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Innovation Benefits Realization for Industrial Research (Part-1)

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Innovation Benefits Realization for Industrial Research (Part-1)

  1. 1. Technology Innovation Management Framework for Industrial Research Part-1 Dr. Iain Sanders January 2005
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  5. 5. What is Strategic Innovation?A. Create an Innovation Mindset  Define the environment required to nurture an innovation mindset, and the benefits obtained by achieving it.B. Develop an Innovation Strategy  Create and implement a framework for achieving an innovation mindset.C. Change Management  Develop a plan empowering others to implement the changes necessary to create an “Innovation Culture”. 5
  6. 6. Develop an Innovation Strategy 3 Innovation Strategy Platforms:  Platform 1: Planning for Innovation  Platform 2: Defining the Development Process  Platform 3: Crafting a Holistic Innovation Organization 6
  7. 7. TECHNOLOGY INNOVATION STRATEGY Three Platforms, Nine Stages Integrating Technology Innovation with Business Function – Part I: Laying the Foundation
  8. 8. Innovation Strategy Platforms Platform 1: Planning for Innovation I. Create an Innovation Vision & Blueprint II. Develop an Innovation Strategy III. Design a Technology & Innovation Portfolio Platform 2: Defining the Development Process IV. Design a Staged Development Process V. Innovation Project Management Platform 3: Crafting a Holistic Innovation Organization VI. Form Innovation Teams VII. Establish Reward Systems VIII. Measure Progress & Returns IX. Infuse Innovation Norms & Values 8
  9. 9. PLANNING FOR INNOVATION Platform 1: (Stages I-III)Integrating Technology Innovation with Business Function – Part I: Laying the Foundation
  10. 10. PLATFORM 1: I I Create an Innovation Vision & Blueprint  THE VISION  The vision is critical for setting the stage to develop an innovation mindset  It better enables employees to envision the end results of innovation  It should offer a way for employees to see & feel the eventual contributions of innovation to the enhancement of the company  THE BLUEPRINT 1. Include the overall growth role for new products 2. Include the estimated five-year budget 3. Include the people requirements 4. Include the revenue target for new products to fill 5. Include the role innovation will play with other growth modes 6. Include top managements expectations & the type of involvement & participation they will have in the innovation process 10
  11. 11. INNOVATION STRATEGIC FOCUS Platform 1: (Stages I, Part 1)Integrating Technology Innovation with Business Function – Part I: Laying the Foundation
  12. 12. PLATFORM 1: I (1) I (1) Innovation Strategic Focus What is Our Common Objective? IRL’s Mission: “We CREATE VALUE for New Zealand”. Personal Mission: “Empowering EVERYONE in IRL to create MORE value for New Zealand through innovation and creativity”. 12
  13. 13. PLATFORM 1: I (1) How can this be Achieved?  There are a number of extremely useful innovation tools and resources, that can significantly benefit IRL‟s bottom line if properly applied and managed.  These tools can support: The Operations Groups, The Technology Platforms, Business Development, and Project Management.  Everyone in IRL can benefit from using these tools: whether or not they have a scientific / engineering / technical / administrative / financial / HR / PR job or project or background.  Everyone can learn to use appropriate tools to do a better job AND achieve their career aspirations! 13
  14. 14. PLATFORM 1: I (1) Organizational Benefits – Different Perspectives  Operations Groups Perspective  Provide the quickest and most effective way of ensuring that every person can make a positive contribution to IRL’s technology platforms and / or business development objectives.  Technology Platforms Perspective  Ensure IRL’s Technology Platforms target and capture actual customer needs and requirements.  Business Development Perspective  Develop effective strategic partnerships to support FRST bids etc., and secure new commercial contracts.  Project Management Perspective  Apply effective R&D metrics and innovation yardsticks to measure the contribution of new concepts generated towards achieving project requirements. 14
  15. 15. PLATFORM 1: I (1) How Can We Manage Innovation More Effectively? 1. Setting strategic outcomes for directing technology innovation and investment. 2. Solving technical problems for realizing new market opportunities. 3. Applying scientific knowledge-based and analytical tools for developing new product, process and service concepts. 4. Building collaborative R&D partnerships for testing and commercializing new concepts developed. 5. Measuring and improving the effectiveness of the R&D process for delivering practical and profitable outcomes. 6. Setting up and coordinating technology innovation excellence teams. 7. Facilitating the dissemination and effective application of appropriate innovation tools and metrics by everyone in the company. 15
  16. 16. PLATFORM 1: I (1) Five Keys to Innovation Success  Five Analogies For Five Strategies 16
  17. 17. PLATFORM 1: I (1) 1st Analogy: A New Renaissance - World Famous In New Zealand  EXAMPLE: During the Renaissance Period (1450-1600) there was a great revival of interest in art, literature, science and learning. Furthermore, the Renaissance Period ushered in a grand age of exploration. People like: Leonardo da Vinci, Christopher Columbus and Johann Gutenberg were trail-blazing pioneers of the Renaissance Period.  APPLICATION: IRL should nurture more of its own trail- blazing pioneers – people like Richard Furneaux and Jeff Tallon, who can inspire (champion) and lead our very own „IRL (NZ?) Renaissance‟. 17
  18. 18. PLATFORM 1: I (1) 1st Strategy: Create A New Corporate Identity Provide incentives to stimulate innovative behaviour, and role models that emulate innovation excellence. 18
  19. 19. PLATFORM 1: I (1) 2nd Analogy: The Economic Rebirth Of A Nation - The Japanese Quality Revolution  EXAMPLE: Japan‟s economic and industrial infrastructure was destroyed by the Second World War. In order to rebuild their shattered economy, Japan adopted, developed and adapted American Total Quality Management methodologies. These methodologies were effectively responsible for the miraculous turn around of Japanese Industry after 1945.  APPLICATION: Today, ISO 9000 quality management standards are sweeping the world. They represent a prominent measure of business performance, attitudes and growth potential. Research and Innovation standards should be created and elevated to the status currently enjoyed by ISO 9000. 19
  20. 20. PLATFORM 1: I (1) 2nd Strategy: Develop Targets To Meet And Exceed Define research and innovation standards to meet, and the outcomes they must achieve. 20
  21. 21. PLATFORM 1: I (1) 3rd Analogy: The Space Race - Necessity Is The Mother Of Invention EXAMPLE: As the Space Race began, the United States and the Soviet Union were building rockets to use as long-range weapons. The United States initially favoured bombers, but the Soviets preferred missiles and thus took an early lead in rocket technology. JFK focused the Space Race on a clear goal: landing a man on the Moon before the Soviets. Along the way, many new technologies were tested and refined: e.g. photovoltaics, fuel cells, microwaves etc. APPLICATION: Low technology products dominate New Zealand‟s exports. Meanwhile, other economies have vigorously applied research and technological innovation to develop high value goods and services. It will not be enough for New Zealand to do more things, better and faster to catch up. The country also needs to be different, smarter, more profitable and competitive to get ahead. 21
  22. 22. PLATFORM 1: I (1) 3rd Strategy: Find The Right Challenges To Face Provide problems to solve, and opportunities to realize. 22
  23. 23. PLATFORM 1: I (1) 4th Analogy: Eureka (I‟ve Found It!) - But Why Does It Work?  EXAMPLE: Several psychological methods have been developed to „force‟ people to generate ideas and think „outside the box‟. The difficulty of obtaining objective information through such means however, is that these results are neither measurable nor reliable. On the other hand, technical information is objective in nature and can be easily observed.  APPLICATION: Consequently, the process of innovation has been studied by screening over 2 million patents and 10,000 scientific effects. From these results, inventive achievements have been recorded and inventive principles derived. Problem-solving tools apply these principles reliably and effectively. 23
  24. 24. PLATFORM 1: I (1) 4th Strategy: Provide Resources That Equip And Empower Provide tools to develop innovative solutions, and technical resources to deliver them. 24
