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Pearson principles of business implementing strategy lecture 2
- 1. Principles of Business Implementing Strategy Lecture 2 – implementing strategy
- 2. Objectives of the session ► To appreciate the importance of excellent implementation of strategy ► To be able to work through Kotter’s 8 steps to managing a strategic implementation ► To be able to develop a balanced scorecard as a way of making strategy relevant to an organisation
- 3. “70% of major … strategy implementation projects fail …because organisations do not take a holistic approach to seeing change through” John Kotter
- 4. Implementing Strategy STRATEGY Flawed Sound EXECUTION SoundFlawed Doomed from the outset Flirting with disaster A pretty good chance A botched job
- 5. The map is not the territory A B
- 6. Kotter’s Eight Steps 1. Create a sense of urgency 2.Create a guiding coalition 3.Create a vision for the strategy/change 4.Communicate the vision 5.Remove obstacles 6.Create some short term wins 7.Build on what you have started 8.Anchor the strategy/changes into the corporate culture
- 7. Step One: Create a Sense of Urgency -Compelling reasons. -Spark the initial motivation. For change to be successful 75% of the management needs to buy in to it Step Two: Form a Guiding Coalition - Strong leadership. - Coalition, or team, of influential (not hierarchical) people. - Step Three: Create a Vision for the Strategy/Change - Easily grasped and remembered. - Help everyone understand why. Can you communicate the vision in 5 minutes?
- 8. Step Four: Communicate the Vision - Communicate it frequently and powerfully. - Keep it fresh on everyone's minds. Step Five: Remove Obstacles - Empowers the people you need to execute your vision. Are all your internal processes aligned with the vision? Step Six: Create Short-term Wins - Plan for a taste of victory early in the change process. - Have results that people can see.
- 9. Step Seven: Build on What you have Started - Don’t declare victory too early. - Keep looking for improvements. The first sign of improvement does not signify a war won! Step Eight: Anchor the Changes in Corporate Culture - Make the change part of the core of the organization. Changes stick when they become ‘the way we do things round here’
- 10. Implementing Strategy – Balancing the Scorecard
- 11. WHAT ARE WE TRYING TO ACHIEVE HERE? (HOW WILL WE KNOW?) FINANCIAL PERSPECTIVE CUSTOMER PERSPECTIVE INTERNAL PROCESS PERSPECTIVE LEARNING AND GROWTH PERSPECTIVE INCREASED INCOME REDUCED COST EXCELLENT EXECUTION CUSTOMER UNDERSTANDING GREAT PRODUCT INNOVATION CONTINUOUS IMPROVEMENT ENVIRONMENTAL AWARENESS THE RIGHT SKILLS THE RIGHT TECHNOLOGY A POSITIVE CULTURE KPI/UNITOFMEASURE
- 12. TO BE THE PERSONAL TRANSPORT BRAND OF CHOICE BY MAKING OUTSTANDING PRODUCTS FINANCE PERSPECTIVE CUSTOMER PERSPECTIVE INT.PROCESS PERSPECTIVE LEARING& GROWTH PERSPECTIVE 40% Gross Margin by 2014 10% Net Profit by 2012 20% turnover growth year on year 15% Unit Sales growth year on year Maintain cash Position £1m in the Bank Right Product to customer at the right time Innovate on existing core offering Create new Markets & Develop existing ones Provide better Information to The customer Provide Excellent service New Products to market Fair Pricing Strategy that Reflects International differences Improve dealer info managem ent Improve order & invoice completio n and tracking Improve employee engagement Improve quality cost and delivery Improve knowledge and info mgmt Greater representation in the community Greater ethical compliance, Waste management and recycling Give people the tools and permission to be effective Improved communicat ion Improved recruitment and on- boarding Greater visibility of leadership Improved performance management process Great at managing resources. Inspirational leadership, change IMPLEMENT MEASURES TO REDUCE PRODUCTION COSTS MAINTAIN CORE REVENUE GROWTH AND IDENTIFY AREAS OF IMPROVED REVENUE OPPORTUNITY
- 13. Our Mission is to be “The personal transport brand of choice by making outstanding products.” Our reputation will be about producing something that is truly outstanding – that is why people will choose us! So how will we do that? Well we clearly must make sure that the business itself continues to grow and we have identified two clear areas for focus: 1.Maintain core revenue growth and identify areas of improved revenue opportunity 2.Implement measures to reduce production costs We will achieve these very demanding financial progress by focusing our attention fully on our customers and: - Making sure we have the right product for every customer and we get it to them at the time they expect it - Providing excellent service EVERY time the customer makes contact with us, for whatever reason. If we do these things with our customers, we will achieve the stretching financial targets we have set ourselves. However, we cannot do any of them unless we: - Improve our overall dealer information management and keep on top of their own performance. - Deliver improvements on quality, cost and delivery We could not do it without the support and dedication to quality of every member of the organisation. And there are a number of things we are now working on that we think will improve this whole area: - We want to improve communication generally across the whole business. - As a leadership team need to be more visible - helping you to do your job by listening to you and taking away the things that get in the way. - We want to review our recruitment, induction and performance management processes so that every member of Brompton staff will understand exactly what is required of them, and what will happen when the meet or exceed those requirements.
