a real options approach to managing resources and capabilities

A real options approach tomanaging resources and

capabilitiesKrsto Pandza

University of Maribor Maribor Slovenia

Stuart HorsburghManchester Metropolitan University Manchester UK

Kevin GortonMorson International Manchester UK and

Andrej PolajnarUniversity of Maribor Maribor Slovenia

Keywords Resources Dynamics Strategic management Open systems Case studies

Abstract The resource-based view (RBV) and the dynamic-capabilities approach (DCA) haveemerged as two important frameworks in strategic management that seek to explain why regrms aredifferent In recent years operations management scholars have sought to integrate both RBV andDCA within the regeldrsquos epistemological orientation to provide normative frameworks for practisingmanagers This paper argues that the structure of resources and capabilities are such that theypresent impediments to normative prescriptions Using ideas from complex systems it argues thatany framework for thinking about resource accumulation and capability development must takeaccount of uncertainty and knowledge imperfections in the system The paper contends that thereal options framework is an appropriate heuristic for managing the process of capabilitydevelopment and a case study of a manufacturing operation is used to illustrate our ideas

Introduction and overviewThe resource-based view (RBV) and the dynamic-capabilities approach (DCA)constitute two separate yet highly related streams of research in thestrategic-management literature A fundamental question in the regeld ofstrategic management is how do regrms create and sustain a competitiveadvantage (Rumelt et al 1991) The resource-based view and thedynamic-capability-based approach have addressed this question in differentways According to the RBV competitive advantage and durable performancedifferences between regrms are accounted for by asymmetric resourceendowments with differential productivities (Wernerfelt 1984 Barney 1986Conner 1991 Mahoney and Pandian 1992 Amit and Schoemaker 1993) Incontrast from the dynamic-capabilities perspective performance differencesacross regrms and over time are accounted for by differences in the capacity ofregrms to accumulate deploy renew and reconreggure resources in response tochanges in the external environment (Nelson and Winter 1982 Teece et al1997 Eisenhardt and Martin 2000 Winter 2000) Capabilities constitute

The Emerald Research Register for this journal is available at The current issue and full text archive of this journal is available at

httpwwwemeraldinsightcomresearchregister httpwwwemeraldinsightcom0144-3577htm

IJOPM239

1010

International Journal of Operations ampProduction ManagementVol 23 No 9 2003pp 1010-1032

q MCB UP Limited0144-3577DOI 10110801443570310491756

individual skills tacit forms of knowledge and social relations that areembedded in a regrmrsquos routines managerial processes forms of communicationand culture In either case resources and capabilities have characteristics thatmake them difregcult to trade or imitate hence performance differences betweenregrms are to be expected as they are a natural outcome of the idiosyncratic andpath dependent histories in which resources and capabilities have evolved

Both approaches have proved to be attractive for operations strategyscholars for numerous reasons The introverted orientation of both RBV andDCA enable them to emancipate the neglected strategic importance ofoperations Since RBV and DCA represent two leading efregciency approaches instrategic management they enable us to understand resources and capabilitiesembedded in operations as something more than strategizing around productmarket positioning

Amundson (1998) has argued for RBV to be used as a driver of regeld-basedresearch in operations management However operations strategy scholarshave made use of both approaches when discussing the intellectual foundationsof operations strategy (Hayes and Pisano 1994 Mills et al 1995 Clark 1996Roth 1996 Swink and Hegarty 1998 Gagon 1999 Slack and Lewis 2001) It isdifregcult to regnd genuine empirical research driven by RBV and DCA in the regeldof operations management Recently Schroeder et al (2002) explored linksbetween manufacturing resources and performance In addition to conceptualdiscussions on revisions to the traditional operations strategy concept RBVand DCA enter the general discussion within the regeld of operationsmanagement more explicitly (Lewis 2000) or more implicitly (Spina et al1996 Spina 1998 Bartezzaghi 1999) when different best practices arediscussed For operations management scholars RBV and DCA presents anopportunity to establish the identity of the discipline around identiregcationtransfer and application of different best practices It seems however thatscholars have not sought to identify themselves with exploring whycapabilities or best practices emerge in the regrst place how they develop andwhy they develop The operations management literature acknowledges theevolutionary paths of capability or best practice development processes as alogical characteristic and recognise contingency factors that make theseprocesses idiosyncratic yet it is somehow assumed that development of bestpractices and valuable capabilities is a result of rational decision making aboutadopting a particular best practice or developing a certain capability This wayof thinking is congruent to the operations management regeldrsquos epistemologicalorientation on ordfhow to get things doneordm which remacrects the importance the regeldattaches to the utility of research for practising managers It leads operationsstrategy scholars to a research agenda that makes RBV and DCA approachesoperational Both approaches should therefore help to develop prescriptiveframeworks and universal principles for managing capabilities and applyingbest practices This stream of thought largely neglects the point that choice

Managingresources and

capabilities

1011

decisions related to capability development are subject to uncertainty due tothe complex ambiguous and even paradoxical nature of organisationalphenomenon The real challenge in managing capabilities does not lie inidentifying different best practices exploring co-relations between them andperformance and studying contingencies that inmacruence applications The realchallenge is to accept the problematic nature of the phenomena and begin theprocess of learning how to cope with uncertainty ambiguity and complexity inthe capability development process

Capability development has parallels with the application of the real optionsheuristic to strategy (Bowman and Hurry 1993 Kogut and Kulatilaka 2001Bowman and Moskowitz 2001 Kylaheiko et al 2002) whereby a regrmrsquosresources capabilities and knowledge create options for future exploitationInvestments in resources and capabilities are choice decisions made in thecontext of uncertainty and as Loasby (2002) reminds us it is the combinationof time and uncertainty that makes real options potentially valuable Realoptions are investments in physical and intangible resources that provide theregrm with contingencies in an uncertain environment The ability to alter acourse of action in the light of new information is valuable and it is thisordfmacrexibilityordm that is captured by real options analysis Following the seminalwork of Black and Scholes (1973) Merton (1973) and Cox et al (1979) inregnancial option pricing the regeld of real options has expanded rapidly over thelast two decades culminating in a wide range of applications (eg Dixit andPindyck 1994 Trigeorgis 1996 Amram and Kulatilaka 1999 Copeland andAntikarov 2001) All of these applications make extensive use of theBlack-Scholes-Merton (BSM) model and its reregnements in transferringregnancial options to the real options domain However as noted by Loasby(2002) in a BSM world uncertainty is transformed to manageable risk in aclosed system where every contingency can be specireged with knownprobabilities In such a setting decision makers have perfect knowledge andchoice is reduced to a logical operation (Loasby 1999)

Our approach to real options follows a different line of reasoning by viewingregrms as networks of reserves (Loasby 1991 1999 2002) a pool of resourcesand capabilities (Kylaheiko et al 2002) which generate macrexibility in a world ofincomplete knowledge where no-one knows how to specify appropriatecontracts Following Potts (2000) we adopt an open systems approach made upof elements and the connections between them but where the connections areincomplete Uncertainty implies that knowledge changes with the passage oftime and endogenous change involves reconregguring connections andconstructing new connections as knowledge about the system grows

In the next section we develop a set of arguments to demonstrate thatcomplexity and uncertainty are inherent within capability development andgiven the evolutionary nature of the process we argue that they constrainmanagerial actions making both RBV and DCA less amenable to the

IJOPM239

1012

development of normative prescriptions Then we discuss the appropriatenessof real options concept for interpreting and managing the process of capabilitydevelopment in an open systems environment Next we present a case study ofa manufacturing facility that illustrates the capability development processusing the real options lens This is followed by a discussion where we integratethe results from our case study with ideas from the literature on complexsystems and real options Finally we provide some concluding remarks

Impediments for normative prescriptionStrategy scholars are constantly challenged to prescribe how to achievecompetitive advantage However it is logically impossible to formulate a set ofrules to systematically create a competitive advantage The intrinsic logic ofboth RBV and DCA and their emphasis on complexity path-dependency andthe idiosyncratic nature of the phenomena produce impediments for any modelthat is used as part of some normative prescription Our contention is that theRBV and DCA literatures has made a signiregcant contribution in explainingwhy some regrms are more successful than others but is less powerful inprescribing how to manage resources and capabilities Operationsmanagement as a regeld of study like other management regelds seeks todevelop frameworks and procedures that can help us to frame problems thatcan offer guidance for practice but any framework with ambition to guideaction will have to confront the properties of the phenomena beinginvestigated To examine the phenomenon of capability development it willbe helpful to adopt a classiregcation based on system complexity and processcomplexity

System complexityWe argue that the complexity of a capability is in its structural composition Acapability is never a singular or a distinctive item It is comprised of a series ofnested systems and each subsystem may deal with a different externalenvironment In other words elements that constitute a capability do not existin isolation from each other they only have meaning and value when linkedThis suggests that complexity in any system is a manifestation of the numberand diversity of the elements in the system and the nature of the connectionsamong those elements (Potts 2000)

To motivate our discussion of system complexity it will be instructive toconsider some deregnitions from the strategic management literature A resourceis often deregned in terms of assets that a regrm owns or has access to (Warren2002) Resources can be tangible assets such as facilities and processtechnology or intangible such as patents brand name reputation and tradesecrets (Hall 1992) If a resource is understood as a more or less a regrm-speciregcasset to which a monetary value can be attached a capability refers to a regrmrsquoscapacity to deploy and reconreggure resources Makadok (2001) refers to a


capabilities

1013

capability as a special type of a resource whose function improves theproductivity of other resources This implies that resources can represent acluster of elements that constitutes a capability In the Wal-Mart case studydocumented by Stalk et al (1992) a regrmrsquos assets such as real estate truckingmacreet and information technology productively linked to other resourcesconstitute a powerful logistic capability Capabilities are often discussed interms of level For example Verona (1999) classireged capabilities into functionaland integrative capabilities The former allows a regrm to deepen its functionalknowledge such as RampD expertise manufacturing knowledge and marketingexpertise The latter binds different functional capabilities and additionallyabsorbs critical knowledge from external sources It is difregcult however due tosystem complexity to develop an unambiguous hierarchy of capabilities andresources Brand name and corporate reputation are likely to be the outcome ofa system of functional and integrative capabilities rather than a resource thatunderpins a marketing capability On the other hand a regrm-speciregc advancedprocess technology developed in-house may be an outcome of RampD andmanufacturing expertise but such a resource in turn can support a basicmanufacturing capability and different integrative capabilities such as quicknew product development or macrexibility in responding to customer demands Anintegrative capability can refer to a regrmrsquos ability to use external resourcesproductively Gulati (1998) deregnes network resources as entities in networksthat provide informational advantage Through the network regrms can obtainaccess to resources that create value and capabilities that would otherwiserequire time to develop This means that something that is seen as a capabilityfrom the perspective of the regrm can be interpreted as a resource from a networkperspective Furthermore a regrmrsquos network is an idiosyncratic resource createdthrough a path-dependent process and is therefore more akin to a capability

Loasbyrsquos (1998) interpretation of a capability as a particular kind ofknowledge how puts even more weight on the system and complex nature of acapability Within a discourse of knowledge a capability is depicted ascollectively held knowledge (Spender 1996) which arises from integration andco-ordination of specialised knowledge (Kogut and Zender 1992 Grant 1996)As Penrose (1959) noted capabilities depend on team activity in which theknowledge and skills of individuals are transformed into the integratedknowledge of the organisation A capability is therefore a system wheredispersed knowledge is integrated The integration is achieved by theco-ordination of different levels of knowledge Conceptualising a capability as asystem of integrated knowledge leads to acknowledging uncertainty as anintrinsic characteristic of a capability Tsoukas (1996) argues that regrmsconfront radical uncertainty since nobody knows what patterns of knowledgeintegration is relevant in particular circumstances This implies that causalambiguity plusmn an organisational phenomenon well documented in the strategicmanagement regeld (Lipmann and Rumelt 1982 Reed and DeFillipi 1990 Collis

IJOPM239

1014

1994) plusmn is a particular form of uncertainty and refers to the fact that theknowledge of the capabilityrsquos underlying structure is always incomplete If thisis the case then the link between resources capabilities and competitiveadvantage will not be readily decipherable System complexity revealsbounded rationality since managers encounter limited capacity whenconsidering different patterns of knowledge integration They confrontlimitations when the numerous possibilities of different patterns of integrationare considered as well as when consequences of a particular integration arevalidated The inability to know in advance what kind of knowledgeintegration is likely to be relevant introduces uncertainty as a result of thedynamic characteristics of the capability development process

Process complexitySystem complexity is characterised by a high level of interdependency amongelements that constitute a capability but the ambiguous structure of the systemis not the only obstacle in the path of managers DCA scholars (Dierickx andCool 1989) argue that capability development is a highly dynamicphenomenon The evolutionary nature of the phenomenon is powerful inrevealing how managers are constrained in their action to manage the processThe avowed dynamism of capability development is acknowledged by theoperations strategy research community however the accompanyinguncertainty is largely ignored An identireged best practice is understood as avaluable capability which has to be disaggregated into constitutive elementsWhen such a design of the new best way is revealed and contingenciesdetermined it is just a matter of time when this dominant knowing how willbecome widespread among other regrms in the market place What is neglectedis the fact that a capability is not something that can be identireged at thebeginning of the process and they do not resemble phenomenon waiting to bediscovered Capability development is a generative process and capabilities areidentireged through retrospective sense making as knowledge of organisationalprocesses and markets evolve

Winter (2000) argues that capabilities emerge in primitive forms Thisimplies that system complexity might be low in the initial phase of capabilitydevelopment but process complexity could be high managers will beconfronted by causal ambiguity in that they will have little understanding ofthe direction in which a process is likely to evolve or how market uncertaintiesare likely to be resolved Thus regrms are unlikely to be able to identify inadvance which resources or capabilities if any will become valuable or howresources and capabilities should be integrated or what conreggurations themarket will value in the future for as Loasby (1998) reminds us resources andcapabilities represents conjectures to be tested in the market and like anyconjecture they may be false During the capability development processsystem complexity is likely to be increasing and by the time a capability is


capabilities

1015

identireged system complexity is high Whilst during the process causalambiguity might have given way to causal understanding knowledge ofcausality is always incomplete

