Abstract
A challenge to management is creating superior values for its customers and improving financial performances. This paper expresses the customer-oriented perspective of a company in terms of its competitive priorities. It builds on the House of Quality (a customer requirements planning matrix) by developing a House of Strategy for translating the improvement needs of a company's business objectives into relative importance of its competitive priorities. A mean square error (MSE) criterion, supporting the selection of vital competitive priorities to be improved, is suggested. This divides a group of items (here a set of competitive priorities) into two groups: vital few and trivial many. The partition minimizes the overall MSE and by so doing delineates two homogeneous groups. The method is implemented in companies from three industry types. It reveals their different HOS structures and thus provides useful information on the vital competitive priorities to be improved as dictated by their respective business objectives and internal capabilities.
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