Five Strategic Choices that Create Sustainable, Profitable Growth
Upcoming SlideShare
Loading in...5
×
 

Like this? Share it with your network

Share

Five Strategic Choices that Create Sustainable, Profitable Growth

on

  • 4,254 views

This presentation is about choices – it is about making hard decisions that create sustainable, profitable growth. Our English word decide comes from the Latin word decidere which literally means ...

This presentation is about choices – it is about making hard decisions that create sustainable, profitable growth. Our English word decide comes from the Latin word decidere which literally means "to cut off.“ For most of us, we don’t like the idea that by choosing one path we are cutting off the possibility of other paths, at least for a time. And yet, we know that it’s true that we cannot simultaneously be successful in every market with every product for every customer segment in every geography. We have to choose. A sure formula for failure is to not make hard decisions, therefore confusing both our customers and our employees. Here's what you'll learn:
The importance of choosing
Models for making clear choices
Methods for understanding the connections between choices
The power of winning aspirations
The importance of customer segmentations and insights
How to create a competitive advantage
Methods for deciding on the right value propositions
How to select the right criteria to design your organization
The power of business models
How to categorize work to create maximum efficiency and effectiveness
How to choose the right structure for your organization
How to create processes and linkages that cut across structure
Methods to align recognition and rewards with strategic choices
How to align talent management to your strategic choices