Causal understanding about the structure of a capability is due to thedynamic nature of the process and is always achieved ex post The same holdstrue for a best practice This suggests that the value of a particular practice canonly be recognised ex post and cannot be planned ex ante A regrmrsquos currentstock of resources or capabilities depends critically on conditions that prevailedand decisions taken at some previous time Since with the passage of timecircumstances and knowledge about those circumstances change a regrmrsquos stockof resources and capabilities at any moment will always be less than desiredgiven the knowledge the regrm now has

Our argument is that operations management and operations strategyscholars have not sought to confront the uncertainty that surrounds choicesabout what future paths of resources and capabilities the regrm should committo Uncertainty related to the complexity of a capabilityrsquos structure and todynamic complexity of the process has been implicitly recognised yet largelyneglected Furthermore the uncertainty associated with the subjective natureof the choice decision so relevant for organisational theorists has been largelyignored by operations management scholars This avoidance undoubtedly doesnot contribute to the development of normative frameworks for managing thecapability development process

Real options and capabilitiesStarting from the premise that any resource or capability is embedded in amuch larger system we explore the interplay between systems and processcomplexity and real options through a more precise discourse based on theopen systems approach proposed by Potts (2000) in his detailed study ofcomplexity in economic systems and the recent work of Loasby (2002) who haselaborated on some of these ideas A system consists of both elements andconnections between them and though a system in itself can be a complexentity it can serve as a building block for higher-level systems (Potts 2000)We can distinguish between closed and open systems In a closed system everyelement is connected to every other element whereas in open systems the set ofelements and the set of connections between them are incomplete and only afraction of the possible connections may be operational (Loasby 2002) In anopen system change occurs by rearranging connections or by constructingnew connections which produce different sets of sub-systems or a hierarchy ofsystems For example rearranging connections may involve somereconregguration of a regrmrsquos value chain and will involve the strengthening ofsome relationships whilst weakening others such as would be the case in asupply chain by moving from parallel to single sourcing Interpreting the regrmas webs of multi-layered sets of connections is more meaningful than the idea

IJOPM239

1016

that a regrm is simply an endowment of resources with differentialproductivities Different connections form different systems and managerialactivity will involve experimenting with these connections to form new entitieswith new routines capabilities and social behaviours (Potts 2000) As in ourearlier discussion a speciregc set of connections constitute a regrmrsquos competences(Potts 2000) and capabilities (Loasby 2002) they are also resources but theyare a particular type of knowledge resource It is the epistemic phenomena ofknowledge that is to be emphasized in that they are instances of speciregcconnections that seem to work in particular environments

The suggestion is that the development of resources and capabilities followa time consuming process by adding and rearranging connections As a resultmanagers have to decide what resource and capabilities to commit to ahead ofwhen they might be needed and at a time when their future value is uncertainFaced with this situation regrms will want to invest in resources and capabilitiesthat have value in a range of circumstances We contend that the real optionsapproach has three redeeming features that offer some potential in thinkingthrough this problem First the real options logic recognizes there is value indelaying investments by waiting for market and technological uncertainty todiminish before making a larger commitment Second many investments canbe undertaken in stages and the real options logic is able to exploit theincremental learning associated with phased investments Third optionsprovide a non-linear payoff structure in that purchasing an option enables aregrm to take advantage of any upside potential whilst avoiding the downsiderisk An option holder has the opportunity to take an action in the future shouldthe situation prove attractive but not the obligation should events becomeunfavourable

It follows from this discussion that the possible different combinations ofconnections (which can be thought of as different conreggurations of the valuechain system) represent different option sets (Loasby 2002) A system movesthrough state space by rearranging connections that is by making differentialinvestments in different value chain conreggurations This explains why regrmsare different When an option is exercised (a deepening of a commitment in aspeciregc set of resources and capabilities) the resulting conregguration will yielda different option set for future exercise Resource accumulation and capabilitydevelopment are the outcome of a sequential process of striking options andthroughout their history regrms will have taken different decisions about whichoption sets to strike

As the density of connectivity varies it is possible to trace out differentsystem structures which are characterised by different dynamical behaviour(Waldrop 1992 Kauffman 1993 and Potts 2000) A highly connectivestructure is ordfdynamically unstableordm producing ordftransient statesordm as changes inone part of the system can produce ordfwavesordm that ordfwash back and forthordmthroughout the entire system (Potts 2000 p 90) If the density of connections is


capabilities

1017

extremely low such that there is a high degree of independence betweenelements the system ordffreezes upordm and the systems dominant behaviour is acontinuation of the pattern that is frozen into the system This structure isreferred to by Potts (2000) as the ordfordered stateordm and it is likely to exhibit a highdegree of inertia making it difregcult for the system to respond to change Highquality structures according to Potts (2000) require the coexistence of bothstability and macrexibility This is the state of ordfcomplexityordm plusmn a balance betweenestablished routines and capabilities being ordfusefullyordm locked into a system andcontinual experimentation with new ones (Potts 2000) The real optionsapproach makes explicit the need to maintain system macrexibility so that newroutines and capabilities can be adapted and absorbed within the system

MethodologyThis research was designed to allow information gathering for the purpose ofinterpreting decision-making relevant for capability accumulation within thesetting where uncertainty is inherent Consistent with this research intent anin-depth case study research strategy was followed (Eisenhardt 1989) Such astrategy is appropriate when dynamic phenomenon is studied (Langley 1999)and when little prior research has been conducted (Yin 1989) We have chosento address the dynamics of the phenomenon by conducting one in-depthlongitudinal and retrospective case research

Research settingTo adhere to the logic of theoretical sampling (Glaser and Strauss 1967) abusiness unit within the aero-engine division of Rolls-Royce plc was selectedwith the aim of providing a setting where the process of interest is transparentCivil aerospace is a cyclical industry and the commercial cycle is unpredictablemany factors inmacruence the pattern of new aircraft orders Civil aero-enginemanufacturers make large commitments to design and RampD in enginetechnology and manufacturing processes For these reasons manufacturers willforge alliances with risk-sharing partners to collaborate on development workand manufacturing In addition all manufacturers have extensive sub-contractnetworks The success of Rolls-Royce as the major rival to GE Aircraft Enginesis attributed to its strengths in gas turbine technology and its product range(Rolls-Royce has the largest portfolio of engines and powers more types of civilaircraft than any other manufacturer) The industry business context denotesnew product development as a core business process therefore the capabilityto develop a wide range of engine types represents a crucial capability Avowedmacrexibility in meeting customer demands illustrated by the extensive productrange signiregcantly inmacruences the process of new product development Largecommitments under conditions of uncertainty to functional capabilities such asRampD manufacturing expertise and investments in resources necessitates theformation of alliances

IJOPM239

1018

Data collectionA long and ongoing consultancy relation with the company enabled theresearch team to negotiate access for two researchers over a period of twoyears In the regeld research archival documents and interviews were used assources of evidence Interviews with the key managers were the primary datacollection method since these provided the richness and depth of dataparticularly regarding managerial decisions Twenty interviews wereconducted with regve senior managers We conducted one group interviewwith four informants that lasted four hours Other interviews typically lastedtwo hours The interviews were tape recorded and transcribed in the hoursimmediately following the interviews Additional observations were noted atthe time of the interview Some short follow-up interviews were made bytelephone Much useful data emerged from informal conversation withmanagers and engineers The majority of interviews were open-endedalthough a list of core questions was prepared to address the relevantquestions A sample of the core questions include

(1) What decisions were made and what actions were conducted

(2) What were the key events

(3) Why were these decisions made and what inmacruenced these decisions

(4) How were these decisions brought about

(5) How did these decisions and actions inmacruence the process of capabilitydevelopment

In this research extensive use was made of archival documents such asbusiness plans strategy documents capital expenditure scheme proposals andinternal memorandums A retrospective mode of research did not allow for areal time observation of how decisions were made and how they inmacruencedcapability development

Data analysisAt the very regrst stage of our research some preliminary interviews wereconducted in order to develop an understanding of the business context and toidentify a particular project whose development had to be traced We werelooking for a project with the following characteristics

multiple decision points

incremental investments in resources and capabilities

trial and error learning and knowledge generation

irreversible commitments and

identiregable outcomes of capability developments

When an appropriate project was identireged interviews were conducted andarchival documents were used in order to develop a chronological picture of


capabilities

1019

relevant events decisions and actions Identiregcation of the process alsodetermined key individuals for interviewing A visual graphical representation(Miles and Huberman 1984) was prepared for a group interview Thisinterview was used to enrich the visual map The relevant events decisions andactions were mapped chronologically Context of each event and motivation foreach decision were discussed Effects of decisions and actions on capabilitydevelopment processes were indicated Such a visual map represented anintermediary step between the row data and a more general understandingThe group interview was followed by additional interviews were a generalinterpretation of the studied process started to emerge The entire analysis wastherefore highly iterative and involved moving back and forth among the dataas the concepts emerged during the inductive mode of the research

The case studyThe case covers the period 1992 until early 2001 and describes the decisionsthat were taken by NGV Machining (NGVM) a business unit within theRolls-Royce Aero Engine Group employing 170 engineers and support staff todevelop a ordfworldrsquos bestordm capability in the design manufacture and testing ofnozzle guide vanes (NGVs) There are several manufacturers of NGVs andcomponents are sourced from a network of suppliers NGVs areprecision-engineered parts designed to reduce the operating temperature ofthe turbo-fans by directing cold air pulled into the fan rotor from the air thatby-passes the combustion chamber

During the period 1989-1992 NGVM experimented with the concept of themulti-skilled engineer (MSE) based around team working and simpliregedmaterial macrow This initiative led to a number of performance improvementssuch as reduced inventory and non-conformance culminating in cost savingsof pound26 million over the period Demands on the system brought about by moreexacting engineering standards from a new generation of engine designs andspurred by the success of MSE the senior management team of NGVM soughtcategory ordfAordm status (core business for Rolls-Royce) for NGV manufacturingand applied for regnancial support to expand the in-house facility In 1992 theapplication to develop this facility was approved Table I identireges events andthe major decisions that were taken by NGVM over the period 1989-2001

Phase one 1992-1996In 1992 NGVM set out a strategy to expand the manufacturing facility for NGVcomponents that were to shape capability development for the next ten yearsThe background to this decision lay in an earlier period 1989-1992 when inresponse to a drive to improve performance by the parent department turbineaerofoil manufacturing the existing set of machine tools were reconreggured toform a machining cell and through initiatives such as multi-skillingmulti-machine manning and in cycle working working practices were

IJOPM239

1020

Dat

esE

ven

tsD

ecis

ions

and

acti

ons

taken

Com

men

ts

1989

-199

2T

urb

ine

Aer

ofoi

lse

ekco

stre

duct

ions

and

other

per

form

ance

impro

vem

ents

from

its

busi

nes

sunit

s

Intr

oduct

ion

ofM

SE

and

form

atio

nof

NG

Vm

anufa

cturi

ng

cells

New

exper

ience

curv

eplusmn

crea

tion

ofle

arnin

gop

tion

1992

-199

5Som

esu

cces

ses

wit

hM

SE

exper

imen

tplusmn

cost

savin

gs

ofpound

26

million

over

the

per

iod

1989

-199

2In

trod

uct

ion

ofnew

gen

erat

ion

ofae

ro-e

ngin

esie

th

eT

rent

fam

ilyra

ise

engin

eeri

ng

and

tech

nic

alst

andar

ds

for

core

com

pon

ents

Air

craf

tdel

iver

ycy

cle

mov

esfr

omit

s19

90pea

k

Fundin

gso

ught

toex

pan

dth

efa

cility

by

addin

ga

seco

nd

cell

Fundin

gap

pro

ved

1992

and

seco

nd

cell

com

eson

stre

amin

1993

Bid

tore

ceiv

eordfA

ordmca

tegor

yst

atus

for

NG

Vm

anufa

cturi

ng

Dec

isio

nta

ken

tore

duce

dep

enden

cyon

the

net

wor

k

NG

Vdes

ignat

eda

ordfcor

eordmco

mpon

ent

by

Turb

ine

Aer

ofoi

lC

reat

ion

ofco

mpou

nd

opti

onplusmn

oppor

tunit

yfo

rordff

ollo

w-o

nordm

inves

tmen

ts19

94plusmn

cost

savin

gs

ofpound

42

million

inreg

rst

full

yea

rof

oper

atio

nfo

rse

cond

cell

Implica

tion

sfo

rth

evia

bilit

yof

som

eunit

sw

ithin

the

net

wor

kplusmn

aban

don

men

tof

net

wor

kop

tion

s19

96-1

997

Unpre

ceden

ted

surg

ein

dem

and

for

airc

raft

asec

onom

iccy

cle

mov

esou

tfr

omit

str

ough

in19

95N

etw

ork

bec

omes

capac

ity-c

onst

rain

ed

Sou

ght

appro

val

toex

pan

dth

efa

cility

by

addin

ga

thir

dce

llusi

ng

tech

nol

ogy

alre

ady

pro

ven

inse

cond

cell

Fundin

gap

pro

ved

1997

and

thir

dce

llco

mes

onst

ream

in19

98

Gro

wth

opti

oncr

eate

dT

wo-

tier

syst

emem

erged

for

NG

Vm

anufa

cturi

ngan

dca

tegor

yA

par

tsso

leso

urc

edby

NG

VM

1997

-200

1E

conom

icex

pan

sion

inN

orth

Am

eric

aco

nti

nues

tofu

elw

orld

airl

ine

gro

wth

and

num

ber

ofor

der

sin

crea

seSubst

anti

algai

ns

mad

ein

oper

atin

gper

form

ance

but

nee

dgre

ater

macrex

ibilit

yan

dto

dri

ve

dow

nle

adti

mes

Lat

est

gen

erat

ion

ofT

rent

engin

esra

ise

the

bar

for

engin

eeri

ngie

m

easu

ring

insp

ecti

ngdri

llin

gan

dm

achin

ing

Ofmacr

oadin

gce

rtai

nca

tegor

yA

par

tsto

the

net

wor

k

Sou

ght

appro

val

toex

pan

dth

efa

cility

by

addin

gtw

om

ore

cells

and

aw

eldin

gfa

cility

Fundin

gap

pro

ved

1998

Dec

isio

nm

ade

touse

stat

eof

art

mac

hin

eto

ols

rath

erth

anso

urc

efr

omth

em

arket

M

achin

eto

olte

chnol

ogy

bec

omes

pro

pri

etar

yL

ength

ens

pro

regt

win

dow

and

incr

ease

sop

tion

val

ues

Gro

wth

sw

itch

ing

and

furt

her

lear

nin

gop

tion

scr

eate

dT

echnic

alpro

ble

ms

del

ayth

edev

elop

men

tof

mac

hin

eto

ols

and

com

pute

rpro

gra

mm

ew

riti

ng

Addit

ional

cells

sched

ule

dto

com

eon

stre

amea

rly

2000

del

ayed

unti

lm

id-2

001

Table IChronology of events

and decisions taken


capabilities

1021

changed These changes created a set of reserves by generating greatermobility and macrexibility in the system Reserves have option value because theyare a form of contingency enabling NGVM to respond more effectively to abroader range of unforeseen events Reserves constitute a timing option as theyprovide an opportunity but not the obligation to make a range of adjustmentsin the future

