Strategic Action Plan Process and Workshop
Strategic Action Plan Process and Workshop Head Office: Level 2, 120 Pacific Highway, ST LEONARDS Ph: (02) 9461 0430 Fax: (02) 9461 0429 Website: www.cegroup.com.au CEG Strategic Action Plan Process Flowchart OVERVIEW NOW WHERE HOW ACTION Management Buy-In Interviews Vision / Destination Statement Critical Issues People First Business Analysis Mission Strategies Leadership Pestlied Purpose Initiatives – Action Plans Strategic Mapping Strategic SWOT Core Values Strategic Accountabilities Corrective Action Paradigm Shift Analysis Objectives Budgets Middle Mgt / Team Leader Magic Wand List/ Whinge List Core Business Statement Strategy Map High Performance Teams Sustainable Competitive Advantage Balanced Scorecard KPI’S/Initiatives Emerging Issues Growth Strategies Communication Plan Reporting Performance Management Ranking Issues Scenario Planning Situation Review Strategic Plan Business Plan Implementation Module One – What is Strategy? What is Strategy? To achieve superiors profitability and value to customers Competition is about a relative advantage and is dependent on differentiation Operational effectiveness is essential but is not a replacement for strategy Defination A business plan is a formal statement of a set of business goals, the reasons why they are believed attainable, and the plan for reaching those goals. It may also contain background information about the organization or team attempting to reach those goals. For-profit business plans typically focus on financial goals, such as profit or creation of wealth. Business plans may be internally or externally focused. Externally focused plans target goals that are important to external stakeholders, particularly financial stakeholders. They typically have detailed information about the organization or team attempting to reach the goals Internally focused business plans target intermediate goals required to reach the external goals. They may cover the development of a new product, a new service, a new IT system, a restructuring of finance, the refurbishing of a factory or a restructuring of the organization. An internal business plan is often developed in conjunction with a balanced scorecard or a list of critical success factors Business plans that identify and target internal goals, but provide only general guidance on how they will be met are called strategic plans. Defination Strategic planning is an organization's process of defining its strategy, or direction, and making decisions on allocating its resources to pursue this strategy, including its capital and people. Various business analysis techniques can be used in strategic planning, including SWOT analysis (Strengths, Weaknesses, Opportunities, and Threats ) and PEST analysis (Political, Economic, Social, and Technological analysis) or STEER analysis (Socio-cultural, Technological, Economic, Ecological, and Regulatory factors) and EPISTEL (Environment, Political, Informatic, Social, Technological, Economic and Legal). Strategic planning is the formal consideration of an organization's future course. All strategic planning deals with at least one of three key questions: "What do we do?" "For whom do we do it?" "How do we excel?“ In business strategic planning, the third question is better phrased "How can we beat or avoid competition?". Our point of differentiation What is Strategic Thinking? Anticipation; reading the game Big picture; knowing what to do Conscious and deliberate; leadership “I skate to where I think the puck will be.” Wayne Gretsky Planned versus Emergent Strategy Formal Oncea-year Planning & Budgeting What happens in practice will always be some blend of what is intended and what emerges along the way - Mintzberg (1994) Adopted Strategy Unrealised Strategy Developed Continuously as New Issues Arise Emergent Strategy Objectives & Benefits Of Strategic Plans Objective Improve Shareholder Value Revenue Growth Strategies Increase value to customer Grow new business in existing and new customers Productivity Strategy Improve cost structure Improve use of assets Revenue Growth Strategies Increase Revenue Better Margins and Product Mix Services Existing Markets New Markets Existing Products / Services New Products / Services Market Penetration Product Expansion Existing products / services in existing markets New products in existing markets Market Expansion Diversification Existing products in new markets New products in new markets Six Sigma – A measure of productivity variation THE COST OF QUALITY Sigma Defects per Million Level Opportunities Cost of Quality 2 308,537 (Non-competitive companies) Not applicable 3 66,807 25 – 40% of sales 4 6,212 (Industry average) 15 – 25% of sales 5 233 5 – 15% of sales 6 3.4 (World class) <1% of sales Each sigma shift provides a 10% net income improvement Source: Six Sigma, M Harry & R Schroeder Keys to Success 1. People First 5. Teams 2. Strategy 4. Operational Innovation 3. Sales (Revenue Growth) People First “Right people on the bus, wrong people off the bus and the right people in the right seats” Jim Collins “Good to Great” please reference PRINTERS Strategy 1. Differentiate 2. Customers, Customers, Customers! Focus 3. Increase Revenue 4. Operational Efficiency Strategy “Obstacles are what you see if you lose sight of the