Statistics

Views

Total Views
4,254
Views on SlideShare
4,021
Embed Views
233

Actions

Likes
2
Downloads
134
Comments
1

1 Embed 233

http://b2bthinking.com 233

Accessibility

Categories

Upload Details

Uploaded via as Microsoft PowerPoint

Usage Rights

© All Rights Reserved

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Processing…
Post Comment
Edit your comment
  • What does the marketplace measure and reward? Sustainable, profitable growth. As leaders in a publicly-traded company, it’s not enough to grow revenue– and grow we must – but we must grow in a way that is profitable, creating higher earnings. If this profitable growth can be sustained over time, this creates shareholder value and attracts investors. As leaders, we are trying to achieve both sustainability and scalability. This presentation will describe five choices that every organization has to make in order to create sustainable, profitable growth.
  • We already know what does not work. You’ve seen it before – Flavor of the month, the latest business book, the “one thing” that everyone is sharing on LinkedIn – Whatever you want to call it, there is no one solution that creates an effective organization. Power flows where the attention goes. Direct your attention to the whole system, or else you’re just a cat chasing a laser.
  • As you proceed, keep in mind, that there are no silver bullets. As much as we keep wishing that “this one thing” will make a difference, we can’t keep chasing the latest solution. It does not work.
  • The temptation is to grab a “best practice” and hope it works in your organization. To be successful, we have to lead from the system level. We have to raise our eyes above the distraction of flavor-of-the-month and make strategic choices that work for our organization.
  • If simple slogans and solutions don’t work, and if best practices don’t work, what DOES work? This presentation is about choices – it is about making hard decisions with lasting consequences. Our English word decide comes from the Latin word decidere which literally means"to cut off.“ For most of us, we don’t like the idea that by choosing one path we are cutting off the possibility of other paths, at least for a time. And yet, we know that it’s true that we cannot simultaneously be successful in every market with every product for every customer segment in every geography. We have to choose. A sure formula for failure is to not make hard decisions, therefore confusing both our customers and our employees.
  • As pointed out earlier, our goal is to create sustainable, profitable growth. To do that, we need to know what our winning aspiration is, where we will play, how we will win, what our core capabilities are, and how will organize ourselves.
  • Here’s what works. Strategy is a series of data-driven choices. Each choice impacts the next.Begin by understanding your environment – both internally and externally. Who is your customer or just as important, who is NOT your customer? Which customer segments will you go after? What are the key characteristics of your target customer? What do they value? How will you differentiate yourself in the eyes of the target customers – create competitive advantage? In which geographies and product categories will you compete? How will you distinguish yourself from your competition? What is your business model for delivering value in the most effective and efficient way? These choices will inform the distinct capabilities required in your organization and which activities are more strategically important than others. Strategic choices create a design criteria from which structure, processes, rewards and people-processes flow. The structure of the organization prescribes decision rights and span of control. Will you organize by function, product, geography or customer? Will you have a simple hierarchy or a matrix? Who will report to whom? Who has P&L responsibilities? What is the role of the local regional representatives? How will the function create excellence, standards and harmonization? If structure defines the shape to the organization, processes define flow – primarily the flow of connected activities and information. This includes work processes, information processes and management processes. It is vital to choose which roles have authority and responsibility, especially where organizational boundaries, created by structure, intersect during the flow of processes. You will need to choose from a series of potential linking mechanisms (lateral connectors) to ensure the smooth flow of processes. The next set of choices are what to measure and how to recognize / reward employees. Which metrics truly measure successful execution of the strategy? What recognition systems will you put into place? How will you ensure that you are not only recognizing and reward the results but how they achieve the results - the behaviors that lead to the results? Your final set of choices have to do with people processes – how you will select, onboard, train, develop, engage and align the talent in your organization.
  • There are an unlimited number of choices that you can select. How will you know which choices are right for your company at this time in its history, in this market?
  • In our hard-charging, profit-driven, rapidly-changing business environment, it might be easy to dismiss the value of models. They may seem academic and impractical. However, there are several good reasons why we would want to begin with models.
  • Strategy creates organizational design criteria. These criteria inform the structure, process, rewards and people-processes for your organization. This model comes from Jay Galbraith, one of the leading thought-leaders in organizational design. He has provide expert organizational design consulting services to senior managers and executives in hundreds of organizations facing strategy and design challenges. We’ll refer to this model often when describing choices two through five.
  • Before we can make strategic choices, we need the data that drives the choices.
  • During the discovery phase of the project, you will start by examining the difference between the current outcomes (metrics and stakeholder satisfaction) and the desired outcomes. This will define the results of the project. You will also conduct an environmental scan, both internally and externally. This will define the requirements of your project.
  •  One significant data-point is the external marketplace. One primary tool to use to evaluate the competitive landscape is Porter’s Five Competitive Forces. You can see the components on the screen. This is an analysis of the current state of competition and the likelihood of new or changing competition.    
  • Once we have gathered data, we move into the design phase. Design begins with the strategy. It moves into the macro structure and finally the micro structure.
  • The first choice we have to make is how we will make data-driven decisions that create differentiated value for our customers. How will we create a competitive advantage by aligning our products and services with the benefits sought by our target customers?
  • An aspiration begins with a desire to win. Participating in a market is not enough. An aspiration focuses on the customer – what benefits are they seeking? It sets the tone for how your company will distinguish itself from the competition.
  • All customer interactions are based on value. What is the value to the customer and what is the value to the business? There are many ways to define value. For the purpose of this discussion, we’ll define value as the difference between what a customer gains in terms of benefits from a product or service, and what he or she has to give in order to obtain those benefits. Benefits are different for everyone. For example, some car buyers will weight different benefits – fuel economy, ability to tow a boat to the lake, social currency – higher or lower. This is why it is important that customer segmentation include research to produce deep insights into the benefits sought by different kinds of buyers. Research answers the questions: Who are our customers? What are they trying to accomplish? What benefits do they seek? Why would they choose us?
  • If you can create value for your target customers, which in turn creates sustained value (profit) for your company, that is competitive advantage.You gain competitive advantage by delivering equal value to customers as your competitors, but at a lower cost (cost advantage), or by delivering superior value to your customers at a cost that is on-par with your competitors (differentiation advantage).In the illustration above, you can see three competitors. The first is the average competitor. They have no competitive advantage. The second competitor delivers the same value to the customer as the average competitor, however, they have a cost advantage through, for example, scale, know-how or innovative processes. The third competitor delivers differentiated value to the customer, something neither of the other competitors are able to replicate. Therefore, they are able to gain a superior price, increasing margins. Note that that the differentiator still must maintain costs on-par with the competitors, though not as low as the cost leader. Please note that no company can pursue both the cost leadership and the differentiation position over time. Eventually companies are forced to choose.
  • The term “Value Proposition” can be used in one of (at least) two ways. Some marketeers use the phrase Value Proposition to mean a statement of why a customer should by from your company. Using this definition, there are two fields of thought:One that we should never tell the customer what our value proposition is, that it is an internal thought process and/or document. The other field of thought is that the Value Proposition took the place of what used to be called the Unique Selling Proposition – the unique reason that a customer should buy from you and, therefore, you should remind the customer of your value proposition early and often. There is, however, another definition for the term value proposition: a differentiated bundle of products and/or services that meet the specific needs of your target customers. This is often also called a value offering. For the purposes of this document, we will use the second definition.
  • The first choice we have to make is how we will make data-driven decisions that create differentiated value for our customers. How will we create a competitive advantage by aligning our products and services with the benefits sought by our target customers?
  • Before we talk about organizational capabilities, it is important to distinguish between capabilities and competencies. Capabilities are integrated processes, systems, and abilities of an organization. Competencies are the knowledge, skills and abilities of an individual. An pharmaceutical organization may need to have capabilities in conducting clinical trials. In order to do that, it may need individuals who are competent in many areas, for example statistical analysis.
  • Let’s put Organizational Capabilities into context. We’ve said that, as leaders, we must make clear choices around “where to play,” our target customers. Research-based insights can help us understand who are they and what values do they seek. Based on these customer insights, we create “how to win” value propositions that come to life in the form of value offerings. In order to create and sustain value offerings, we must have certain core capabilities – those core areas where our company must be better than their competition in order to differentiate our offerings in the eyes of their target customers. When organizational capabilities are hard to duplicate, it provides competitive advantage.
