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Posts filed under 'Operations'

Circuit City: Paying for Stupidity

At the beginning of April StrategyWorld pointed out Circuit City’s foolish strategy to fire experienced employees to cut costs.

Now it’s time to fire the decisionmakers who came up with this bright idea.

According to the Washington Post:

“…the Richmond electronics retailer says it expects to post a first-quarter loss next month, and analysts are blaming the job cuts.

The company, which on Monday also revised its outlook for the first half of its fiscal year ending Feb. 29, 2008, cited poor sales of large flat-panel and projection televisions. Analysts said Circuit City had cast off some of its most experienced and successful people and was losing business to competitors who have better-trained employees.”

Will they never learn?

Perhaps they need to attend our FAST strategy webinar… although I doubt anything can help this kind of blindness.

Speaking of ethics, how about Duke’s cheating scandal?

Listen to this:

A survey released last year by Rutgers University professor Don McCabe showed 56 percent of MBA students acknowledged cheating in 2005. In other fields, 47 percent of graduate students said they cheated.

Note: these were graduate students, not undergrads.

May 2nd, 2007

John Hagel: FAST Strategy

When I work with senior executives, they express a real conflict: they know strategy is important (strategy, like IT, does matter) but they have a growing sense that traditional approaches to strategy are simply not up to the challenge of coping with increasingly uncertain business environments. What to do?

EDITOR’s NOTE: see our webinar with John Hagel on May 9th: “FAST Strategy: How to Get Results in Disruptive Markets”

My first piece of advice: throw out two basic tenets of business strategy. First, reject the notion that strategy is sequential – that detailed strategic blueprints need to be laid out before a company can proceed with operational implementation. Secondly, abandon the traditional strategy view that the relevant time frame for strategic planning is a five-year horizon.

My second piece of advice: implement a FAST approach to strategy. FAST in this case is an acronym for Focus, Accelerate, Strengthen and Tie it all together. This approach urges executives to move along parallel paths, operating on two very different time horizons: one horizon takes a five to ten year view of the business and the second horizon zooms in to a much more tactical six to twelve month view of the business. The one to five year horizon that is so loved by traditional business strategists actually receives very little attention in the FAST approach.

Focus is the key activity on the five to ten year horizon. This requires senior management to develop a common view on two key questions for their business. Five to ten years from now, what will the markets that we participate in look like? Then, what kind of business we will need to have in order to continue to create value in these markets? Unlike strategic approaches of the past, Focus does not require management to develop a detailed view of the future, but it does require management to develop a clear, high level view specific enough to help the company make important near-term choices.

To illustrate the high level nature of the view of the future, look at Microsoft. Back in the late 1970’s Bill Gates defined a Focus for Microsoft that could be summed up in two sentences. First, computing power is inexorably moving from centralized mainframes to desktop computers. Second, to be successful in the future, a computer company will need to “own” the desktop. Simple and succinct, yet specific enough that it helped Microsoft to answer the unexpected call it got from IBM to help IBM develop an operating system for a new desktop computer it was developing, rather than the twenty other calls it undoubtedly received on that same day. This Focus helped to guide the company for two decades. It only began to need retooling in the late 1990’s as the advent of the Internet set into motion fundamentally new forces.

On the six to twelve month horizon, Accelerate and Strengthen are the key requirements. By Accelerate, I mean identifying a few key operating initiatives that have the potential to significantly accelerate the movement of the company towards the long-term Focus. Once these initiatives are identified and agreed upon by senior management, the question is what can be done to help these initiatives increase their impact over the next six to twelve months? Management needs to set aggressive and measurable operating performance objectives for these initiatives over the next six to twelve months.

On the same time horizon, Strengthen also comes into play. Here, management needs to ask, what are the major organizational obstacles that are preventing us from moving even faster to achieve our operational objectives? Then the question becomes, what can be done over the next six to twelve months to “de-bottleneck” the organization and strengthen our organizational capabilities so that we can move even faster in the next six to twelve month cycle?