The decision to expand was made against a background of considerablemarket and technological uncertainty By 1992 the economic cycle for aircraftdeliveries had moved well away from its peak in 1990 and both the UK andUSA were still in recession Although the cyclical nature of the industry is wellunderstood forecasting the length and magnitude of these cycles isproblematic There were two sources of technological uncertainty for NGVMuncertainty associated with the integration of new machine tools and a relatedproblem associated with performance uncertainty of NGV components for newengines during simulations and testing In response to both types ofuncertainty a decision was made to stage the investment and extend theapplication of MSE cells where some successes had been achieved

A phased investment constitutes an option set where each phase completed(investment in an additional machining cell plus the learning associated withcumulative production) gave NGVM the option to invest in the next phaseOptions within the set evolve along a trajectory as opportunities to invest insubsequent phases are accelerated deferred or abandoned depending on howmarket and technological uncertainties unfold NGVMrsquos managers were notpassive in this process By making the investment undertaking production andmaking adjustments in real time they generated learning options wherecurrent costs of production become an option on future production the payofffrom which is a reduction of future costs and other productivity beneregts suchas reduced inventory lead times and non-conformance It is learning by doingand using Accumulated learning in cellular manufacturing reduced the risk forNGVM of introducing new technology and falsely moving to a new state andhaving an inappropriate set of capabilities By the end of 1994 the regrst full yearof operation for the new cells cost savings from avoiding the networkamounted to pound42 million lead times had been reduced from 21 to 14 weeks onaverage and there were signiregcant reductions in both inventory andnon-conformance

Phase two 1996-1997In late 1996 a decision was made to accelerate investment in a second phase byadding a third cell This decision was taken largely as a result of anunprecedented upsurge in demand for aircraft a combination of the deliverycycle moving from its trough in 1994 and the market share gains being madeby Rolls-Royce Approval was granted in early 1997 and the cell was fullyoperational by early 1998

IJOPM239

1022

Projections of load-capacity comparisons indicated that without thisadditional investment in-house capacity would be half that of total task by theyear 2000 but ofmacroading this amount of work onto the sub-contract networkraised two important issues First the network had become severelycapacity-constrained and could not absorb this amount of ofmacroad Secondfurther investments in the in-house facility had widened the performance gapas implied by the productivity improvements given above

The network constitutes a pool of resources and capabilities which provideNGVM with the macrexibility to defer its own investments by making use of thenetwork A decision made in 1992 to reduce NGVMrsquos dependence on thenetwork in order to prove the viability of the second cell meant that networkbeneregts could be forfeited if these activities are internalised To make availablethe real options in a network requires investment and continual maintenance ofthe relationships by the network partners By incurring network costs largelycoordination costs NGVM effectively purchased a set of options on thenetwork The network options provide NGVM with the opportunity but not theobligation to participate in a range of network beneregts including theopportunity to defer its own investments Foregoing these investmentseffectively kills-off the network options but such a decision has to be balancedagainst the investments that had been made by the mid-1990s in developing thein-house facility and the preferential access this gave NGVM to make furtherinvestments for returns they believed would be more favourable than could beobtained on the network By early 1998 NGV manufacturing in the UK hadbecome a two-tier system with NGVM sourcing all the high-value-addedhigh-volume components for the new generation of engines (category A parts)whilst the network sourced much of the remainder

Phase three 1997-2001In late 1997 the senior management team revisited the load-capacity issue andtheir projections indicated that without further investments there would haveto be ofmacroads for category ordfAordm components With some reduction in bothmarket and technological uncertainty a decision was made to accelerateinvestment and a proposal was prepared that set out the case for investing inthree additional cells The proposal also made the case for an investment instate of art machine tools using technology currently being developed in-houseby Rolls-Royce and its technology partners

Investments in phases one and two represent capability developmentthrough cumulative incremental improvements as NGVM increased itscapabilities in combining cell teams with proven machine tool technology Theproposal for the third phase represented a much greater degree ofexperimentation with new and as yet unproven technology At this pointNGVM were faced with a dilemma because in spending time and funding onexploration it could create a diversion of resources which could slow down its


capabilities

1023

accumulation of learning with the current technology At the same timeengaging in exploration reduces the possibility of inertia and the pathdependent constraints associated with incremental investments and locallearning Experimenting with the new technology during the period 1998-2001created a ordfswitching optionordm Switching in this case means having the ability toextend the different uses of the cells Such an investment requires higher sunkcosts but the payoff is the ability to produce a diverse product range and theability to meet different performance standards with the minimal sacriregce inoperating costs compared with more conventional technology

Capability development in NGVM combined with the advances being madethrough the integration of advanced machine tool technology producedproductivity improvements in contiguous processes such as engine design andtesting This is an example where advances being made in one part of thesystem can generate options in other parts NGVMrsquos emerging capability inmachining high precision sculptured components created product options forengine designers Product options are created from perceiving an opportunityto create a new or improved product and where a business has the resourcesassembled and the capabilities to develop and produce the product Anexample is swept fan aerofoil technology unique to Rolls-Royce (to be used forthe regrst time in the Trent 900 engine to power the Airbus A380 when it comesinto service in 2006) became possible as a result of advances in high precisionmeasurement and inspection drilling and machining in areas such as NGVmanufacturing

DiscussionWe have argued that resources and capabilities are embedded in much largersystems and that real options offers a heuristic for understanding capabilitydevelopment in complex systems where knowledge is partial ambiguous andwhere uncertainty can never be completely resolved A case study was used toillustrate how a real options lens can provide a better understanding of the wayin which resources were accumulated and capabilities had been developed in amanufacturing environment where market and technological uncertaintyremained high throughout the period of the study As discussed below the casestudy integrates prior literature and provides some insights for strategicmanagement and operations management in particular

Complexity and the evolving nature of the processIn a recent paper Kogut and Kulatilaka (2001) suggested that the real merit ofthe options heuristic is in the potential to know the value of a change incapabilities in moving to a different point in state space It would be useful toknow the value of different conreggurations of capabilities and real options hasthe potential to do this As Kogut and Kulatilaka (2001) explain the value ofchanging resources and capabilities requires an evaluation of the uncertain

IJOPM239

1024

costs of changing position against the future unknown reward The realoptions approach to capability development would do this by computingexpected values of changing position in the future based on current marketvalues (Kogut and Kulatilaka 2001) However the knowledge required toundertake such an evaluation should not be underestimated Consistent withthe literature (Penrose 1959 Loasby 1999) the case revealed that a regrm maystart from a position of considerable ambiguity about the direction of changeand from this knowledge grows by purposeful trial and error fromconstructing connections to yield capabilities to make further connectionsKnowledge accumulates as a regrm operates with its current stock of resourcesand increases in knowledge raise the prospect of extending the range andamount of services available The case illustrated that experience andknowledge acquired by NGVM over the period helped to form new connectionsby building routines and capabilities centred around MSE and cellularmanufacturing which enabled them to develop more productive resources andcapabilities accumulate further knowledge from pushing out the boundaries inusing machine tool technology and so on

Resources that provide a broader range of services can afford a regrm somemacrexibility which is especially valuable when the future evolution ofopportunities is unknown Flexibility has option value which suggests thata useful heuristic would be for managers to build macrexibility into the systemPrior literature (eg Kauffman 1993 Potts 2000) suggests that a state ofcomplexity represents a balance between stability and the ability to remainmacrexible such that there are routines standard operating procedures skills andhabits the competences or capabilities of a regrm that are enduring yet can beadapted to a range of uses This brings us to the notion of viewing the regrm as aset of reserves (Loasby 1991 2002) which create options and the importanceof acquiring and developing reserves as a response to a range of threats andopportunities in an uncertain world We did regnd the idea of regrms-as-reservesreggured strongly at several points over the period documented in the caseparticularly in the initial phase 1989-1992 where it was a motivating force forchange and again in the third phase 1997-2001 when state-of-art technologywas introduced as a means of reconciling conmacricting demands from the need tomaintain volume production of high-precision engineered components and theneed to provide a fast response to engineering and testing In completing theinvestment for phase three we can view NGVM has an adaptive systemutilizing capabilities and resources in different input combinations orconverting inputs into outputs at different conversion rates making it moreresponsive to market demands and changing competitive conditions

When the direction of change is unknown prior literature (Brown andEisenhardt 1998 Potts 2000 Kogut and Kulatilaka 2001) has emphasised themerits of exploration through investing in probes by adding to or rearrangingthe present set of connections To reduce the risks for a regrm in adopting radical


capabilities

1025

change in its capabilities Kogut and Kulatilaka (2001) suggest recombinationthat is exploring connections that recombine current resources with new onesWe can relate this point to our earlier discussion on complex systems In acomplex system a balance can be maintained such that if one part of thesystem is in an ordered state the other part can be free to behave with morefreedom or in the context of our discussion experimentally (Potts 2000) Thesuggestion is that as a regrm develops capabilities and gains conregdence in onepart of the system it may be able to experiment with other parts withoutjeopardising the entire system Our case lends some support to this ideaDuring the 1990s a distinctive set of capabilities evolved in designmanufacture and testing of high value added components and this increasein conregdence prompted a series of adaptive experimentations in both workpractices and machine tool technology

One might argue that NGVM identireged the options that were the mostobvious to exploit as they tended to involve transitions to adjacent states Thisbrings us to what is seemingly an obvious point but an important one thatoptions have to be recognised (Bowman and Hurry 1993) before they can beevaluated and the options that are recognised are likely to represent a smallproportion of the options that are potentially available Recognizing options isconcerned with making sense of situations and as Loasby (2002 p 8) remarksordfsense is to be made rather than revealedordm We can make a connection here toone of the central contributions of Penrose (1959) the concept of subjectivity ofproductive opportunities which combines the idea of the environment as anordfimageordm in the entrepreneurs mind with the insight that the ordfproductiveopportunitiesordm are the possibilities that managers conceive and ordfcan takeadvantage ofordm (Penrose 1959 p 31) This suggests that options are the productof mental conceptions but as Witt (1998) observes conceiving in organisationsis not an individual act but the outcome of ordfsocially shared interpretations andpatternsordm and these emerge from the experiences and knowledge generatedwithin the regrm

This suggests that a capability is a socially constructed phenomenon sincemanagers impart meaning and value to the knowledge a regrm possessesManagers largely inmacruence the process of capability development and theirdecisions are framed by their cognition about the value of a capability and itsproductive opportunities Cognition however is also an evolutionary processand accompanies the capability development process Within this cognitiveprocess mechanisms such as sense making (Daft and Weick 1984)interpretation (Thomas et al 1993) and imagination (Witt 1998) play animportant role in coping with uncertainty

NetworksOur case study suggests that processes within NGVM its routines operatingprocedures habits and skills are generators of knowledge and this knowledge

IJOPM239

1026

is a major inmacruence on the real options that become available as well as thetiming of these options The process is emergent and unpredictable as NGVMcannot know what knowledge it will possess in the future and the uses it islikely to make of such knowledge Equally the case suggests that thesubcontract network and the variety of collaborative arrangements are alsogenerators of knowledge and make available a variety of real options It is wellunderstood in the literature (Richardson 1972 Coombs and Metcalfe 2000Madhok 2002) that different governance structures lead to differences in theirpotential to generate knowledge and consequently their potential toaccumulate capabilities and generate options Different modes representdifferent bundles of resources and capabilities and as suggested by Madhok(2002) if a regrm possesses the appropriate governance skills it can select aproduction set from a range of possibilities and is not restricted to its ownproduction technology The literature has emphasized the beneregts of networksover internal organisation (Coombs and Metcalfe 2000 Madhok 2002)suggesting that networks provide beneregts that could not be available to asingle regrm From an options perspective this conclusion should be treated withsome caution

Our case study suggests that NGVM were not facing the kind ofoptimisation problem suggested in the real options literature (eg Sanchez2000) where the problem is to maximise the value of the different option setsover all governance modes Our discussion of both systems and processcomplexity should alert us to the difregculties of performing this task Differentgovernance modes (internal organisation and the subcontract network) haveembedded in them different sets of options so that in choosing to develop itsinternal capabilities NGVM sacriregced the value that could be made availableby developing the network As illustrated by the case NGVM madecommitments to build capabilities in support of a particular mode ofgovernance the in-house facility and the resulting expenditure represented asunk cost in that it was speciregc to a particular governance choice and could notbe fully recovered The irreversibility inherent in this decision coupled with theuncertainty is what makes the option valuable Irreversibility imposes whatArgyres and Liebeskind (2000) refer to as a ordfgovernance switching constraintordmwhich suggests that governance modes are the outcome of idiosyncratic andpath-dependent processes

Whilst we can agree with Madhok (2002) that networks provide substantialscope for learning it does not follow that it will always be the preferred modewhen market and technological uncertainty is high In addition to the idea ofregrms as reserves Madhokrsquos (2002) argument overlooks the beneregts of amodular organisation structure such as was developed by NGVM as analternative approach to organisational and technological problem solvingbased on decomposability Whilst the principles of modularity for managingtechnological design are well known the application of the idea to


capabilities

1027

organisational design is more recent (eg Sanchez and Mahoney 1996Langlois 1999 Baldwin and Clark 2000) Decomposability reduces the numberof connections in a system by partitioning tasks but the beneregts of separabilityfor NGVM were not fully realised until phase three when three more cells wereadded Modularity is a response to the problems of dispersed and tacitknowledge plusmn inherent features of complex systems Connections between cellscan be kept low and knowledge need not be communicated to all parts of thesystem Within modular structures the whole system may not be consciouslydesigned but emerges as an adaptive process Modularity is compatible withstaged investments it enables the regrm to learn and as the regrm learns anddevelops its capabilities it creates options to beneregt from emergent andunforeseen events

