Hurricane Katrina, Sandy and the Boeing Dreamliner!!! PT. 2

Hurricane Katrina, Sandy and the Boeing
Dreamliner!!!
Part II.

By
Dalip Raheja
President and CEO
The Mpower Group

1/22/13

Dreamliner 787

© 2013 The Mpower Group, Inc. All Rights Reserved.
Unauthorized Duplication, Storage or Transmission Strictly Prohibited. 2

Hot Off The Press
key managerial wrong turning a decade ago. ..Boeing decided at the outset
to rely on outsourcing for 70 percent of the plane’s manufactured content….
greatly increased the managerial complexity of the project and almost certainly helps explain

why the project ended up three years late …Boeing’s reputation ….contractual penalties.

long-term cost in weakening Boeing’s competitiveness. …the wings and the wing-box. …
most technologically advanced …Boeing’s secret wing-building know-how had to be
transferred to Japan…Boeing workers …as vulgarly referring to Boeing’s technology-
transfer

deal as the “open kimono” policy. carbon fiber. The learning curve in putting this tricky new

material to work has been climbed by Tokyo-based Toray and Mitsubishi, not by
Boeing…left

behind by its suppliers and cannot catch up .Airbus…Japanese-made carbon-fiber for the
wings

of its next major plane. ..Mitsubishi seems to be planning in the long run to enter the fray as
a direct competitor to Boeing and Airbus

Hot Off The Press

The right goal: add value for customers
Overheating batteries – current focus

“What we do know is that the cost-cutting way that Boeing went about
outsourcing both in the US and beyond did not include steps to
mitigate or eliminate the predicted costs and risks that have already materialized.”
The coordination risk The innovation risk

The outsourcing risk The risk of tiered
outsourcing
The risk of partially The offshoring risk
The risk of communications The labor relations risk
by computer
The project management The risk of a disengaged C-
skills risk suite


Hot Off The Press

“….additional costs and risks of large-scale outsourcing. Outsourcing
didn’t cut costs and increase profits, he wrote; instead, it drove
profits and knowledge to suppliers while increasing costs for the
mother company. “Not only is the work out-sourced; all of the profits
associated with the work are out-sourced, too.”

Dr. L.J. Hart-Smith – Boeing, 2001


Value
Adoption is a process not an initiative
Solution Adoption Intended
Introduced Business
Into the Market
Results
100 22 %
Economic • Only 8.8% of solution
UNITS OF Success (product, process, etc.) will
“VALUE” be successful
60%
• Change is hard and not
easily adopted
• Getting a new process /
18% product adopted requires
60% 40%
8.8% of All investment (cost)
Projects

Technical Stopped Because Economic
Failure of Insufficient Failure
Economic Success
Potential Impact on project
Innovation Process

100%
% of total costs of

funding
• Shift Investment
• Shift Resources
50%
• Longer Timeline
• “Customer” commitment

0%
Source: Maier, F. H.
Unauthorized Duplication, Storage or Transmission Strictly Prohibited.
Time 6

Changing Value Drivers
Examples of Value Drivers

Critical to a CMO Others
Brand CMO
On Time Differentiation
Management

Strategic Sales Relationship
Planning Support Management

Competitive Customer
Lead
Analysis Life Cycle
Generation
Management
CIO, CPO, CFO, ETC…
Industry
Functional
Awareness Under Budget
Requirements


What do we mean by “Risk”

Risk – From an industry training guide:
“The cumulative effect of the chances of an uncertain
occurrence that will adversely affect program or project
objectives. It is the degree of exposure to negative
events and probable consequences.”

Risk – The English Version:
“The net chance we have of stuff going wrong that could
screw up what we are trying to accomplish.”

Risk – The Mpower Group:
“The biggest risk a project can take is trying to eliminate
all risk – it can’t be done. Risk must be embraced and
effectively managed.”


Managing Risk
The Only Thing We Have to Fear…

Uncertainty Risk
Potential for negative Potential for negative
economic impact economic impact
Range of impacts Range of impacts can be
unknown / unclear established
Likelihood of occurrence Likelihood of occurrence
unknown / unclear can be estimated
Can only be worried Can and should be
about managed / mitigated

Leads to paralysis Leads to opportunities

Goal: Transform Uncertainty into Risk

Direct vs. Systemic Causation!!

Predictable & Inevitable!!


Managing Risk
Next we classify risk into four major risk types
Market Risk → Factors that would affect every supplier regardless of industry.

Examples include: market drivers, new product introduction, interest rate
sensitivity, currency changes, geographic risk, and political risk.

Industry Risk → Factors that would affect all suppliers in related businesses.

Examples include: raw material price increases, shortages, environmental
compliance, quotas, tariffs, innovation, and capacity issues.

Factors that would prevent a single supplier from fulfilling its
Supplier Risk →
contractual obligation to Your Company.
Examples include: time or production delays, quality defects, stock-outs, change in
ownership, bankruptcy, and missed or broken promises.

Internal Risk → Factors that are internal to Your Company
Examples include: using a single source of supply, incorrect lead-times in an
internal system, schedule risk, exposure for stock consignment, obsolete
inventory and transportation/logistics risk, engineering changes, errors in
demand forecast, data integrity, BOM version control, Business Unit friction, and
information silos.
This assists in determining how controllable the risk is
and our potential responses.11

Managing Risk
Lastly we assess the likelihood, impact, and level of
control for each risk.