Tie it all together integrates these three streams of activities. The key to success with the FAST strategy is to frequently iterate back and forth across these two time horizons and refine efforts on all streams based on the results of efforts to date. The near-term operating initiatives will provide management with much more information regarding both the market place and the capabilities of the company. This should help to refine the longer-term Focus view. In turn, this refined Focus view will be helpful in selecting and shaping the next wave of near-term operating and organizational initiatives. Senior management must actively monitor progress on all three streams and play an active role in shaping initiatives and setting objectives.

The FAST strategy approach respects the need for both near-term performance and longer-term direction, learning and adaptation. It favors incrementalism but recognizes that, without direction, incrementalism will inevitably sub-optimize relative to longer-term opportunities. Properly focused, incrementalism provides significant advantages relative to more tempting “big bang” transformational initiatives:

Provides clear, near-term operational performance metrics to assess progress
Focuses management on delivery of significant near-term operating results consistent with longer-term direction
Enhances ability to fund major strategic thrusts by emphasizing the need for tangible returns early – initiatives potentially become self-funding
Helps to build organizational support for longer-term direction by demonstrating tangible returns quickly while at the same time helping to neutralize opposition
Accelerates organizational learning by providing clear metrics and creating rapid performance feedback loops
Strengthens ability to adapt based on new information gained from near-term operational and organizational initiatives

Few companies today have adopted anything like a FAST strategy approach. You can use five questions to determine whether a company is pursuing this approach:

Does senior management have a common view of what their markets will look like five to ten years from now and what the implications are for the kind of company they will need to develop? Some of the common issues companies confront here are:

Management avoids the issue entirely, claiming that the future is too uncertain
Management aims too low, under-estimating the amount of change that will occur and the size of the opportunities (and challenges) created by this change
Management fails to align around a common view – if interviewed individually, senior executives would offer very different views of the long-term requirements for success

Has this view of the future been adequately communicated throughout the organization? Some of the common issues at this level are:

Management under-invests in communication of the long-term view
Management fails to make this long-term view tangible to the organization by not offering specific examples of how near-term choices will be affected
Management communicates through the ranks rather than directly to the rank and file, leading to divergent and confused views as the message becomes distorted with each level of communication

Is there sufficient focus in the near-term on a few (3-5) high-impact operating initiatives that, over the next six to twelve months, can materially accelerate the company’s movement towards the long-term destination? Common challenges here are:

Management supports too many near-term operational initiatives, in part as “insurance” against uncertainty, with the result that initiatives are under-resourced and rarely achieve the impact anticipated
Near-term operational initiatives are not clearly tied to the long-term destination
Explicit six to twelve month operating performance objectives are not established

Is senior management identifying and addressing major organizational obstacles that prevent even more rapid movement towards the long-term destination? Some of the issues here are:

Organizational changes rarely tied to high impact operating initiatives
Explicit six to twelve month performance objectives are not established – how will management know whether the organizational changes are having the desired impact?

Are there systematic processes to assess near-term operating performance relative to the requirements defined by the longer-term destination? One of the most frequent issues here is:

Operating performance rarely assessed systematically in terms of implications for long-term direction

The FAST strategy approach provides a robust framework for incremental innovation. It offers a useful context for understanding how to create strategic advantage through sustained innovation in business practices enabled by IT capabilities. It also helps us to understand the deep business significance of the emergence of a much more flexible distributed service architecture. This new IT architecture will help businesses to accelerate their near-term operational initiatives even further. In doing so, it will provide a solid foundation for radical incrementalism.

EDITOR’s NOTE: For more on FAST Strategy, see our webinar with John Hagel on May 9th: “FAST Strategy: How to Get Results in Disruptive Markets”

April 28th, 2007

John Hagel: FAST STRATEGY webinar

“What if everything you learned about business strategy is WRONG?”

Why, then it’s time to sign-up for John Hagel’s webinar on FAST Strategy presented by StrategyWorld.org.