- 14. In summary It is hard work developing a strategy It is hard work executing it It is particularly hard work when neither are done properly. Strategy is about knowing where you are, where you want to be, and understanding the steps you need to take to get there. Then it is about taking those steps!
- 15. The Seminars The seminars accompanying this part of the module will take some of these ideas and develop them further: 1. 2. 3. 4.
Editor's Notes
- Begin the session by asking a question: You have been asked to go on a Business Trip to Paris – think about what you might do to get there. Invite thoughts and suggestions from the group. The obvious answer is ‘well, fly there’ But there are other choices and options. Where would you fly from? Which Airport would you fly to? How would you get to the airport? How would you get from the airport to your desitination? What other alternatives are there? Eurostar? Shuttle? Ferry? Bicycle!!? Maybe it will depend on where we are starting from. Explain that it will all become clear as the lecture continues as to why you had that discussion
- A strategy might be beautifully crafted, using the most up to date information, models and tools of analysis, but if it is not executed properly it may as well have been written on the back of a napkin. On the other hand, a fairly hastily written strategy, well executed, has at least some chance of success. Clearly the best approach is an excellently developed strategy followed by excellent implementation! John Kotter did a lot of work around execution, particularly of strategic change. We will hear more from him soon.
- This is a fairly self explanatory diagram, work from bottom left round to bottom right, a sound strategy executed well has at least a decent chance of success. What kind of things might still cause a strategy to fail? Here you might mention Donald Rumsfeld’s ‘known knowns and unknown unknowns’ these are the things that can get in the way There are known knowns. These are things we know that we know. There are known unknowns. That is to say, there are things that we know we don't know. But there are also unknown unknowns. There are things we don't know we don't know. Donald Rumsfeld
- Look at this map, you want to get from A to B. On the map it looks straightforward, but look at those contour lines – up and down very steeply. Having things written on a piece of paper don’t make them happen. Someone taking that bit of paper and making it reality makes them happen.
- John Kotter Over decades, Dr. Kotter observed the behavior and results of hundreds of organizations and thousands of leaders at all levels when they were trying to transform or execute their strategies. He identified and extracted the success factors and combined them into a methodology, the 8-Step Process. This is one of the best approaches known to leading and executing any form of strategic change. Go through each line very briefly to make sure the group understand the concepts generally – the following two slides outline each step in more detail
- The steps are fairly straightforward but if you can bring one or two of them to life with a good story or two that would help – stories of the good and the bad!
- Think about flying a plane. What do you need to know: The speed – yes that’s good and it’s enough to keep us in the air. The altimeter – yes, that shows we are flying high enough The horizon – yes that’s below us so we are clearly not flying upside down The direction – yes, we are heading the right way Each of these things is important, but unless they are ALL correct the plane isnt going to be going too far. The balanced scorecard is a way of looking at a business and making sure that it is flying the right way to ensure successful strategic execution
- This is how it works: First you have to develop a very clear statement of vision – what are we trying to achieve? Keep this simple and short and easily remembered ‘We are aiming to land a man on the moon by the end of the decade’ So what does that mean in terms of the finances – do we need to increase our income, decrease our costs, reallocate our budgets, make more sales etc And our customers, what do we need to do there – get things right first time, understand their needs better, have great products? So what about our processes – are we innovative enough, do we need to look at quality, lean methodologies etc. Finally the people, do they have the right skills, the right technology available, a positive culture etc. A good balanced scorecard well constructed will help you to tell a strong story
- This is a balanced scorecard that was produced for a well known compact bicycle manufacturing company. Pick out a few of the points – one from each line maybe – and discuss it with the group.
- This can then be turned into a story – it’s shortened here for space but the gist is there. The challenge then is to ensure that all creators of the scorecard agree with the story it tells. If something isn't there in the story, then it needs to be added to the scorecard. Constructing a good balanced scorecard can take many hours of work, often days, but when it is in place, and communicated, then the whole organisation will be completely clear about what is happening.
- Straightforward call to action