Operations Strategy The Need For An Ongoing, FactBased Planning Process

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Operations Strategy -- The Need For An Ongoing,
Fact-Based Planning Process
Avoid unnecessary exposure in strategic
decision-making.
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CASE STUDY
Hammers, Balloons, and Unnecessary Exposure
Company Sporting Goods Manufacturer, Strong But
Dated Brand. Situation New Management Team,
Brought In to Improve Profitability. The
Strategy Increase Prices and Reduce Costs,
Decided After No Analysis. The Result
Declining Revenue, Unhappy Customers, Vindictive
Competitors. Why? What Was Missing from the
Strategic Planning Process?
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STRATEGIC CHANGE MANAGEMENT
Internal and External Assessments to Achieve A
Goal.
Awareness of wildcard opportunities
Strategic decision-making process
Awareness of market opportunities
Awareness of competitor opportunities
Internal Levers
External Levers
Growth capital
Internal systems, processes and competencies
Awareness of customer opportunities
Human capital infrastructure
Brand strategy
The Balance of Internal and External
Levers Internal Levers in Balance Execution
of Strategy External Levers in Balance
Identification of Appropriate Strategy
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THE VISION
A Fun Place To Work, Where People Are Proud to
Be.
The Goal Maximize Employee Satisfaction.
The Strategy to Achieve The Goal Enhance
Profitability.
The Tactics to Achieve The Strategy
Revenue Increase
Cost Decrease
Volume Growth
Price Increase
HR Activity
Accounting Activity
IT Activity
Purchasing Activity
Manufacturing Activity
Sales and Marketing Activity
Logistics, Delivery Activity
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A PRACTICAL EXERCISE
What are the issues you would want to understand,
prior to deciding on how to achieve the goal?
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Strategies for Revenue Growth Raise prices
Strategic decision-making process Decide this is
the correct path to revenue growth.
Awareness of wildcard opportunities Skipping a
step in the supply chain may justify a higher
price, for example.
Growth capital Invest in innovation improved
processes improved design improved services.
Internal systems, processes and competencies
Higher quality, more innovative, or better
looking products faster delivery.
Internal Levers
Awareness of competitor opportunities Awareness
that competitors are increasing, or planning to
increase, prices could justify increase.
Awareness of market opportunities Market
segments willing to pay more, that are growing,
and that have limited competition.
External Levers
Human capital infrastructure Hire, reward,
retain the right mix of employees to justify
higher prices.
Brand strategy The look and feel of
professional goals, with the emotion of status
and elite, may facilitate price increases.
Awareness of customer opportunities Customers
may be willing to pay a 10 premium for portable
and transportable goals.
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Strategies for Revenue Growth Gain share,
without price increases.
Product Development
New
Diversification
Product Strategy
Acquisitions
Market Development
Penetration
Same
New
Same
Market Strategy
What are the Internal and External Issues to be
Addressed in Deciding Which Strategy To Pursue?
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Strategies for Cost Decrease Activity Based
Costing Analysis.
Benchmark to determine norms for the industry and
best practices for the activity.
Develop metrics for measuring current vs. desired
performance.
Competencies, Gather data to analyze efficiency
of activities, not just people.
Create implementation plan for changing the way
work is done.
What are the Internal and External Issues to be
Addressed in Pursuing Cost Decreases?
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INTERNAL SYSTEMS, PROCESSES, COMPETENCIES
Issues to Consider Scores
Financial competencies Identification of major
cash flow items, contribution margin analysis,
revenue growth, profitability, cost control, etc.
How well are resources allocated against profit
drivers? Sales competencies -- Lead development,
service, customer relationship management.