ConclusionAccording to RBV and DCA resources and capabilities with differentialproductivities are a source of performance differentials across regrms From thisperspective it is natural for both researchers and managers to enquire into howthe resources and capabilities with the desired attributes can be identiregeddeveloped and managed Our contention in this paper has been that many ofthe strategically important resources and capabilities are embedded in denseand highly complex clusters both within and across networks of regrms Systemscomplexity would suggest that attempts to identify and then isolate speciregcresources or capabilities for development is fraught with difregculties In makingthe connection between resources capabilities and knowledge our paperhighlights the second phenomena we discussed process complexity Resourcesand capabilities develop and change over time as knowledge changes Theprocess of how a regrm acquires its capabilities cannot be separated from how itacquires its knowledge Much of the knowledge we have been concerned withcomes from experience as managers learn to solve problems and in doing soaccumulate knowledge and acquire capabilities which are used to build up theregrmrsquos resource base

Knowledge is problematic and therefore tentative it accumulates through aprocess of purposeful trial and error In this respect the knowledge acquired bythe regrm represent conjectures and like any conjecture they are fallible as theyare subject to continuous testing in the market In highlighting the problematicnature of knowledge and capability development the paper makes a potentiallyimportant contribution to the operations management literature Ourexamination of complex systems within the context of a manufacturingoperation offers a cautionary note to research that either explicitly orimplicitly assumes that managers have knowledge they could not reasonablybe expected to have Formulating prescriptions on the basis that managershave perfect or near perfect knowledge can only lead to outcomes that aremisleading and over-simplistic as guides for action

IJOPM239

1028

When systems and process complexity are signiregcant we contend that areal options approach provides a useful set of tools for thinking aboutcapability development We illustrated these points using a case studydescribing incremental investment in a strategically important manufacturingoperation for a large aerospace company where difregcult governance choicedecisions had to be resolved The case was interpreted using the real optionslens and we discussed the contribution of real options in building macrexibility asa response to uncertainty and systems complexity

This paper explicitly addresses the capability development process andmore implicitly networking and investment decisions in manufacturingtechnology All these present phenomena of interest for operationsmanagement These phenomena however are socially complex ambiguousand subject to uncertainty and therefore less amenable for producingprescriptive knowledge for improving short-term organisational performanceOperations management scholars should not hold back in their study of suchphenomena for it is only in developing this knowledge can the regeld providemanagers with a touchstone when confronting an ambiguous situation Thismay require researchers to lessen their ties with the regeldrsquos intellectualfoundation and integrate their research with other management regelds If suchresearch does result in the creation of conceptual knowledge it will lead to theoperations management discipline having a regrmer identity

References

Amit R and Schoemaker PJH (1993) ordfStrategic assets and organizational rentordm StrategicManagement Journal Vol 14 No 1 pp 33-46

Amram M and Kulatilaka N (1999) Real Options Managing Strategic Investments in anUncertain World Harvard Business School Press Cambridge MA

Amundson SD (1998) ordfRelationships between theory-driven empirical research in operationsmanagement and other disciplinesordm Journal of Operations Management Vol 16 No 4pp 341-59

Argyres N and Liebeskind JP (2000) ordfThe role of prior commitment in governance choiceordm inFoss N and Volker M (Eds) Competence Governance and Entrepreneurship Advancesin Economic Strategy Research Oxford University Press Oxford

Baldwin CY and Clark KB (2000) Design Rules Volume I The Power of Modularity MITPress Cambridge MA

Barney JB (1986) ordfStrategic factor market expectations luck and business strategyordmManagement Science Vol 32 No 10 pp 1231-41

Bartezzaghi E (1999) ordfThe evolution of production models is a new paradigm emergingordmInternational Journal of Operations amp Production Management Vol 19 No 2 pp 229-50

Black F and Scholes M (1973) ordfThe pricing of options and corporate liabilitiesordm Journal ofPolitical Economy Vol 81 pp 637-59

Bowman EH and Hurry D (1993) ordfStrategy through the options lens an integrated view ofresource investments and the incremental-choice processordm Academy of ManagementReview Vol 18 No 4 pp 760-82


capabilities

1029

Bowman EH and Moskowitz GT (2001) ordfReal options analysis and strategic decisionmakingordm Organization Science Vol 12 No 6 pp 772-7

Brown S and Eisenhardt K (1998) Competing on the Edge Strategies as Structured ChaosHarvard Business School Press Boston MA

Clark KB (1996) ordfCompeting through operations and the new operations paradigm isoperations strategy passeordm Production and Operations Management Vol 5 No 1pp 42-58

Collis DJ (1994) ordfResearch note how valuable are organizational capabilitiesordm StrategicManagement Journal Vol 15 pp 143-52

Conner KR (1991) ordfA historical comparison of resource-based theory and regve school of thoughwithin industrial organization economics do we have a new theory of the regrmordm Journal ofManagement Vol 17 No 1 pp 121-54

Coombs R and Metcalfe S (2000) ordfOrganizing for innovation co-ordinating distributedinnovation capabilitiesordm in Foss N and Volker M (Eds) Competence Governance andEntrepreneurship Advances in Economic Strategy Research Oxford University PressOxford

Copeland T and Antikarov V (2001) Real Options A Practitionerrsquos Guide Texere New YorkNY

Cox JC Ross SA and Rubinstein M (1979) ordfOption pricing a simplireged approachordm Journal ofFinancial Economics Vol 7 pp 229-63

Daft RL and Weick KE (1984) ordfToward a model of organizations as interpretation systemsordmAcademy of Management Review Vol 9 No 2 pp 284-95

Dierickx I and Cool K (1989) ordfAsset stock accumulation and sustainability of competitiveadvantageordm Management Science Vol 17 No 1 pp 121-54

Dixit AK and Pindyck RS (1994) Investment Under Uncertainty Princeton University PressPrinceton NJ

Eisenhardt KM (1989) ordfBuilding theories from case study researchordm Academy of ManagementReview Vol 14 No 4 pp 532-50

Eisenhardt KM and Martin JA (2000) ordfDynamic capabilities what are theyordm StrategicManagement Journal Vol 21 special issue pp 1105-21

Gagon S (1999) ordfResource-based competition and the new operations strategyordm InternationalJournal of Operations amp Production Management Vol 19 No 2 pp 125-38

Glaser B and Strauss A (1967) The Discovery of Grounded Theory Strategies of QualitativeResearch Wiedenfeld and Nicholson London

Grant RM (1996) ordfProspering in dynamically-competitive environments organizationalcapability as knowledge integrationordm Organization Science Vol 7 No 4 pp 375-87

Gulati R (1998) ordfAlliances and networksordm Strategic Management Journal Vol 19 No 4pp 293-317

Hall R (1992) ordfThe strategic analysis of intangible resourcesordm Strategic Management JournalVol 13 pp 135-44

Hayes RH and Pisano G (1994) ordfBeyond world class the new operations strategyordm HarvardBusiness Review JanuaryFebruary pp 77-86

Kauffman S (1993) The Origins of Order Self-organization and Selection in Evolution OxfordUniversity Press Oxford

Kogut B and Kulatilaka N (2001) ordfCapabilities as real optionsordm Organization Science Vol 12No 6 pp 744-58

IJOPM239

1030

Kogut B and Zender U (1992) ordfKnowledge of the regrm combinative capabilities and thereplication of technologyordm Organization Science Vol 3 No 3 pp 383-97

Kylaheiko K Sandstrom J and Virkkunen V (2002) ordfDynamic capability view in terms of realoptionsordm International Journal of Production Economics Vol 80 No 1 pp 65-83

Langley A (1999) ordfStrategies for theorising from process dataordm Academy of ManagementReview Vol 24 No 4 pp 691-710

Langlois RN (1999) ordfModularity in technology organization and societyordm available at httppapersssrncom

Lewis MA (2000) ordfLean production and sustainable competitive advantageordm InternationalJournal of Operations amp Production Management Vol 20 No 8 pp 959-78

Lipmann SA and Rumelt RP (1982) ordfUncertain imitability an analysis of interregrmdifferences in efregciency under competitionordm Bell Journal of Economics Vol 13 pp 418-38

Loasby BJ (1991) Equilibrium and Evolution Manchester University Press Manchester

Loasby BJ (1998) ordfThe organisation of capabilitiesordm Journal of Economic Behaviour ampOrganization Vol 35 No 2 pp 139-60

Loasby BJ (1999) Knowledge Institutions and Evolution in Economics Routledge London

Loasby BJ (2002) ordfOptions and evolutionordm paper presented at the Druid Summer Conferenceavailable at wwwdruiddk

Madhok A (2002) ordfReassessing the fundamentals and beyond Ronald Coase the transactioncost and resource-based theories of the regrm and the institutional structure of productionordmStrategic Management Journal Vol 23 No 6 pp 535-50

Mahoney JT and Pandian JR (1992) ordfThe resource-based view within the conversation ofstrategic managementordm Strategic Management Journal Vol 13 No 5 pp 363-80

Makadok R (2001) ordfToward a synthesis of the resource-basedand dynamic-capability views ofrent creationordm Strategic Management Journal Vol 23 No 5 pp 387-401

Merton RC (1973) ordfThe theory of rational option pricingordm Bell Journal of Economics andManagement Science Vol 4 Spring pp 141-83

Miles M and Huberman A (1984) Analyzing Qualitative Data A Source-book for New MethodsSage Beverly Hills CA

Mills J Platts K and Gregory M (1995) ordfA framework for the design of operations strategyprocess a contingency approachordm International Journal of Operations amp ProductionManagement Vol 15 No 4 pp 17-49

Nelson R and Winter S (1982) An Evolutionary Theory of Economic Change Belknap PressCambridge MA

Penrose ET (1959) The Theory of the Growth of the Firm Wiley New York NY

Potts J (2000) The New Evolutionary Microeconomics Complexity Competence and AdaptiveBehaviour Edward Elgar Northampton MA

Reed R and DeFillipi R (1990) ordfCausal ambiguity berriers to imitation and sustainablecompetitive advantageordm Academy of Management Review Vol 15 No 1 pp 88-102

Richardson GB (1972) ordfThe organization of industryordm Economic Journal Vol 82 pp 883-96

Roth AV (1996) ordfNeo-operations strategies linking capabilities-based competition totechnologyordm in Gaynor GH (Ed) The Handbook of Technology ManagementMcGraw-Hill Publishing New York NY

Rumelt RP Schendel DE and Teece DJ (1991) ordfStrategic management and economicsordmStrategic Management Journal Vol 12 Winter special issue pp 5-29


capabilities

1031

Sanchez R (2000) ordfDemand uncertainty and asset macrexibility incorporating strategic options inthe theory of the regrmordm in Foss N and Volker M (Eds) Competence Governance andEntrepreneurship Advances in Economic Strategy Research Oxford University PressOxford

Sanchez R and Mahoney JT (1996) ordfModularity macrexibility and knowledge management inproduct and organizational designordm Strategic Management Journal Vol 17 WinterSpecial Issue pp 63-76

Schroeder RG Bates KA and Junttila MA (2002) ordfA resource-based view of manufacturingstrategy and the relationship to manufacturing performanceordm Strategic ManagementJournal Vol 23 No 2 pp 105-17

Slack N and Lewis M (2001) Operations Strategy Financial Times and Prentice-Hall Londonand Englewood Clifs NJ

Spender JC (1996) ordfMaking knowledge the basis of a dynamic theory of the regrmordm StrategicManagement Journal Vol 17 Winter special issue pp 45-62

Spina G (1998) ordfManufacturing paradigms versus strategic approaches a misleading contrastordmInternational Journal of Operations amp Production Management Vol 18 No 8 pp 684-709

Spina G Bartezzaghi E Bert A Cagliano R Draaijer D and Boer H (1996) ordfStrategicallymacrexible production the multi-focused manufacturing paradigmordm International Journal ofOperations amp Production Management Vol 16 No 11 pp 20-41

Stalk G Evans P and Shulman LE (1992) ordfCompeting on capabilities the new rules ofcorporate strategyordm Harvard Business Review Vol 70 No 2 pp 57-69

Swink M and Hegarty WH (1998) ordfCore operations capabilities and their links to productdifferentiationordm International Journal of Operations amp Production Management Vol 18No 4 pp 374-96

Teece DJ Pisano G and Shuen A (1997) ordfDynamic capabilities and strategic managementordmStrategic Management Journal Vol 18 No 7 pp 509-33

Thomas JB Clark SM and Gioia DA (1993) ordfStrategic sensemaking and organizationalperformance linkages among scanning interpretation action and outcomesordm Academy ofManagement Journal Vol 36 No 2 pp 239-70

Trigeorgis L (1996) Real Options Managerial Flexibility and Strategy in Resource AllocationThe MIT Press Cambridge MA

Tsoukas H (1996) ordfThe regrm as a distributed knowledge system a constructionist approachordmStrategic Management Journal Vol 17 Winter special issue pp 11-25

Verona G (1999) ordfA resource-based view of product developmentordm Academy of ManagementReview Vol 24 No 1 pp 132-42

Waldrop M (1992) Complexity The Emerging Science at the Edge of Order and Chaos Simonand Schuster New York NY

Warren K (2002) Competitive Strategy Dynamics John Wiley Chichester

Wernerfelt B (1984) ordfA resource-based view of the regrmordm Strategic Management Journal Vol 5No 2 pp 171-80

Winter SG (2000) ordfThe satisregcing principle in capability learningordm Strategic ManagementJournal Vol 21 special issue pp 981-96

Witt U (1998) ordfImagination and leadership plusmn the neglected dimension of an evolutionary theoryof the regrmordm Journal of Economic Behaviour amp Organization Vol 35 No 2 pp 161-77

Yin RK (1989) Case Study Research Design and Methods Sage Publications London

IJOPM239

1032

individual skills tacit forms of knowledge and social relations that areembedded in a regrmrsquos routines managerial processes forms of communicationand culture In either case resources and capabilities have characteristics thatmake them difregcult to trade or imitate hence performance differences betweenregrms are to be expected as they are a natural outcome of the idiosyncratic andpath dependent histories in which resources and capabilities have evolved