In this webinar John reveals why the basic principles of traditional strategy - the principles still taught at most business schools and company executive education programs - are wrong:

· WRONG: Develop a detailed strategy before moving to operational implementation
· WRONG: Focus on a one to five year time horizon to develop robust strategies.
· WRONG: Pursue a portfolio approach to business initiatives to cope with growing uncertainty.
· WRONG: Strategy is a specialized discipline that needs to be pursued by experts.

The alternative? FAST Strategy.

John shows us how some of the most successful companies in the world maintain their advantages, and we can begin to synthesize a new approach to strategy, an approach called FAST strategy.

This approach integrates four elements in an innovative way:

· Focus - building alignment around a long term, five to ten year destination.
· Accelerate - ensuring that the highest impact operational initiatives over the next six to twelve months receive a critical mass of resources
· Strengthen - designing organizational initiatives that can be implemented over a six to twelve month period to address key bottlenecks preventing the firm from moving even more rapidly.
· Tie it together - effectively integrating the first three elements in ways that speed up learning and enhance performance.

Here’s our pitch:

Some of the world’s most successful companies use John Hagel’s thinking to guide them as they navigate the turbulent waters of business competition. Don’t you think you owe it to yourself and your company to find out how they do it? For the price of a plane ticket, you can. And you don’t have to leave the comfort of your office. Mark your calendar, hold your calls, and join our webinar.

PS- space is limited, so please sign up and reserve your seat.

April 22nd, 2007

The Competitive Advantage Assessment: Can Your Company Compete?

In 4 Sources of Advantage, authors Peter S. Cohan and Barry Unger tell us that technology leaders create success cycles by the way they perform four critical business processes – which they call “the four sources of advantage.”

The four processes are:

- Entrepreneurial leadership
- Open technology
- Boundaryless product development
- Disciplined resource allocation

So where does your company stand? If you’re seeking to accelerate your company’s, take this self-assessment and find out: [hint - A is good, B is bad]

Entrepreneurial leadership

1. Hiring
A. Hires engineers with strong technical skills and keen business sense; or
B. Hires engineers with strong technical skills and limited business sense.

2. Self-driven research
A. Gives engineers, say 10 per cent to 20 percent, of their time to work on projects they choose; or
B. Requires engineers to work exclusively on manager-directed projects.

3. Publishing
A. Allows engineers to publish current research in peer reviewed publications after appropriate patent disclosures have been made; or
B. Requires engineers to keep their research company confidential.

4. Peer recognition
A. Holds annual celebrations for engineers who develop innovative products; or
B. “Rewards” engineers who innovate by letting them keep their jobs.

5. Culture
A. Uses culture and supporting measurement and reward systems to emphasise how society benefits from its products; or
B. Uses culture and supporting measurement and reward systems to focus on enhancing shareholder value.

Open technology

6. Speed to market
A. Acquires companies or licenses technology to obtain rapid access to products its customers want to buy; or
B. Uses only internally developed technology to develop new products.

7. Customer perspective
A. Builds technologies that create customer value; or
B. Builds technologies that satisfy executive requirements.

Boundaryless product development

8. Cross-functional teams
A. Uses cross-functional teams of, say, engineering, manufacturing, sales, marketing, finance, and early
adopter customers, to design new products; or
B. Uses its engineering department to design new products.

9. Prototypes
A. Uses cross-functional team input to build new product prototypes; or
B. Manufactures product based solely on engineering blueprints.

10. Fast feedback
A. Redesigns prototypes using feedback from early adopter customers, manufacturing, and other functions; or
B. Redesigns products only after they’re out in the market.

Disciplined resource allocation

11. Timing discipline
A. Creates strong incentives to meet project milestones; or
B. Lets product development deadlines slide.

12. Expected value discipline
A. Validates development projects’ expected value (EV) via continuously updated market research and kills them if their EV goes negative; or
B. Once their budget has been set, sticks with development projects.

