaries  – Entrepreneurs who revolutionized the 20th Century – by Thaddeus Wawro, 2000

 

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6 thoughts on “ENT 601 Week 5 Blog Assignment – Getting the Scope of the Business Right

  1. Mary, the Levitt example is an awesome one! I had never studied this model of house manufacturing. I know there are some wild innovations being done with bridge building (like IKEA approaches to building) and to home building (even in the western North Carolina region – as I know WCU is doing some testing and prototyping with the company, and it is very cool). That being said, I am wondering in what area/industry of production or manufacturing where every piece of the process can be controlled by one company. I am even wondering if policy/regulation would allow that anymore? That being said… I think this is an awesome example of the concept of SCOPE. For the Levitt company, it seems everything associated with HOME BUILDING/MANUFACTURING was IN SCOPE – and it worked out for them! Thanks for sharing!

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  2. I agree with the authors that you need to decide what you do internally and what needs to be outsourced. The Levitt’s example was very good especially what they did back in 1949. They definetely got the scope of business right. This has gotten more complex today as business is now global. There are more moving parts to consider.

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  3. Mary The Levitt’s example is an excellent one to follow. It is one thing to know and understand you can have a great idea but to have the data analysis to support the project has a high percentage of having a positive outcome. Numbers never lie. Great Post. I enjoyed reading the steps to what seems to be perfect idea and follow through.

    Eric

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  4. The Levitt family totally bought the farm! That example was jaw dropping and should such efficiency right down the nails. I think about business today and how this cookie cutter strategy can work. The strategy is task driven. I am going to relate it to myself. I often have 5 things open on my desk at the same time. It takes me longer to get something completed because I allow myself to get distracted with other tasks. I found that when I prioritize and time my tasks in order to complete one at a time, I get them all done in less time. My desk is cleared before the end of the day, which makes me more productive. The Levitt family perfected the tasks to create more product in less time. This was a great example that can be applied to everyday life.

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  5. Hi Mary,

    I see that they used these methods to be more successful worked for this company because this company needed exactly those changes to win. I guess you are right – if something fits – use it. If it does not relate to your core -then pass. Thanks for an excellent conversation. Great post!

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  6. Mary – a fascinating story that I didn’t know about. I’ve heard about contractors doing this in Atlanta to increase production speed. This post really touched me – my first business, I thought I could do it all. I was wrong and failed miserably! I was great at the selling of my business and products but the paperwork and filing tax forms on a timely basis – not so good! My next business, I hired a professional, but after about 1 1/2 years, I figured out my professional was cheaper than others because they were not very good at what they did and eventually costing me time and money!

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