Both approaches have proved to be attractive for operations strategyscholars for numerous reasons The introverted orientation of both RBV andDCA enable them to emancipate the neglected strategic importance ofoperations Since RBV and DCA represent two leading efregciency approaches instrategic management they enable us to understand resources and capabilitiesembedded in operations as something more than strategizing around productmarket positioning

Amundson (1998) has argued for RBV to be used as a driver of regeld-basedresearch in operations management However operations strategy scholarshave made use of both approaches when discussing the intellectual foundationsof operations strategy (Hayes and Pisano 1994 Mills et al 1995 Clark 1996Roth 1996 Swink and Hegarty 1998 Gagon 1999 Slack and Lewis 2001) It isdifregcult to regnd genuine empirical research driven by RBV and DCA in the regeldof operations management Recently Schroeder et al (2002) explored linksbetween manufacturing resources and performance In addition to conceptualdiscussions on revisions to the traditional operations strategy concept RBVand DCA enter the general discussion within the regeld of operationsmanagement more explicitly (Lewis 2000) or more implicitly (Spina et al1996 Spina 1998 Bartezzaghi 1999) when different best practices arediscussed For operations management scholars RBV and DCA presents anopportunity to establish the identity of the discipline around identiregcationtransfer and application of different best practices It seems however thatscholars have not sought to identify themselves with exploring whycapabilities or best practices emerge in the regrst place how they develop andwhy they develop The operations management literature acknowledges theevolutionary paths of capability or best practice development processes as alogical characteristic and recognise contingency factors that make theseprocesses idiosyncratic yet it is somehow assumed that development of bestpractices and valuable capabilities is a result of rational decision making aboutadopting a particular best practice or developing a certain capability This wayof thinking is congruent to the operations management regeldrsquos epistemologicalorientation on ordfhow to get things doneordm which remacrects the importance the regeldattaches to the utility of research for practising managers It leads operationsstrategy scholars to a research agenda that makes RBV and DCA approachesoperational Both approaches should therefore help to develop prescriptiveframeworks and universal principles for managing capabilities and applyingbest practices This stream of thought largely neglects the point that choice