Marketing competencies Analysis of product
development, pricing, promotions, positioning,
branding. Systems competencies -- Software,
hardware for operations, sales, accounting, hr,
logistics and inventory control. Technological
differentiators, improvement potential. Product/se
rvice competencies -- Analysis of new product
development, price/quality/service niche,
relative to competitors. Purchasing competencies
Analysis of vendor relations, supply chain
management. Distribution competencies To what
extent is distribution niche, relative to
competitors, compelling. Outsourcing
competencies -- To what extent is the company
outsourcing what it should? Operational
efficiencies -- Capacity utilization, rework
rates, throughput, turns (and inactive
inventory), facilities, and overall operational
effectiveness and efficiency. Operational
alignment -- Understanding of corporate goals and
cooperation across departments and functions in
achieving these).
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INTERNAL GROWTH CAPITAL
Issues to Consider Scores
Contribution margin analysis and cash flow
analysis -- How well are resources allocated
against profit drivers? Net working capital
Analysis of potential improvements to cash plus
other current assets minus current
liabilities. Short and long term debt
Short-term borrowing in relation to long-term
debt Debt structure and cost of capital
Analysis of potential for savings with
restructuring of debt. Inventory Analysis of
turns and relevance of inventory. Cash flow time
line analysis -- Graphical illustration of
operating cycle and cash cycle. Owners equity
and participation of management in equity
Analysis of opportunities to involve management
more in buying in to the goals of the business.
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INTERNAL HUMAN CAPITAL INFRASTRUCTURE
Issues to Consider Scores
Management competencies Is the depth, breadth,
experience, appropriate for this Companys goals
and current situation? Leadership competencies
Is the leadership style and the effectiveness of
this style appropriate for this Companys goals
and current situation? Employee competencies
Are the right people in right places for
corporate goal and situation? Job/Work Design
competencies What is the process for reviewing
and improving duplication, gaps, fit, and
satisfaction levels of work design? Human capital
infrastructure competencies To what extent does
the company invest in fostering growth and
development of human capital training,
seminars, education, structured communications,
etc? HR competencies To what extent is the HR
department compliant, and to what extent is it
fostering communication, knowledge management,
development of skills, and feedback loops?
Retention competencies -- Is the company
retaining its talent at least as well as its
peers? Management alignment To what extent is
management cooperating to accomplish the goals
of the organization as a whole?
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INTERNAL STRATEGIC DECISION-MAKING PROCESS
Issues to Consider Scores
Process -- To what extent does the company have a
formal strategic decision-making
process? Alignment -- To what extent are the
companys strategy, vision, goals, positioning
understood by management and employees? Are their
actions supporting the strategy? Customer
knowledge and action -- To what extent is
employee knowledge of customers supporting
strategy accomplishment? Competitor knowledge and
action -- To what extent is employee knowledge of
competitors supporting strategy
accomplishment? Market knowledge and action -- To
what extent is employee knowledge of the market
supporting strategy accomplishment? Opportunity
knowledge and action -- What is the level of
understanding of and communication of and
incorporation of opportunities for growth and
profit. Threat knowledge and action -- What is
the level of understanding of and communication
and incorporation of threats in strategic
decision-making. Relative competencies knowledge
and action -- Understanding of the companys
relative strengths and weaknesses and actions
taken as a result. Incorporation Use of the
collective knowledge and experience in developing
company strategy?
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HYBRID OF INTERNAL EXTERNAL BRAND POSITIONING
Issues to Consider Scores
Intention What is the intention of the brand
and its promise? How well does this intention
align with the companys competencies and the
customers needs? Awareness -- The Company
maintains an awareness of its brand and the
perceptions of its brand promise among customers
and prospective customers. Strive for
benchmarks of competitors -- The Company
maintains an awareness of its competitors brands
and the perceptions ofs brand promise among
customers and prospective customers. Influence
-- The Company analyzes ways that it can
influence the market through its brand.