  25. 25. PLATFORM 1: I (1) 5th Analogy: The New Rules Of Engagement - The Internet Tsunami Effect  EXAMPLE: Speed, range and accessibility of information on the Internet, and the low cost of distributing and capturing it, create new commercial possibilities. Entirely new companies and business models are emerging in industries ranging from chemicals to road haulage to bring together buyers and sellers in super- efficient new electronic marketplaces.  APPLICATION: By harnessing the power and reach of the Internet, IRL can utilise the tools to compile and qualify business investment proposals. Furthermore, funding might come from around the block or around the world. 25
  26. 26. PLATFORM 1: I (1) 5th Strategy: Deliver The Means To Make A Difference Provide business resources to commercialize research & innovative solutions, and investors to maximise the wealth created from them. 26
  27. 27. CREATE AN INNOVATION MINDSET Platform 1: (Stages I, Part 2)Integrating Technology Innovation with Business Function – Part I: Laying the Foundation
  28. 28. PLATFORM 1: I (2) I (2) Create an Innovation Mindset I. Definition II. 10 Benefits of Instilling an Innovation Mindset III. Top 10 Innovation Insights IV. 7 Changes Driving Innovation V. Instilling Innovation at a CEO Level VI. 7 Initiatives of Innovation Mind-Setters VII. Formula for Successful Innovation VIII. The Innovation Creed 28
  29. 29. PLATFORM 1: I (2) Definition  “Creating newness across all dimensions of the organization” 29
  30. 30. PLATFORM 1: I (2) 10 Benefits of Instilling an Innovation Mindset1. An expanded, futuristic vision of the business, including the strategic roles that innovation can satisfy2. Motivated team members who are rewarded financially, commensurate with the market performance of the new products they launch3. Effective measurement indices enabling the company to determine its return from innovation investments & calibrate future expenditure levels, depending on strategic roles4. Improved up-front consumer research, which explores the problems & unmet needs in a defined category to help guide idea generation5. An alignment of technology & R&D resources against new product strategic roles to increase both efficiency & effectiveness6. Committed & supportive functional & senior managers to ensure the "right" people resources & funds are dedicated to innovation7. A pervasive & optimistic attitude about innovation that is felt & endorsed by all employees8. A systematic development process that enables new product participants to know their roles at each step of the process & to understand their accountability & decision-making criteria9. Acceptance of business judgement, intuition, experience, & insight as additional "tools" to use in the development process10. Values that encourage & foster a belief in innovation as a legitimate & leverageable "intangible asset" for accelerating stock price & increasing future earnings 30
  31. 31. PLATFORM 1: I (2) Top 10 Innovation Insights1. Failure is an intrinsic part of innovation2. Companies that have a new products strategy in place are more successful3. Using multi-functional teams with dedicated team members is critical for success4. A systematic, well-defined, & commonly understood new product development process is a given - not a differentiator for successful innovation5. Compensation incentives that stimulate an entrepreneurial environment are more likely to motivate participants on new products & innovation teams6. Top management commitment is the foundation on which successful innovation is built7. Companies that are successful innovators keep track of their results & know how much bang they are getting for their innovation buck8. Developing a portfolio of new product types helps to diversify risk & provide a balanced investment approach to innovation9. Companies should begin the new product development process with customer problem identification & need intensity research10. Identify innovation values & new product team norms to guide behaviour & communications among team members 31
  32. 32. PLATFORM 1: I (2) 7 Changes Driving Innovation1. Shareholders will want annual reports to describe & detail a companys innovation initiatives & returns generated from new product development efforts2. Companies will develop a new financial measurement tool - Return on Innovation (ROI)3. Innovation will be established as a separate yet integrated function within companies4. New products & innovation managers will be viewed as potential COOs & CEOs5. A new type of market research will focus on consumer problems & needs identification prior to idea generation6. Larger financial investments will be made in radical innovation & technology breakthroughs as the proliferation of line extension & "me-too" new products dramatically declines7. Companies will establish dramatically new compensation incentives for innovation managers, departments, & teams 32
  33. 33. PLATFORM 1: I (2) Instilling Innovation at a CEO Level 1. Trust your Teams & Functional Managers 2. Ensure recognition, rewards, & respect 3. Be positive, buoyant, & supportive 4. Dont cut the funding 33
  34. 34. PLATFORM 1: I (2) 7 Initiatives of Innovation Mind-Setters 1. Develop a new product strategy 2. Use a consumer-driven development process 3. Conduct up-front consumer problems / needs research 4. Develop concepts with high concepts need intensity 5. Use cross-functional, dedicated, & accountable teams 6. Motivate teams with rewards, incentives, & reinforcers 7. Measure & track cumulative returns on innovation 34
  35. 35. PLATFORM 1: I (2) Formula for Successful Innovation LOW COSTS + HIGH-DEMAND PRODUCTS & MARKET SHARE + NEW PRODUCTS + MOTIVATED & VALUE-BASED EMPLOYEES = HIGH PROFITS & STOCK PRICE GROWTH Top Executive endorsement required: 1. Innovation will be linked to & integrated with business strategy 2. Innovation will become a separate function or department within the company 3. Shareholders will appreciate & reward innovation more, & stock prices will reflect a companys effectiveness in innovation 4. Companies will measure returns on innovation as the level of investment & performance expectations increase 5. Team structures that reinforce an innovation mindset will be kept in place for long periods, & innovation will have its own career path 6. New compensation mechanisms will be developed to reinforce a more entrepreneurial & risk-sharing environment 35
  36. 36. PLATFORM 1: I (2) The Innovation Creed1. I believe innovative new products & services are integral to my companys future success2. I believe I control the future success of innovation for my company3. I believe new-to-the-world products can be our most valued currency4. I believe successful internal innovation will yield greater returns than equally risky acquisitions5. I believe long-term investments in innovation will yield profitable returns if managed correctly6. I believe innovation will pay for itself & generate high returns if a balanced new products portfolio is maintained7. I believe that quantity of new products is as important as their quality8. I believe new solutions to existing problems will provide big-hit new product opportunities9. I believe that I am one of the biggest assets or most impenetrable barriers that can make or break innovation10. I believe that an effective innovation mindset can motivate my employees to perform better & be more productive11. I believe that the death or success of innovation lies directly in my hands12. I believe that measuring return on innovation is as important as measuring return on equity13. I believe that failure is an intrinsic component of innovation, & I accept that14. I believe that maintaining a positive, proactive, & buoyant attitude about innovation is critical for morale15. I believe innovation should be one of my top five priorities & remain on my to-do list 36
  38. 38. PLATFORM 1: II II Develop an Innovation Strategy 1. Define the financial growth gap that new products & services will try to fill during the next five years 2. Define the financial objectives to be met through innovation efforts 3. Define the strategic roles that new products & services will try to satisfy 4. Define the screening criteria to be used for moving ideas & concepts through the development process 38
  39. 39. WHAT DRIVES TECHNOLOGY INNOVATION? Platform 1: (Stage II, Part 1)Integrating Technology Innovation with Business Function – Part I: Laying the Foundation
  40. 40. PLATFORM 1: II (1) What Drives Technology Innovation?  A. Two Reasons, Many Motives  Stimulate invention / innovation motivated by purpose-driven research and creativity.  B. Charting the Future  Develop future scenarios and roadmaps defining the technological environmental constraints and possibilities available to work with.  C. Finding Ideas  Generate dozens of ideas for every researcher to target at least one significant market, product or process of importance they can improve. 40
  41. 41. PLATFORM 1: II (1) What Drives Technology Innovation (Continued)?  D. Assessing Concepts  Determine the cost-benefit relationship of the new market, product or process concept developed.  Determine the strategic fit-difficulty of implementation relationship of the new market, product or process concept developed.  E. Critical Factors  Identify the critical business development factors, and measure their impact. 41