goal” Teams and Training Teams are the foundation of High Performance Companies – Try as you might, you cannot get to high performance without them. Now – Where? – How? Business Plan Critical Issues Strategies Action Plans 60 – 100 Issues SWOT/PEST Situational Review Strategic Planning Workshop Vision Business Statement Objective Prioritise Issues 1 Page Plan Situational Review NOW Magic Wand List / “Whinge List” Management Interviews PESTLIED STEER Strategic SWOT Strategic Marketing Business Analysis The Strategic Plan WHERE Vision / Destination Statement Mission Core Values Purpose Core Business Statement Sustainable Competitive Advantage Position the Product Portfolio Growth Strategies Defining Critical Issues Scenario Planning Business Plan HOW Critical Issues Strategies Initiatives – Action Plans Strategic Accountabilities Budgets Strategy Map Balanced Scorecard KPIs / Initiatives Communication Plan Implementation ACTION People First Leadership Strategy Mapping Corrective Action Middle Management / Team Leader High Performance Teams Emerging Issues Reporting Performance Management Module Three – Now – Situational Review Situational Review NOW Magic Wand List / “Whinge List” Management Interviews PESTLIED Strategic SWOT Review current business documentation Marketing and sales plans Business plans ( last year) Employee & customer surveys Financials/Budgets Research Stretch Brainstorm (Magic Wand) If you did not have to worry about time or money, what would I change about my business. My business “issues list” Management Interviews Purpose of interviews: The easiest way to identify the key/critical issues in a business is to undertake a series of interviews of between 30 minutes – 1 hour duration across the organisation using our diagnostic questionnaire. Within 2 or 3 days you will have identified everything you need to know about the business including culture, the politics, priorities, opportunities, issues, inhibitors etc. Interview a cross section of individuals at all levels – Senior management, middle/line mangers, supervisory level and some frontline staff Ensure you interview senior managers of marketing, sales, operations, technology, HR, finance, innovation/product, etc Ensure confidentiality ( consider using an internal/external consultant) typically undertake a minimum of 8 and maximum of 30 interviews Use Diagnostic General Questionnaire attached Summarise issues into Issue List Template and complete Diagnostic Questionnaire Survey Identify issues into their appropriate category – management, marketing, sales, operations etc. Please note an issue can be in more than one category Economical Technical Political PESTLIED Model – What’s happening in the world around us? (Source: Annual Reports) Social Legal ORGANISATION Demographic International Environmental SWOT STRENGTHS WEAKNESSES Build Greater Capability Fix or Improvise Assess Internal Capabilities Internal Summarise from questionaire Respond Cautiously Consider Responses Assess External Environment OPPORTUNITIES External THREATS Module Four – Where – Strategic Plan The Strategic Plan WHERE Vision Mission/Purpose Core Values Core Business Statement Sustainable Competitive Advantage Porters 5 Forces Customer Value Proposition Growth Strategies – Objectives & Goals Defining Critical Issues Definitions Vision: Defines the desired or intended future state of a specific organization or enterprise in terms of its fundamental objective and/or strategic direction. Vision is a long term aim, a view of how the organization would like the world in which it operates to be. Mission: Defines the fundamental purpose of an organization or an enterprise, basically describing why it exists. A corporate Mission can last for many years, or for the life of the organization. It is not an objective with a timeline, but rather the overall goal that is accomplished over the years as objectives are achieved that are aligned with the corporate mission. Values: Beliefs that are shared among the stakeholders of an organization. Values drive an organization's culture and priorities. Planning Tip Values include the stated values and the “real values”. Real values can be described as “what really happens here” . The “real values” unless understood can impact a businesses ability to implement its plan Vision, Mission, Values Walt Disney Example Purpose To make people happy Core Values No cynicism Nurturing and promulgation of “wholesome” American values Creativity, dreams and imagination Fanatical attention to consistency and detail Preservation and control of the Disney magic Mission Disney’s overriding objective is to create shareholder value by continuing to be the world’s premiere entertainment company from a creative strategic and financial standpoint. Culture of one of the World’s Leading Technology Companies Quality Team Open Communication Stretch Goals Teamwork Empowerment Trust Frugality No Technology Religion Drive Change Customer Business Statement Example The CORE PROCESS: We market, design and construct.. The PRODUCT: quality new homes.. The CUSTOMER: for high net worth individuals. Up market project home builder Sustainable Competitive Advantage DEFINITION: The point of difference or winning edge that will enable you to beat others in the same business. Defination Competitive advantage is, in