  • Earlier we said that competencies belong to individuals, but capabilities belong to organizations. Realizing that, let’s look at an analogy using a figure skater and a hockey player to represent different organizational choices in the marketplace. They both compete on ice. They both must be good at skating. But that’s where the similarities begin to break down. They each participate in very different sports and therefore their “how to win” strategy must be radically different. The capabilities required to win in each sport are completely different. And so it is, with organizations. If one decide to win on price and another on quality, their organizational capabilities must be very different.
  • Earlier we introduced the Star Model. Let’s look closer at how strategy becomes organization design criteria.
  • Different strategies lead to different organizational choices. Organization is more than the org charts. The unique capabilities required to execute against our differentiation strategy determines the design of the organization. Therefore, by understanding the unique capabilities required to win in the marketplace, you have the criteria for your organizational design.
  • For those key capabilities, the ones that support the strategy, we define activities. Some activities have more strategic value than others.
  • After defining differentiating capabilities, it is important to categorize the work so that we can know where to be world-class and where to be on-par with the industry.
  • Once work has been categorized, you can begin to decide where / when to source the activities. As we stated earlier, competitive work is never outsourced.
  • So far we’ve been making choices around individual components of strategy. Now it’s time to bring the components together to see the process flows and linkages. A business model is a logical description of customers (segments and relationships), value offerings (including supporting activities and resources), infrastructure (including key partners and channels) and financial viability (including revenue streams and cost structures).
  • This is a high-level map of a business model. You’ve already made choices that will populate the business model.Customer Segments: The people or companies for whom we create valueValue Proposition: For each segment we have a specific value proposition: a differentiated bundle of products and/or services that create value for target customersChannels:Touch points for interacting with customers and delivering value propositionsCustomer relationships: Outline the types of relationships you’re establishing with your customersRevenue Streams: Clarify how and through which pricing mechanisms you are capturing valueKey Resources: Part of the infrastructure to create, deliver and capture value. Key resources show which assets are indispensable in our businessKey Activities: Which activities deliver customer valueKey Partnerships: Who can help you leverage your business model?Cost Structure: Cost structure includes both fixed and variable costs. The key resources and partnerships may determine the cost structure
  • There are several ways to work with this map. I have found it useful to place a large poster of the business model on the wall, give the leaders post-it notes and then facilitate the conversation. On the screen you can see a representative example of a business model for a Japanese chemical company. The actual models contain more detail.
  • It’s time to go back to the Star model. Now that we understand our organizational capabilities, our competitive activities and our business plan, it’s time to visit the structure.
  • There are many reasons for making different structural choices. Some are better reasons than others. Too often companies make structural choices based on personnel or history.
  • There are many options for structure. They each have their advantages and disadvantages.
  • For every choice, there is a trade-off.
  • Organizations tend to change structure over time as they grow, go into new geographies, start new businesses and become more complex.
  • Before we leave this topic, here is a word of caution. Many companies, hoping to undergo transformation stop here. This is a mistake. The new structure is beginning to emerge. Once the structure emerges, it’s tempting to break out the organizational charts and start changing reporting relationships based on insights gathered to date. Companies who do so fail to successfully transform their companies. Instead of transformation, they get ornamentation, and that has never created sustainable, profitable growth.
  • This brings us to our third choice: creating alignment through processes and structure.
  • The two key words in this choice are process and linkage.
  • Building on our Star model, we’re adding processes. Structure adds form. Process adds flow.
  • If we’re going to talk about processes, we’re going to need to define what a process is. According to organizational design guru, Jay Galbraith, this includes work processes such as order fulfillment, new product development or invoicing. It also includes management processes such as forecasting, portfolio management, capacity building and conflict resolution.
  • It might be helpful to begin mapping processes by defining the overarching roles and responsibilities. What is the role of the business unit? What about regions, what decision rights do they have? What is the role of the global function? By clarifying these roles across the company, decision rights begin to emerge.
  • It can be helpful to map both the vertical processes and the lateral processes. Vertical processes indicate how budgets are set and how funds are allocated. Lateral processes indicate process flow, linkages and handoffs.
  • Let’s be clear. Mapping processes is not easy work. It requires intense focus from groups of employees over a period of time. This type of discipline might not be common in your organization. Be clear on the benefits before you begin. One helpful construct for mapping processes is SIPOC – Suppliers, Inputs, Processes, Outputs and Customers/Clients. As you map processes, the flow of work emerges, as does the list of activities. Handoffs and linkages are defined.
  • As the steps in processes are determined, it is important that you determine who is responsible, accountable, consulted and informed. It might also be helpful to map who has veto power.
  • Not all work is linear, passing from one department to the next. Much work is iterative, moving back and forth across multiple departments. Another form of process mapping is the Swim Lane map. A swim lane map overlays work flow with multiple departments and stakeholders.
  • Before we leave the topic of alignment, let’s talk about how we achieve team-level alignment. The model on the screen is adopted from work by James Shonk, an expert in teaming. It is sometimes referred to as the P-GRPI model. If you asked your team to explain the purpose, goals, roles, processes and team agreements, would the entire team give you the same answers?
  • This brings us to our third choice: creating alignment through processes and structure.
  • The two key words in this choice are recognition and reward. Recognition and rewards are two forms of reinforcement. Recognition appeals to our emotional needs. Rewards appeal to our rational selves.
  • As you recall, we’re still working on the Star Model. Rewards reinforces everything that has come before p strategy, structure and processes.
  • All recognition begins with metrics. You know the old adage, you can only manage what you can measure. It is equally true that you can only recognize and reward what you measure. That measure may be business metrics. It can also be goal achievement, milestone achievement and, most importantly, behaviors that lead to the desired outcomes.
  • Before we proceed into a discussion of recognition and rewards, it might be helpful to review the presentation “ABC-Squared” at http://www.slideshare.net/tloyd/abcsquared
  • According to research by author Bob Nelson, there is a significant gap between what employees say motivate them most, and what Managers believe motivate employees most. Managers thought people wanted money and promotions. But the highest motivators that they found in study after study are:Praise and recognitionPersonal and written thanks by one’s Manager for good performancePublic praise for good performanceMorale building meetings to celebrate successesAlso, people felt best if their pay and promotions were based on performance (as opposed to political abilities). People want to be recognized for performance.Over 50% of employees surveyed reported that the top incentive, personal thanks from one’s boss, was seldom if ever given.This aligns with research reported by Kenneth A. Kovach, who said the top ten motivators employees seek are:Interesting workFull appreciation of work doneA feeling of being “in” on thingsJob securityGood wagesPromotion and growth in the organizationGood working conditionsManagement’s personal loyalty to the employee.Tactful disciplineSympathetic help with personal problems.In the Kovach surveys, again, Managers guessed the number one motivator of employees would be “good wages.”
  • Consequences can be thought of as either positive or negative; immediate or future; and certain or uncertain.Only positive consequences can get someone to repeat a behavior consistently. Negative consequences work well if there’s a behavior you’re trying to stop, but it can’t start a behavior you want to encourage.Immediate consequences are the only ones that work. The promise of some future reward rarely motivates people to repeat a behavior. And to work, the consequence needs to be certain – that it happens every time. In order to stop a behavior you don’t want, you need to ensure the consequence is negative, immediate and certain or NIC.To reinforce a behavior you want repeated, you need to set up positive, immediate and certain consequences, or PIC. That’s the only type of reinforcement that works.The most important thing to remember about Consequences, Incentives and Rewards is: It is important to manage the consequences. Do not leave them to chance.If you have a behavior that you want to see repeated, engineer a PIC for that behavior.
  • Rewards are usually in the form of salary, bonuses, stocks and other benefits. Rewards must not only be tied to the end results – the metrics, but also to the behaviors that lead to the metrics. Rewards can be based on individual performance, but they can also be based on department, function, business unit or organization-wide performance. Some key areas to consider when designing rewards:Whose behavior / results should be rewarded? Do you reward business units, divisions or departments? What about the success of geographies and functions that contribute to business unit growth and profitability?How far down in the organization do rewards cascade?What key behaviors are measured and reinforced?What is the evaluation process?
  • This brings us to our final choice: people processes.
  • The fifth choice has to do with the human resources philosophies, policies, procedures and processes around attracting, recruiting, onboarding, managing and developing key talent. Please note: this is a leadership responsibility. Though HR should provide the standards and ensure consistency, it is the job of every leader to manage and develop their employees.
  • We have now come to the final phase of the Star Model, People-strategies.
  • Let’s face it. Strategy does not execute itself. Without the right talent in the organization, all of the previous choices will come to nothing. There are several components of talent management, as you can see on the screen. These systems / processes are supported by a strong change management and communication strategy.
  • This brings us to our final choice: people processes.
  • This brings us to our final choice: people processes.