  42. 42. PLATFORM 1: II (1) A. Two Reasons, Many Motives  TWO REASONS  A PROBLEM ARISES OUTSIDE THE TECHNIQUE (e.g. Demand from society, Creativity of an inventor)  A PROBLEM ARISES INSIDE THE TECHNIQUE (e.g. Cost reduction & quality improvement efforts or new materials or technology available) 42
  43. 43. PLATFORM 1: II (1) A. Many Motivations  As a response to a threat - e.g. radar, weapons  Through cost reduction & quality improvement  As a response to an existing need - e.g. can efforts - e.g. float glass opener  Through finding new uses for waste products - e.g.  As a response to a future need - e.g. high- aluminium flakes in roofing temperature ceramics  Through continuous improvement of work done by  For the fun of it - e.g. as an expression creativity others  To satisfy intellectual curiosity  By finding new applications for existing  As a response to an emergency - e.g. Band-Aid technology  To increase ones chance of survival & security  Through having new materials available  To increase comfort & luxury in lifestyle  To win a prize or recognition - e.g. human-powered  Better problem solving - e.g. hydraulic propulsion system aircraft  Turning failure into success - e.g. Post-It notes  Meeting tougher legal & legislated requirements -  To overcome flaws - e.g. "Magic" tape e.g. catalytic converter  Accidentally, on the way to researching  By having research funds available to solve a something else - e.g. polyethylene specific problem - e.g. superconductors  As a deliberate synthesis - e.g. carbon brakes  By being a dissatisfied user of a product for aircraft  Responding to a challenge or assignment  Through brainstorming with experts or outsiders  Because "its my job" - e.g. "I do it for a living" - e.g. courseware  To improve the organizations competitive position  From studying trends, demographic data, & customer surveys  To get around someone elses patent 43
  44. 44. PLATFORM 1: II (1) B. Charting the Future FUTURE SCENARIOS  What will the ECONOMIC ENVIRONMENT look like in X years?  What will the POLITICAL ENVIRONMENT look like in X years?  What will the REGULATORY & LEGISLATIVE ENVIRONMENT look like in X years?  What will the DEMOGRAPHIC & SOCIAL ENVIRONMENT look like in X years?  What will the MARKETS look like in X years?  What will CUSTOMER / USER PROFILES & HABITS look like in X years?  What will the COMPETITIVE ENVIRONMENT look like in X years?  What will the next two to three GENERATIONS OF TECHNOLOGY look like in X years?  What FEATURES & CONTENT will PRODUCTS have in the next X years?  What will MANUFACTURING PROCESSES & CAPABILITIES look like in X years?  What will SALES / MARKETING METHODS look like in X years?  What will DELIVERY / DISTRIBUTION METHODS & SYSTEMS look like in X years?  What will HUMAN, FINANCIAL, & NATURAL RESOURCES look like in X years? 44
  46. 46. PLATFORM 1: II (1) B. Creating the Future  “The best way to manage the future? Create it!  The best competitive position to be in is to have no competition  This position can only be achieved by NOT playing the way your competition plays the game but rather by controlling the game, by creating products and services that change the rules in your favour. 46
  47. 47. PLATFORM 1: II (1) B. How to Create the Future Use a framework that classifies best-practice business processes for identifying, developing and retaining customers The first-level processes in this framework for identifying best- practice business opportunities, define a company‟s basic operations, such as: 1. Understand markets and customers 2. Involve customers in the design of products and services 3. Market and sell products and services 4. Involve customers in the delivery of products and services. 5. Provide customer service 6. Manage customer information Supporting these basic operations, management and support processes maximize the value and use of human resources, information and technology, and financial and physical resources, to name a few 47
  48. 48. PLATFORM 1: II (1) B. How to Create the Future The sub-processes (second-level processes) supporting the first-level processes are as follows: 1. Understand markets and customers: i. Understand the market environment ii. Understand customers‟ wants and needs iii. Segment customers 2. Involve customers in the design of products and services: i. Develop new concepts and plans for products and services ii. Design, build, and evaluate prototypes iii. Refine and customize products or services, then test their effectiveness 3. Market and sell products and services: i. Secure channels of distribution ii. Establish pricing iii. Develop advertising and promotion strategies iv. Develop and deploy a sales force v. Process orders vi. Develop customers 48
  49. 49. PLATFORM 1: II (1) B. How to Create the Future The sub-processes (second-level processes) supporting the first-level processes are as follows (continued): 4. Involve customers in the delivery of products and services: i. Offer broad delivery options to become the „supplier of choice‟ ii. Use delivery customization to attract and retain core customers iii. Identify customers‟ delivery needs iv. Develop distribution capability 5. Provide customer service: i. Establish „points-of-contact‟ excellence ii. Build cross-functional „points-of-contact‟ cooperation iii. Train employees to improve customers‟ expectations for products and services 6. Manage customer information: i. Build customer profiles ii. Establish service information iii. Measure customer performance and satisfaction 49
  50. 50. PLATFORM 1: II (1) B. How to Create the Future1. Best-practice agenda for understanding markets and customers:  Understand that the market is more than just the customer. In its broadest sense, the market environment includes the company‟s supply chain and merchant partners as well as intermediary customers and end users. A company‟s understanding of government regulations, trends in consumer purchasing, and unpredictable events can dramatically affect its production and relationship with customers  Systematically create an image of the company‟s value chain, from suppliers to end users. Prominently displayed, this diagram serves to inform all employees how they fit into the market environment as well as how other stakeholders with whom they deal (customers, suppliers, and so forth) also fit into the market environment  Survey your customers frequently, systematically, directly, and personally. Review the surveys and then share them with the people in our organization who need to know what those customers have to say. Responding personally to every survey, for example, should provide the norm for executive behavior. If you don‟t have time to respond personally, make sure someone in your company does  Revise your products or services as customers request or tell them why they can‟t have it their way. Promote the new version and resurvey customers to assess their satisfaction. Survey every customer, for example, and require every employee linked to that customer to read and respond to those comments. Requests for new products and services can lead to expanded offerings and even new companies being launched  Segment customers so that you can meet demands more directly and profitably. Establish the criteria by which customers should be grouped (by age, income, credit history, purchases, demographic factors, and so forth), then offer products and services tailored to those segments. When appropriate, partner with merchants and suppliers to create greater value for customers 50
  51. 51. PLATFORM 1: II (1) B. How to Create the Future1. Top ten best-practice diagnostic questions for understanding markets and customers: 1. Can you describe in detail all the major suppliers in your company‟s value chain and list substitute suppliers who could provide raw materials and component parts in an emergency? Do you need a week‟s review to do so? (You won‟t have a week if a fire destroys a supplier‟s production plant.) 2. How often do you survey your customers? Once a month? Once a year? Once a millennium? 3. Which customers do you choose to survey? Only those who call you first? 4. How good is your process for responding to customer concerns expressed in surveys? 5. What quick, tangible rewards do you offer customers who take the time to complete one of your surveys or requests for information? 6. What external sources other than surveys do you typically use to gather information about your customers? About competitors? About suppliers? About trends in the marketplace? 7. What other internal sources do you use to collect this information? 8. List five (or more) segmentations that your company currently uses. Can you explain succinctly the benefits it realizes from grouping customers as it does? 9. Name a product or service your company provides that has come about as a result of a customer request or survey and has since improved your overall profitability. 10. Does your company have a process for customers to evaluate your employees and departments? Is it similar to the Net Satisfaction Index that Dickens Data Systems has developed? Do you support cross-functional teams to analyze customer needs and fulfill them? 51