very basic words, a position a firm occupies against its competitors. According to Michael Porter, the three methods for creating a sustainable competitive advantage are through: 1. Cost leadership - Cost advantage occurs when a firm delivers the same services as its competitors but at a lower cost; [1] 2. Differentiation - Differentiation advantage occurs when a firm delivers greater services for the same price of its competitors. They are collectively known as positional advantages because they denote the firm's position in its industry as a leader in either superior services or cost; [2] 3. Focus (economics) - A focused approach requires the firm to concentrate on a narrow, exclusive competitive segment (market niche), hoping to achieve a local rather than industry wide competitive advantage. There are cost focus seekers, who aim to obtain a local cost advantage over competition and differentiation focuser, who are looking for a local difference. [3] Many forms of competitive advantage cannot be sustained indefinitely because the promise of economic rents invites competitors to duplicate the competitive advantage held by any one firm. A firm possesses a sustainable competitive advantage when its value-creating processes and position have not been able to be duplicated or imitated by other firms, [4]. Sustainable competitive advantage results, according to the resource-based view theory in the creation of above-normal (or supranormal) rents in the long run.. The primary factors of competitive advantage are innovation, reputation and relationships. Competitive advantage occurs when a organization acquires or develops an attribute or combination of attributes that allows it to outperform its competitors. These attributes can include access to natural resources, such as high grade ores or inexpensive power, or access to highly trained and skilled personnel human resources. New technologies such as robotics and information technology either to be included as a part of the product, or to assist making it Discipline of Market Leaders The idea is to be excellent at one and very good at the other two !!!! Operational Excellence Price Consistent Quality Speed Customer Intimacy Service Relationship Flexibility Product leadership Features Innovation Speed to Market Adapted from Kaplan & Norton (2000) Stuck In The Middle PRICE High Volume Low Margin QUALITY High Margin Low Volume Competitive Advantage Hyundai Sustainable Competitive Advantage Marketing Strategy Operations Strategy Innovation Strategy Human Resource Strategy Financial Strategy BMW Competitive Advantage Exercise Hyundai ( price & volume) BMW /Mercedes ( quality) Marketing Market on TV and mass newspapers to their their age segments Market in business magazines, prestige events, selective TV shows and CRM Operations Located in low cost countries with high volume highly mechanised production Germany is benchmark & replicate in South Africa, USA highly mechanised production Innovation Copy Lead innovation Human Resource Strategy Low cost with selective areas of expertise Highly qualified workforce – engineers etc Finance Lowest cost Huge innovation budget – lead the world Step 2: Sustainable Competitive Advantage DEVELOP YOUR SCA VALUE TO CUSTOMERS High 10 5 Low 0 5 10 High ABILITY TO BEAT COMPETITORS Step 3: Sustainable Competitive Advantage TOP 5 ITEMS 1. 2. 3. 4. 5. PERVASIVENESS SCORE ___________________ ___________________ ___________________ ___________________ ___________________ ___________________ ___________________ ___________________ ___________________ ___________________ How will you WIN? Use attached Success Factors Template A simple way to think about what is your Sustainable Competitive Advantage Step 1 ITEMS THAT ARE CRITICAL TO THE SUCCESS OF YOUR BUSINESS 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. ___________________ ___________________ ___________________ ___________________ ___________________ ___________________ ___________________ ___________________ ___________________ ___________________ 11. ___________________ 12. ___________________ 13. ___________________ 14. ___________________ 15. ___________________ 16. ___________________ 17. ___________________ 18. ___________________ 19. ___________________ 20. ___________________ Porter’s 5 Forces Nature of Competition Potential new Entrant Threat of Bargaining power new entrants of buyers Industry competitors Suppliers Buyers Rivalry among existing firms Bargaining power Threat of of suppliers substitute products Substitutes Source: Michael E Porter Competitive Advantage: Creating and Sustaining Superior Performance Free Press 1985 Porters 5 Forces The Customer Value Proposition Private Sector What Benefits Are We Offering to Customers? Product &&Service Product ServiceAttributes Attributes + Image Image + Relationship Relationship • Price • Brand • Empathy • Features • Status • Personal • Build and Dynamic Quality • Reputation • Membership • Accessibility and Convenience • Intimacy • Speed and Consistency • Self-Managed and Reach • Error-Free The challenge is to identify what • Safety each customer segment prefers • Comfort • Choice and Flexibility and to deliver those preferences. Strategy Canvas Example The Strategy Canvas of the Short-Haul Airline Industry high Other Airlines Offerings Car Southwest