Mmi strategy 1


Published on

Published in: Business, Education
  • Be the first to comment

  • Be the first to like this

No Downloads
Total views
On SlideShare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide
  • There is an iterative relationship between aspirations and strategy. Clearly articulated aspirations are important to give context and focus to a strategy development effort. It is important to have some consensus among the company’s senior leadership on what it wants the company to become, and how it views success. Yet, until we undertake the strategy development effort, how do we know what the company can become? Why should we limit the space of opportunities we look at a priori ? Making grand statements like “we want to be the leading global TV station in the next millennium” sound good, but how do we know that is realistic?
  • A company’s aspiration has two components – a mission , which is a statement about the company’s reason for existence, and a vision , which is a statement about what the company wants to become. A company’s aspiration is to live up to its mission while making progress toward its vision. For example, if the Disney Company’s mission is “to make people happy” and its vision is to “be the world’s premier media and entertainment company,” Disney can judge whether it is meeting its aspirations by asking “are we making people happy?” and “are we on a path toward building the world’s premier media and entertainment company?” Aspirations should be short and clear . Two good tests are: whether they are easy to remember – if members of your team cannot recite the aspiration a few hours after last looking at a written copy, it probably fails this test – and, whether a stranger to the organization can quickly infer what the company is about without any other information.
  • A company’s mission provides an inspirational purpose to the organization and helps define the organization’s scope and core capabilities. Examples of mission statements: 1. Leo Burnett: “ To be the best in the world bar note at building the most valued, leadership brands. 2. Unilever: “ Unilever’s Mission is to add Vitality to life.” A vision is the goal toward which the organization aspires. The goal should be aggressive to the point of being unreasonable, but should also be consistent with the reality of the organization’s current position. Examples of vision statements: Avon: “To be the company that best understands and satisfies the product, service and self-fulfillment needs of women – globally.” Marriott International: “To be the number one lodging company in the world.” A good vision encompasses four ideas: Fundamental aim: compelling and difficult-to-achieve, long-term goal of the organization Core strength: for example becoming the leading global internet portal in the next century might be a great fundamental aim for someone, but not for a company whose core strength is running highly cost-efficient poultry processing plants. Focus to the organization’s efforts Envisioned future
  • Strategic objectives allow a company to measure how it is performing in key result areas — those areas where the company must achieve superior results to achieve its long-term strategy. Key result areas often come directly from a company's direction statement. For example, if a company's vision is global expansion, then it will want to measure success in that area. Areas for which a company might set strategic objectives are market position, customer loyalty, quality, service, innovation, and human capital. Management must decide how it will measure success in the key result areas and then set objectives for those measures. For example, if customer loyalty is a key result area, it might be measured by a customer satisfaction index. The corresponding objective might be: "Raise the customer satisfaction index from 89 to 96 in the next three years."
  • Different functions are measured in different ways. For example: Marketing unit can measure the achieving of strategic objectives by sales volume, market penetration, new products, Pricing, Distribution, etc Printing unit cam measure its performance by: unit volume, printing Cost, Efficiency, Quality, Innovation Human Resource unit by Training, Recruitment, Compliance, Compensation/wages, etc Once the key result areas for a unit are determined, the next step is to determine how success will be measured. Based on those measures, unit objectives can be defined. For example, for a Manufacturing unit, two key result area and their corresponding measures and objectives might be as in example above.
  • When writing objectives, make sure they are SMART — specific, measurable, achievable, realistic, and timebound . Above are some examples of SMART and not-so-SMART objectives.
  • Aspirations force “forward and discontinuous thinking” – Setting aspirations requires looking to the future. It fosters an innovative thought process and a dedicated growth orientation. Aspirations establish boundary conditions for strategy decisions – Since an aspiration sets the direction of a company – its mission and vision for the future – it naturally follows that the company’s choice of strategy should align with the aspiration. Thus the aspiration, while stretching the client’s thinking on strategy, also helps set some boundary conditions for what is and what is not an appropriate strategy. Aspirations help drive high performance – high levels of performance over long periods of time shows that setting high aspirations is one of five “must-haves” in creating a “performance ethic” in the company. The aspiration is tightly linked to the company’s targets and goals, organization structure and management processes for performance feedback and consequence management.
  • Aspirations must become embedded in the culture of the organization. It takes strong leadership from senior management and the use of a number of levers to do this: Orientation and ongoing training programs; teaching such things as values, norms, history, and tradition On-the-job socialization by peers and immediate supervisors Rigorous up-through-the-ranks indoctrination – hiring young, shaping the employee's mind-set from a young age, tight screening processes, and promoting from within Integration processes – disciplined ways of culturally integrating later-stage hires and acquisitions Unique language and terminology that provide a frame of reference and reinforce the sense of belonging to a special, elite group Monetary incentives Public recognition and reward for those who display great effort consistent with the ideology
  • Typically, aspirations provide both a starting and an ending point for a strategy study. But is possible to make aspirations a central focus of the strategy. In “aspiration based planning” significant effort is spent to picture of an aspirational future state, rolling back that future to the present and creating a set of milestones, and then developing a plan for achieving the milestones.
  • Aspirations should be revisited at the end of the strategy development process because the fact-base and debates of the process may significantly reshape the aspiration. In addition, companies should periodically revisit their aspirations to keep them fresh and relevant to the organization. As the future unfolds – as the rate of industry change shifts, status becomes more certain or uncertain, or viewpoints change when they gain more knowledge about the industry – the client must look back and revisit the company aspirations. Aspirations are dynamic and should change as often as the industry does. Thus a company in a stable industry may only need to revisit aspirations every 5-10 years, while an internet competitor may see its aspirations shift by the month or even week.
  • Setting the Right Goals is crucial to a good strategy. The fundamental goal of a company is superior long-term return on investment. Growth is good only if superiority in ROIC is achieved and sustained. Profitability must be measured realistically, capturing the actual profits on the full investment. Remember: Profitability metrics beside ROIC (e.g. return on sales, EBITDA margin, pro-forma earnings, cash flow margin) are risky for strategy Prevalent accounting adjustments to reported profitability (e.g. writeoffs, writedowns, restructuring charges) can obscure true economic performance and lead to bad competitive choices. Goodwill must be treated as part of investment Important: Unrealistic profitability or growth targets can led to failed strategies
  • Mmi strategy 1