  52. 52. PLATFORM 1: II (1) B. How to Create the Future2. Best-practice agenda for involving customers in the design of products and services:  Survey customers for their opinions, ideas, feelings, likes, and dislikes about products or services. Whenever possible, meet them face-to-face to discuss their views. Most important, listen closely to what they have to say  From these surveys and other customer interactions, collect, categorize, and deliver information about product use to the people in our organization who need it  Describe to your customers how they can help you understand their needs, then create products and services that meet those demands. Define the values that this step of the process has for them: more precisely customized products and services, speedier development, increased opportunities to participate in the design stages, and greater savings in production and use  Make refinements in existing products and services, partnering with your customers either on their premises or yours when possible. Share information both at home and at the customer‟s site  Test the refinement in a controlled environment with targeted segments of customers  Market the successfully refined product, but keep the doors open to further improvements as you receive suggestions from your customers and as their needs change 52
  53. 53. PLATFORM 1: II (1) B. How to Create the Future2. Top ten best-practice diagnostic questions for involving customers in the design of products and services: 1. How do you gather customer input about product design and use? Telephone or mail surveys? Internet bulletin boards? Focus groups? Feasibility studies? 2. Do you have a team comprising representatives from various groups – manufacturing, engineering, marketing, sales, and so forth – that goes out to meet with customers? 3. Have you ever allowed your customers to decide whether or not you should implement a change, as Disney did in creating Mickey‟s Starland and character breakfasts? 4. To what extent do you involve customers in the design of prototypes? What about their customers? 5. Do you look for customer insights before making refinements or customization changes to existing products, as Black & Decker did in creating its VersaPak line? 6. Do you get wisdom and insights from customers at each step of development? Do you have a customer advisory board? 7. Do you partner with customers so that they allow your employees to visit their sites? If so, how many of these relationships do you have? 8. Do you have space reserved in your plant for your best clients (or suppliers) to collaborate with you in design, production, and other areas? (A mailbox slot or coffee mug doesn‟t count.) 9. How much do you share information with clients? Do you give them the right to attend design and engineering meetings? Get input on upcoming advertising and sales campaigns? 10. How easy is it for clients to reach someone at your company with a proposed change or refinement? How long does it take your company to respond? How many people get to see and discuss the proposal? 53
  54. 54. PLATFORM 1: II (1) B. How to Create the Future3. Best-practice agenda for marketing and selling products and services:  Make sure you know all links in your value chain – all suppliers, distributors, advertisers, marketers, salespeople, and customers. By its thorough understanding of its value chain, Lexus was able to overcome potential distribution problems  Establish a competitive pricing strategy, as Southwest Airlines has done by looking outside its industry (namely, to automobile rentals and other modes of transportation) to determine pricing policies  Develop strong advertising strategies, seeking input from all levels of your company to develop an appropriate image that can distinguish your company from others in the industry. As Nike has proven, developing a good product is only half the battle. You also have to get the message to your customers  Train your employees, especially those who will sell your products and services, to know everything they need to know about the market, the item they are selling, and the customers to whom they are selling. As Cutler-Hammer illustrates with its team-selling approach, this melding of individuals with different talents and degrees of expertise makes good business sense  Develop an integrated system for processing orders tailored to customers‟ needs. Through its ValueLink program, Allegiance Healthcare serves over 150 acute-care hospitals in the United States with 98 percent fill-rate accuracy  Do business with the customers you choose and in the ways you choose – by surveys, interviews, point-of-sale contacts, repair calls, and the like. As Peapod, Inc., and American Airlines have demonstrated, it is possible to partner with customers, establishing key drivers of greater value and lower prices 54
  55. 55. PLATFORM 1: II (1) B. How to Create the Future3. Top ten best-practice diagnostic questions for marketing and selling products and services: 1. The foundation of a successful sales effort is knowledge of customer needs and an ability to communicate how your products and services best fit those needs. What training systems does your company use to educate your salespeople and service technicians on: (i) identifying customers‟ key needs; and, (ii) differentiating your products and services from those of the competition? 2. How often do you retrain your employees in these and other areas? What tests do you give them? 3. When was the last time you critically evaluated your channels of distribution? Have you considered emerging channels such as the Internet? 4. Do you monitor your price performance and that of your competitors? How do you determine what customers are willing to pay? 5. Does your advertising strategy address current and developing trends in your market? 6. Have you studied non-customers and your lost customers to identify their needs? Have you responded to them appropriately? 7. How do you go about building a positive image for your company and its products? How do you help potential customers understand that they need your products and services 8. What degree of integration (such as EDI) do you have in place for processing orders? 9. What special offers or incentives do you offer selected segments of your customers? 10. Do you know what differentiates your products and services from your competitors‟ products and services? How do you communicate those differences? 55
  56. 56. PLATFORM 1: II (1) B. How to Create the Future4. Best-practice agenda for involving customers in the delivery of products and services:  Become the „supplier of choice‟ by using out-of-box thinking to generate customer delivery solutions not bound by conventional wisdom, as New Pig Corporation, Norrell Corporation, and Holy Cross Hospital have done  Customize delivery systems to fit the needs of core customers, in particular by creating channels of communication and service offerings to meet their demands. Establish a program similar to the CERRFS initiative undertaken by SARCOM  Identify customer delivery requirements through a complete understanding of the impact that distribution has on a customer‟s business. As Granite Rock and Cemex show, often a best-practice company builds extensive lines of communication within its own system before streamlining its delivery services to customers  Develop distribution capability as exemplified by Campbell‟s, paying close attention to small details – such as pallet size – that combine to solidify the customer-supplier relationship 56
  57. 57. PLATFORM 1: II (1) B. How to Create the Future4. Top ten best-practice diagnostic questions for involving customers in the delivery of products and services: 1. How do you respond to customer delivery needs in emergency situations? 2. How do you identify the delivery service needs of individual customers? Do you use these needs as a method of customer segmentation? 3. Do you have just-in-time supply and continuous replenishment services? 4. What steps have you taken to ensure reliability in your delivery process? How do you communicate this process to your customers? 5. Do you have in-plant reps at customer sites? If so, what do you consider the biggest advantages of these relationships? 6. What is your delivery channel strategy? Do you align your delivery strategies to service specific customer needs? 7. Can you continuously track products from the production line to the customer‟s door? 8. Do you offer special delivery deals for large-scale purchases such as same-day shipping? Twenty- four-hour delivery? Any other customization features in packaging and delivery? 9. How do you differentiate your delivery strategy from competitors‟ trying to become the supplier of choice? 10. What methods of feedback (other than a payment) do you get from customers regarding delivery and repair information? How do you elicit this input – via phone surveys, the Internet, or other means? 57