low lounges seating choices meals price hub connectivity Factors Of Competition friendly service speed frequent departures See reference page Case Study - Southwest Airlines No meals No seat assignments Frequent, reliable departures 15 - minute gate turnarounds Lean, highly productive ground & gate crews High compensation of employees Flexible union contracts High level of employee stock ownership Limited passenger service Limited use of travel agents Automatic ticketing machines High aircraft utilisation No baggage transfers No connections with other airlines Standardised fleet of 737 aircraft Short-haul, point-to-point routes between midsize cities and secondary airports Very low ticket prices “Southwest the low-fare airline” Porter’s Activity Map Source: Porter on Competition Positioning Frequent, reliable departures The positioning of Southwest is multiple in the sense that it is serving part of the needs of some customers (ie. getting them to the target city at a convenient time) who use other airlines, whilst it may be serving all of the needs of other customers who can only pay low fares and are not fussed about landing at a secondary airport. If I had to pick it I would say that the positioning is a mixture of Variety and Access-based positioning. It is broadly targeted in that it ignores the more idiosyncratic needs of particular customer groups. (The Model T Ford of air travel!) Standardised fleet of 737 aircraft Short-haul, point-to-point routes between midsize cities and secondary airports Very low ticket prices “Southwest the low-fare airline” Leunig View Trade-offs No meals No seat assignments Limited passenger service Limited use of travel agents No baggage transfers No connections with other airlines Standardised fleet of 737 aircraft Short-haul, point-to-point routes between midsize cities and secondary airports Very low ticket prices Leunig View Enabling Strategies No meals No seat assignments Frequent, reliable departures 15 - minute gate turnarounds Limited passenger service Limited use of travel agents No baggage transfers No connections with other airlines Standardised fleet of 737 aircraft Short-haul, point-to-point routes between midsize cities and secondary airports Lean, highly productive ground & gate crews High compensation of employees Flexible union contracts High level of employee stock ownership Automatic ticketing machines High aircraft utilisation Leunig View Objectives/Goals WHAT ARE THE KEY OBJECTIVES YOU ARE TARGETTING? 1. 2. 3. 4. 5. 6. 01/02 02/03 03/04 04/05 05/06 __________________________________________ __________________________________________ __________________________________________ __________________________________________ __________________________________________ __________________________________________ Module Five – How – Business Plan Business Plan HOW Critical Issues Strategies Initiatives – Action Plans Strategic Accountabilities – Who When Budgets – how much Balanced Scorecard & Strategy Map Measurements & KPIs What are the critical issues and how do we determine them? Critical Issues: Critical issues are issues identified that will impact a businesses ability to implement its strategy. These issues cover all areas/processes of the business plus culture, politics, customers, suppliers. In a business planning context they all need to be addressed for the following reasons 1. 2. 3. They are interlinked: Interconnectivity is a concept that can be summarized as that all parts of a system interact with and rely on one another simply by the fact that they occupy the same system, and that a system is difficult or sometimes impossible to analyze through its individual parts considered alone. Prioritisation: Once all the critical issues have been identified and in the “How” part of the business plan we describe how to address them i.e.. critical issue (CI)>strategy to address CI > Action Plan > Who > When > How Much > Measures > Links to other CI’s, we can then determine the priority Determining the critical issues allows one to address resourcing and budgetary issues i.e. We do not have enough recourses or money to address all the CI , which ones go first, how do we sequence Determining critical issues Step 1: Take the issues list compiled from management and staff questionnaires and list in category/process i.e. Management, marketing etc Review the list of issues in each category to determine critical issues – remember there will be several issues that are similar that identify an issue/theme identified by several people through the questionnaire What are the critical issues and how do we determine them? ( continued) Determining critical issues Step 1: Take the issues list compiled from management and staff questionnaires and list in category/process i.e. Management, marketing etc Step 2: Review the list of issues in each category to determine critical issues – remember there will be several issues that are similar that identify an issue/theme identified by several people through the questionnaire Step 3: List in Critical issue summary Exercise: Take issue list template and work out what the critical issues are Planning Tip There are normally 2 or 3 Critical Issues per Category Critical Issues Exercise Answers Management Brand & Marketing Senior job roles Bringing on & empowering middle