Five Strategic Choices that Create Sustainable, Profitable Growth Presentation Transcript

  • 1. Five Strategic Choices that CreateSustainable, Profitable GrowthTony Loydtloyd@cultureshift.com
  • 2. Who Can Benefit• Customers who want a clear value proposition thataligns to their needs• Shareholders who want sustainable, profitable growth• Executives who want both a systemic (holistic) and asystematic (linear) approach to strategy and actions• Leaders of Business Units, Regions or Functions whowant to create an aligned, high-performing enterprise• Employees who are waiting for clear, authenticdirection. Choices lead to engagement and execution
  • 3. What You will Learn• The importance of choosing• Models for making clear choices• Methods for understanding theconnections between choices• The power of winning aspirations• The importance of customersegmentations and insights• How to create a competitiveadvantage• Methods for deciding on the rightvalue propositions• How to select the right criteria todesign your organization• The power of business models• How to categorize work to createmaximum efficiency andeffectiveness• How to choose the right structurefor your organization• How to create processes andlinkages that cut across structure• Methods to align recognition andrewards with strategic choices• How to align talent management toyour strategic choices
  • 4. The Central GoalSustainableProfitableGrowthStrategy must create both sustainability and scalability
  • 5. You Already Know WhatDoes NOT WorkChasing the individual components of strategydoes not work.Unfocused, reactive behavior wastes resources and discourages employees
  • 6. Beware the Simple Solution“For every complexproblem there is ananswer that is clear,simple…and wrong.”There are no silver bulletsH. L. MenckenWriter, Editor, Satirist
  • 7. Lead From the System LevelCopying a bestpractice from anothercompany doesn’twork. What you needis a best system.- Dave UlrichAuthor, SpeakerSustainable, profitable growth requires sustained effort at the system level
  • 8. Here’s What WorksStrategy is the process of choosing what NOT to do
  • 9. “Strategy is anintegrated set of choicesthat uniquely positionsthe firm in its industry soas to create sustainableadvantage and superiorvalue relative to thecompetition.“- A. G. LafleyFormer P&G CEOStrategic ChoicesStrategy is a series of integrated choices
  • 10. Five Strategic Choices1. Who are we and how do we create differentiated valuefor our target customers?2. What unique capabilities and activities create value?How do we best organize to deliver value to ourcustomers?3. How will we create alignment through processes andlinkages that cut across the structure?4. How will we align recognition and rewards to ourstrategic choices?5. What people-processes must we create to support ourstrategic choices?
  • 11. How to ChooseAs leaders, we have anunlimited number of optionsfrom which to choose.How do you know whichchoices are right?With so many choices, how will you choose?
  • 12. Why We Need Models• Models provide a framework for decision-making – webegin by deciding how we will decide.• Models create common language for the choices to bemade.• Models align decisions with strategy – all choicescascade from one another, starting with the strategy.• Models balance the natural tension between alignmentand flexibility.• Once decisions are made, models provide criteria toevaluate outcomes, understand root causes and makeadjustments.
  • 13. Star ModelOrganizationDesign CriteriaStructureProcessPeopleRewardsStrategy influences how to make trade-offs between various organizationaloptionsStructuredetermines theplacement ofauthority in theorganizationProcesses cut across anorganization’s structureand determine it’sfunctioning. Verticalprocesses allocate scarceresources while lateralprocesses enableeffective work flowRewards align the goals ofTeam Members andmanagers withorganizational goals.Rewards must becongruent with structureand processes toimplement strategyeffectivelyPeople processesproduce the talentthat is required bythe strategy andstructure of theorganizationSource: Designing Your Organization: Using the STAR Model to Solve 5 Critical Design Challenges by Amy Kates and Jay R. GalbraithStrategy
  • 14. Strategy is a Series of ChoicesHow will wewin?Whatmanagementsystems arerequired?What is ourwinningaspiration?Whatcapabilitiesmust be inplace ?Where will weplay?The right playing field: Where we will compete: our geographies,product categories, consumer segments,channels and vertical stages of production.The unique right to win: Our value proposition Our competitive advantageThe support systems: Systems, structures and measuresrequired to support our choicesThe set of capabilities require to win: Our reinforcing activities Our specific configurationThe purposeof the enterprise: Our guidingaspirationsSource: Playing to Win: How Strategy Really Works, A.G. Lafley and Roger L. Martin
  • 15. Project OverviewFact-based Analysis• Strategic Alignment• Five Forces• External Scan• Internal Scan• Interviews• Gap Analysis• Business Implications• Current Work• SWOT Analysis• Key IssuesDesign Decisions andMetricsStrategiesKey Initiatives,Programs / Projects• Discovery Workshop• Purpose / Vision• Goals• Business ModelDefinition• Activities• Processes• Same Store Sales• Net Revenue• Net Promoter Score• Employee Engagement &Retention• Number of ready-nowleadersMetrics2. Strategy 22.12.32.23. Strategy 33.13.23.31. Strategy 11.11.21.3Discover Design DeployImplicationsDevelop
  • 16. Discovery: Gather DataBefore we can make data-drivendecisions, we need…data!
  • 17. Discover PhaseExternalEnvironmentalScan• Porter’s FiveCompetitive Forces• Current StateStakeholder AnalysisofShareholders, Customers, Regulators andCommunities in whichwe workOutcomeAnalysis• Desired Stakeholderoutcomes forShareholders, Leaders, Customers, Employees and Communities• Desired Metrics• Gap Analysis betweenCurrent Metrics andDesired MetricsDiscoverInternalEnvironmentalScan• SWOT Analysis• Current StateStakeholder Analysisof Leaders andEmployees• Leadership Interviews• Current Strategy• Assessment ofIntegration, Complexity and Customer-Centric• Current BusinessModel• CurrentCapabilities, Activitiesand Processes• Current MetricsRequirementsResults