  58. 58. PLATFORM 1: II (1) B. How to Create the Future5. Best-practice agenda for providing customer service:  Establish primary „points of contact‟ between your employees and customers, instilling in customers the feeling that their needs are being met personally and promptly. At the same time, information can be used to alter company-wide business processes  Build cross-functional cooperation by training employees to understand and enhance the entire customer experience, then holding them responsible for customer satisfaction. This training could come via improving lines of communication between management and frontline employees – much as Coldwell Banker Relocation Services does – or by instructing employees how to treat customers from the first point of contact, such as Hyatt and Disney  Create a database to identify customer service failures and embrace their identification, recalling the principle that drives customer satisfaction at IBM and FedEx: Your customers know best what they don‟t like and what they can‟t understand  Raise customer expectations for products and services by giving them high-quality treatment each step of the way. Whether it is greeting guests at the front door, as the Red jackets do at East Jefferson General Hospital, or helping guests locate keys to their locked cars, as Disney World attendants do, the best-practice company personalizes its customer service at every point of contact  Make sure each employee has at hand all information needed to process a customer‟s request promptly and efficiently. Providing this information may require sophisticated databases such as those used by Hyatt Hotels to identify specific guests‟ needs and FedEx has in place to help customers track shipments. Or the organization may assemble data from customer surveys and distribute it as needed to appropriate personnel, much as East Jefferson General Hospital has done by collecting information from groups such as senior citizens to better prepare employees associated with its Elder Advantage program 58
  59. 59. PLATFORM 1: II (1) B. How to Create the Future5. Top ten best-practice diagnostic questions for providing customer service: 1. What is your customer retention rate? Does it indicate any trends you can act upon? 2. What is the level of cross-functional communication between your company and its customers? 3. Do you train employees throughout the organization in various tasks so that any of them can handle any problem that arises during the customer cycle? 4. What financial empowerment do you provide to your frontline employees to solve customer problems? Do you give them additional authority to make decisions on the spot? 5. Do those frontline employees have access to executive groups such as IBM‟s customer action councils where they can receive additional assistance and powers of authority? 6. Do you have in place a cross-functional database to track and analyze customer service highlights and lowlights? 7. How do you explicitly gauge your customers‟ satisfaction? Do focus groups play a role? 8. Is any portion of your company‟s merit system based on customer service? 9. Do you have a client advisory board? How often does it meet? What does it accomplish? 10. Do you surprise your customers with great customer service as East Jefferson general Hospital does with its red-jacketed representatives who accompany visitors to their destinations? 59
  60. 60. PLATFORM 1: II (1) B. How to Create the Future6. Best-practice agenda for managing customer information:  Design and build profiles using a common database to track customer information. As American Express demonstrates, a complete and flexible database allows a company to capture significant information about customers and merchants, thereby controlling this three-way relationship by virtue of its involvement in each transaction  Collect observations about customer preferences from point-of-contact employees who serve as „listening posts‟, as the Ritz-Carlton does  Communicate customer satisfaction throughout the company. By using the chain‟s extensive database, each Ritz-Carlton hotel can combine its own employees‟ observations with those from employees who encountered the same guests on visits to other Ritz-Carlton hotels. This process helps the company prepare for guests‟ visits and secure long-term relationships  Establish service information by studying how customers use (or misuse) products and services. Black & Decker discovered that it could actually instruct customers how best to use its VersaPak product, thereby altering customers‟ perceptions and ensuring sales. Peapod, Inc., on the other hand, finds that by understanding customers‟ buying patterns and preferences, it can capture present and future sales  Gauge customer performance and satisfaction through both internal measures such as sales growth and revenues, and external ones such as industry analyses and customer surveys. As the Orange County Teachers FCU shows, it is possible to preserve customers‟ privacy while simultaneously establishing acceptable levels of risk and tracking how the company ranks against its competitors in terms of customer satisfaction 60
  61. 61. PLATFORM 1: II (1) B. How to Create the Future6. Top ten best-practice diagnostic questions for managing customer information: 1. Do you know your customers‟ purchasing patterns s o well that you can pinpoint when they will likely make their next purchase of one of your products? Are you holding your breath, or are you taking a jar of Skippy off the shelf as Peapod is doing? 2. Do you study customer profiles to determine how much individuals are willing or likely to spend for products or services? 3. Where will customers make their next purchase of one of your products? At a discount store, through a catalog, over the Internet? Will you be there to make the sale wherever the order occurs? 4. Can you track customer preferences and how they change over time? If so, what do you do with this information? 5. What means do you have for collecting, organizing, and sharing customer data with people throughout your company? Why do you want to keep your people in the dark? 6. Are you constantly surprising and delighting customers with your products and services? How do you know? 7. How do you build long-tern loyalty? (See „Building Customer Loyalty‟ below) 8. Does our organization have the capability for identifying customers to target with promotions specific to their needs? Can you find fans of a particular merchant or product as adeptly as American Express? 9. Can you deal with „ugly guests‟ as effectively as the Ritz-Carlton does? 10. Does your company try to educate customers in the proper use of products and services as Black & Decker does, or do you pray they‟ll educate themselves? 61
  62. 62. PLATFORM 1: II (1) C. Finding Ideas 1. Unexpected Successes 2. Unexpected Failures 3. Unexpected External Events 4. Process Weaknesses 5. Industry / Market Structure Changes 6. High-Growth Areas 7. Converging Technologies 8. Demographic Changes 9. Perception Changes 10.New Knowledge 62
  63. 63. PLATFORM 1: II (1) C(1) Unexpected Successes 1. What unexpected product success have you had recently? 2. In which geographic areas have you had unexpected success recently? 3. In which market / industry segments have you experienced unexpected success recently? 4. What customer segments have provided unexpected success recently? 5. What unexpected successes have your suppliers had recently? 6. What unexpected successes have your competitors had recently? 7. Which of your technologies has had unexpected success recently? 8. What unexpected customer / user groups have bought from you recently? 9. What unexpected sources have asked to sample, distribute, or represent your product recently? 63
  64. 64. PLATFORM 1: II (1) C(2) Unexpected Failures 1. What unexpected product failures have you had recently? 2. In which geographic areas have you had unexpected failures recently? 3. In which market / industry segments have you experienced unexpected failures recently? 4. What customer segments have provided unexpected failures recently? 5. What unexpected failures have your suppliers had recently? 6. What unexpected failures have your competitors had recently? 7. Which of your technologies has had unexpected failures recently? 8. Which customer / user groups have had unexpected failures recently? 9. Which distributors, dealers, & / or agents have had unexpected failures recently? 64
  65. 65. PLATFORM 1: II (1) C(3) Unexpected External Events 1. What unexpected external events have occurred recently? 2. What unexpected internal events have occurred recently? 3. Have any expected external & internal events combined in an unexpected way recently? 65
  66. 66. PLATFORM 1: II (1) C(4) Process Weaknesses  Every process or system in existence has one of three things wrong with it: 1. A bottleneck 2. A weak link 3. A missing link  Checklist 1. What self-contained processes exist in the organization? 2. What process weaknesses exist in our customers organization? 3. What weakness or "missing link" prevents better process performance? 4. Why do some processes perform better at some times than at others? 5. What bottlenecks do each of these processes have? 6. What process weaknesses among our competitors might we be able to improve on? 66
