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| In Chapter 4, the need to change strategies as markets and customer needs change is discussed. Change can be motivated by several factors, including poor performance and new ownership. Quite often, changing strategies requires a change in methods, particularly in managing productive resources. "Lean production" methods are quite often used to help businesses adapt to new, more responsive, strategies. Lean production is a way to reduce costs and increase output from business resources. High ROA can only result from high levels of return and low levels of asset investment. Being lean means that the expensive resources used in operations to create value must be efficiently used. The strategies must be able to provide the meet changing needs of the market. Quite often, when a business is sold, new owners find that they must completely redevelop the business's strategy to get it back in financial health. | VIDEOvo1 |
| An ownership change at ABTCO provides an excellent example of an effort to change strategies and support those changes with lean production approaches. ABTCO produces a wide range building products for North America, Europe, and the Pacific Rim. When new owners took over, they quickly determined that operations improvement was needed to regain financial health. Cutting back was necessary to transition to a use of resources that provided an acceptable financial return. | VIDEOvo2 |
| ABTCO had to reduce staffing to avoid completely closing plants. Reducing costs of labor and administration, as well as reducing salaries was necessary to get these costs under control. Management of other resources, including inventory was dramatically changed as well. All efforts were directed toward improving the ratio of outputs to inputs. | VIDEOvo3 |
| Inventory reductions freed up cash desperately needed. Incentive systems were incorporated to better manage inventory and other assets. | VIDEOvo4 |
| While reducing inputs, investments in strategic equipment were also made to increase outputs. A selection of exactly which products to continue producing and which to drop provided a narrowing of focus for the firm. | VIDEOvo5 |
| Changes resulted in dramatic output increases, with virtually no new equipment or capital assets. More efficient techniques resulted in large increases in the return on asset investments. | VIDEOvo6 |
| A new focus, combined with improved techniques, resulted in a capability to introduce new products. Time to market was reduced. The new products completed ABTCO's product line, enabling them to be a sole supplier to building and home stores. | VIDEOvo7 |
| Once the improvement effort was on track, management was able to provide increased incentives to motivate the types of improvement necessary. | VIDEOvo9 |
| ABTCO evaluated their customer expectations, and focused all efforts on meeting those expectations. High quality products and high quality service accomplished that. | VIDEOvo8 |