management Review organisational structure of x division Competitor reviews Brand & marketing strategy review Lack of penetration in x segment Sales Operations Leveraging sales & marketing across the channel Develop the sales culture Sales Strategy Lack of sales process Key account management Leverage our resources File management, protocol & storage Review and update our processes in line with new technology Project Management of IT integration Supply chain review (printing, telco, stationary, freight/couriers) Making the key supplier relationship work effectively Gross Margin Critical Issues Exercise answers Finance Innovation Review general ledger requirements Review management reporting Early warning key performance indicators Cash and cash management Shareholder communication Review key supplier reporting Quantify capital requirements going forward Review how we innovate Develop an innovation culture Human Resources Technology Career Path Development HR Job Role clarification and interaction with managers Communication Look at High Performance Team Process Training (team training, project mgt, leadership, HR training, sales & key account mgt, KPI training, technology, mentoring) Smooth implementation of new technology SAP Look at our IT resource (internal vs. Outsourcing) Printer, copier & outsourcing / productivity Intranet Server Critical Issues Management 1. 1. Sales / Channel Competitors Marketing 1. 1. Customers Suppliers Critical Issues Technology 1. Culture Human Resources 1. Operations 1. 1. Innovation Finance Critical Issue Action Plan Template Critical Issue Action Plan Critical Issue Description: Strategy: Action Plans: Action 1 2 3 4 Who: When: How Much: How to measure the results: Comments Example Critical Issue/Action Plan NO ISSUE 1.1 Management team development STRATEGY / ACTIONS ISSUE: The business plan calls for 25% growth over the next 3years. We need to develop a top management team capable of operating with more complexity in a challenging enviroment STRATEGY: We need to review HO capabilities and resourcing requirements for the next 3 years and determine the capabilities required to run this size business and when should we be recruiting and or developing internal staff. The same would apply for middle managers and supervisors ACTIONS: 1. Eight of the top 10 key roles have been filled 2. Communicate the business plan in 1 or 2 day offsite and get others input – include leadership development program on second d ay. 3. Allocate action plans to members of the team as a way of testing and developing them 4. Develop and or source leadership and skill programs for all staff including coaching, effective communication and working as a team WHO: CEO & HR Director WHEN: March 2010 COST: $55,000 Benefits of a Business Plan Lead to better management and superior business performance Help you win the war against your competitors Lead to better decision making Result in better management Offset uncertainty brought about change Lead to better control (keeping the business ‘on track’) Help people work smarter Help to build confidence about the business Help to integrate personal and business goals Enhance any funding needs Improve efficiency Help identify emerging problems and threats Facilitate the coordination of work activities Increase the focus on results Put you in charge of your business Operational and Strategic Budgeting Manage Strategically Strategic Initiatives Enhancement 10% 25% Maintenance Improve Operating Efficiency & Effectiveness Operations 65% Infrastructure Why Is Strategy Execution So Difficult? The Vision Barrier Strategy is not understood by those who must implement it Only 5% of the work force understands the strategy Only 25% of managers have incentives linked to strategy The People Barrier Personal goals, incentives and competencies are not linked to strategy STRATEGY The Management Barrier Management systems are designed for operational control and little time is spent on strategy 85% of executive teams spend less than one hour per month discussing strategy The Operational Barrier 60% of organizations don’t Budgeting process is separated from strategic planning link budgets to strategy Module Six – How - Implementation Implementation ACTION People First Leadership Balanced Scorecard/Strategy Mapping Corrective Action Middle Management / Team Leader High Performance Teams Emerging Issues Reporting Performance Management Balanced Scorecard - Strategy Maps “The formulation of great strategies is an art, and it will always remain so. But the description of strategy should not be an art. If people can describe strategy in a more disciplined way, they will increase the likelihood of its successful implementation.” Kaplan & Norton Definition From Wikipedia, the free encyclopedia The Balanced Scorecard (BSC) is a strategic performance management tool for measuring whether the smaller-scale operational activities of a company are aligned with its larger-scale objectives in terms of vision and strategy. By focusing not only on financial outcomes but also on the operational, marketing and developmental inputs to these, the Balanced Scorecard helps provide a more comprehensive view of a business, which in turn helps organizations act in their best long-term interests. Organizations were encouraged to measure, in