  67. 67. PLATFORM 1: II (1) C(5) Industry / Market Structure Change 1. What major structural changes are occurring among your customers? 2. What major structural changes are occurring in your geographic markets? 3. What major structural changes are occurring within your market / industry structure or in the conduct of your business? 4. What major structural changes are occurring among your competitors? 5. What major structural changes are happening in your customers businesses? 6. What major structural changes are occurring within your regulatory environment? 7. What major structural changes are occurring in your supplier relationships? 67
  68. 68. PLATFORM 1: II (1) C(6) High-Growth Areas 1. What parts of the business are growing faster than economic or population growth? 2. What other businesses are growing faster than economic or population growth? 3. What potentially high-growth businesses related to yours are dominated by only one or two companies? 4. What parts of your competitors businesses are growing faster than economic or population growth? 5. What parts of your customers or suppliers businesses are growing faster than economic or population growth? 68
  69. 69. PLATFORM 1: II (1) C(7) Converging Technologies 1. What technologies in your business are converging or merging? 2. Which of your technologies is now being joined to outside technologies? 3. Which of your technologies can be more effective if deliberately converged? 4. What would be the ideal convergence of technologies in your business? 69
  70. 70. PLATFORM 1: II (1) C(8) Demographic Changes 4 categories of demographic changes need to be monitored in a firms end customers: 1. Income 2. Age 3. Education 4. Mix Checklist 1. How is the age distribution of your customers & users changing? 2. How will the educational level of your customers & users change in the next few years? 3. How will the income distribution of your customers & users change in the next few years? 4. How will the geographic distribution of your customers & users change in the years ahead? 5. How might the buying habits of your customers & users change in the years ahead? 6. What are the customer demographics that might change over the years ahead? 7. How will the mix of your users & customers change in the next few years? 70
  71. 71. PLATFORM 1: II (1) C(9) Perception Changes 1. What changes are occurring in how your products & services are perceived? 2. What changes are occurring in the values of your customers? 3. What changes are occurring in the lifestyle, image, & status of your customers? 4. How will changes in perception affect your customers & suppliers? 5. For what new purposes have customers purchased your products & services recently? 6. What intangible reasons are customers developing to support your products & services? 7. What societal, peer, & normative pressures will affect your products & services in the future? 71
  72. 72. PLATFORM 1: II (1) C(10) New Knowledge 1. What new knowledge has recently become known about your business? 2. What combinations of knowledge have created new insights into your business? 3. What new sources of information about your business have recently been tapped? 4. What new patents or discoveries have been announced relating to your business? 72
  73. 73. PLATFORM 1: II (1) D. Assessing Concepts  COST-BENEFIT RELATIONSHIP 1. What is the cost of this new product or market opportunity? 2. What is the benefit of this new product or market opportunity?  CHECKLIST Costs Benefits People Market Share Materials Return / Profit Equipment Prestige / Image Research Service / Satisfaction Marketing Earnings / Dividends Legal Fallout / Residuals Promotion Safety / Security Time Quality Pilot Morale / Motivation Contingency Growth / Size 73
  74. 74. PLATFORM 1: II (1) D. Assessing Concepts  Strategic Fit / Difficulty of Implementation Relationship  Strategic Driving Force  What is Driving the Business?  What Should be Driving the Business?  Identify Strategic Fit  Assess Difficulty of Implementation 74
  75. 75. PLATFORM 1: II (1) D. Strategic Fit / Difficulty of Implementation Relationship  Strategic Driving Force 1. Product Concept-Driven Company: e.g. automobile industry 2. Market category-Driven Company: e.g. American Hospital Supply 3. User Class-Driven Company: e.g. Johnson & Johnsons strategy of making products for "doctors, nurses, patients, & mothers" 4. Production Capacity / Capability-Driven Company: e.g. paper companies because of enormous capital tied up in their mills 5. Technology / Know-How-Driven Company: e.g. Du Pont & 3M 6. Sales / Marketing Method-Driven Company: e.g. Mary Kay, Tupperware, Amway 7. Distribution Method-Driven Company: e.g. telephone operating companies, department stores 8. Natural Resources-Driven Company: e.g. Exxon 9. Size / Growth-Driven Company: e.g. conglomerates 10. Return / Profit-Driven Company: e.g. Virgin 75
  76. 76. PLATFORM 1: II (1) D. Strategic Fit / Difficulty of Implementation Relationship  What is Driving the Business? 1. Which strategic driving force is currently acting as the heartbeat of your business & driving your strategy? 2. Which driving force do you think each of your key subordinates would say drives your company & acts as the strategic heartbeat of the business? 76
  77. 77. PLATFORM 1: II (1) D. Strategic Fit / Difficulty of Implementation Relationship  What Should be Driving the Business? 1. What component of the business should drive the strategy of the business in the future? 2. Should we continue to be driven as we have been, or should we explore another driving force? 3. If we explore a new driving force, which one should that be? 4. What implications will that have on the choices that we make on the nature of products, customers, & markets that we do or do not offer? 5. What will our future strategic profile look like if we change the driving force of our company? 77
  78. 78. PLATFORM 1: II (1) D. Strategic Fit / Difficulty of Implementation Relationship Identify Strategic Fit 1. How similar are the products this opportunity brings compared to the products we currently offer? 2. How similar are the markets (segments or geographic) this opportunity brings compared to the markets we currently serve? 3. How similar are the customers this opportunity brings compared to the customers we currently serve? 4. How similar are the production capabilities & / or processes this opportunity brings compared to the production capabilities we currently have? 5. How similar is the technology this opportunity brings compared to the technology we currently know? 6. How similar are the sales / marketing methods this opportunity requires compared to the ones we currently use? 7. How similar are the distribution / delivery methods this opportunity requires compared to the ones we use currently? 8. How similar are the human resources & skills this opportunity requires compared to those we have currently? 9. How will size / growth & return / profit criteria compare with current levels of achievement? 78
  80. 80. PLATFORM 1: II (1) D. Strategic Fit / Difficulty of Implementation Relationship Assess Difficulty of Implementation  How much change will be required, in each of the following areas, to implement this new product or market opportunity?  ORGANIZATION STRUCTURE  PROCESSES & / OR SYSTEMS  SKILLS & / OR TALENTS  MANUFACTURING METHODS & CAPABILITIES  SELLING & / OR MARKETING METHODS  DISTRIBUTION OR DELIVERY METHODS  TECHNOLOGIES  CAPITAL & FINANCING  LEGAL & REGULATORY ISSUES  IMAGE, REPUTATION, & QUALITY  COMPENSATION SYSTEMS  RAW MATERIALS  CUSTOMER SERVICES  CORPORATE CULTURE 80
  81. 81. PLATFORM 1: II (1) E. Critical Factors 1. Technical Factors 2. Timing Factors 3. Stability Factors 4. Position Factors 5. Growth Factors 6. Marketability Factors 7. Production Factors 8. Financial Factors 9. Protection Factors 81
  82. 82. PLATFORM 1: II (1) E(1) Technical Factors  Availability or requisite scientific / technical skills  Adequacy of research resources  Quality & quantity of support personnel  Probability of technical success & validation  Government & / or regulatory position 82
  83. 83. PLATFORM 1: II (1) E(2) Timing Factors  Research completion versus market need  Market penetration & development  Known & assumed competitive actions 83
  84. 84. PLATFORM 1: II (1) E(3) Stability Factors  Durability of the market  Chances for a dominant or preeminent position  Probability & impact of down markets  Stability of largest projected users  Volatility of the approach 84
  85. 85. PLATFORM 1: II (1) E(4) Position Factors  Impact on other products & services  Impact on overall credibility  Ability to assume a rapid leadership position  Ability to facilitate other opportunities 85
  86. 86. PLATFORM 1: II (1) E(5) Growth Factors  Diversification  Possibility of substantial future growth in volume, units, & / or revenue  Possibility of a family of products  Possibility of changes or shifts in the industry of which this product & / or service can take advantage  Short-term market potential  Long-term market potential  Impact on market share 86