Severity of Effect
(Impact)

Manufacturing
Customers
& Suppliers

Your
Company
Probability of Level of
Occurrence Control
(Likelyhood) (Influence)

This helps us understand and focus on the actual magnitude of the
risk, and in prioritizing mitigating activities and responses.


Managing Risk
In assessing risk, it is useful to have a consistent
scoring methodology
Likelihood Impact Controllability
(The probability the risk will (The severity of outcomes if the (The level of control we can exert
occur if unmitigated) risk occurred) over the likelihood)
Very unlikely 1 Moderate, progress 1 Total direct control 1
disrupted with through project actions
manageable extensions
to short-mid term
schedule and cost
Somewhat unlikely 2 Medium; progress 2 Highly controllable 2
disrupted with large through project actions
extensions to mid term
schedule and cost
50/50 3 High, significant 3 Moderately controllable 3
disruption to schedule, through project actions
cost, and products over
the mid-long terms
Highly likely 4 Extreme, significant 4 Minimal control 4
disruption to successful
delivery of objectives,
products, and benefits
Nearly certain 5 Critical, threatens 5 No control 5
success of program


Managing Risk
Once this first step is complete we analyze and
mitigate risk
Review the identified risks and their quantified assessments from the
preceding steps.
Risk analysis and mitigation develops specific, discrete, and measurable
responses to each identified risk.
Identify and record actions that could be taken to avoid or mitigate the
individual risks based on their level of controllability.
Controllability Type of Mitigation
High (1) Actions which should be immediately incorporated into the
project plan.

2

Medium (3) Actions which are contingent risk responses to be incorporated
in the project plan if the risk occurs.

4

Low (5) None. By definition, such risks cannot be avoided or mitigated.


Managing Risk
Lastly we begin the process to manage and report
risk

Risk Management does not end with the identification and
implementation of mitigating strategies or potential responses

Risk Management must monitor the effectiveness of the Risk
Mitigation Plan
• Tracking measurable reductions in the likelihood
• Tracking measurable reductions in the impact of each risk

Review the Risk Mitigation Plan on a monthly basis
• Discuss the status and movement of each risk reviewed
• Establish a Risk Watch List

Remember Portfolio Risk

Most Projects needs to focus on an expanded “When”
and “What”
Projects
typically END HERE (Deployment)

The Value to the User starts here (Adoption) When

2012 2013 2014 2015 2016 ……………………
……….IProjects……….

Attracting and
Risk Market
Traditional Focus: retaining new
Management position
customers
Cost What –
Time Value Focus
Scope Operational Demand Business
Advantage Planning growth
Quality

Business Drivers of “Users”


Focus on Proactive Value Creation

Maximum Designed Value of “software”(solution)

Customer A
Value Gap

Customer B
Value Gap

Customer C
Value Gap
A

B

C

2 YEARS

Time

Increasing Perceived Value and lowering Perceived Cost
leads to increased Actual Realized Value

Perceived “Value” > Perceived “Cost” =
Increased Adoption Actual Realized Value

“Value” and “Costs” extend beyond Financials


What is Value?
Fundamentals of Value (Sawhney)

Customer Defined • Non-Negotiable

Opaque • Non-Quantifiable

Multi Dimensional • Functional, Economic, Psychological

Trade Off • Cost - Value

Contextual Defined by How it is Used

Relative Compared to Alternatives

Mind Set Based on a Belief


What is Value?
IT Business Value Program – “Cost Center to Value Center”
(Fortune 100 Company)

• Behavioral change across IT – Business Value focus
• Uptime, service calls etc. – TTM, Increased revenue
• Changed relationship with customers – support to business partner
• New measurements, New alliances
• Common language, based on needs of customers
• Value defined by customers
• Standard measurement, valuation, training – evangelism!
• Changing corporate attitude value of IT investments
• Getting “customer” to accept accountability increases success
• Linking Business value to IT processes was critical


What’s Different? Example: New measures for project
success and completion

 Is it patch/upgrade
stable?  Did it reduce cost?
 Is testing done?  Did it improve service?
Traditional

 Are people aware of the new features?
 Did we meet the budget?  Are people using the new features?
 Did we do initial  Did the business change their
training? processes
or are we repeating old mistakes?
 Do we have a support
 What open issues still exist?
person/super-user  Is it better than what we had?
identified?  What users are most displeased?
Why…
 What users are most excited? Why…
Expanded  What do our customers think?
 What do our suppliers think?
Thinking  How does this compare to what our
competitors have?
 What process steps were automated?


TMG’s Approach
Competency Model Framework
Illustrative

Business, Industry, & Enterprise Knowledge
Change
Management
Operational Management
Consulting & Functional
Facilitation Core Processes
• Engineering
• Finance Competency Exceptional
Information • HR
Based Business
• IT
Technology • Manufacturing Talent Results
• Operations Management
• Quality
Project • Sales
Management • Supply Chain
Business Context /
Organizational
Teamwork Competencies

Strategic
Competencies

Functional
Competencies

THANK YOU FOR ATTENDING!

By
Dalip Raheja
President and CEO
The Mpower Group
(630) 268-8963
www.thempowergroup.com
http://blog.thempowergroup.com


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