capabilities

1011





IJOPM239

1012






capabilities

1013



IJOPM239

1014





capabilities

1015





IJOPM239

1016






capabilities

1017




IJOPM239

1018
















capabilities

1019





IJOPM239

1020

Dat

esE

ven

tsD

ecis

ions

and

acti

ons

taken

Com

men

ts

1989

-199

2T

urb

ine

Aer

ofoi

lse

ekco

stre

duct

ions

and

other

per

form

ance

impro

vem

ents

from

its

busi

nes

sunit

s

Intr

oduct

ion

ofM

SE

and

form

atio

nof

NG

Vm

anufa

cturi

ng

cells

New

exper

ience

curv

eplusmn

crea

tion

ofle

arnin

gop

tion

1992

-199

5Som

esu

cces

ses

wit

hM

SE

exper

imen

tplusmn

cost

savin

gs

ofpound

26

million

over

the

per

iod

1989

-199

2In

trod

uct

ion

ofnew

gen

erat

ion

ofae

ro-e

ngin

esie

th

eT

rent

fam

ilyra

ise

engin

eeri

ng

and

tech

nic

alst

andar

ds

for

core

com

pon

ents

Air

craf

tdel

iver

ycy

cle

mov

esfr

omit

s19

90pea

k

Fundin

gso

ught

toex

pan

dth

efa

cility

by

addin

ga

seco

nd

cell

Fundin

gap

pro

ved

1992

and

seco

nd

cell

com

eson

stre

amin

1993

Bid

tore

ceiv

eordfA

ordmca

tegor

yst

atus

for

NG

Vm

anufa

cturi

ng

Dec

isio

nta

ken

tore

duce

dep

enden

cyon

the

net

wor

k

NG

Vdes

ignat

eda

ordfcor

eordmco

mpon

ent

by

Turb

ine

Aer

ofoi

lC

reat

ion

ofco

mpou

nd

opti

onplusmn

oppor

tunit

yfo

rordff

ollo

w-o

nordm

inves

tmen

ts19

94plusmn

cost

savin

gs

ofpound

42

million

inreg

rst

full

yea

rof

oper

atio

nfo

rse

cond

cell

Implica

tion

sfo

rth

evia

bilit

yof

som

eunit

sw

ithin

the

net

wor

kplusmn

aban

don

men

tof

net

wor

kop

tion

s19

96-1

997

Unpre

ceden

ted

surg

ein

dem

and

for

airc

raft

asec

onom

iccy

cle

mov

esou

tfr

omit

str

ough

in19

95N

etw

ork

bec

omes

capac

ity-c

onst

rain

ed

Sou

ght

appro

val

toex

pan

dth

efa

cility

by

addin

ga

thir

dce

llusi

ng

tech

nol

ogy

alre

ady

pro

ven

inse

cond

cell

Fundin

gap

pro

ved

1997

and

thir

dce

llco

mes

onst

ream

in19

98

Gro

wth

opti

oncr

eate

dT

wo-

tier

syst

emem

erged

for

NG

Vm

anufa

cturi

ngan

dca

tegor

yA

par

tsso

leso

urc

edby

NG

VM

1997

-200

1E

conom

icex

pan

sion

inN

orth

Am

eric

aco

nti

nues

tofu

elw

orld

airl

ine

gro

wth

and

num

ber

ofor

der

sin

crea

seSubst

anti

algai

ns

mad

ein

oper

atin

gper

form

ance

but

nee

dgre

ater

macrex

ibilit

yan

dto

dri

ve

dow

nle

adti

mes

Lat

est

gen

erat

ion

ofT

rent

engin

esra

ise

the

bar

for

engin

eeri

ngie

m

easu

ring

insp

ecti

ngdri

llin

gan

dm

achin

ing

Ofmacr

oadin

gce

rtai

nca

tegor

yA

par

tsto

the

net

wor

k

Sou

ght

appro

val

toex

pan

dth

efa

cility

by

addin

gtw

om

ore

cells

and

aw

eldin

gfa

cility

Fundin

gap

pro

ved

1998

Dec

isio

nm

ade

touse

stat

eof

art

mac

hin

eto

ols

rath

erth

anso

urc

efr

omth

em

arket

M

achin

eto

olte

chnol

ogy

bec

omes

pro

pri

etar

yL

ength

ens

pro

regt

win

dow

and

incr

ease

sop

tion

val

ues

Gro

wth

sw

itch

ing

and

furt

her

lear

nin

gop

tion

scr

eate

dT

echnic

alpro

ble

ms

del

ayth

edev

elop

men

tof

mac

hin

eto

ols

and

com

pute

rpro

gra

mm

ew

riti

ng

Addit

ional

cells

sched

ule

dto

com

eon

stre

amea

rly

2000

del

ayed

unti

lm

id-2

001


and decisions taken


capabilities

1021





IJOPM239

1022






capabilities

1023





IJOPM239

1024





capabilities

1025





IJOPM239

1026





capabilities

1027




IJOPM239

1028



References











capabilities

1029






















IJOPM239

1030

























capabilities

1031





















IJOPM239

1032





IJOPM239

1012






capabilities

1013



IJOPM239

1014





capabilities

1015





IJOPM239

1016






capabilities

1017




IJOPM239

1018
















capabilities

1019





IJOPM239

1020

Dat

esE

ven

tsD

ecis

ions

and

acti

ons

taken

Com

men

ts

1989

-199

2T

urb

ine

Aer

ofoi

lse

ekco

stre

duct

ions

and

other

per

form

ance

impro

vem

ents

from

its

busi

nes

sunit

s

Intr

oduct

ion

ofM

SE

and

form

atio

nof

NG

Vm

anufa

cturi

ng

cells

New

exper

ience

curv

eplusmn

crea

tion

ofle

arnin

gop

tion

1992

-199

5Som

esu

cces

ses

wit

hM

SE

exper

imen

tplusmn

cost

savin

gs

ofpound

26

million

over

the

per

iod

1989

-199

2In

trod

uct

ion

ofnew

gen

erat

ion

ofae

ro-e

ngin

esie

th

eT

rent

fam

ilyra

ise

engin

eeri

ng

and

tech

nic

alst

andar

ds

for

core

com

pon

ents

Air

craf

tdel

iver

ycy

cle

mov

esfr

omit

s19

90pea

k

Fundin

gso

ught

toex

pan

dth

efa

cility

by

addin

ga

seco

nd

cell

Fundin

gap

pro

ved

1992

and

seco

nd

cell

com

eson

stre

amin

1993

Bid

tore

ceiv

eordfA

ordmca

tegor

yst

atus

for

NG

Vm

anufa

cturi

ng

Dec

isio

nta

ken

tore

duce

dep

enden

cyon

the

net

wor

k

NG

Vdes

ignat

eda

ordfcor

eordmco

mpon

ent

by

Turb

ine

Aer

ofoi

lC

reat

ion

ofco

mpou

nd

opti

onplusmn

oppor

tunit

yfo

rordff

ollo

w-o

nordm

inves

tmen

ts19

94plusmn

cost

savin

gs

ofpound

42

million

inreg

rst

full

yea

rof

oper

atio

nfo

rse

cond

cell

Implica

tion

sfo

rth

evia

bilit

yof

som

eunit

sw

ithin

the

net

wor

kplusmn

aban

don

men

tof

net

wor

kop

tion

s19

96-1

997

Unpre

ceden

ted

surg

ein

dem

and

for

airc

raft

asec

onom

iccy

cle

mov

esou

tfr

omit

str

ough

in19

95N

etw

ork

bec

omes

capac

ity-c

onst

rain

ed

Sou

ght

appro

val

toex

pan

dth

efa

cility

by

addin

ga

thir

dce

llusi

ng

tech

nol

ogy

alre

ady

pro

ven

inse

cond

cell

Fundin

gap

pro

ved

1997

and

thir

dce

llco

mes

onst

ream

in19

98

Gro

wth

opti

oncr

eate

dT

wo-

tier

syst

emem

erged

for

NG

Vm

anufa

cturi

ngan

dca

tegor

yA

par

tsso

leso

urc

edby

NG

VM

1997

-200

1E

conom

icex

pan

sion

inN

orth

Am

eric

aco

nti

nues

tofu

elw

orld

airl

ine

gro

wth

and

num

ber

ofor

der

sin

crea

seSubst

anti

algai

ns

mad

ein

oper

atin

gper

form

ance

but

nee

dgre

ater

macrex

ibilit

yan

dto

dri

ve

dow

nle

adti

mes

Lat

est

gen

erat

ion

ofT

rent

engin

esra

ise

the

bar

for

engin

eeri

ngie

m

easu

ring

insp

ecti

ngdri

llin

gan

dm

achin

ing

Ofmacr

oadin

gce

rtai

nca

tegor

yA

par

tsto

the

net

wor

k

Sou

ght

appro

val

toex

pan

dth

efa

cility

by

addin

gtw

om

ore

cells

and

aw

eldin

gfa

cility

Fundin

gap

pro

ved

1998

Dec

isio

nm

ade

touse

stat

eof

art

mac

hin

eto

ols

rath

erth

anso

urc

efr

omth

em

arket

M

achin

eto

olte

chnol

ogy

bec

omes

pro

pri

etar

yL

ength

ens

pro

regt

win

dow

and

incr

ease

sop

tion

val

ues

Gro

wth

sw

itch

ing

and

furt

her

lear

nin

gop

tion

scr

eate

dT

echnic

alpro

ble

ms

del

ayth

edev

elop

men

tof

mac

hin

eto

ols

and

com

pute

rpro

gra

mm

ew

riti

ng

Addit

ional

cells

sched

ule

dto

com

eon

stre

amea

rly

2000

del

ayed

unti

lm

id-2

001


and decisions taken


capabilities

1021





IJOPM239

1022






capabilities

1023





IJOPM239

1024





capabilities

1025





IJOPM239

1026





capabilities

1027




IJOPM239

1028



References











capabilities

1029






















IJOPM239

1030

























capabilities

1031





















IJOPM239

1032






capabilities

1013



IJOPM239

1014





capabilities

1015





IJOPM239

1016






capabilities

1017




IJOPM239

1018
















capabilities

1019





IJOPM239

1020

Dat

esE

ven

tsD

ecis

ions

and

acti

ons

taken

Com

men

ts

1989

-199

2T

urb

ine

Aer

ofoi

lse

ekco

stre

duct

ions

and

other

per

form

ance

impro

vem

ents

from

its

busi

nes

sunit

s

Intr

oduct

ion

ofM

SE

and

form

atio

nof

NG

Vm

anufa

cturi

ng

cells

New

exper

ience

curv

eplusmn

crea

tion

ofle

arnin

gop

tion

1992

-199

5Som

esu

cces

ses

wit

hM

SE

exper

imen

tplusmn

cost

savin

gs

ofpound

26

million

over

the

per

iod

1989

-199

2In

trod

uct

ion

ofnew

gen

erat

ion

ofae

ro-e

ngin

esie

th

eT

rent

fam

ilyra

ise

engin

eeri

ng

and

tech

nic

alst

andar

ds

for

core

com

pon

ents

Air

craf

tdel

iver

ycy

cle

mov

esfr

omit

s19

90pea

k

Fundin

gso

ught

toex

pan

dth

efa

cility

by

addin

ga

seco

nd

cell

Fundin

gap

pro

ved

1992

and

seco

nd

cell

com

eson

stre

amin

1993

Bid

tore

ceiv

eordfA

ordmca

tegor

yst

atus

for

NG

Vm

anufa

cturi

ng

Dec

isio

nta

ken

tore

duce

dep

enden

cyon

the

net

wor

k

NG

Vdes

ignat

eda

ordfcor

eordmco

mpon

ent

by

Turb

ine

Aer

ofoi

lC

reat

ion

ofco

mpou

nd

opti

onplusmn

oppor

tunit

yfo

rordff

ollo

w-o

nordm

inves

tmen

ts19

94plusmn

cost

savin

gs

ofpound

42

million

inreg

rst

full

yea

rof

oper

atio

nfo

rse

cond

cell

Implica

tion

sfo

rth

evia

bilit

yof

som

eunit

sw

ithin

the

net

wor

kplusmn

aban

don

men

tof

net

wor

kop

tion

s19

96-1

997

Unpre

ceden

ted

surg

ein

dem

and

for

airc

raft

asec

onom

iccy

cle

mov

esou

tfr

omit

str

ough

in19

95N

etw

ork

bec

omes

capac

ity-c

onst

rain

ed

Sou

ght

appro

val

toex

pan

dth

efa

cility

by

addin

ga

thir

dce

llusi

ng

tech

nol

ogy

alre

ady

pro

ven

inse

cond

cell

Fundin

gap

pro

ved

1997

and

thir

dce

llco

mes

onst

ream

in19

98

Gro

wth

opti

oncr

eate

dT

wo-

tier

syst

emem

erged

for

NG

Vm

anufa

cturi

ngan

dca

tegor

yA

par

tsso

leso

urc

edby

NG

VM

1997

-200

1E

conom

icex

pan

sion

inN

orth

Am

eric

aco

nti

nues

tofu

elw

orld

airl

ine

gro

wth

and

num

ber

ofor

der

sin

crea

seSubst

anti

algai

ns

mad

ein

oper

atin

gper

form

ance

but

nee

dgre

ater

macrex

ibilit

yan

dto

dri

ve

dow

nle

adti

mes

Lat

est

gen

erat

ion

ofT

rent

engin

esra

ise

the

bar

for

engin

eeri

ngie

m

easu

ring

insp

ecti

ngdri

llin

gan

dm

achin

ing

Ofmacr

oadin

gce

rtai

nca

tegor

yA

par

tsto

the

net

wor

k

Sou

ght

appro

val

toex

pan

dth

efa

cility

by

addin

gtw

om

ore

cells

and

aw

eldin

gfa

cility

Fundin

gap

pro

ved

1998

Dec

isio

nm

ade

touse

stat

eof

art

mac

hin

eto

ols

rath

erth

anso

urc

efr

omth

em

arket

M

achin

eto

olte

chnol

ogy

bec

omes

pro

pri

etar

yL

ength

ens

pro

regt

win

dow

and

incr

ease

sop

tion

val

ues

Gro

wth

sw

itch

ing

and

furt

her

lear

nin

gop

tion

scr

eate

dT

echnic

alpro

ble

ms

del

ayth

edev

elop

men

tof

mac

hin

eto

ols

and

com

pute

rpro

gra

mm

ew

riti

ng

Addit

ional

cells

sched

ule

dto

com

eon

stre

amea

rly

2000

del

ayed

unti

lm

id-2

001


and decisions taken


capabilities

1021





IJOPM239

1022






capabilities

1023





IJOPM239

1024





capabilities

1025





IJOPM239

1026





capabilities

1027




IJOPM239

1028



References











capabilities

1029






















IJOPM239

1030

























capabilities

1031





















IJOPM239

1032



IJOPM239

1014





capabilities

1015





IJOPM239

1016






capabilities

1017




IJOPM239

1018
















capabilities

1019





IJOPM239

1020

Dat

esE

ven

tsD

ecis

ions

and

acti

ons

taken

Com

men

ts

1989

-199

2T

urb

ine

Aer

ofoi

lse

ekco

stre

duct

ions

and

other

per

form

ance

impro

vem

ents

from

its

busi

nes

sunit

s

Intr

oduct

ion

ofM

SE

and

form

atio

nof

NG

Vm

anufa

cturi

ng

cells

New

exper

ience

curv

eplusmn

crea

tion

ofle

arnin

gop

tion

1992

-199

5Som

esu

cces

ses

wit

hM

SE

exper

imen

tplusmn

cost

savin

gs

ofpound

26

million

over

the

per

iod

1989

-199

2In

trod

uct

ion

ofnew

gen

erat

ion

ofae

ro-e

ngin

esie

th

eT

rent

fam

ilyra

ise

engin

eeri

ng

and

tech

nic

alst

andar

ds

for

core

com

pon

ents

Air

craf

tdel

iver

ycy

cle

mov

esfr

omit

s19

90pea

k

Fundin

gso

ught

toex

pan

dth

efa

cility

by

addin

ga

seco

nd

cell

Fundin

gap

pro

ved

1992

and

seco

nd

cell

com

eson

stre

amin

1993

Bid

tore

ceiv

eordfA

ordmca

tegor

yst

atus

for

NG

Vm

anufa

cturi

ng

Dec

isio

nta

ken

tore

duce

dep

enden

cyon

the

net

wor

k

NG

Vdes

ignat

eda

ordfcor

eordmco

mpon

ent

by

Turb

ine

Aer

ofoi

lC

reat

ion

ofco

mpou

nd

opti

onplusmn

oppor

tunit

yfo

rordff

ollo

w-o

nordm

inves

tmen

ts19

94plusmn

cost

savin

gs

ofpound

42

million

inreg

rst

full

yea

rof

oper

atio

nfo

rse

cond

cell

Implica

tion

sfo

rth

evia

bilit

yof

som

eunit

sw

ithin

the

net

wor

kplusmn

aban

don

men

tof

net

wor

kop

tion

s19

96-1

997

Unpre

ceden

ted

surg

ein

dem

and

for

airc

raft

asec

onom

iccy

cle

mov

esou

tfr

omit

str

ough

in19

95N

etw

ork

bec

omes

capac

ity-c

onst

rain

ed

Sou

ght

appro

val

toex

pan

dth

efa

cility

by

addin

ga

thir

dce

llusi

ng

tech

nol

ogy

alre

ady

pro

ven

inse

cond

cell

Fundin

gap

pro

ved

1997

and

thir

dce

llco

mes

onst

ream

in19

98

Gro

wth

opti

oncr

eate

dT

wo-

tier

syst

emem

erged

for

NG

Vm

anufa

cturi

ngan

dca

tegor

yA

par

tsso

leso

urc

edby

NG

VM

1997

-200

1E

conom

icex

pan

sion

inN

orth

Am

eric

aco

nti

nues

tofu

elw

orld

airl

ine

gro

wth

and

num

ber

ofor

der

sin

crea

seSubst

anti

algai

ns

mad

ein

oper

atin

gper

form

ance

but

nee

dgre

ater

macrex

ibilit

yan

dto

dri

ve

dow

nle

adti

mes

Lat

est

gen

erat

ion

ofT

rent

engin

esra

ise

the

bar

for

engin

eeri

ngie

m

easu

ring

insp

ecti

ngdri

llin

gan

dm

achin

ing

Ofmacr

oadin

gce

rtai

nca

tegor

yA

par

tsto

the

net

wor

k

Sou

ght

appro

val

toex

pan

dth

efa

cility

by

addin

gtw

om

ore

cells

and

aw

eldin

gfa

cility

Fundin

gap

pro

ved

1998

Dec

isio

nm

ade

touse

stat

eof

art

mac

hin

eto

ols

rath

erth

anso