    1. 1. Set and Revisit Company’s Aspirations Chapter I
    2. 2. Company’s Aspirations Company’s Aspirations Mission “ statement about the company’s reason for existence” Vision “ statement about what the company wants to become” <ul><li>Fundamental aim </li></ul><ul><li>Core strength </li></ul><ul><li>Focus </li></ul><ul><li>Envisioned future </li></ul>Strategic Objectives “ measure how it is performing in key result areas ”
    3. 3. Business Mission & Vision MISSION VISION <ul><ul><li>Provides context for major decisions within the organization </li></ul></ul><ul><ul><li>Describes an enduring reality </li></ul></ul><ul><ul><li>Is capable of infinite fulfillment (not subject to a time frame) </li></ul></ul><ul><ul><li>Useful for both internal and external audiences </li></ul></ul><ul><ul><li>Guides development of strategy and organization </li></ul></ul><ul><ul><li>Describes an inspiring new reality </li></ul></ul><ul><ul><li>Is achievable within a specific time period </li></ul></ul><ul><ul><li>Primarily useful internally (also can be used externally) </li></ul></ul>
    4. 4. Strategic Objectives <ul><li>Allow a company to measure how it is performing in key result areas—those areas where the company must achieve superior results to achieve its long-term strategy </li></ul><ul><li>Management must decide how it will measure success in the key result areas and then set objectives for those measures </li></ul>
    5. 5. Measuring Performance Key Result Area Measures Objectives <ul><li>Cost </li></ul><ul><li>Cost per unit </li></ul><ul><li>By end of Year 1, cost per unit will be $0.4 </li></ul><ul><li>By end of Year 2, cost per unit will be $0.3 </li></ul><ul><li>Units per employee per year </li></ul><ul><li>By end of Year 1, units per employee per year will be 10 million </li></ul><ul><li>By end of Year 2, units per employee per year will be 13 million </li></ul><ul><li>HR </li></ul><ul><li>Work time loss per year (hours) </li></ul><ul><li>By end of Year 1, work time loss per year will be 25 hours </li></ul><ul><li>By end of Year 2, work time loss per year will be 10 hours </li></ul><ul><li>Compensations </li></ul><ul><li>By end of Year 1, compensations will increase by 10% </li></ul><ul><li>By end of Year 2, compensations will increase by 15% </li></ul>
    6. 6. SMART Objectives SMART Objective Not-So-SMART Objective <ul><li>Add 20 new sales agents in the next three years who are capable of selling advertising in the 4 new launched magazines — Year 1 add 2 new people, Year 2 add 9 new people, Year 3 add 9 new people. </li></ul><ul><li>Add new sales agents who are capable of selling advertising in the 4 new launched magazines (not specific, measurable, or timebound). </li></ul><ul><li>Raise sales 10% annually over the next three years. </li></ul><ul><li>Improve sales over the next year (not specific or measurable). </li></ul><ul><li>Reduce average duration of customer service phone calls by 30% over the next two years. </li></ul><ul><li>Reduce average duration of customer service phone calls by 50% over the next year (not likely achievable or realistic). </li></ul>
    7. 7. Why Set Aspiration? <ul><li>Aspirations force “forward and discontinuous thinking” </li></ul><ul><ul><li>Innovative thinking </li></ul></ul><ul><ul><li>Growth-oriented thinking </li></ul></ul><ul><li>Aspirations establish boundary conditions for strategy decisions </li></ul><ul><li>Aspirations help drive high performance </li></ul>
    8. 8. Aspiration must engage the entire organization Set aspirations Draw implications Build momentum Frontline Change agents Top management Head Heart Hand ORGANIZATION
    9. 9. Step 1: Picture the future and define aspirations Step 3: Develop business plan to “create” the future and attain milestones Step 2: Roll back the future and define intermediate milestones Today Aspiration Based Planning
    10. 10. <ul><ul><li>Are we on track toward interim targets? </li></ul></ul><ul><ul><li>What new initiatives must we take to achieve targets? </li></ul></ul><ul><ul><li>What new barriers to achieving our aspirations exist? </li></ul></ul><ul><ul><li>What new levels of performance must we achieve? </li></ul></ul><ul><ul><li>What new capabilities must we build? </li></ul></ul><ul><ul><li>How has our understanding of the future changed? </li></ul></ul><ul><ul><li>What do changes suggest for our performance vis-à-vis our stakeholders? </li></ul></ul>Revisit the Aspirations Learning in the present Next Year 3 years 5 years 10 years 20+ years
    11. 11. Setting the Right Goals <ul><li>Superior long-term return on investment </li></ul><ul><li>Superiority in Return on Invested Capital must be achieved and sustained </li></ul><ul><li>Profitability must be measured realistically, capturing the actual profits on the full investment </li></ul><ul><li>Unrealistic profitability or growth targets can led to failed strategies </li></ul>!