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EXTERNAL CUSTOMER POSITIONING
Issues to Consider Scores
Customer Attractiveness -- Attractiveness (unmet
needs to fulfill, willingness to pay premiums,
limited bargaining power, etc.) of customers
within the market(s) the Company has chosen to
serve.Understanding of Customer Opportunities
-- Company sees clear opportunities to grow, or
gain profitability, by serving customers in a
unique manner. Purchase Decision Factors -- The
most important factors impacting customer
purchase decisions are also strengths or areas of
differentiation for the Company. Customer Ratings
of Company -- Compared to competitors, the
Company rates highly among customers, especially
in those areas that are the most important
purchase decision factors. Loyalty of Customers
-- Customers are loyal to the Company because of
its capabilities or because of the difficulties
of switching, its brand equity, or the lack of
other supply options.Awareness of, and Response
to Changing Customer Needs -- Is the Company
aware of how customer needs and opportunities are
evolving and is taking steps to meet these future
requirements,
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EXTERNAL COMPETITIVE POSITIONING
Issues to Consider Scores
Financial -- The Company understands each major
competitors growth, profitability, and share
within various segments. Business Model --The
Company understands competitors business models
and Go To Market strategies, and believes its are
sound, relative to competitors. Strengths and
Weaknesses -- The Company understands
competitors strengths and weaknesses. Its
relative strengths are in areas important to
customers and to market. Product Positioning --
It understands where its competitors have
positioned themselves in terms Products, and has
either decided to compete head-to-head or has
analyzed the competition and decided to position
itself to serve a segment untapped by
competitors. Customer Positioning -- The
company understands where its competitors have
positioned themselves in terms of Customers, and
has either decided to compete head-to-head or has
analyzed the competition and decided to position
itself to serve a segment untapped by
competitors. Distribution Positioning -- The
company understands where its competitors have
positioned themselves in terms of Customers, and
has either decided to compete head-to-head or has
analyzed the competition and decided to position
itself to serve a segment untapped by
competitors. Operational efficiencies -- The
Company has differentiated itself from
competitors in terms of operational effectiveness
and efficiency.
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EXTERNAL MARKET POSITIONING
Issues to Consider Scores
Market understanding -- How well does the company
understand its market, the various segments of
its market, and the opportunities and threats
presented by the segments of the market?
Capabilities for serving the market -- To what
extent do the companys capabilities align with
the Critical Success Factor of the
market?Positioning for growth -- The Company is
positioned in the most attractive product,
end-use, and geographic segments of the market
(from a growth standpoint). Positioning for
profit -- The Company is positioned in the most
attractive product, end-use, and geographic
segments of the market (from a profit
standpoint). Market attractiveness -- How
attractive (growth, profit, opportunities,
barriers to entry, customer and supplier
bargaining power) are the segments that the
Company does focus upon, either by design or by
default? Market influence -- To what extent is
the Company taking steps to influence its market
in ways that will be beneficial to the Company
(growth, profit, awareness and market size, ease
of serving the market, etc.) Market strategy --
To what extent is the Companys market strategy
(price, position, product, promotion,
distribution) well-thought out and appropriate
for its goals and intentions?
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EXTERNAL WILDCARD
Issues to Consider Scores
Awareness -- The Company maintains an awareness
of market changes, trends, and dynamics which may
influence its business. Strive for best
practices, by functional area -- The Company
looks for best practice leaders in all aspects
of its business operation to find companies that
it can emulate from other industries. Technology
-- The Companys use of systems and technology
serve as a differentiator in terms of efficiency
or operational excellence. Influence -- The
Company analyzes ways that it can influence the
market.
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OUR APPROACH Strategic Transition Matrix
Acclaro uses a proven, non-linear, operations
research approach to address strategic
imperatives
IDENTIFY and PRIORITIZE Current TRIGGERS and
TRANSITION SITUATIONS
BUILD and PROCESS the STRATEGIC ARCHITECTURAL
LAYERS
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CONCLUSIONS AND QUESTIONS?
Beware of the following Hammers Is it the
right tool for the job? Balloons When you
change something, what impact are you having on
the rest of the organization? Strategic off-site
two-day workshops Continuous scan, analyze,
influence.