Constructing High Performing Organisations - Building Blocks, Structures, And Culture

CONSTRUCTING HIGH-PERFORMING ORGANISATIONS: Building Blocks, Structures, And Culture Case Study, Concepts and Debatable Ideas Kenny Ong CNI Holdings Berhad www.myCNI.com.my www.OOBEY.com

Workforce Psychology

“ Cow don’t drink water cannot push cow head down”

Workforce Psychology Behavior Influence Decision Making Direct Communication In-Direct Environment

Summary: Today’s presentation 1. Business Model 2. Building Blocks www.myCNI.com.my www.OOBEY.com

1. Get the right Business Model first www.myCNI.com.my www.OOBEY.com

How to fail without trying

1. Wrong Business Model www.myCNI.com.my www.OOBEY.com

The Roadmap to Failure Fred Wiersema and Mike Treacy Performance Time www.myCNI.com.my www.OOBEY.com Clear Sailing Today’s performance Ad-hoc Tactics Denial & Defense Doom Projections Overdue Failure The Moment of Truth X Performance Freefall Tomorrow’s actual performance Downpresure of Unclear Strategy

Denial and Defense

“ It’s not really good value our competitor is offering, because it doesn’t include a lot of our features.” - ABC vs Air Asia

“ It’s good value but not in our preferred customer market.” - ABC vs Toyota

“ Sure they’re hurting us, but with their unfair advantage, what can we do?” – ABC vs MILO

“ The rules we are playing by have always worked before” – AMEX vs VISA

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Ad Hoc Tactics

Selectively hold discounts to hold business that has started to go elsewhere

Introduce new promotions, terms, conditions, and offers to confuse and cloud the market

Beef up customer service by adding people to fix mess-ups and quicken delayed shipments

Delay capital investments and adjust accounting methods to portray quarterly financial results more favorably

Introduce “new and improved” products that are new in form, but not in substantive ways that are of consequence to purchasers

Introduce Balanced Scorecards and Performance Management Systems

“ What is the moral of the story?”

What is the Business Model? USP Market Discipline Profit Model www.myCNI.com.my www.OOBEY.com

Intro: Market Discipline

Mamak stall

Intro: Market Discipline

"Exactly what I need"

Customized products

Personalized communications

"They're very responsive"

Preferential service and flexibility

Recommends what I need

"I'm very loyal to them"

Helps us to be a success

"They are the most innovative" "Constantly renewing and creative" "Always on the leading edge" "A great deal!" Excellent/attractive price Minimal acquisition cost and hassle Lowest overall cost of ownership "A no-hassles firm" Convenience and speed Reliable product and service Product Leadership Operational Excellence Customer Intimacy www.myCNI.com.my www.OOBEY.com

Strategy: Disciplines Operational Excellence (low cost producer) Ref: The Discipline of Market Leaders , Michael Treacy & Fred Wiersema; 1995 Product Leadership (best product) Customer Intimacy (best total solution) www.myCNI.com.my www.OOBEY.com

Intro: Market Discipline * Treacy & Wiersema, The Discipline of Market Leaders , 1995 Product/Service Attributes Relationship Image www.myCNI.com.my www.OOBEY.com

Intro: Market Discipline * Treacy & Wiersema, The Discipline of Market Leaders , 1995 Product/Service Attributes Price Quality Time Selection √ √ Smart Shopper Relationship Image Operational Excellence : Quality and selection in key categories with unbeatable prices www.myCNI.com.my www.OOBEY.com

Intro: Market Discipline * Treacy & Wiersema, The Discipline of Market Leaders , 1995 Product/Service Attributes √ Brand Time Function √ √ Best Product Relationship Image Product Leadership: Unique products and services that push the standards www.myCNI.com.my www.OOBEY.com

Intro: Market Discipline * Treacy & Wiersema, The Discipline of Market Leaders , 1995 Product/Service Attributes √ √ √ √ Service Trusted Brand Relationship Image Customer Intimacy: Personal service tailored to produce results for customer and build long-term relationships Relations www.myCNI.com.my www.OOBEY.com

Summary: Today’s presentation 1. Business Model 2. Building Blocks  Done www.myCNI.com.my www.OOBEY.com