addition to financial outputs, those factors which influenced the financial outputs. For example, process performance, market share / penetration, long term learning and skills development, and so on. The underlying rationale is that organizations cannot directly influence financial outcomes, as these are "lag" measures, and that the use of financial measures alone to inform the strategic control of the firm is unwise. Organizations should instead also measure those areas where direct management intervention is possible. In so doing, the early versions of the Balanced Scorecard helped organizations achieve a degree of "balance" in selection of performance measures. In practice, early Scorecards achieved this balance by encouraging managers to select measures from three additional categories or perspectives: "Customer," "Internal Business Processes" and "Learning and Growth.“ Strategy Maps: measures are selected based on a set of "strategic objectives" plotted on a "strategic linkage model" or "strategy map With this modified approach, the strategic objectives are distributed across the four measurement perspectives, so as to "connect the dots" to form a visual presentation of strategy and measures. To develop a strategy map, managers select a few strategic objectives within each of the perspectives, and then define the cause-effect chain among these objectives by drawing links between them. A balanced scorecard of strategic performance measures is then derived directly from the strategic objectives. This type of approach provides greater contextual justification for the measures chosen, and is generally easier for managers to work through. The Balanced Scorecard Strategy Map Kaplan and Norton Financial Perspective Improve Shareholder Value Revenue Growth Strategy Build the franchise Customer Perspective Customer Value Proposition Internal Process Perspective Productivity Strategy Increase value to customers Improve cost structure Improve use of assets Product Leadership Customer Intimacy Operational Excellence Process No 1 New Product Development Learning & Growth Perspective Process No 2 Brand Development Employee competencies Process No 3 Retail & Outlet Management Technology Process No 4 Operations Corporate culture Components of a Balanced Scorecard Strategy Map THEME Customer Perspective Financial Internal Internal Perspective Learning Perspective Measures Targets F1 - Improve Returns F2 - Broaden Revenue Mix F3 - Reduce Cost Structure Deposit Service Cost Change -5% Global Re-Engineers C1 - Increase Customer Satisfaction With Our Products & People Share of Segment 20% Sales & marketing Reorganization & Training C2 - Increase Satisfaction “After the Sale” Customer Retention 95% I1 - Understand Our Customers I2 - Create Innovative Products New Product Revenue 10% I3 - Cross-Sell Products Cross-Sell Ratio 9% I4 - Shift Customers to CostEffective Channels I5 - Minimize Operational Problems I6 - Responsive Service Channel Mix Change TBD Service Error Rate <1% Request Fulfillment Time <2 days L1 - Develop Strategic Skills L2 - Provide Strategic Info L3 - Align Personal Goals Skills Coverage Employee Satisfaction Revenue per Employee 15% +10% Initiatives Return on Investment Revenue Growth Custome r Financial Perspective Strategic Objectives Learning THEME Scorecard 100% 80% Finance 2000 QFD Project Customer Database Global Service Training Program HRMS Knowledge Management System Financial Outcomes Customer Outcomes Process Drivers Learning / Development / Technology Drivers What A Good Scorecard Looks Like Mobil NMA&R’s Strategy Map (Kaplan & Norton (2000), The Strategy-Focused Organization) Increase ROCE to 12% Financial Perspective • ROCE • Net Margin (vs. Industry) Revenue Growth Strategy New Sources of Nongasoline Revenue Increase Customer Profitability through Premium Brands • Nongasoline Revenue and Margin • Volume vs. Industry • Premium Ratio Become Industry Cents Leader Basic Mystery Shopper • Clean Rating • Share of • Safe segment • Quality Product • Trusted Brand Internal Perspective • Cash Flow “Win-Win Dealer Relations” Differentiators Speedy Purchase Friendly, Helpful Employees “Build the Franchise” “Increase Customer Value” Create Nongasoline Products & Services Understand Consumer Segments • New Product ROI • New Product Acceptance Rate • Share of Target Segment Best-in-Class Franchise Teams More Consumer Products Recognize Loyalty Help Develop Business Skills “Achieve Operational Excellence” Improve Hardware Performance On Spec On Time • Perfect Orders • Dealer Profit Growth • Dealer Satisfaction “Be a Good Neighbor” Understand Consumer Segments • Yield Gap • Inventory Levels • Unplanned Downtime • Run-out Rate • Dealer Quality Rating Learning & Growth Perspective Maximize Use of Existing Assets • Cash Expense (Cost per Gallon) vs. Industry “Delight the Consumer” Customer • Perspective Productivity Strategy Improve Environmental, Health & Safety • Environmental Incidents • Safety Incidents Industry Cost Leader • Activity Cost vs. Competition A Motivated and Prepared Workforce Climate for Action • Aligned • Personal Growth Competencies • Functional Excellence • Leadership Skills • Integrated View Technology • Process Improvement • Y2K • Personal Scorecard • Employee Feedback • Strategic Skill Coverage Ratio • Systems Milestones