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BUDGETING:
Case Study, Concepts and Debatable Ideas
         by Ambassador Tal Edgars
Summary: Today’s presentation


      1.  Done
         Business Model

         2. D
            Done
          Strategy
        3. Done
        
        3 Alignment

        4.
        4 Budgeting
Budgeting

The art and science of allocating
   and aligning Resources to
           g g
         strategic plans
Budgeting: Some thoughts…

Two major roles of Budgeting:
1.
1 Provide real life CONSTRAINTS to strategic planning
           real-life
2. Provide RESOURCES to realize strategic plans

Why Constraints?
1. Over aggressive unrealistic planning, usually by
   Marketing/Sales need to be grounded to real life
2. Creative entrepreneurial thinking when resources are
   limited
3. Enforce the need f A
3 E f       th     d for Accountability i.e. ‘ROI’ thinking
                                t bilit i          thi ki
   for all Managers
Alignment: 4-Wheels
                   Model
                   M d l

                                               Business
                  Person
Structure                                       Model
                                   Strategic
                                   Planning
            Culture
                      Leadership

      Resources
Alignment: Framework

          •   Focus point
Culture
C lt
          •   Alignment
          •   Quality
          •   Innovation & Differentiation
          •   Risk taking
              Ri k t ki g
          •   Performance Management
          •   Corporate obsession
          •   Decision making
Alignment: Framework
            •   Org Structure
            •   Job Design
Structure   •   C&B
            •   Policies & procedures
                           p
            •   Decision making
            •   Job fit
            •   Management Systems
            •   BSC and KPIs
            •   Decentralized & Empower
Strategy: Framework
             •   Role modeling
             •   V s o M ss o
                 Vision/Mission/Philosophy
                                   losop y
Leadership
             •   Leadership Style
             •   Delegation & Empowerment
             •   C&B, Promotions
             •   Sense of Urgency
             •   Speak regularly about
                  p      g     y
                 Performance
Strategy: Framework
         •   Recognition
         •   Recruitment
Person   •   Training
         •   Profit sharing
         •   Values
         •   Motivation
         •   Self Efficacy
         •   Awareness
         •   Useful Competencies
         •   Career aspirations
         •   Attribution (control)
Strategy: Framework
            Enablers
            • Technology
Resources
            • Equipment      Funding
            • M t i l
              Materials      • CAPEX
                             • OPEX
            • Human
            • Intellectual
                 p y
              Property
            • Partners
            • Property
Alignment: 4-Wheels
                   Model
                   M d l

                                                Business
                   Person
Structure                                        Model
                                    Strategic
                                    Planning
             Culture
                       Leadership

      Resources
Each Discipline Requires Different Priorities &
                     Resources
Organization, jobs,
skills


Culture, values,
norms

                      Operational   Product      Customer
Information and       Excellence                 Intimacy
systems                             Leadership


Management
systems
Each Discipline Requires Different Priorities &
                    Resources
                   Operational Excellence

Organization,
Organization       •Central authority, low level of empowerment
                            authority
jobs, skills       •High skills at the core of the organization

Culture, values,
       ,       ,   •Disciplined Teamwork
                    Disciplined
norms              •Process, product- driven
                   •Conformance, 'one size fits all' mindset


Information and
systems            •Integrated, low cost transaction systems
                   •The system is the process


Management         •Command and control
systems            •Quality management
                          y     g
Each Discipline Requires Different Priorities &
                    Resources
                   Product Leadership
Organization, jobs, •Ad hoc, organic and cellular
skills
 kill               •High skills abound in loose-knit structures


Culture, values,
C lt       l       •Concept future driven
                    Concept, future-driven
norms              •Experimentation and 'out of the box' mindset


Information and
                   •Person-to-person communications systems
                    P      t                 i ti      t
systems            •Technologies enabling cooperation


Management         •Rewarding individuals' innovative capacity
systems            •Risk and exposure management
                   •Product Life Cycle profitability
Each Discipline Requires Different Priorities &
                    Resources
                   Customer Intimacy

