We start by reviewing the main idea of using operations to create value (and the VCAP framework). We briefly discuss the key questions and introduce the main firm we are going to use (the Mafia restaurant chain). We discuss the key idea of measuring financial return (EVA and ROIC). Then we introduce the main tool, the ROIC tree. We apply the ROIC tree to the firm and discuss the steps: constructing the tree, identifying metrics, assessing impact (sensitivity analysis), building a growth plan and communicating the narrative.

Module 1 introduced the capability view of operations as the natural link between competitive strategy and operations. In this module we will investigate this link in greater depth and use the capability view to assess the competitive risk the firm faces. A good operations strategy clearly stipulates which capabilities are critical and which are of secondary importance. One can't have it all: operational capabilities exhibit trade-offs and superior performance requires making choices. But where do these trade-offs come from and how can operations shape them to our competitive advantage? That is the subject of this module. We will outline the main challenge; develop the framework, and the use a simple case to illustrate it.

In the previous modules, we introduced the VCAP framework for operations strategy and studied value and capabilities. We learned how to invest assets in the face of uncertain demand. Now we turn our attention to structuring operational processes. In this module, we will analyze two essential components of operations strategy: the questions of who should perform an activity or process in the value chain, and how we should manage the supply relationship.

Modules 1 through 3 of the course introduced the VCAP framework for operations strategy and outlined the main diagnostic tools. We discussed how operations create value V and the role of capabilities in a competitive environment. In this module, we adopt the resource view and turn our attention to the assets that comprise the operating system of the firm. We start with the capacity sizing and investment decision in this chapter. After discussing the key trade-offs and challenges in a capacity strategy, we study how uncertainty impacts capacity valuation. Maximizing this value suggests guidelines on how we can tailor an operation's capacity sizing decision.