Quick takes

Citation

(2001), "Quick takes", Strategy & Leadership, Vol. 29 No. 3. https://doi.org/10.1108/sl.2001.26129cae.002

Quick takes

Editor's note"Quick takes" presents the key points and action steps contained in each of the feature articles. Catherine Gorrell prepares these summaries.

Page 4Putting tools to the test: senior executives rate 25 top management tools

Darrell K. Rigby

Eight years ago, Bain & Company launched an annual survey to investigate the actual experience of companies that adopt leading management tools. The findings of the latest North American survey indicate that:

• •

  Tool use is high, but dropping. On average, companies reported using 11.4 tools, down from an average of 13.4 in the previous year. This represents a huge investment of time, money, and executive attention.

• •

  The four tools used most often used were strategic planning (89 percent), mission and value statements (85 percent), benchmarking (76 percent) and customer satisfaction measurement (74 percent).

• •

  The average rating for all tools used was 3.76 on a five-point scale with five meaning "highly satisfied."

Each tool had enthusiasts and detractors, which shows that every tool can contribute value to an organization if used under the right circumstances. Data analysis reveals that: high-commitment efforts are the most likely to achieve satisfying results; and successful companies are significantly more satisfied than less successful companies, because managers at successful companies are better users of the tools.

All tools were evaluated for their ability to improve performance in five crucial areas: financial results, customer equity (increasing market share, customer loyalty, customer value), performance capabilities, competitive positioning, and organizational positioning. There are caveats, however. Users must know the positive attributes of a tool, but they must also be prepared to deal with likely side effects. There is no one magic tool.

Successful use of any tool requires:

• •

  Getting the facts and setting realistic expectations before using a tool.

• •

  Not mistaking tools for strategy.

• •

  Choosing the right tool for the right job.

• •

  Communicating clearly throughout the organization about why and how the tool is to be used.

• •

  Making sure results are measurable.

• •

  Adapting tools to your systems, not vice versa.

Management tools can bring structure and clarity to organizations grappling with a daunting array of challenges, and they improve performance in strategic areas. But the power to achieve results is not imbued in the tool, it resides in users and in their capability for informed choices, discerning selection, and skillful implementation.

Page 13Back to basics: exploring the business idea

Kees van der Heijden

The collapse of the dot-com business sector has shown us that there is no "new economy" with "new rules." In reality, there has always been only one economy, with a new technology trying to find its way in it. Success in business will always depend on two areas of attention:

1. 1.

   building the business; and

2. 2.

   protecting the business.

The Business Idea represents the underlying success formula of the firm, as distinguished from a business model, which describes the interface between the business and its customers. The business idea provides a method to consider the future viability of a business proposition in all basic aspects that make for longer-term success. Business leaders must consider seven key factors in developing a business idea:

1. 1.

   Scarcity and customer value. The goal of business is to find unfulfilled customer needs and unrealized potential customer value. However, what is scarcity today may become abundance tomorrow. Losing touch with customers and their value systems is a hazard faced by established businesses.

2. 2.

   The entrepreneurial invention. A business must be founded on a new idea that creates customer value by helping to relieve an existing scarcity.

3. 3.

   The activity set. The activities of a business are set in motion by its management team, business model, and investment of resources.

4. 4.

   Competitive advantage. Success is based on offering a product or service that addresses a real scarcity and is priced to earn a high margin. Cost leadership or true differentiation allows a business to reap super-normal returns.

5. 5.

   Results. Successful application of the first four factors may create a business, but barriers must be established if the business is to be sustainable.

6. 6.

   Strategic investments and learning. A successful new idea draws imitators that put pressure on margins. Investments must be made to protect the business from encroachment by competitors.

7. 7.

   Distinctive resources and competencies. Lock-in of a unique activity set and of the competitive advantage that comes from it is achieved by building distinctive resources such as embedded know-how.

A business that wants to survive must develop a positive feedback loop that encompasses all these factors. This virtuous cycle ensures continued success and growth and the ongoing awareness of the evolving scarcities in the marketplace, leading to new inventions to keep the business's offerings in line with customer needs.

Page 19Unlocking shareholder value from shared services

Lee Mergy and Paul Records

Despite the recognition that technology, people, and money are critical success factors, most businesses do not focus management attention on their shared service units. As a result, areas such as human resources, information technology, and finance tend to create their own objectives, which may or may not be linked to those of other business units or the overall company. Compounding this problem is the fact that, unlike general managers, managers of support service units often do not have training in strategic thinking or making multidisciplinary tradeoffs.

The recommended solution: a strategic look shows that the shared service units can be strong competitive weapons for your company. Senior executives can expect equally high standards for strategic-planning and profit-generation initiatives from these units as they expect from other business units. The goal: turn the shared service units from being service providers to being profit creators. This strategy will change the performance of the overall company.

The key to achieving this goal is to change the business model mindset of shared service unit managers by setting new standards for management behavior.