Organization jobs, •Empowerment close to point of customer contact
Organization, jobs
skills             •High skills in the field and front-line

Culture, values,    Customer driven
                   •Customer-driven
norms              •Variation and 'have it your way' mindset


Information and
I f    ti     d    •Strong customer databases, linking internal and
systems             external information
                   •Strong analytical tools

Management         •Customer equity measures like life time value
systems            •Satisfaction and share management
                   •Focus on ‘Share of Wallet’
Managing Gaps between actual and
        planned budgets
1. Budgeting vs. Priorities
2. Basic Budgeting policies
3. Activity Grid to determine budget
   priorities
4.
4 Budgeting for Investments based on the
   ‘BCG Matrix’ principles
Budgeting vs. Priorities



Priority = Time + Money
Budgeting vs. Priorities
          Example: Business Situation vs. R&D P i i i
          E    l B i        Si    i           Priorities

   Upturn                       Flat             Downturn
Fight Complacency     Innovation               Sales
Sharpen Edge          Acquire                  Cash Flow
Keep Momentum         Profits
Conquer               Build momentum
NPD Cycle Time        Focused on
                      F     d
                                               Improve Top 15%
                      ‘Breakthrough’
Improve Edge                                   revenue-generating
                      JV, In-source, Out-
                        ,          ,           p
                                               products
Extensions            source
Counter Competitor    Eliminate bottom 20%
                                               ↓ R&D, ↑Sales
Basic Budgeting policies
• Flexibility to switch between line items
• Reserve Funds
• Loans/External Funding
Activity Grid to determine
          budget i iti
          b d t priorities
Increase (↑)                     Create (+)
What are features/               What are features/
  activities/services to           activities/services to
  increase?                        introduce?
Reduce (↓)                       Eliminate (-)
What are features/               What are features/
  activities/services to           activities/services to
  reduce?                          eliminate?
1. Manage conflicts where limited resources should go
2. Solve problem of compounding activities & resources
Budgeting for Investments based on the ‘BCG
                Matrix’ principles
                        p     p




  Market
Potential




            Business Performance
How to maximize Budget?
1. Align budget to priorities
2.
2 Integration of businesses and
   functions for teamwork
3. Do practical, implementable stuff
   that bring real results (hard work)
            g              (         )
Budgeting in a Downturn
Budgeting in a Downturn
Budgeting in a Downturn
Budgeting in a Downturn
THE END; DISCUSSION