  87. 87. PLATFORM 1: II (1) E(6) Marketability Factors  Market potential in the immediate future  Market potential in the long-range future  Compatibility with current & long-range marketing objectives  Competitive environment  Promotional requirements to launch  Promotional requirements to sustain  Adequacy of present distribution systems  User view of cost versus value  Applicability to current customers  Servicing requirements  Impact on reputation 87
  88. 88. PLATFORM 1: II (1) E(7) Production Factors  Capabilities of production facilities  Utilization of familiar production processes  Availability of human resources 88
  89. 89. PLATFORM 1: II (1) E(8) Financial Factors  Calculation of DCF  Expected ROI  Expected increase in profits or earnings per share  Expected new capital outlays for equipment  Expected cost to complete the project  Expected cost to complete the development 89
  90. 90. WHERE ARE THE BUSINESS OPPORTUNITIES? Platform 1: (Stages II, Part 2)Integrating Technology Innovation with Business Function – Part I: Laying the Foundation
  91. 91. PLATFORM 1: II (2) Where are the Business Opportunities?  Business Opportunity  Use the critical business development factors to determine whether the ideas / concepts created are worth pursuing. 91
  92. 92. PLATFORM 1: II (2) Business Planning & Development A. Establish Current Position B. Assess Business Environment C. Identify Critical Success Factors D. Set Strategic Direction E. Establish Clear Objectives F. Develop Marketing Strategy G. Outline Business Processes H. Determine Business Capability I. Secure Finance and Resources J. Implement, Monitor and Review 92
  93. 93. PLATFORM 1: II (2) A. Establish Current Position What is the current position of the business? 1. What does the business do & why? 2. How long has the business been operating? 3. What stage of growth is the business at? 4. What is the form of the business? (Limited Company etc.) 5. Is the current form of business appropriate for future operations? 6. What makes the business different? 7. What are the major accomplishments of the business? 8. What major setbacks have you met? 9. What are the major challenges facing the business in the future? 10. Who are your business partners or who do you have important relationships with? 11. Are there well-defined business agreements & levels of service drawn up with business partners? 12. Why is the business attractive to you & potential investors? 13. How stable is the business financial performance? 14. Does the business have a good reputation in its industry? 93
  94. 94. PLATFORM 1: II (2) A. Establish Current Position  FIVE STAGES OF GROWTH 1. EXISTENCE 2. SURVIVAL 3. SUCCESS 4. EXPANSION 5. MATURITY 94
  95. 95. PLATFORM 1: II (2) B. Assess Business Environment  What is happening in the business environment & what are the implications for the business? 1. POLITICAL FACTORS: What is the Government doing? - still the major influence in the economy, consider pending elections, de- regulation, tax policy, & public confidence 2. ECONOMIC FACTORS: What is the economy doing? - Inflation, leading indicators, interest rates, exchange rates, employment levels etc. 3. ENVIRONMENTAL FACTORS: What is happening in the general environment? - Controls on business activity, regulations, availability of resources, climatic events 4. SOCIAL FACTORS: What are the factors affecting society? - Population drift, immigration, wage rises, unemployment, mortgage rates, racial & cultural issues 5. TECHNICAL FACTORS: What is happening in your particular industry or sector? - New products & services, organizational trends, market trends? 95
  96. 96. PLATFORM 1: II (2) B. Assess Business Environment  ENVIRONMENTAL FOCUS  External Focus  Identify the 7 most significant factors in the business environment A. Impact on Business B. Action Required  Internal Focus  SWOT Analysis: List as many factors about our organization that you can think of 96
  97. 97. PLATFORM 1: II (2) C. Identify critical Success Factors What does the business need to be good at to succeed? 1. Critical Success Factors (CSFs): List between 5-7 factors that are essential to the future success of the business 2. How often are the CSFs reported on?  Weekly?  Monthly?  Quarterly?  Six Monthly?  Annually? 3. Does the management information system provide the necessary information to monitor CSF performance at the appropriate level of detail? TYPES OF CRITICAL SUCCESS FACTORS 1. INDUSTRY FACTORS 2. BUSINESS CAPABILITY 3. FUNCTIONAL 4. ENVIRONMENT 97
  98. 98. PLATFORM 1: II (2) C. Identify critical Success Factors  IDENTIFY CRITICAL SUCCESS FACTORS  Identify 7 Critical Success Factors for your business, how they impact, & how they should be measured, examining: A. Critical Success Factor B. Impact on Business C. How Measured 98
  99. 99. PLATFORM 1: II (2) D. Set Strategic Direction Which way is the business heading? 1. What (if anything) gives this business distinctiveness? 2. What skills does this business currently have that are better than those of the competition? Can this advantage be sustained for a period of more than a few years? 3. How is this organization generally regarded in the industry or by outside experts? How do outsiders see the businesss strategy? What do they think about it? 4. What are this organizations strengths in creating a high performing business? 5. What are the biggest roadblocks to this business becoming a high performing business? 6. What does the business do? Why? 7. What does it not do? Why not? 8. Who are its customers / Who are not its customers? 9. What are its products / What are not its products? 10. What are its markets / What are not its markets? 11. Why is the business in this business & not another? 12. Why is the business focusing on these customers & not others? Why is it providing these services (or making these products) & not others? 13. Does this business have more than one strategy? 99
  100. 100. PLATFORM 1: II (2) D. Set Strategic Direction  BUSINESS STRATEGY ISSUES 1. VISION, VALUES, PURPOSE 2. OVERALL DIRECTION 3. DESIRED OUTCOMES 4. LONG TERM OBJECTIVES 5. STRATEGY TO ACHIEVE OBJECTIVES  IDENTIFYING BUSINESS STRATEGY ISSUES  Identify 7 business strategy issues that need to be addressed in your business plan, examining: A. Strategic Issue B. Impact C. Action Required 100
  101. 101. PLATFORM 1: II (2) E. Establish Clear Objectives What is the business trying to achieve in the near future?  STRATEGIC 1. Has the business developed clear & formal objectives for the long-term as well as the immediate future? 2. Are those objectives quantified in terms of rate & return, growth, market share, product or service development? 3. Does the business know at what stage in their life cycles its products currently are? 4. Does the business consider the following in its development of strategic objectives:  Economic conditions, including the effects of inflation?  Political conditions?  Labour requirements?  Capital requirements?  Tax implications?  Production capacity? 5. Have the strategic objectives been embodied in a formalized financial plan looking a number of years ahead? 6. Are the objectives & plans reviewed regularly & is the actual performance monitored against the plan? 101
  102. 102. PLATFORM 1: II (2) E. Establish Clear Objectives What is the business trying to achieve in the near future?  OPERATIONAL 7. Is the role to be played by each individual Advisor in achieving the plan clearly identified? 8. Have the Advisors developed their own business plans? 9. Is the business planning to expand in the coming year into a new:  MARKET?  SERVICE?  CUSTOMER BASE? 102
  103. 103. PLATFORM 1: II (2) E. Establish Clear Objectives  DEVELOP CLEAR OBJECTIVES & PLANS  S: SPECIFIC  M: MEASURABLE  A: ATTAINABLE  R: REASONABLE & RESOURCED  T: TIME BOUND  KEY STRATEGIC OBJECTIVES  Identify 7 key strategic objectives for your business, the desired outcome, & how it can be measured, examining:  STRATEGIC OBJECTIVE  OUTCOME  HOW MEASURED 103
  104. 104. PLATFORM 1: II (2) F. Develop Marketing Strategy  What market is the business in, & who are its customers? 1. Does our current marketing strategy give us the share of the local market we might expect? 2. What kind of demand is there for our products & services? 3. Will our strategy provide us with a sustainable competitive advantage? 4. Will this marketing strategy help us accomplish our business objectives? 5. What kind of future opportunity is there if the business objectives are achieved? 6. What are the vulnerabilities of this strategy? 7. Is this strategy consistent with the environment & changing 8. How does this strategy fare in future mapping or scenario analysis? 104
  106. 106. PLATFORM 1: II (2) G. Outline Business Processes What activities need to occur to achieve the business objectives? 1. What are our major business processes? How many are there? 2. What are our Units of Competitive Advantage (UCA) - those things that distinguish us from competitors & create an advantage in the market? 3. What is our Value-added Support Work (VA) that facilitates the accomplishment of UCA work? 4. What is our Essential Support Work (ES) that does not directly create an advantage of facilities that work, but which must be done if we are to continue to operate? 5. What is our Non-essential Work (NE) - work that has lost its usefulness but continues to be done because of tradition? 6. Which areas of our work could be regarded as industry best practice? 7. Which areas of our work could benefit from comparison & improvement to meet industry best practice? 8. Is taking risks accepted & used as a learning experience? 9. Is creativity & innovation rewarded? 10. Are all key business processes well under control? 106