2. Strategies, Structures, Culture www.myCNI.com.my www.OOBEY.com

Dangers of Best Practice and Benchmarking… “ Abraham Wald’s Work on Aircraft Survivability”, M. Mangel and F.J. Samaniego Where would you focus reinforcement? www.myCNI.com.my www.OOBEY.com

Dangers of Best Practice and Benchmarking… www.myCNI.com.my www.OOBEY.com Company Performance high low ‘ Best Practice’ theories low high zero Performance “ Selection Bias and the Perils of Benchmarking”, Jerker Denrell, Harvard Business Review 2005 Trend line

How about Competencies? www.myCNI.com.my www.OOBEY.com Success high low ‘ Superior’ Competencies low high zero Performance “ Selection Bias and the Perils of Benchmarking”, Jerker Denrell, Harvard Business Review 2005 Trend line

Dangers of ‘Superior’ Competencies… www.myCNI.com.my www.OOBEY.com Success high low ‘ Superior’ Competencies low high zero Performance “ Selection Bias and the Perils of Benchmarking”, Jerker Denrell, Harvard Business Review 2005 Trend line

Dangers of Best Practice and Benchmarking…

Selection Bias:

Success Traits = Failure Traits

Successful Cases + Failure Cases

Worst effects in ‘Old’ industries

Overvalue ‘best practice’ theories

Current accomplishments unfairly magnified by past achievements

Reverse Causal

Dangers of Best Practice and Benchmarking…

Also known as ‘Beware of Consultants’:

Selection Bias

Big vs. Small company

Selective success stories

Correlation vs. Causal

Survey problems

Practical vs. Glamour-to-have

Leaders who benchmark

Focus: Corporate Alignment Financial “ To satisfy our stakeholders, what Financial objectives must we accomplish?” www.myCNI.com.my www.OOBEY.com Internal Process “ To satisfy our customers, in which internal business processes must we excel?" Customer “ Who are our target customers? What is our value proposition?” Learning & Growth “ What capabilities and tools do our employees require to help them execute our strategy?

Linking BSC to Strategy Revenue Growth Base Retention Share Gain Positioning Adjacent Market New Business Operational Excellence Product Leadership Customer Intimacy Competencies Information Systems Motivation, empowerment, alignment Financial Learning & Growth Internal Process Customers Investment Strategy Productivity Market Value www.myCNI.com.my www.OOBEY.com

Focus: Corporate Alignment Financial Learning & Growth Internal Process Customers / Distributors www.myCNI.com.my www.OOBEY.com Revenue Growth Productivity Market Value Department Operations Supplier & Alliances External Involvement Target Markets Products/ Services Channel Strategies Human Resources Technology Information & Intelligence Systems & Processes

Alignment: 4-Wheels Model Culture Business Model Strategic Planning www.myCNI.com.my www.OOBEY.com Structure Person Leadership Resources

Alignment: Framework

Focus point

Alignment

Quality

Innovation & Differentiation

Risk taking

Performance Management

Corporate obsession

Decision making

Culture www.myCNI.com.my www.OOBEY.com

Alignment: Framework

Org Structure

Job Design

C&B

Policies & procedures

Decision making

Job fit

Management Systems

BSC and KPIs

Decentralized & Empower

www.myCNI.com.my www.OOBEY.com Structure

Strategy: Framework

Role modeling

Vision/Mission/Philosophy

Leadership Style

Delegation & Empowerment

C&B, Promotions

Sense of Urgency

Speak regularly about Performance

www.myCNI.com.my www.OOBEY.com Leadership

Strategy: Framework

Recognition

Recruitment

Training

Profit sharing

Values

Motivation

Self Efficacy

Awareness

Useful Competencies

Career aspirations

Attribution (control)

www.myCNI.com.my www.OOBEY.com Person

Strategy: Framework

Enablers

Technology

Equipment

Materials

Human

Intellectual Property

Partners

Property

Funding

CAPEX

OPEX

www.myCNI.com.my www.OOBEY.com Resources

Alignment: 4-Wheels Model Culture Business Model Strategic Planning www.myCNI.com.my www.OOBEY.com Structure Person Leadership Resources

The New Rules of Market Competition

Rule 1

Provide the best offering in the marketplace by excelling in ONE specific dimension of value

Market Disciplines Operational Excellence (low cost producer) Ref: The Discipline of Market Leaders , Michael Treacy & Fred Wiersema; 1995 Product Leadership (best product) Customer Intimacy (best total solution) www.myCNI.com.my www.OOBEY.com

Rule 2

Maintain ‘market standards’ on the other two disciplines of value

Rule 3

Dominate your market by improving value year after year

Rule 4

Build a well-tuned operating model dedicated to delivering unmatched value

Each Value Discipline Requires Different Emphasis

Product Leadership

R&D, Legal (Licenses), Engineering

Product development, Concept-to- Customer

Linkages, insight, comm, groupware

Ideas-thru- funnel, patents, etc.