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Budgeting Presentation

  • 1. BUDGETING: Case Study, Concepts and Debatable Ideas by Ambassador Tal Edgars
  • 2. Summary: Today’s presentation 1.  Done Business Model 2. D Done  Strategy 3. Done  3 Alignment 4. 4 Budgeting
  • 3. Budgeting The art and science of allocating and aligning Resources to g g strategic plans
  • 4. Budgeting: Some thoughts… Two major roles of Budgeting: 1. 1 Provide real life CONSTRAINTS to strategic planning real-life 2. Provide RESOURCES to realize strategic plans Why Constraints? 1. Over aggressive unrealistic planning, usually by Marketing/Sales need to be grounded to real life 2. Creative entrepreneurial thinking when resources are limited 3. Enforce the need f A 3 E f th d for Accountability i.e. ‘ROI’ thinking t bilit i thi ki for all Managers
  • 5. Alignment: 4-Wheels Model M d l Business Person Structure Model Strategic Planning Culture Leadership Resources
  • 6. Alignment: Framework • Focus point Culture C lt • Alignment • Quality • Innovation & Differentiation • Risk taking Ri k t ki g • Performance Management • Corporate obsession • Decision making
  • 7. Alignment: Framework • Org Structure • Job Design Structure • C&B • Policies & procedures p • Decision making • Job fit • Management Systems • BSC and KPIs • Decentralized & Empower
  • 8. Strategy: Framework • Role modeling • V s o M ss o Vision/Mission/Philosophy losop y Leadership • Leadership Style • Delegation & Empowerment • C&B, Promotions • Sense of Urgency • Speak regularly about p g y Performance
  • 9. Strategy: Framework • Recognition • Recruitment Person • Training • Profit sharing • Values • Motivation • Self Efficacy • Awareness • Useful Competencies • Career aspirations • Attribution (control)
  • 10. Strategy: Framework Enablers • Technology Resources • Equipment Funding • M t i l Materials • CAPEX • OPEX • Human • Intellectual p y Property • Partners • Property
  • 11. Alignment: 4-Wheels Model M d l Business Person Structure Model Strategic Planning Culture Leadership Resources
  • 12. Each Discipline Requires Different Priorities & Resources Organization, jobs, skills Culture, values, norms Operational Product Customer Information and Excellence Intimacy systems Leadership Management systems
  • 13. Each Discipline Requires Different Priorities & Resources Operational Excellence Organization, Organization •Central authority, low level of empowerment authority jobs, skills •High skills at the core of the organization Culture, values, , , •Disciplined Teamwork Disciplined norms •Process, product- driven •Conformance, 'one size fits all' mindset Information and systems •Integrated, low cost transaction systems •The system is the process Management •Command and control systems •Quality management y g
  • 14. Each Discipline Requires Different Priorities & Resources Product Leadership Organization, jobs, •Ad hoc, organic and cellular skills kill •High skills abound in loose-knit structures Culture, values, C lt l •Concept future driven Concept, future-driven norms •Experimentation and 'out of the box' mindset Information and •Person-to-person communications systems P t i ti t systems •Technologies enabling cooperation Management •Rewarding individuals' innovative capacity systems •Risk and exposure management •Product Life Cycle profitability
  • 15. Each Discipline Requires Different Priorities & Resources Customer Intimacy Organization jobs, •Empowerment close to point of customer contact Organization, jobs skills •High skills in the field and front-line Culture, values, Customer driven •Customer-driven norms •Variation and 'have it your way' mindset Information and I f ti d •Strong customer databases, linking internal and systems external information •Strong analytical tools Management •Customer equity measures like life time value systems •Satisfaction and share management •Focus on ‘Share of Wallet’
  • 16. Managing Gaps between actual and planned budgets 1. Budgeting vs. Priorities 2. Basic Budgeting policies 3. Activity Grid to determine budget priorities 4. 4 Budgeting for Investments based on the ‘BCG Matrix’ principles
  • 18. Budgeting vs. Priorities Example: Business Situation vs. R&D P i i i E l B i Si i Priorities Upturn Flat Downturn Fight Complacency Innovation Sales Sharpen Edge Acquire Cash Flow Keep Momentum Profits Conquer Build momentum NPD Cycle Time Focused on F d Improve Top 15% ‘Breakthrough’ Improve Edge revenue-generating JV, In-source, Out- , , p products Extensions source Counter Competitor Eliminate bottom 20% ↓ R&D, ↑Sales
  • 19. Basic Budgeting policies • Flexibility to switch between line items • Reserve Funds • Loans/External Funding
  • 20. Activity Grid to determine budget i iti b d t priorities Increase (↑) Create (+) What are features/ What are features/ activities/services to activities/services to increase? introduce? Reduce (↓) Eliminate (-) What are features/ What are features/ activities/services to activities/services to reduce? eliminate? 1. Manage conflicts where limited resources should go 2. Solve problem of compounding activities & resources
  • 21. Budgeting for Investments based on the ‘BCG Matrix’ principles p p Market Potential Business Performance
  • 22. How to maximize Budget? 1. Align budget to priorities 2. 2 Integration of businesses and functions for teamwork 3. Do practical, implementable stuff that bring real results (hard work) g ( )
  • 23. Budgeting in a Downturn
  • 24. Budgeting in a Downturn
  • 25. Budgeting in a Downturn
  • 26. Budgeting in a Downturn