  • 18. Porter’s Five Competitive ForcesIndustryRivalryBuyers(Buying Power)Substitutes(Threat ofSubstitutes)PotentialEntrants(Threat ofMobility)Suppliers(Supplier Power)Bargaining power of suppliers:• Supplier concentration• Availability of substitute inputs• Importance of supplier’s input to buyer• Supplier’s product differentiation• Importance of industry to suppliers• Buyer’s switching cost to other input• Suppliers’ threat of forward integrationRivalry among existing competitors:• Number of competitors (concentration)• Relative size of competitors (balance)• Industry growth rate• Fixed cost vs. variable cost• Product differentiation• Diversity of competitorsThreat of substitute products or services:• Relative price of substitute• Relative quality of substitute• Switching cost to the buyerBargaining power of buyers:• Number of buyers relative to sellers• Product differentiation• Switching costs• Buyer’s profit margins• Buyer’s use of multiple sources• Buyer’s threat of backwards integration• Importance of the product to the buyer• Buyer’s volumeThreat of new entrants:• Barriers to entry:• Economies of scale• Product differentiation• Capital requirements• Switching cost to buyers• Access to distribution channel• Government policies• Incumbent’s defense of market share• Industry growth rateSource: Competitive Advantage by Michael Porter
  • 19. Project OverviewFact-based Analysis• Strategic Alignment• Five Forces• External Scan• Internal Scan• Interviews• Gap Analysis• Business Implications• Current Work• SWOT Analysis• Key IssuesDesign Decisions andMetricsStrategiesKey Initiatives,Programs / Projects• Discovery Workshop• Purpose / Vision• Goals• Business ModelDefinition• Activities• Processes• Same Store Sales• Net Revenue• Net Promoter Score• Employee Engagement &Retention• Number of ready-nowleadersMetrics2. Strategy 22.12.32.23. Strategy 33.13.23.31. Strategy 11.11.21.3Discover Design DeployImplicationsDevelop
  • 20. DiscoveryDesign PhaseStrategy• Strategic Intent,Purpose, Vision& Values• Where to Play /TargetSegments andCustomers• How to Win /ValueProposition /DifferentiationStrategy• Goals• MetricsMacroStructure• BusinessModel• Org DesignCriteria /RequiredCapabilities• ManagementSystems• Activities andProcessesMapping• Categorizationof Work• Processes andLateral LinkageMicroStructure• OrganizingStructure• Governance /Decision Rights• InformationManagement• ProgramManagement• People• RewardsDesign
  • 21. Choice 1Who are we and how do wecreate differentiated value for ourtarget customers?
  • 22. Choice #1Who are we and how do we create differentiatedvalue for our target customers?Customer SegmentCompetitive AdvantageWinning AspirationValue Propositions
  • 23. Start with Our AspirationHow will wewin?Whatmanagementsystems arerequired?What is ourwinningaspiration?Whatcapabilitiesmust be inplace ?Where will weplay?The right playing field: Where we will compete: our geographies,product categories, consumer segments,channels and vertical stages of production.The unique right to win: Our value proposition Our competitive advantageThe support systems: Systems, structures and measuresrequired to support our choicesThe set of capabilities require to win: Our reinforcing activities Our specific configurationThe purposeof the enterprise: Our guidingaspirationsSource: Playing to Win: How Strategy Really Works, A.G. Lafley and Roger L. Martin
  • 24. It’s not About the BoxesIf you start strategicdesign with Orgcharts, you’re……dead meat.Strategy Flows from a Higher Purpose, Focused on Customer Needs
  • 25. What is an Aspiration?Less about us…Grow our market share in the Chinamedical device market (internally-focused)Serve superior coffee sourced fromthe world’s best global productionregions (product-centric)Grow earnings per share by greaterthan ten percent (performance-centric)More about the customer…Alleviate pain, restore health andextend life (Medtronic)To inspire and nurture the humanspirit – one person, one cup and oneneighborhood at a time (Starbucks)Ladies and Gentlemen serving Ladiesand Gentlemen (Ritz-Carlton)Winning Aspirations Begin with the Customer in Mind
  • 26. The Purpose of an Aspiration―It is impossible to have a great lifeunless it is a meaningful life. And it isvery difficult to have a meaningful lifewithout meaningful work.‖- Jim Collins
  • 27. Where will we Play?How will wewin?Whatmanagementsystems arerequired?What is ourwinningaspiration?Whatcapabilitiesmust be inplace ?Where will weplay?The right playing field: Where we will compete: our geographies,product categories, consumer segments,channels and vertical stages of production.The unique right to win: Our value proposition Our competitive advantageThe support systems: Systems, structures and measuresrequired to support our choicesThe set of capabilities require to win: Our reinforcing activities Our specific configurationThe purposeof the enterprise: Our guidingaspirationsSource: Playing to Win: How Strategy Really Works, A.G. Lafley and Roger L. Martin
  • 28. Sustainable, ProfitableGrowthWhere will we Play?CustomerSegmentationThe central goalWhich Segment?Based on research of attitudes,behaviors and firmographics/demographics of targetcustomers
  • 29. Sustainable, ProfitableGrowthCustomerSegmentationThe central goal• Geography• Product Category• Channel• Vertical/horizontalin the value chainWhich Segment?Based on research of attitudes,behaviors and firmographics/demographics of targetcustomersWhere will we Play?
  • 30. How will we Win?How will wewin?Whatmanagementsystems arerequired?What is ourwinningaspiration?Whatcapabilitiesmust be inplace ?Where will weplay?The right playing field: Where we will compete: our geographies,product categories, consumer segments,channels and vertical stages of production.The unique right to win: Our value proposition Our competitive advantageThe support systems: Systems, structures and measuresrequired to support our choicesThe set of capabilities require to win: Our reinforcing activities Our specific configurationThe purposeof the enterprise: Our guidingaspirationsSource: Playing to Win: How Strategy Really Works, A.G. Lafley and Roger L. Martin
  • 31. ValueBenefits - Cost
  • 32. Competitive AdvantageValueCostMarginValueCostMarginValueCostMarginValueCostMarginAverage Competitor Cost Leader DifferentiatorTo be Sustainable, You Must Choose Between Cost Leadership or Differentiation