Tomorrow, Product Portfolio, Ideas and Risks

Operational Excellence

Production,

Logistics, Finance

Order fulfillment, Resource stewardship

Transactions, costs, time

Costs, quality, speed

Trends (past), Transactions Employee tools/tasks

Customer Intimacy

Marketing Sales,

Service

Market

mgmt, Customer satisfaction

Customers, analysis, linkages

Satisfaction, cust. success, share, anecdotes

Today, Relation-ships, Employee empowerment

Functional emphasis Process Emphasis Information emphasis Key metrics Key concerns www.myCNI.com.my www.OOBEY.com

Product Leadership

Each Discipline Requires Different Priorities & Resources Operational Excellence Customer Intimacy Organization, jobs, skills Management systems Information and systems Culture, values, norms www.myCNI.com.my www.OOBEY.com

Each Discipline Requires Different Priorities & Resources

Central authority, low level of empowerment

High skills at the core of the organization

Disciplined Teamwork

Process, product- driven

Conformance, 'one size fits all' mindset

Integrated, low cost transaction systems

The system is the process

Command and control

Quality management

Organization, jobs, skills Management systems Information and systems Culture, values, norms www.myCNI.com.my www.OOBEY.com

Product Leadership

Ad hoc, organic and cellular

High skills abound in loose-knit structures

Concept, future-driven

Experimentation and 'out of the box' mindset

Person-to-person communications systems

Technologies enabling cooperation

Rewarding individuals' innovative capacity

Risk and exposure management

Product Life Cycle profitability

Each Discipline Requires Different Priorities & Resources Organization, jobs, skills Management systems Information and systems Culture, values, norms www.myCNI.com.my www.OOBEY.com

Each Discipline Requires Different Priorities & Resources Organization, jobs, skills Management systems Information and systems Culture, values, norms

Customer Intimacy

Empowerment close to point of customer contact

High skills in the field and front-line

Customer-driven

Variation and 'have it your way' mindset

Strong customer databases, linking internal and external information

Strong analytical tools

Customer equity measures like life time value

Satisfaction and share management

Focus on ‘Share of Wallet’

Core Processes for Each Discipline

Product Delivery and basic service cycle

Built on standard, no frills fixed assets

Customer Intimacy

Client acquisition and development

Solution Development

Flexible and responsive work procedures

Product Leadership

Invention, commercialization

Market exploitation

Disjoint work procedures

Sample KPIs for Each Discipline

Price

Selection

Convenience

Zero Defects

Growth

Customer Intimacy

Customer Knowledge

Solutions Offered

Penetration

Customer Data

Customer-success focus

Product Leadership

Marketing

Functionality

# of Successes

# of Failures

Learn from key users

Interdisciplinary teams

Pipeline

Move know-how from top performing units to others

Benchmark against best in class

Ensure operations training for all employees

Use disciplines like TQM for continuous learning to reduce costs and improve quality

Strategy: Value Disciplines www.myCNI.com.my www.OOBEY.com

Strategy: Value Disciplines

Customer Intimacy

Capture knowledge about customers

Understand customer needs

Empower front line employees

Ensure that everyone knows the customer

Make company knowledge available to customers

Product Leadership

Reduce time to market

Commercialize new products fast

Ensure that ideas flow

Reuse what other parts of the company have already learned

Ensure there are multiple sources of funding

Strategy: Value Disciplines www.myCNI.com.my www.OOBEY.com

The Final Lever: PAY

Pay for Service

Pay for Job

Pay for Performance

Pay for Competency

What’s the Difference?

Increment

Bonus

Promotion

Employee Distinction Group I (Talent Pool) Group II (  Potential) Group III (  Performance) Group IV (Counseling) 2 3 4 5 2 3 4 5 PERFORMANCE POTENTIAL