  107. 107. PLATFORM 1: II (2) G. Outline Business Processes OUTLINE BUSINESS PROCESSES 1. INPUTS: Time & resources you require for yourself & others to perform key activities 2. ACTIVITIES / PROCESSES: Tasks you perform to add value to inputs you have received 3. OUTPUTS: Your work product or services that meet your customers requirements BUSINESS PROCESS  Select one of your main business processes, then: 1. Start at the first step, & note (for each step) the activity that takes place 2. Work through each step in the process until you reach the end result 3. Categorize each activity I - IV ranging from: (I) UCA - unit of competitive advantage (II) VA - value-added support work (III) ES - essential support work (IV) NE - non-essential support work 4. Identify possible process improvements 107
  108. 108. PLATFORM 1: II (2) H. Determine Business Capability How is the business organized, who are the key people involved, & is it capable of high performance? A. BUSINESS CAPABILITY 1. What is this business really good at? 2. What skills does this business currently have that are better than those of competitors? 3. What capabilities are needed with this strategy? 4. Where do customers say we need to improve? 5. What is the gap between current capabilities & those capabilities needed to give the company an advantage? 6. How easy is it to acquire or build the needed capabilities? 7. How much time & money will be needed to develop these skills? 8. What clients or contracts have been lost & to whom were they lost? 9. Where & how is the competition beating this company? 10. What programs does the company need or have in place that are designed to improve capabilities? 108
  109. 109. PLATFORM 1: II (2) H. Determine Business Capability How is the business organized, who are the key people involved, & is it capable of high performance? B. BUSINESS STRUCTURE 1. What parts of the business are well aligned to delivered our business strategy? 2. What current beliefs, policies, procedures, systems, or other elements are not aligned to deliver our business strategy? 3. What business initiatives are going well? 4. What are the things that get in the way of the business achieving its objectives? 5. What are the things in the business that are working well to support the business strategy? 6. What does the business need to do better to execute the business strategy effectively? 7. What gets in the way of people doing their work? Are there areas where effort is wasted? 8. How do people spend their time? 9. Where should efforts be focused to ensure competitive advantage? 10. Where are the opportunity areas for improving efficiency & effectiveness? 109
  110. 110. PLATFORM 1: II (2) H. Determine Business Capability Determine Business Capability  Governance  Structure  Organization  Management  Capability Organization Capability  Identify key individuals in our organization and for each specify: 1. Name 2. Area of responsibility 3. Length of service in industry (years) 4. Length of service in this office / area 5. Key strengths 6. Weaknesses 7. Key areas for specialization 8. Development actions required 9. Successor if person left 110
  111. 111. PLATFORM 1: II (2) I. Secure Finance & Resources  What resources are required to ensure the business can operate effectively?  BUDGETS  FINANCIAL REPORTS  CASH  DEBTORS  FIXED ASSETS  SALES  Secure finance & resources  Monthly & annual costings 111
  112. 112. PLATFORM 1: II (2) I. Secure Finance & Resources Budgets: 1. Are annual operating budgets prepared? 2. Are the budgets consistent with the tactical objectives of the business & its long-term plans? 3. Are key individuals, in close liaison with each other, responsible for preparing their own sections of the budget based on objectives & criteria established by management? 4. Are budgets based on detailed assumptions which are evaluated each year in particular to avoid the dangers of the "last year plus inflation" approach? 5. Do these budget assumptions consider:  External economic trends? Policy changes that may have an effect on the structure of revenues or costs e.g. lease versus purchase, use of computer bureau? Capacity? Personnel requirements? Market trends? 6. Do the budget assumptions contain a detailed projection of sales volume, sales mix & of contribution by product / service? 7. Are the business unit budgets carefully reviewed by management from the points of view of:  Their individual adequacy? Their co-ordination? Their overall compatibility, when combined into one budget with the boards stated objectives? 8. Are budget assumptions consistently & thoroughly documented to support variance analysis? 9. Is the budget subjected to sensitivity analysis in order to assess the effect on profitability of alternative eventualities? 10. Are budgets prepared in such a way as to permit month-by-month comparison of actual with budget? 11. Is the completed budget available, & its constituent parts distributed among those responsible for its achievement, well in advance of the start of the year? 112
  113. 113. PLATFORM 1: II (2) I. Secure Finance & Resources Financial Reports: 1. Do the monthly financial reports:  Highlight exceptions? Show percentage of revenue for the major products / services? Contain statistics & ratios that focus attention on the "critical success factors" for the business? Reconcile with the annual financial accounts with proper investigation of major discrepancies? 2. Are financial statements produced within a few days of the period end? 3. Is this target met consistently? 4. Are the financial reports organised so that there is a summary sheet that highlights results, supported by detailed schedules? 5. Are reports derived from the overall accounts provided for Advisors to enable them to review their own performance against budget? 6. Are Advisors required to provide oral or written explanations to senior management of significant variances? 7. Where variances suggest that the overall plans will not be achieved, are such plans adjusted accordingly? 8. Do the financial statements contain other ratios including:  Current ratio (current assets / current liabilities)? Does the company calculate a "quick ratio" (cash & debtors / current liabilities)? Expenses to revenues? 9. Do the financial statements contain measures of profitability by:  PRODUCT? CUSTOMER GROUP? GEOGRAPHIC AREA? EMPLOYEE? 10. Does management appear to make full use of the information available? 113
  114. 114. PLATFORM 1: II (2) I. Secure Finance & Resources Cash: 1. Is a cashflow forecast for the year ahead produced as part of the budgeting process? 2. Are Cashflow forecasts reviewed by management throughout the year? 3. Is actual Cashflow updated monthly against the most current projection so as to identify peak demands for cash? 4. Has the business arranged for adequate sources of credit? 5. Is there a link between the Advisors budgets & the Cashflow analysis? 6. Is the forecast subject to sensitivity tests so as to assess the likely effects of possible alternative evaluations? 7. Is this link preserved as the budgets or the Cashflow projections are modified? Debtors: 1. Does the business have a formal credit policy & is it adhered to? 2. Does the business calculate debtor days? (State the level) 3. Are new accounts checked for credit worthiness before being opened or actioned? 4. Are invoices sent out immediately are purchase of services? 5. Are statements sent out regularly within a few days of each month-end? 6. Are bad debt risks regularly reviewed & quantified? 7. Is firm action, including a system of reminder letters, taken against late payers? 8. Does management receive a regular credit control report? 114
  115. 115. PLATFORM 1: II (2) I. Secure Finance & Resources Fixed Assets: 1. Does the business have a plan for long term capital acquisitions, improvements, including financing? 2. Are major fixed acquisitions supported by a capital expenditure assessment? 3. Are capital acquisitions reviewed to determine if projected results were achieved? 4. Is the businesss investment in fixed assets adequately safeguarded through:  Regular maintenance? Sufficient insurance? 5. Has the business made adequate use of borrowing? 6. Is the business adequately capitalised? 7. Have all lease, rental or purchase options been considered? Sales: 1. Are substantial variances from the sales forecast adequately analysed & explained? 2. Does the business have adequate information on clients? 3. Does management investigate the effectiveness of its methods of:  MARKETING? ADMINISTRATION? 4. Does management investigate the effectiveness of its marketing support, such as:  ADVERTISING? TECHNICAL SERVICES? DELIVERY PERFORMANCE? COMMISSION STRUCTURE? 5. Are trends in sales performance identified & appropriate action taken? 115