Step 1: Articulate the current strategy of each shared service unit. Clearly define the "customers" served. HR, for example, may serve four constituencies: business units, other shared service units, corporate management, and employees. Next, clearly define the services offered. HR may perform transactional, compliance, strategic, and performance services. Creating a matrix of these eight categories helps to frame analysis.

Step 2: Assess existing strategy. Is the service provided satisfactory? What do other business units need in order to meet the company's overall performance targets? How do internal services compare to those offered by outside firms?

Step 3: Develop value-creating initiatives. What are the most significant opportunities for the shared service group to contribute to the value of the company? "Value" means those activities that generate a return above the company's cost of capital.

Step 4: Design and implement the strategy. A tactical plan for each value-creating opportunity needs to be created.

Changing behavior is not easy. Creating strategies in a shared service unit requires solid information, creative thinking, risk-taking, and an understanding of the value-creating role of the corporation.

Page 23Managing process risk: planning for the booby traps ahead

Deborah Buchanan and Michael Connor

Any time a company significantly changes the way it does things – as with e-business initiatives, ERP, CRM, supply chain overhauls, or mergers and acquisitions – there is "process risk," that is, risk that the business will suffer significant financial losses or harm to its reputation as a result of the change. Failure to effectively manage process risk explains why most major change initiatives ultimately fail.

Process risk occurs in four primary ways: performance dips, project frights (and cancellations), process fumbles, and process failures. There are two types of risk: people risks and operations risks. How well the risks are recognized and managed will determine the degree of success or failure for the change program.

There are six people risks:

1. 1.

   Mismanaging resistance. The psychological process by which people adapt to change must be thoughtfully managed through the three stages of resistance: head, heart, and hand.

2. 2.

   Making it look worse than it is. Explaining what will not change, as well as what will, is needed to make people more comfortable with the change project.

3. 3.

   Ignoring the learning curve. Training everybody at once may seem efficient but almost always proves to be wasteful. Train immediately before doing.

4. 4.

   Mismanaging communications. The more complex the change project, the more human, individual, and trustworthy your communications need to be.

5. 5.

   Ignoring implementation history. Successful change projects honestly put the past behind, acknowledging prior flaws, and credibly demonstrating how the current project differs.

6. 6.

   Mismanaging performance levers. Change leaders, not HR, have the responsibility for managing the performance levers.

There are three key operations risks:

1. 1.

   Processes that cross functions. Bring people out of their "silos," and let them begin talking to each other.

2. 2.

   Interactions with the outside world. Have discussions with outside parties who might be affected or who might have an effect on the company's ability to succeed.

3. 3.

   The performance dip. All process risks come together in the performance dip that usually follows the implementation of new systems and processes.

The key to getting it right involves looking ahead for problems and viewing the proposed changes from many different directions. The more your company works at this approach, the more it will acquire good skills, and the better it will be at implementing change.

Page 29The new science of strategy execution: how incumbents become fast, sleek wealth creators

William R. Bigler

Strategy execution is emerging as one of the critical sources of sustainable competitive advantage in the twenty-first century. Most competitive strategies go to parity among competitors very quickly; therefore, strategy execution can no longer take a back seat to strategy formulation. As Peter Drucker wrote, the key role of an "execut-ive" is to execute to results.

Forces such as e-commerce, globalization, and disruptive technology mandate that strategy be executed speedily, at the lowest cost, and with little or no rework. The new strategic paradigm requires five world-class, strategy-execution skills.

1. 1.

   Implement a process approach to initiative management. Create a process that identifies, prioritizes, allocates resources, implements, and then manages initiatives to ultimate financial return or early termination. Most firms fail by confusing effort with results, and their hodgepodge of current, stalled, or stealth initiatives causes confusion.

2. 2.

   Make all executive, operating, and support processes PALS. The acronym PALS stands for prioritized, aligned, linked, and synchronized with the speed and rhythm of the marketplace. The new science of execution replaces a calendar-driven view of execution with a dynamic, recurring-process view, where synchronization with the marketplace is paramount. Research has shown that a firm's true market rhythm is about four to five times faster than the buying cycle of its most important customers.

3. 3.

   Manage all key initiatives against a growth and innovation map. This will allow consistency in managing the portfolio of initiatives for long-term accountability. The average tenure (three years) for a CEO underscores the importance of a multi-year directional tool.

4. 4.

   Measure the competitive environment to time-phase four key thrusts: growth, architecting, process reengineering, cost reduction, and turnaround. Inappropriate timing of competitive thrusts can derail strategy execution.

5. 5.

   Gain an early warning of ripple effects. A small ripple in one place can have huge consequences elsewhere. The mandate is for few stalls or rework in strategy execution, as they obscure an understanding of the root cause and effect of disruptions.

At a strategic and operating level, these practices improve all of the classic drivers of shareholder wealth. The grittiness of execution can now marry the boardroom mandate for increasing wealth in a way that gets things done.