  • 33. Four Competitive StrategiesOverall Low-Cost ProviderBroadDifferentiatorFocused Low-Cost ProviderFocusedDifferentiatorCompetitive AdvantageMarketCoverageCost Leader DifferentiatorLimitedRangeofMarketSectorsBroadRangeofMarketSectorsSource: Essentials of Strategic Management by John Gamble and Arthur Thompson Jr.
  • 34. Sustainable, ProfitableGrowthCompetitiveAdvantageCustomerSegmentThe central goalType of advantageLow cost DifferentiatedBroadNarrowScopeofadvantageHow will we Win?• Geography• Product Category• Channel• Vertical/horizontalin the value chainWhich Segment?Based on research of attitudes,behaviors and firmographics/demographics of targetcustomers
  • 35. Sources of AdvantageHow The Firm WinsCostDifferentiationCost Scale Learning Linkages Pattern of capacityutilization Integration Timing PoliciesDifferentiation  Product features andperformance Services provided Intensity of an activity Content of an activity Technology employed Information employed Process Training and employeeskill Linkages Timing Location Learning Interrelationships Integration Scale Institutional factors BrandingSource: Competitive Advantage by Michael Porter
  • 36. A Value Proposition is…EITHERA statement that summarizes why a customer shouldbuy a product or use a service. It describes what westand for relative to the benefits sought by the customer.It is the answer to the customer’s question “why should Ibuy from you?”ORA differentiated bundle of products and/or services thatcreate value for target customers.
  • 37. The Results of Choice #1• Your Winning Aspiration• Customer Segments with Research-BasedInsights• A Competitive Advantage• Value PropositionsWho are we and how do we create differentiatedvalue for our target customers?
  • 38. Choice 2What unique capabilities andactivities create value? How dowe best organize to deliver valueto our customers?
  • 39. Choice #2What unique capabilities and activities createvalue? How do we best organize to deliver valueto our customers?StructureCategorization of WorkOrganizational Capabilities /Design CriteriaBusiness Model
  • 40. CapabilitiesHow will wewin?Whatmanagementsystems arerequired?What is ourwinningaspiration?Whatcapabilitiesmust be inplace ?Where will weplay?The right playing field: Where we will compete: our geographies,product categories, consumer segments,channels and vertical stages of production.The unique right to win: Our value proposition Our competitive advantageThe support systems: Systems, structures and measuresrequired to support our choicesThe set of capabilities require to win: Our reinforcing activities Our specific configurationThe purposeof the enterprise: Our guidingaspirationsSource: Playing to Win: How Strategy Really Works, A.G. Lafley and Roger L. Martin
  • 41. Capabilities are NOT CompetenciesCapabilities belong toorganizationsCompetencies belongto individuals
  • 42. The Context ofOrganizational CapabilitiesTarget CustomersWho, specificallyis our targetcustomer andwhat benefits dothey seek?Competitive AdvantageHow do wedifferentiateourselves in theeyes of our targetcustomers?Value Proposition / OfferingsWhat do we / canwe offer benefitsthat our targetcustomers value?CapabilitiesIn order to delivervalue, whatspecifically do wehave to be goodat – better thanour competition?
  • 43. What are Organizational Capabilities?Capabilities are integrated processes, systems,and abilities. In order to be differentiating, theymust be unique to your company and difficult toreplicate. They are created by an organization(never sourced). Differentiating capabilities aredeveloped, perfected and protected within thecompany.If a capability is not unique, is easily copied orcan be bought in the marketplace, then it is notdifferentiating.A Primary Value-Add of HR is the Creation of Corporate Capabilities
  • 44. “How to Win” Decisions CreateDifferent Capability RequirementsDifferent Competitive Strategies Drive Different Capability RequirementsWhichcapabilitiesare importantto yourcompanydepends onyourdifferentiationstrategy.
  • 45. Star ModelOrganizationDesign CriteriaStructureProcessPeopleRewardsStrategy
  • 46. Organization Design CriteriaOrganizationDesign Criteria• Strategy drives organizational choices• Strategic Choices become capability requirements• The unique capabilities required to execute against ourdifferentiation strategy determines the design of theorganizationStrategyOrganizational Capabilities = Design Criteria
  • 47. Guidelines:Writing Good Design CriteriaGuideline Poor Criteria . . . Better Criteria . . .1. Specific: not too broad,measurableMake the bestproductsDesign products that meetthe needs of our targetaccounts2. Differentiating:not simply table stakesUse technologyeffectivelyCreate technology solutionsthat support our clients inservicing their customers3. Actionable: start with a verb Be a good organizationto work forBuild a reputation as a goodcommunity citizen in our keycommunities4. Future oriented: aspirational Reduce costOperate state-of-the art,cost-effective customerservice centers5. About Capability:not activitySelect the best people Create a leadership pipelineto support global growthSource: Designing Your Organization: Using the STAR Model to Solve 5 Critical Design Challenges by Amy Kates and Jay R. Galbraith
  • 48. Capabilities DefineCompetitive ActivitiesTarget CustomersWho,specifically isour targetcustomer andwhat benefits dothey seek?Competitive AdvantageHow do wedifferentiateourselves in theeyes of ourtargetcustomers?Value Proposition / OfferingsWhat do we /can we offerbenefits that ourtargetcustomersvalue?CapabilitiesIn order todelivervalue, whatspecifically dowe have to begood at – betterthan ourcompetition?
  • 49. Categorization of Work• No company can (or should) be world-class at everything.It is important to be most effective at work thatdifferentiates the company.• Not all work is equal. While work may be essential, not allwork directly creates differentiated value for the targetcustomers• Work can be categorized as competitive (directly impactsthe customer experience), enabling (enables competitivework), essential (such as payroll) or compliance (we do itbecause we are required to do so).• Strive for effectiveness with competitive and enabling work.Strive for efficiency with essential and compliance work.
