Formula Facilities Framework
A strategy for competing in fragmented industries
The Formula Facilities Framework provides a strategy for competing in fragmented industries. This framework involves designing a standard facility, whether it be a plant or a service establishment, and polishing to a science the process of constructing and putting the facility into operation at minimum cost.
- Design a standard facility
- Polish to a science the process of constructing and putting the facility into operation at minimum cost
- Focus on achieving above-average results, rather than seeking dominance
- Be disciplined in implementing strategic choices
- Monitor and adjust the strategy as needed
- Analyze the Industry's StructureUnderstand the industry's characteristics, including the number of competitors, bargaining power, and profitability. Identify the causes of fragmentation and the key success factors in the industry.Pro tipUse tools such as the Five Forces Framework to analyze the industry's structureWarningFailure to understand the industry's structure can lead to ineffective strategies
- Design a Standard FacilityDesign a standard facility, whether it be a plant or a service establishment, that can be replicated at multiple locations. Polish to a science the process of constructing and putting the facility into operation at minimum cost.Pro tipUse tools such as the Process Innovation Framework to design a standard facilityWarningFailure to design a standard facility can lead to inefficiencies and increased costs
- Focus on Achieving Above-Average ResultsFocus on achieving above-average results, rather than seeking dominance. This may involve specializing in a particular product or customer segment, or developing a unique value proposition.Pro tipUse tools such as the Focus Strategy Framework to develop a focus strategyWarningFailure to focus on achieving above-average results can lead to a lack of direction and focus
- Be Disciplined in Implementing Strategic ChoicesBe disciplined in implementing strategic choices. This may involve developing a clear and consistent strategy, and avoiding the temptation to deviate from the strategy in response to short-term pressures.Pro tipUse tools such as the Commitment Framework to develop a disciplined approach to strategy implementationWarningFailure to be disciplined in implementing strategic choices can lead to a lack of direction and focus
- Monitor and AdjustMonitor the industry's structure and competitive forces, and adjust the strategy as needed. This may involve continuously gathering market intelligence, and being willing to pivot the strategy in response to changes in the industry.Pro tipUse tools such as the Market Signals Framework to monitor the industry's structure and competitive forcesWarningFailure to monitor and adjust the strategy can lead to a lack of responsiveness to changes in the industry
Fleetwood, Inc., a mobile home producer, has successfully implemented a formula facilities strategy, which involves designing a standard facility and polishing to a science the process of constructing and putting the facility into operation at minimum cost.
The framework was developed by Michael E. Porter, a renowned business strategist. Porter recognized that fragmented industries pose unique challenges for businesses, and that traditional strategies may not be effective in these environments. He developed the Formula Facilities Framework to provide businesses with a structured approach to competing in fragmented industries.