urc

efr

omth

em

arket

M

achin

eto

olte

chnol

ogy

bec

omes

pro

pri

etar

yL

ength

ens

pro

regt

win

dow

and

incr

ease

sop

tion

val

ues

Gro

wth

sw

itch

ing

and

furt

her

lear

nin

gop

tion

scr

eate

dT

echnic

alpro

ble

ms

del

ayth

edev

elop

men

tof

mac

hin

eto

ols

and

com

pute

rpro

gra

mm

ew

riti

ng

Addit

ional

cells

sched

ule

dto

com

eon

stre

amea

rly

2000

del

ayed

unti

lm

id-2

001


and decisions taken


capabilities

1021





IJOPM239

1022






capabilities

1023





IJOPM239

1024





capabilities

1025





IJOPM239

1026





capabilities

1027




IJOPM239

1028



References











capabilities

1029






















IJOPM239

1030

























capabilities

1031





















IJOPM239

1032





capabilities

1015





IJOPM239

1016






capabilities

1017




IJOPM239

1018
















capabilities

1019





IJOPM239

1020

Dat

esE

ven

tsD

ecis

ions

and

acti

ons

taken

Com

men

ts

1989

-199

2T

urb

ine

Aer

ofoi

lse

ekco

stre

duct

ions

and

other

per

form

ance

impro

vem

ents

from

its

busi

nes

sunit

s

Intr

oduct

ion

ofM

SE

and

form

atio

nof

NG

Vm

anufa

cturi

ng

cells

New

exper

ience

curv

eplusmn

crea

tion

ofle

arnin

gop

tion

1992

-199

5Som

esu

cces

ses

wit

hM

SE

exper

imen

tplusmn

cost

savin

gs

ofpound

26

million

over

the

per

iod

1989

-199

2In

trod

uct

ion

ofnew

gen

erat

ion

ofae

ro-e

ngin

esie

th

eT

rent

fam

ilyra

ise

engin

eeri

ng

and

tech

nic

alst

andar

ds

for

core

com

pon

ents

Air

craf

tdel

iver

ycy

cle

mov

esfr

omit

s19

90pea

k

Fundin

gso

ught

toex

pan

dth

efa

cility

by

addin

ga

seco

nd

cell

Fundin

gap

pro

ved

1992

and

seco

nd

cell

com

eson

stre

amin

1993

Bid

tore

ceiv

eordfA

ordmca

tegor

yst

atus

for

NG

Vm

anufa

cturi

ng

Dec

isio

nta

ken

tore

duce

dep

enden

cyon

the

net

wor

k

NG

Vdes

ignat

eda

ordfcor

eordmco

mpon

ent

by

Turb

ine

Aer

ofoi

lC

reat

ion

ofco

mpou

nd

opti

onplusmn

oppor

tunit

yfo

rordff

ollo

w-o

nordm

inves

tmen

ts19

94plusmn

cost

savin

gs

ofpound

42

million

inreg

rst

full

yea

rof

oper

atio

nfo

rse

cond

cell

Implica

tion

sfo

rth

evia

bilit

yof

som

eunit

sw

ithin

the

net

wor

kplusmn

aban

don

men

tof

net

wor

kop

tion

s19

96-1

997

Unpre

ceden

ted

surg

ein

dem

and

for

airc

raft

asec

onom

iccy

cle

mov

esou

tfr

omit

str

ough

in19

95N

etw

ork

bec

omes

capac

ity-c

onst

rain

ed

Sou

ght

appro

val

toex

pan

dth

efa

cility

by

addin

ga

thir

dce

llusi

ng

tech

nol

ogy

alre

ady

pro

ven

inse

cond

cell

Fundin

gap

pro

ved

1997

and

thir

dce

llco

mes

onst

ream

in19

98

Gro

wth

opti

oncr

eate

dT

wo-

tier

syst

emem

erged

for

NG

Vm

anufa

cturi

ngan

dca

tegor

yA

par

tsso

leso

urc

edby

NG

VM

1997

-200

1E

conom

icex

pan

sion

inN

orth

Am

eric

aco

nti

nues

tofu

elw

orld

airl

ine

gro

wth

and

num

ber

ofor

der

sin

crea

seSubst

anti

algai

ns

mad

ein

oper

atin

gper

form

ance

but

nee

dgre

ater

macrex

ibilit

yan

dto

dri

ve

dow

nle

adti

mes

Lat

est

gen

erat

ion

ofT

rent

engin

esra

ise

the

bar

for

engin

eeri

ngie

m

easu

ring

insp

ecti

ngdri

llin

gan

dm

achin

ing

Ofmacr

oadin

gce

rtai

nca

tegor

yA

par

tsto

the

net

wor

k

Sou

ght

appro

val

toex

pan

dth

efa

cility

by

addin

gtw

om

ore

cells

and

aw

eldin

gfa

cility

Fundin

gap

pro

ved

1998

Dec

isio

nm

ade

touse

stat

eof

art

mac

hin

eto

ols

rath

erth

anso

urc

efr

omth

em

arket

M

achin

eto

olte

chnol

ogy

bec

omes

pro

pri

etar

yL

ength

ens

pro

regt

win

dow

and

incr

ease

sop

tion

val

ues

Gro

wth

sw

itch

ing

and

furt

her

lear

nin

gop

tion

scr

eate

dT

echnic

alpro

ble

ms

del

ayth

edev

elop

men

tof

mac

hin

eto

ols

and

com

pute

rpro

gra

mm

ew

riti

ng

Addit

ional

cells

sched

ule

dto

com

eon

stre

amea

rly

2000

del

ayed

unti

lm

id-2

001


and decisions taken


capabilities

1021





IJOPM239

1022






capabilities

1023





IJOPM239

1024





capabilities

1025





IJOPM239

1026





capabilities

1027




IJOPM239

1028



References











capabilities

1029






















IJOPM239

1030

























capabilities

1031





















IJOPM239

1032





IJOPM239

1016






capabilities

1017




IJOPM239

1018
















capabilities

1019





IJOPM239

1020

Dat

esE

ven

tsD

ecis

ions

and

acti

ons

taken

Com

men

ts

1989

-199

2T

urb

ine

Aer

ofoi

lse

ekco

stre

duct

ions

and

other

per

form

ance

impro

vem

ents

from

its

busi

nes

sunit

s

Intr

oduct

ion

ofM

SE

and

form

atio

nof

NG

Vm

anufa

cturi

ng

cells

New

exper

ience

curv

eplusmn

crea

tion

ofle

arnin

gop

tion

1992

-199

5Som

esu

cces

ses

wit

hM

SE

exper

imen

tplusmn

cost

savin

gs

ofpound

26

million

over

the

per

iod

1989

-199

2In

trod

uct

ion

ofnew

gen

erat

ion

ofae

ro-e

ngin

esie

th

eT

rent

fam

ilyra

ise

engin

eeri

ng

and

tech

nic

alst

andar

ds

for

core

com

pon

ents

Air

craf

tdel

iver

ycy

cle

mov

esfr

omit

s19

90pea

k

Fundin

gso

ught

toex

pan

dth

efa

cility

by

addin

ga

seco

nd

cell

Fundin

gap

pro

ved

1992

and

seco

nd

cell

com

eson

stre

amin

1993

Bid

tore

ceiv

eordfA

ordmca

tegor

yst

atus

for

NG

Vm

anufa

cturi

ng

Dec

isio

nta

ken

tore

duce

dep

enden

cyon

the

net

wor

k

NG

Vdes

ignat

eda

ordfcor

eordmco

mpon

ent

by

Turb

ine

Aer

ofoi

lC

reat

ion

ofco

mpou

nd

opti

onplusmn

oppor

tunit

yfo

rordff

ollo

w-o

nordm

inves

tmen

ts19

94plusmn

cost

savin

gs

ofpound

42

million

inreg

rst

full

yea

rof

oper

atio

nfo

rse

cond

cell

Implica

tion

sfo

rth

evia

bilit

yof

som

eunit

sw

ithin

the

net

wor

kplusmn

aban

don

men

tof

net

wor

kop

tion

s19

96-1

997

Unpre

ceden

ted

surg

ein

dem

and

for

airc

raft

asec

onom

iccy

cle

mov

esou

tfr

omit

str

ough

in19

95N

etw

ork

bec

omes

capac

ity-c

onst

rain

ed

Sou

ght

appro

val

toex

pan

dth

efa

cility

by

addin

ga

thir

dce

llusi

ng

tech

nol

ogy

alre

ady

pro

ven

inse

cond

cell

Fundin

gap

pro

ved

1997

and

thir

dce

llco

mes

onst

ream

in19

98

Gro

wth

opti

oncr

eate

dT

wo-

tier

syst

emem

erged

for

NG

Vm

anufa

cturi

ngan

dca

tegor

yA

par

tsso

leso

urc

edby

NG

VM

1997

-200

1E

conom

icex

pan

sion

inN

orth

Am

eric

aco

nti

nues

tofu

elw

orld

airl

ine

gro

wth

and

num

ber

ofor

der

sin

crea

seSubst

anti

algai

ns

mad

ein

oper

atin

gper

form

ance

but

nee

dgre

ater

macrex

ibilit

yan

dto

dri

ve

dow

nle

adti

mes

Lat

est

gen

erat

ion

ofT

rent

engin

esra

ise

the

bar

for

engin

eeri

ngie

m

easu

ring

insp

ecti

ngdri

llin

gan

dm

achin

ing

Ofmacr

oadin

gce

rtai

nca

tegor

yA

par

tsto

the

net

wor

k

Sou

ght

appro

val

toex

pan

dth

efa

cility

by

addin

gtw

om

ore

cells

and

aw

eldin

gfa

cility

Fundin

gap

pro

ved

1998

Dec

isio

nm

ade

touse

stat

eof

art

mac

hin

eto

ols

rath

erth

anso

urc

efr

omth

em

arket

M

achin

eto

olte

chnol

ogy

bec

omes

pro

pri

etar

yL

ength

ens

pro

regt

win

dow

and

incr

ease

sop

tion

val

ues

Gro

wth

sw

itch

ing

and

furt

her

lear

nin

gop

tion

scr

eate

dT

echnic

alpro

ble

ms

del

ayth

edev

elop

men

tof

mac

hin

eto

ols

and

com

pute

rpro

gra

mm

ew

riti

ng

Addit

ional

cells

sched

ule

dto

com

eon

stre

amea

rly

2000

del

ayed

unti

lm

id-2

001


and decisions taken


capabilities

1021





IJOPM239

1022






capabilities

1023





IJOPM239

1024





capabilities

1025





IJOPM239

1026





capabilities

1027




IJOPM239

1028



References











capabilities

1029






















IJOPM239

1030

























capabilities

1031





















IJOPM239

1032






capabilities

1017




IJOPM239

1018
















capabilities

1019





IJOPM239

1020

Dat

esE

ven

tsD

ecis

ions

and

acti

ons

taken

Com

men

ts

1989

-199

2T

urb

ine

Aer

ofoi

lse

ekco

stre

duct

ions

and

other

per

form

ance

impro

vem

ents

from

its

busi

nes

sunit

s

Intr

oduct

ion

ofM

SE

and

form

atio

nof

NG

Vm

anufa

cturi

ng

cells

New

exper

ience

curv

eplusmn

crea

tion

ofle

arnin

gop

tion

1992

-199

5Som

esu

cces

ses

wit

hM

SE

exper

imen

tplusmn

cost

savin

gs

ofpound

26

million

over

the

per

iod

1989

-199

2In

trod

uct

ion

ofnew

gen

erat

ion

ofae

ro-e

ngin

esie

th

eT

rent

fam

ilyra

ise

engin

eeri

ng

and

tech

nic

alst

andar

ds

for

core

com

pon

ents

Air

craf

tdel

iver

ycy

cle

mov

esfr

omit

s19

90pea

k

Fundin

gso

ught

toex

pan

dth

efa

cility

by

addin

ga

seco

nd

cell

Fundin

gap

pro

ved

1992

and

seco

nd

cell

com

eson

stre

amin

1993

Bid

tore

ceiv

eordfA

ordmca

tegor

yst

atus

for

NG

Vm

anufa

cturi

ng

Dec

isio

nta

ken

tore

duce

dep

enden

cyon

the

net

wor

k

NG

Vdes

ignat

eda

ordfcor

eordmco

mpon

ent

by

Turb

ine

Aer

ofoi

lC

reat

ion

ofco

mpou

nd

opti

onplusmn

oppor

tunit

yfo

rordff

ollo

w-o

nordm

inves

tmen

ts19

94plusmn

cost

savin

gs

ofpound

42

million

inreg

rst

full

yea

rof

oper

atio

nfo

rse

cond

cell

Implica

tion

sfo

rth

evia

bilit

yof

som

eunit

sw

ithin

the

net

wor

kplusmn

aban

don

men

tof

net

wor

kop

tion

s19

96-1

997

Unpre

ceden

ted

surg

ein

dem

and

for

airc

raft

asec

onom

iccy

cle

mov

esou

tfr

omit

str

ough

in19

95N

etw

ork

bec

omes

capac

ity-c

onst

rain

ed

Sou

ght

appro

val

toex

pan

dth

efa

cility

by

addin

ga

thir

dce

llusi

ng

tech

nol

ogy

alre

ady

pro

ven

inse

cond

cell

Fundin

gap

pro

ved

1997

and

thir

dce

llco

mes

onst

ream

in19

98

Gro

wth

opti

oncr

eate

dT

wo-

tier

syst

emem

erged

for

NG

Vm

anufa

cturi

ngan

dca

tegor

yA

par

tsso

leso

urc

edby

NG

VM

1997

-200

1E

conom

icex

pan

sion

inN

orth

Am

eric

aco

nti

nues

tofu

elw

orld

airl

ine

gro

wth

and

num

ber

ofor

der

sin

crea

seSubst

anti

algai

ns

mad

ein

oper

atin

gper

form

ance

but

nee

dgre

ater

macrex

ibilit

yan

dto

dri

ve

dow

nle

adti

mes

Lat

est

gen

erat

ion

ofT

rent

engin

esra

ise

the

bar

for

engin

eeri

ngie

m

easu

ring

insp

ecti

ngdri

llin

gan

dm

achin

ing

Ofmacr

oadin

gce

rtai

nca

tegor

yA

par

tsto

the

net

wor

k

Sou

ght

appro

val

toex

pan

dth

efa

cility

by

addin

gtw

om

ore

cells

and

aw

eldin

gfa

cility

Fundin

gap

pro

ved

1998

Dec

isio

nm

ade

touse

stat

eof

art

mac

hin

eto

ols

rath

erth

anso

urc

efr

omth

em

arket

M

achin

eto

olte

chnol

ogy

bec

omes

pro

pri

etar

yL

ength

ens

pro

regt

win

dow

and

incr

ease

sop

tion

val

ues

Gro

wth

sw

itch

ing

and

furt

her

lear

nin

gop

tion

scr

eate

dT

echnic

alpro

ble

ms

del

ayth

edev

elop

men

tof

mac

hin

eto

ols

and

com

pute

rpro

gra

mm

ew

riti

ng

Addit

ional

cells

sched

ule

dto

com

eon

stre

amea

rly

2000

del

ayed

unti

lm

id-2

001


and decisions taken


capabilities

1021





IJOPM239

1022






capabilities

1023





IJOPM239

1024





capabilities

1025





IJOPM239

1026





capabilities

1027




IJOPM239

1028



References











capabilities

1029






















IJOPM239

1030

























capabilities

1031





















IJOPM239

1032




IJOPM239

1018
















capabilities

1019





IJOPM239

1020

Dat

esE

ven

tsD

ecis

ions

and

acti

ons

taken

Com

men

ts

1989

-199

2T

urb

ine

Aer

ofoi

lse

ekco

stre

duct

ions

and

other

per

form

ance

impro

vem

ents

from

its

busi

nes

sunit

s

Intr

oduct

ion

ofM

SE

and

form

atio

nof

NG

Vm

anufa

cturi

ng

cells

New

exper

ience

curv

eplusmn

crea

tion

ofle

arnin

gop

tion

1992

-199

5Som

esu

cces

ses

wit

hM

SE

exper

imen

tplusmn

cost

savin

gs

ofpound

26

million

over

the

per

iod

1989

-199

2In

trod

uct

ion

ofnew

gen

erat

ion

ofae

ro-e

ngin

esie

th

eT

rent

fam

ilyra

ise

engin

eeri

ng

and

tech

nic

alst

andar

ds

for

core

com

pon

ents

Air

craf

tdel

iver

ycy

cle

mov

esfr

omit

s19

90pea

k

Fundin

gso

ught

toex

pan

dth

efa

cility

by

addin

ga

seco

nd

cell

Fundin

gap

pro

ved

1992

and

seco

nd

cell

com

eson

stre

amin

1993

Bid

tore

ceiv

eordfA

ordmca

tegor

yst

atus

for

NG

Vm

anufa

cturi

ng

Dec

isio

nta

ken

tore

duce

dep

enden

cyon

the

net

wor

k

NG

Vdes

ignat

eda

ordfcor

eordmco

mpon

ent

by

Turb

ine

Aer

ofoi

lC

reat

ion

ofco

mpou

nd

opti

onplusmn

oppor

tunit

yfo

rordff

ollo

w-o

nordm

inves

tmen

ts19

94plusmn

cost

savin

gs

ofpound

42

million

inreg

rst

full

yea

rof

oper

atio

nfo

rse

cond

cell

Implica

tion

sfo

rth

evia

bilit

yof

som

eunit

sw

ithin

the

net

wor

kplusmn

aban

don

men

tof

net

wor

kop

tion

s19

96-1

997

Unpre

ceden

ted

surg

ein

dem

and

for

airc

raft

asec

onom

iccy

cle

mov

esou

tfr

omit

str

ough

in19

95N

etw

ork

bec

omes

capac

ity-c

onst

rain

ed

Sou

ght

appro

val

toex

pan

dth

efa

cility

by

addin

ga

thir

dce

llusi

ng

tech

nol

ogy

alre

ady

pro

ven

inse

cond

cell

Fundin

gap

pro

ved

1997

and

thir

dce

llco

mes

onst

ream

in19

98

Gro

wth

opti

oncr

eate

dT

wo-

tier

syst

emem

erged

for

NG

Vm

anufa

cturi

ngan

dca

tegor

yA

par

tsso

leso

urc

edby

NG

VM

1997

-200

1E

conom

icex

pan

sion

inN

orth

Am

eric

aco

nti

nues

tofu

elw

orld

airl

ine

gro

wth

and

num

ber

ofor

der

sin

crea

seSubst

anti

algai

ns

mad

ein

oper

atin

gper

form

ance

but

nee

dgre

ater

macrex

ibilit

yan

dto