  • 50. Work CategorizationCompetitiveActivities(Greatest Return)EnablingActivitiesCompliance(No Return, but high risk)EssentialActivitiesDoes this work directlymake our strategyhappen?Does it directly impactour value offering(s)?Will it createsustainabledifferentiation?If we were forced togive up control ofwork, would this be thelast thing we wouldgive up?Are the outputs of thisprocess used by orconsumed byCompetitive Work?Does it enableCompetitive Work?Does the corporationconsider this anenabler because of itsvalues/ beliefs?Do we do this becausewe don’t want to go tojail or get fined?If allowed, would westop doing this work?Is it essential to thebusiness, but not togaining market share?Is it only a potentialdisadvantage?Could we afford to beat par with ourcompetitors?Effectiveness EfficiencySource: AlignOrg Solutions
  • 51. Sourcing DecisionsOutsource to aStrategicPartner(Develop BestStrategic Vendors)DeliverInternally(Develop BestInternal Capability)Outsource toLow-CostProvider(Develop MostCost-Effective &Compliant Source)MaintainInternally(Must be at leastOn-Par with theIndustry)Enabling WorkEssential &Compliance WorkUnique /ProprietaryActivitiesGenericActivitiesNOTE: AlwaysmaintainCompetitivework internally
  • 52. The Business ModelWhat is a business model?• A business model is a logical description ofcustomers, value offerings, infrastructure andfinancial viability.• It provides a very high-level map of workprocesses that create value and support thestrategy. It indicates linkages betweenprocesses.
  • 53. The Business ModelSource: Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers by Alexander Osterwalder and Yves Pigneur
  • 54. Key Partners Key ActivitiesCost StructureKey ResourcesValue Propositions Customer RelationshipsChannelsCustomer SegmentsRevenue StreamsExample
  • 55. StructureOrganizationDesign CriteriaStructureStrategy
  • 56. Structure Choices Depend on…Activities• Structure defines capabilities, which imply activities, which are part of a larger business model.These decisions drive structural choices. Creative, customer-centric businesses tend to organizearound customer segments and geographies while a product-centric businesses tend to organizearound products.Size & Complexity• Start-ups need more generalists and less structure. Global Organizations need high overarchingstructure with local flexibility. Span of control may shift as business units, regions and functionsgrow.Culture• Are you an autocratic culture or a more egalitarian culture? What is your organization’s readinessfor different structural options?History• Structures evolve over time. Because of decisions made in the past, it might be more difficult toshift the organizational structure.Personnel• Some organizations make structural decisions around strong personalities. This can lead tochoices that are less efficient and effective.SmarterChoicesPoorerChoices
  • 57. Some Structure OptionsCEOCardio-vascularDiabetes NeuroProduct StructureCEOAmericas EMA ASIARegional StructureGMR&D Ops MarketingFunctional StructureGMHealthCareEducation Gov.Market (Customer Segment) StructureGMNew Prod.Dev.OrderFulfillmentCustomerAcq.Process StructureCEOBUPresidentRegionalHeadFunctionalHeadMatrix StructureRegionalFunctionalSupport
  • 58. Advantages / Disadvantages ofStructural ChoicesOption Advantages Disadvantages1. FunctionOrganized around majoractivity groups such asresearch and development,operations, marketing, finance,human resources, etc.Increased knowledge sharing withinfunctionsAbility to build depth and specialization—attracts and develops experts who ―speakthe same language‖Leverage with vendorsEconomies of scaleStandardization of processes andproceduresDifficult to manage diverse product andservice linesCross-functional processes causecontentionDifferent departments have differentpriorities; the customers interest can getoverlookedIntegration tends to occur only at theleadership team level2. GeographyOrganized around physicallocations such as states,countries, or regionsLocal focus and customizationRelationships with active localgovernmentsReduces transportation costsDifficult to mobilize and share resourcesacross regional boundaries3. ProductOrganized into productdivisions, each with its ownfunctional structure to supportproduct linesRapid product development cyclesFocus allows for "state of the art" researchProfit and loss responsibility for eachproduct is located at the division level witha general managerPositive team identity develops aroundproduct lines—clear line of sight betweendecisions and success of businessDivergence among product lines in focusand standardsLoyalty to product division may make ithard to recognize when a product shouldbe changed or droppedDuplication of resources and functionsLost economies of scale when functionsare spread outMultiple points of contact for the customer4. CustomerOrganized around majormarket segments such asclient groups, industries, orpopulation groupsCustomize for customersBuild in-depth relationships and customerloyaltyCreate more value-added product andservice bundles and solutionsAvoid commoditized products andcompetition on price aloneDivergence among customer/marketsegments in focus and standardsDuplication of resources and functionsChallenge of measuring customerprofitability and identifying appropriatesegmentsSource: Designing Your Organization: Using the STAR Model to Solve 5 Critical Design Challenges by Amy Kates and Jay R. Galbraith
  • 59. The Evolution of Dance:Organizational StructureStart-upBureaucraticFunctionalDivisional (Business Unit or Product)MatrixSize&ComplexityoftheOrganization
  • 60. The Results of Choice #2• Organizational Capabilities• Design Criteria• Categorization of Work• Business Model• Initial Organizational StructureWhat unique capabilities and activities createvalue? How do we best organize to deliver valueto our customers?
  • 61. CAUTION: To createsustainable, profitablegrowth, you cannot stophere. You have to diginto the details:processes, linkages,rewards and peoplestrategies.
  • 62. Choice 3How will we create alignmentthrough processes and linkagesthat cut across the structure?
  • 63. Choice #3How will we create alignment through processesand linkages that cut across the structure?ProcessesLinking Mechanisms
  • 64. ProcessesOrganizationDesign CriteriaStructureProcessStrategy