Mobil NMA&R’s Balanced Scorecard (Kaplan & Norton [2000], The Strategy-Focused Organization) Strategic Themes Strategic Objectives Strategic Measures • • • • • • • ROCE Cash Flow Net Margin Rank (vs. Competition) Full Cost per Gallon Delivered (vs. Competition) Volume Growth Rate vs. Industry Premium Ratio Non-gasoline Revenue and Margin Financial Financial Growth F1 Return on Capital Employed F2 Existing Asset Utilisation F3 Profitability F4 Industry Cost Leader F5 Profitable Growth Customer Delight the Consumer C1 Continually Delight the Targeted Consumer • Share of Segment in Selected Key Markets • Mystery Shopper Rating Win-Win Dealer Relations C2 Build Win-Win Relations with Dealer • Dealer Gross Profit Growth • Dealer Survey Build the Franchise I1 Innovative Products and Services • New Product ROI • New Product Acceptance Rate I2 Best-in-Class Franchise Teams • Dealer Quality Score Safe and Reliable I3 Refinery Performance • Yield Gap • Unplanned Downtime Competitive Supplier I4 Inventory Management • Inventory Levels • Run-out Rate I5 Industry Cost Leader • Activity Cost vs. Competition Quality I6 On Spec, On Time • Perfect Orders Good Neighbour I7 Improve EHS • Number of Environmental Incidents • Days Away from Work Rate Motivated and Prepared L1 Climate for Action L2 Core Competencies and Skills L3 Access to Strategic Information • • • • Internal Learning And Growth Employee Survey Personal Balanced Scorecard (%) Strategic Competency Availability Strategic Information Availability Mobil NMA&R’s Educational Brochure (Kaplan & Norton (2000), The Strategy-Focused Organization) NAM&R Strategic Themes Will guide us to our vision and are defined above each graph. NAM&R Strategic Measures Will keep us focused on achieving NAM&R’s strategic themes. They are explained in the graphs and the bulleted text accompanying them. Win/Win Relationship Good Neighbor Improve Dealer/Wholesale Marketer profitability through customer-driven products and services And by developing their business competencies. Dealer/Mobil Gross Profit Protect the health and safety of our people, the communities in which we work, and the environment we all share. Total profit earned at Mobil outlets and split between our dealers/wholesaler marketers and Mobil Composite of: • Reportable releases to air and water • Reportable spills • Community reported incidents 1993 1994 Target Environmental Index 1993 1994 Target Financially Strong Safe & Reliable On Spec On Time Reward our shareholders by providing a superior long-term return which exceeds that of our peers. Maintain a leadership position in safety while keeping our refineries fully utilized. Provide quality products supported by quality business processes that are on time and done right the first time. Income divided by capital employed including all allocations ROCE Days Away from Work Manufacturing Reliability 12% 8% 7% 1993 1994 Target 1993 1994 Target 1993 1994 Target Composite of: • Product off spec • Order shipped late • Business process errors • Customer complaints • Cost of rework Quality Index 1993 1994 Target Delight the Consumer Competitive Supplier Motivated & Prepared Understand our consumers’ needs better than anyone and offer them products and services with exceed their expectations. Mystery Shopper The Mystery Shopper program rates how well each of our stations is delivering the “best buying experience.” Provide product to our terminals at a cost equal to or better than the competitive market maker. Develop and value teamwork and the ability to think Mobil, act locally. 1993 1994 Target Activity Cost vs. Competition Our cost to deliver product to the terminal vs. lowest cost provider. 1993 1994 Target Survey of employees to measure how people perceive the Mobil workplace environment Climate Survey 1993 1994 Target Corporate Strategy Bus. Unit Strategy Individual’s Performance Plan High High “LINE OF SIGHT” ALIGNMENT Knowledge of Work & Processes Knowledge of Strategy Low Low Executive Middle Management Individual Linking Performance Management To Change Leadership Development Leadership is about Change Balanced Scorecard Strategy Map THEME Customer Perspective Strategic Objectives Financial Financial Perspective Internal Internal Perspective Learning Initiatives Targets Return on Investment Revenue Growth F3 - Reduce Cost Structure Deposit Service Cost Change -5% Global Re-Engineers C1 - Increase Customer Satisfaction With Our Products & People 15% +10% Sales & marketing Reorganization & Training Share of Segment 20% C2 - Increase Satisfaction “After the Sale” Customer Retention 95% I1 I2 - Understand Our Customers Create Innovative Products New Product Revenue 10% I3 - Cross-Sell Products Cross-Sell Ratio 9% I4 - Shift Customers to CostEffective Channels Minimize Operational Problems Responsive Service Channel Mix Change TBD Service Error Rate <1% Request Fulfillment Time <2 days I5 I6 - Learning Perspective Measures F1 - Improve Returns F2 - Broaden Revenue Mix Custome r THEME Scorecard L1 - Develop Strategic Skills L2 - Provide Strategic Info L3 - Align Personal Goals Skills Coverage Employee Satisfaction Revenue per Employee 100% 80% Identification and Testing Leaders at all levels though Strategy implementation Finance 2000 QFD Project Customer Database Global Service Training Program Balanced