dri

ve

dow

nle

adti

mes

Lat

est

gen

erat

ion

ofT

rent

engin

esra

ise

the

bar

for

engin

eeri

ngie

m

easu

ring

insp

ecti

ngdri

llin

gan

dm

achin

ing

Ofmacr

oadin

gce

rtai

nca

tegor

yA

par

tsto

the

net

wor

k

Sou

ght

appro

val

toex

pan

dth

efa

cility

by

addin

gtw

om

ore

cells

and

aw

eldin

gfa

cility

Fundin

gap

pro

ved

1998

Dec

isio

nm

ade

touse

stat

eof

art

mac

hin

eto

ols

rath

erth

anso

urc

efr

omth

em

arket

M

achin

eto

olte

chnol

ogy

bec

omes

pro

pri

etar

yL

ength

ens

pro

regt

win

dow

and

incr

ease

sop

tion

val

ues

Gro

wth

sw

itch

ing

and

furt

her

lear

nin

gop

tion

scr

eate

dT

echnic

alpro

ble

ms

del

ayth

edev

elop

men

tof

mac

hin

eto

ols

and

com

pute

rpro

gra

mm

ew

riti

ng

Addit

ional

cells

sched

ule

dto

com

eon

stre

amea

rly

2000

del

ayed

unti

lm

id-2

001


and decisions taken


capabilities

1021





IJOPM239

1022






capabilities

1023





IJOPM239

1024





capabilities

1025





IJOPM239

1026





capabilities

1027




IJOPM239

1028



References











capabilities

1029






















IJOPM239

1030

























capabilities

1031





















IJOPM239

1032
















capabilities

1019





IJOPM239

1020

Dat

esE

ven

tsD

ecis

ions

and

acti

ons

taken

Com

men

ts

1989

-199

2T

urb

ine

Aer

ofoi

lse

ekco

stre

duct

ions

and

other

per

form

ance

impro

vem

ents

from

its

busi

nes

sunit

s

Intr

oduct

ion

ofM

SE

and

form

atio

nof

NG

Vm

anufa

cturi

ng

cells

New

exper

ience

curv

eplusmn

crea

tion

ofle

arnin

gop

tion

1992

-199

5Som

esu

cces

ses

wit

hM

SE

exper

imen

tplusmn

cost

savin

gs

ofpound

26

million

over

the

per

iod

1989

-199

2In

trod

uct

ion

ofnew

gen

erat

ion

ofae

ro-e

ngin

esie

th

eT

rent

fam

ilyra

ise

engin

eeri

ng

and

tech

nic

alst

andar

ds

for

core

com

pon

ents

Air

craf

tdel

iver

ycy

cle

mov

esfr

omit

s19

90pea

k

Fundin

gso

ught

toex

pan

dth

efa

cility

by

addin

ga

seco

nd

cell

Fundin

gap

pro

ved

1992

and

seco

nd

cell

com

eson

stre

amin

1993

Bid

tore

ceiv

eordfA

ordmca

tegor

yst

atus

for

NG

Vm

anufa

cturi

ng

Dec

isio

nta

ken

tore

duce

dep

enden

cyon

the

net

wor

k

NG

Vdes

ignat

eda

ordfcor

eordmco

mpon

ent

by

Turb

ine

Aer

ofoi

lC

reat

ion

ofco

mpou

nd

opti

onplusmn

oppor

tunit

yfo

rordff

ollo

w-o

nordm

inves

tmen

ts19

94plusmn

cost

savin

gs

ofpound

42

million

inreg

rst

full

yea

rof

oper

atio

nfo

rse

cond

cell

Implica

tion

sfo

rth

evia

bilit

yof

som

eunit

sw

ithin

the

net

wor

kplusmn

aban

don

men

tof

net

wor

kop

tion

s19

96-1

997

Unpre

ceden

ted

surg

ein

dem

and

for

airc

raft

asec

onom

iccy

cle

mov

esou

tfr

omit

str

ough

in19

95N

etw

ork

bec

omes

capac

ity-c

onst

rain

ed

Sou

ght

appro

val

toex

pan

dth

efa

cility

by

addin

ga

thir

dce

llusi

ng

tech

nol

ogy

alre

ady

pro

ven

inse

cond

cell

Fundin

gap

pro

ved

1997

and

thir

dce

llco

mes

onst

ream

in19

98

Gro

wth

opti

oncr

eate

dT

wo-

tier

syst

emem

erged

for

NG

Vm

anufa

cturi

ngan

dca

tegor

yA

par

tsso

leso

urc

edby

NG

VM

1997

-200

1E

conom

icex

pan

sion

inN

orth

Am

eric

aco

nti

nues

tofu

elw

orld

airl

ine

gro

wth

and

num

ber

ofor

der

sin

crea

seSubst

anti

algai

ns

mad

ein

oper

atin

gper

form

ance

but

nee

dgre

ater

macrex

ibilit

yan

dto

dri

ve

dow

nle

adti

mes

Lat

est

gen

erat

ion

ofT

rent

engin

esra

ise

the

bar

for

engin

eeri

ngie

m

easu

ring

insp

ecti

ngdri

llin

gan

dm

achin

ing

Ofmacr

oadin

gce

rtai

nca

tegor

yA

par

tsto

the

net

wor

k

Sou

ght

appro

val

toex

pan

dth

efa

cility

by

addin

gtw

om

ore

cells

and

aw

eldin

gfa

cility

Fundin

gap

pro

ved

1998

Dec

isio

nm

ade

touse

stat

eof

art

mac

hin

eto

ols

rath

erth

anso

urc

efr

omth

em

arket

M

achin

eto

olte

chnol

ogy

bec

omes

pro

pri

etar

yL

ength

ens

pro

regt

win

dow

and

incr

ease

sop

tion

val

ues

Gro

wth

sw

itch

ing

and

furt

her

lear

nin

gop

tion

scr

eate

dT

echnic

alpro

ble

ms

del

ayth

edev

elop

men

tof

mac

hin

eto

ols

and

com

pute

rpro

gra

mm

ew

riti

ng

Addit

ional

cells

sched

ule

dto

com

eon

stre

amea

rly

2000

del

ayed

unti

lm

id-2

001


and decisions taken


capabilities

1021





IJOPM239

1022






capabilities

1023





IJOPM239

1024





capabilities

1025





IJOPM239

1026





capabilities

1027




IJOPM239

1028



References











capabilities

1029






















IJOPM239

1030

























capabilities

1031





















IJOPM239

1032





IJOPM239

1020

Dat

esE

ven

tsD

ecis

ions

and

acti

ons

taken

Com

men

ts

1989

-199

2T

urb

ine

Aer

ofoi

lse

ekco

stre

duct

ions

and

other

per

form

ance

impro

vem

ents

from

its

busi

nes

sunit

s

Intr

oduct

ion

ofM

SE

and

form

atio

nof

NG

Vm

anufa

cturi

ng

cells

New

exper

ience

curv

eplusmn

crea

tion

ofle

arnin

gop

tion

1992

-199

5Som

esu

cces

ses

wit

hM

SE

exper

imen

tplusmn

cost

savin

gs

ofpound

26

million

over

the

per

iod

1989

-199

2In

trod

uct

ion

ofnew

gen

erat

ion

ofae

ro-e

ngin

esie

th

eT

rent

fam

ilyra

ise

engin

eeri

ng

and

tech

nic

alst

andar

ds

for

core

com

pon

ents

Air

craf

tdel

iver

ycy

cle

mov

esfr

omit

s19

90pea

k

Fundin

gso

ught

toex

pan

dth

efa

cility

by

addin

ga

seco

nd

cell

Fundin

gap

pro

ved

1992

and

seco

nd

cell

com

eson

stre

amin

1993

Bid

tore

ceiv

eordfA

ordmca

tegor

yst

atus

for

NG

Vm

anufa

cturi

ng

Dec

isio

nta

ken

tore

duce

dep

enden

cyon

the

net

wor

k

NG

Vdes

ignat

eda

ordfcor

eordmco

mpon

ent

by

Turb

ine

Aer

ofoi

lC

reat

ion

ofco

mpou

nd

opti

onplusmn

oppor

tunit

yfo

rordff

ollo

w-o

nordm

inves

tmen

ts19

94plusmn

cost

savin

gs

ofpound

42

million

inreg

rst

full

yea

rof

oper

atio

nfo

rse

cond

cell

Implica

tion

sfo

rth

evia

bilit

yof

som

eunit

sw

ithin

the

net

wor

kplusmn

aban

don

men

tof

net

wor

kop

tion

s19

96-1

997

Unpre

ceden

ted

surg

ein

dem

and

for

airc

raft

asec

onom

iccy

cle

mov

esou

tfr

omit

str

ough

in19

95N

etw

ork

bec

omes

capac

ity-c

onst

rain

ed

Sou

ght

appro

val

toex

pan

dth

efa

cility

by

addin

ga

thir

dce

llusi

ng

tech

nol

ogy

alre

ady

pro

ven

inse

cond

cell

Fundin

gap

pro

ved

1997

and

thir

dce

llco

mes

onst

ream

in19

98

Gro

wth

opti

oncr

eate

dT

wo-

tier

syst

emem

erged

for

NG

Vm

anufa

cturi

ngan

dca

tegor

yA

par

tsso

leso

urc

edby

NG

VM

1997

-200

1E

conom

icex

pan

sion

inN

orth

Am

eric

aco

nti

nues

tofu

elw

orld

airl

ine

gro

wth

and

num

ber

ofor

der

sin

crea

seSubst

anti

algai

ns

mad

ein

oper

atin

gper

form

ance

but

nee

dgre

ater

macrex

ibilit

yan

dto

dri

ve

dow

nle

adti

mes

Lat

est

gen

erat

ion

ofT

rent

engin

esra

ise

the

bar

for

engin

eeri

ngie

m

easu

ring

insp

ecti

ngdri

llin

gan

dm

achin

ing

Ofmacr

oadin

gce

rtai

nca

tegor

yA

par

tsto

the

net

wor

k

Sou

ght

appro

val

toex

pan

dth

efa

cility

by

addin

gtw

om

ore

cells

and

aw

eldin

gfa

cility

Fundin

gap

pro

ved

1998

Dec

isio

nm

ade

touse

stat

eof

art

mac

hin

eto

ols

rath

erth

anso

urc

efr

omth

em

arket

M

achin

eto

olte

chnol

ogy

bec

omes

pro

pri

etar

yL

ength

ens

pro

regt

win

dow

and

incr

ease

sop

tion

val

ues

Gro

wth

sw

itch

ing

and

furt

her

lear

nin

gop

tion

scr

eate

dT

echnic

alpro

ble

ms

del

ayth

edev

elop

men

tof

mac

hin

eto

ols

and

com

pute

rpro

gra

mm

ew

riti

ng

Addit

ional

cells

sched

ule

dto

com

eon

stre

amea

rly

2000

del

ayed

unti

lm

id-2

001


and decisions taken


capabilities

1021





IJOPM239

1022






capabilities

1023





IJOPM239

1024





capabilities

1025





IJOPM239

1026





capabilities

1027




IJOPM239

1028



References











capabilities

1029






















IJOPM239

1030

























capabilities

1031





















IJOPM239

1032

Dat

esE

ven

tsD

ecis

ions

and

acti

ons

taken

Com

men

ts

1989

-199

2T

urb

ine

Aer

ofoi

lse

ekco

stre

duct

ions

and

other

per

form

ance

impro

vem

ents

from

its

busi

nes

sunit

s

Intr

oduct

ion

ofM

SE

and

form

atio

nof

NG

Vm

anufa

cturi

ng

cells

New

exper

ience

curv

eplusmn

crea

tion

ofle

arnin

gop

tion

1992

-199

5Som

esu

cces

ses

wit

hM

SE

exper

imen

tplusmn

cost

savin

gs

ofpound

26

million

over

the

per

iod

1989

-199

2In

trod

uct

ion

ofnew

gen

erat

ion

ofae

ro-e

ngin

esie

th

eT

rent

fam

ilyra

ise

engin

eeri

ng

and

tech

nic

alst

andar

ds

for

core

com

pon

ents

Air

craf

tdel

iver

ycy

cle

mov

esfr

omit

s19

90pea

k

Fundin

gso

ught

toex

pan

dth

efa

cility

by

addin

ga

seco

nd

cell

Fundin

gap

pro

ved

1992

and

seco

nd

cell

com

eson

stre

amin

1993

Bid

tore

ceiv

eordfA

ordmca

tegor

yst

atus

for

NG

Vm

anufa

cturi

ng

Dec

isio

nta

ken

tore

duce

dep

enden

cyon

the

net

wor

k

NG

Vdes

ignat

eda

ordfcor

eordmco

mpon

ent

by

Turb

ine

Aer

ofoi

lC

reat

ion

ofco

mpou

nd

opti

onplusmn

oppor

tunit

yfo

rordff

ollo

w-o

nordm

inves

tmen

ts19

94plusmn

cost

savin

gs

ofpound

42

million

inreg

rst

full

yea

rof

oper

atio

nfo

rse

cond

cell

Implica

tion

sfo

rth

evia

bilit

yof

som

eunit

sw

ithin

the

net

wor

kplusmn

aban

don

men

tof

net

wor

kop

tion

s19

96-1

997

Unpre

ceden

ted

surg

ein

dem

and

for

airc

raft

asec

onom

iccy

cle

mov

esou

tfr

omit

str

ough

in19

95N

etw

ork

bec

omes

capac

ity-c

onst

rain

ed

Sou

ght

appro

val

toex

pan

dth

efa

cility

by

addin

ga

thir

dce

llusi

ng

tech

nol

ogy

alre

ady

pro

ven

inse

cond

cell

Fundin

gap

pro

ved

1997

and

thir

dce

llco

mes

onst

ream

in19

98

Gro

wth

opti

oncr

eate

dT

wo-

tier

syst

emem

erged

for

NG

Vm

anufa

cturi

ngan

dca

tegor

yA

par

tsso

leso

urc

edby

NG

VM

1997

-200

1E

conom

icex

pan

sion

inN

orth

Am

eric

aco

nti

nues

tofu

elw

orld

airl

ine

gro

wth

and

num

ber

ofor

der

sin

crea

seSubst

anti

algai

ns

mad

ein

oper

atin

gper

form

ance

but

nee

dgre

ater

macrex

ibilit

yan

dto

dri

ve

dow

nle

adti

mes

Lat

est

gen

erat

ion

ofT

rent

engin

esra

ise

the

bar

for

engin

eeri

ngie

m

easu

ring

insp

ecti

ngdri

llin

gan

dm

achin

ing

Ofmacr

oadin

gce

rtai

nca

tegor

yA

par

tsto

the

net

wor

k

Sou

ght

appro

val

toex

pan

dth

efa

cility

by

addin

gtw

om

ore

cells

and

aw

eldin

gfa

cility

Fundin

gap

pro

ved

1998

Dec

isio

nm

ade

touse

stat

eof

art

mac

hin

eto

ols

rath

erth

anso

urc

efr

omth

em

arket

M

achin

eto

olte

chnol

ogy

bec

omes

pro

pri

etar

yL

ength

ens

pro

regt

win

dow

and

incr

ease

sop

tion

val

ues

Gro

wth

sw

itch

ing

and

furt

her

lear

nin

gop

tion

scr

eate

dT

echnic

alpro

ble

ms

del

ayth

edev

elop

men

tof

mac

hin

eto

ols

and

com

pute

rpro

gra

mm

ew

riti

ng

Addit

ional

cells

sched

ule

dto

com

eon

stre

amea

rly

2000

del

ayed

unti

lm

id-2

001


and decisions taken


capabilities

1021





IJOPM239

1022






capabilities

1023





IJOPM239

1024





capabilities

1025





IJOPM239

1026





capabilities

1027




IJOPM239

1028



References











capabilities

1029






















IJOPM239

1030

























capabilities

1031





















IJOPM239

1032





IJOPM239

1022






capabilities

1023





IJOPM239

1024





capabilities

1025





IJOPM239

1026





capabilities

1027




IJOPM239

1028



References











capabilities

1029






















IJOPM239

1030

























capabilities

1031





















IJOPM239

1032






capabilities

1023





IJOPM239

1024





capabilities

1025





IJOPM239

1026





capabilities

1027




IJOPM239

1028



References











capabilities

1029






















IJOPM239

1030

























capabilities

1031





















IJOPM239

1032





IJOPM239

1024





capabilities

1025





IJOPM239

1026





capabilities

1027




IJOPM239

1028



References











capabilities

1029






















IJOPM239

1030

























capabilities

1031





















IJOPM239

1032





capabilities

1025





IJOPM239

1026





capabilities

1027




IJOPM239

1028



References











capabilities

1029






















IJOPM239

1030

























capabilities

1031





















IJOPM239

1032





IJOPM239

1026





capabilities

1027




IJOPM239

1028



References











capabilities

1029






















IJOPM239

1030

























capabilities

1031





















IJOPM239

1032





capabilities

1027




IJOPM239

1028



References











capabilities

1029






















IJOPM239

1030

























capabilities

1031





















IJOPM239

1032




IJOPM239

1028



References











capabilities

1029






















IJOPM239

1030

























capabilities

1031





















IJOPM239

1032



References











capabilities

1029






















IJOPM239

1030

























capabilities

1031





















IJOPM239

1032






















IJOPM239

1030

























capabilities

1031





















IJOPM239

1032

























capabilities

1031





















IJOPM239

1032





















IJOPM239

1032

a real options approach to managing resources and capabilities

Documents