  • 65. What is a Process?“Process is a series ofconnected activities thatmove information up anddown and across theorganization. Thisincludes workprocesses…It alsoincludes managementprocesses…”- Jay GalbraithDesigning Your Organization
  • 66. Roles & ResponsibilitiesBusiness UnitsP&Lresponsibility.Choices &trade-offsRegionsLocalleadership, execution andexpertiseFunctionsExcellence,standard-setting &harmonizationBegin in broader swaths
  • 67. Processes Link & AlignVertical Processes Lateral Processes• Allocate funds & talent• Business planning• Budget planning• Workflow• Hand-offs• RACIStructure defines shape. Processes define flow.
  • 68. Map the ProcessesProcess maps define work flow, activities and linkages
  • 69. RACI ChartsR = ResponsibilityResponsible for making and/or carrying out the decision. If more than oneperson is responsible, they all have to agree to the decision.A = Accountability May not make the decision, but will be ultimately held AccountableC = Consult Must be Consulted and give input before the decision is madeI = Informed Needs to be Informed about the decision after it is madeRolesRole 1 Role 2 Role 3 Role 4KeyDecisionsCreate JobDescriptionC A I ASet Salary for Role R C A ISource Candidatesfor RoleR C I AScreen Candidates R C A I
  • 70. Swim Lanes
  • 71. CurrentStateDesiredStateImportance of Alignment
  • 72. Alignment Creates AgilityCurrentStateDesiredState
  • 73. Operating MechanismsRegional orFunctional PlanAnnualOperating PlanStrategyQBRsStrategic DirectionIndividual Objectives
  • 74. Linkage ChoicesComplexityEffectivenessLOWERLOWERHIGHERHIGHERRules & policiesInformal networksLiaison roles, jobexchangeCross-discipline teamsMatrixorganization
  • 75. Team-Level Alignment
  • 76. The Results of Choice #3• Definitions of Roles & Responsibilities• Process maps – SIPOCS and Swim Lanes• RACI Charts• Operating Mechanisms• Linkages• P-GRPI• AlignmentHow will we create alignment through processesand linkages that cut across the structure?
  • 77. Choice 4How will we align recognition andrewards to our strategic choices?
  • 78. Choice #4How will we align recognition and rewards to ourstrategic choices?Reinforcement based on emotional needsReinforcement based on rational needs
  • 79. Star ModelOrganizationDesign CriteriaStructureProcessRewardsStrategy
  • 80. Rewards begin with MetricsYou can only manage what you measure……and you can only recognize and reward whatyou measure.
  • 81. ReinforcementFor a reinforcement theory, see:http://www.slideshare.net/tloyd/abcsquared
  • 82. What Motivates Your Employees?1. Praise and recognition2. Personal and written thanks by one’s managerfor good performance3. Public praise for good performance4. Morale building meetings to celebratesuccesses5. Pay for Performance
  • 83. RecognitionPositive Immediate CertainNegative Future Uncertain
  • 84. Rewards• Whose behavior / results should be rewarded?• How do you reward geographies and functionsfor business unit growth and profitability?• How far down in the organization do rewardscascade?• What key behaviors are measured andreinforced?• What is the evaluation process?
  • 85. The Results of Choice #4• Recognition and reward systems• Reward structures• Reward and recognition budgetsHow will we align recognition and rewards to ourstrategic choices?
  • 86. Choice 5What people-processes must wecreate to support our strategicchoices?
  • 87. Choice #5What people-processes must we create tosupport our strategic choices?Human Resources philosophies, policies, procedures and processes
  • 88. Star ModelOrganizationDesign CriteriaStructureProcessPeopleRewardsStrategy
  • 89. Change ManagementCommunication
  • 90. What could go wrong?Why decisions don’t get made
  • 91. What Stands in the Way?• Choices do not get made– Continual study of unresolved“issues”– Decision gridlock• Choices appear to get made,but fall apart– Weak consensus– False consensus• Choices are not robust– Invalid data– Untested inferences• Choices get made, but actionis not timely– Drawn-out choice process– Time consuming “buy-in”process• Choices are not sufficientlyfocused– Choices not clear on what will“not” be done– Too much flexibility results inlimited differentiation
  • 92. What next?How do we get started?
  • 93. Project OverviewFact-based Analysis• Strategic Alignment• Five Forces• External Scan• Internal Scan• Interviews• Gap Analysis• Business Implications• Current Work• SWOT Analysis• Key IssuesDesign Decisions andMetricsStrategiesKey Initiatives,Programs / Projects• Discovery Workshop• Purpose / Vision• Goals• Business ModelDefinition• Activities• Processes• Same Store Sales• Net Revenue• Net Promoter Score• Employee Engagement &Retention• Number of ready-nowleadersMetrics2. Strategy 22.12.32.23. Strategy 33.13.23.31. Strategy 11.11.21.3Discover Design DeployImplicationsDevelop
  • 94. DRAFT: Project PlanPhase 1 Phase 2 Phase 3 Phase 4 Phase 5 Phase 6 Phase 7 Phase 8Design teamdevelops aclearunderstandingof stakeholderrequirements,gains clarityaround thevalue offeringand designprinciples.Categorizeworkactivities.Organizingrationale isdiscussedand agreed-upon.Anyoutstandingorganizingrationale workis completed.Begindetailedanalysisaround thevolume ofwork andwhere to bestsource thatwork Processredesign isinitiated.Choosestakeholdersand designteammembers.Contractaroundproblemstatements,project goalsand processto befollowed.Launchstakeholder.ConductExecutiveStakeholderinterviews.Conductworkshop fordesign team.Createunderstandingand alignmentaroundapproach andtools.ContinuePhase 4activities.Gain clarityarounddecisionrights. MapRACI.Create firstdraft of newdesign forconsumptionanddiscussion.Updateroadmapdraft. Providebudgetguidance.Beginsocializationof roadmap.
  • 95. ResourcesVideo:YouTube Video: The Inspirational Power of Purpose (30 Minutes)YouTube Video: Business Model Canvas ExplainedHarvard Business Publishing video on Porter’s Five ForcesBooks:Playing to Win: How Strategy Really WorksDesigning Your Organization: Using the STAR Model to Solve 5 Critical Design ChallengesBusiness Model Generation: A Handbook for Visionaries, Game Changers, and ChallengersPurpose: The Starting Point of Great CompaniesCompetitive Strategy: Techniques for Analyzing Industries and CompetitorsBringing Out the Best in PeopleOther resources:Beam, Inc. Blog on Depth & Duration of Innovation & TransformationAlignOrg Solutions