Scorecard Identifies Strategic Initiatives and Emerging Issues HRMS Knowledge Management System KPI and Performance Report Back Corrective Action High Performance Culture Capabilities Required Leadership Team Leader High Performance Teams Understanding Process Flow vs Organisational Structure Department A Department B Department C Business Processes Cut Across Departments Customer Customer Michael Porter’s Value Chain Primary Activities = Generic Core Processes Generate Revenues Develop Markets Build Relationships Manage Operations Coordinate Logistics Conduct R & D C U S T O M E R S Michael Porter’s - Support Activities Infrastructure & Management Processes Manage Human Resources C O R E Manage Information Administer the Business Manage the Finances Manage the Assets Manage Risks P R O C E S S E S Example - Manufacturing Company Core Processes New Product Development Order Generation and Fulfilment Integrated Logistics Example - Consumer Goods Company New Product Development Brand Development Retail Outlet Management Integrated Logistics Eg. - Government Agencies in the USA Core Processes Establish [Agency's] Direction Acquire Necessary Resources Provide Capabilities Execute the [Agency's] Mission www.va.gov/fedsbest/ Example - The Dupont Company Core Processes Planning Deliver the Current Offering Renewal Identifying Core Processes - Guidelines They should face the customer. Core processes represent core business. They do not have to cover 100% of all things the business does. The management team should nominate core processes. A single person should not be tasked with the job. The processes need to be defined at levels high enough so that major improvements are visible to everyone in the organisation or unit. Identifying Core Processes - Guidelines (continued) They should be recognisable as the platform around which strategy is developed. They should capture the major workflows, which result in something very quantifiable being offered to the customer. These workflows typically involve more than one function. There should be minimum overlap between the core processes. The skills, technologies and sub-processes should be substantially different for each. Identifying Core Processes - Guidelines (continued) It should be clear that measures of quantity, quality, cost, revenue, and time, applied to these processes would form the backbone of the organisation's performance measurement system. It should be clear that all strategic contact points with the customer are covered. Vagueness should be avoided. For example Manage the Business seems to say it all, but is at too high a cognitive level to work with. Elevating a small process to core status puts it under the spotlight at management reviews. Forces it to be resourced and managed. Template for Core Processes Activity Core Processes Case Study 1 Global FMCG Subsidiary BACKGROUND A subsidiary of a multinational manufacturing company that needed to increase their gross margin from 49% to 62% or close manufacturing operation and source from overseas. Worst-in-class in inter-company benchmarking Culture resistant to change with silo mentality Top-heavy management Case Study 1 Global FMCG Subsidiary STRATEGY Set Vision of “best-in-class” and 62% Gross Margin within 15 months Developed implementation plan and communicated it and restructured quickly Focused on process across silos using Value Stream Analysis Implemented high performance team culture and multi-skilling Re-trained workforce ($0.75M) Case Study 1 Global FMCG Subsidiary STRATEGY Introduced MRPII solution and performance measurement Activity Based Costing to identify customer and product profitability Co-ordination with marketing and customers to improve manufacturing velocity by standardisation of packaging Re-equipment program ($4M) Case Study 1 Global FMCG Subsidiary RESULTS (15 MONTHS) Improved gross margin by 13% to 62% “Best-in-class” Reduced workforce from 150 to 75 and increased output by 40% Reduced stock levels from 120 days to 45 days Reduced out-of-stocks from 30% to 5% Used some of the cost saving (part of the negotiation with marketing dept for using consistent bottle shapes) to increase advertising budget by $3M and increased sales revenue by 20% Developed a multi-skilled high performance team culture Case Study 2 INTRODUCING SALES FORCE RE-ENGINEERING AND CRM TECHNOLOGY BACKGROUND 2200 customers of which Top 200 = 92% of total revenue Top 24 customers = 80% of total revenue 98 sales force & customer service Operating in a mature market with no perceived opportunity for growth Case Study 2 INTRODUCING SALES FORCE RE-ENGINEERING AND CRM TECHNOLOGY STRATEGY Introduced new CRM system with a sales process upgrade Develop consultative/solution selling capability model Assessed all sales force personnel and restructured sales force Activity Based Costing to identify customer and product profitability Migrated 2000 customers to lower cost customer service / call centre model or increased prices to get rid of unprofitable customers Refocused sales team on generating sales growth from top 200 customers Case Study 2 INTRODUCING SALES FORCE RE-ENGINEERING AND CRM TECHNOLOGY RESULTS Identified growth opportunities that equated to 98% of current revenue Increased gross margin Reduced cost of sales force by $5 million
© Copyright 2024