13. Learning discipline
A. Allocates resources and shares learning through control systems that measure competitive performance; or
B. Rewards those who tell the CEO what the CEO wants to hear and fires those who contradict the CEO.

14. Renewal discipline
A. Develops a deep bench of management talent; or
B. Dismisses ambitious managers to protect the CEO.

March 5th, 2007

The Quick Fix Postal Solution: Fix Long Waits by Removing Clocks

The US Postal Service has taken customer service to the next level of incompetence.

Instead of fixing the problem - the long wait in line - it has decided to work on perception instead: 37,000 post offices across the country have removed their wall clocks from retail areas.

This as part of a “retail standardization program” launched last year.

A spokesman for the U.S. Postal Service says: “We want people to focus on postal service and not the clock.”

The USPS seems to have lost track of what it means to build a positive customer experience.

USPS Customers know that the USPS is not as fast as FedEx, for example, and they don’t expect to be. They’re not using the USPS for efficiency but for cost.

So what’s the big deal? My research tells me that the clock is a fundamental part of the checkout experience - whether you’re in a grocery store or the post office. And not having a clock actually makes the perception of service quality go down, not up.

Says service guru Leonard Berry, “It’s silly, I guess they think people don’t have watches.”

March 5th, 2007

The Coming Disruption of the Auto-Market

One Billion New Automobiles!

Bill Jackson and Vikas Sehgal from Booz Allen Hamilton warn executives in the ailing auto industry about emerging trends which will change their future:

1) Social mobility: for the first time residents of remote villages in India and China will be able to reach urban centers in a half-day’s travel

2) Environmental Impact: Manufacturers in India and China will likely develop indigenous technologies at lower cost, making the cars more affordable but still meeting emission norms (they will lag behind Western emission standards by a couple of years, but this will be a competitive advantage!).

3) The Expanding Lower-End Market: The requirements in China and India are far different from the West. Take the $4,500 Maruti Alto, for example.

4) The Learning Model in Emerging Markets: The basic vehicle model of the emerging economies could be adapted for other nations, offering fuel efficiency and unprecedented low prices, with a few extra tweaks like the additional safety features that established markets require. China and India are honing their products in the Middle East, Africa, and Eastern Europe.

Jackson and Sehgal warn:

“Recent history suggests that many Western automakers will fail to respond effectively. U.S. manufacturers have focused on large cars and trucks, and European car companies have focused on performance. Both groups have thus missed opportunities to develop economical cars with high fuel efficiency and the selling point of reducing dependence on foreign oil.

“If all the current automotive trends accelerate, many companies will see their value chains overhauled, not just in the auto industry but in every sector. Nations around the world will suffer the consequences of increased pollution and greater global competition for fuel. And the automobile as a product will be transformed. Those manufacturers and suppliers that start planning now for a new wave of upstart competition will be the most likely to thrive in the next automotive environment.”

What will Ford and Chrysler do?

Download the article here >>

For those of you who think this is simply an issue for the auto industry, think again. The $100 PC is here, Dell.

1 comment February 16th, 2007

Fuqua: Offshoring about Talent, not Cost

Here’s a report you’ll be interested in: The Globalization of White-Collar Work: The Facts and Fallout of Next-Generation Offshoring from Duke’s Fuqua School of Business and Booz Allen Hamilton.

The news? Apparently offshoring is no longer “all about moving jobs elsewhere; increasingly, it’s about sourcing talent everywhere.”

And: “…what used to be a tactical labor cost-saving exercise is now a strategic imperative of competing for talent globally. White-collar work can be performed where it makes the most sense and saves the most cents. More important, a looming shortage of technically trained talent, such as engineers and computer scientists, in advanced economies will require the ability to source and manage such talent globally.”

Here are the 5 main points:

1. Labor arbitrage is giving way to accessing talent as the primary driver of next-generation offshoring.

2. Offshoring high-skilled functions does not replace jobs onshore.

3. Companies look elsewhere because they can’t get it at home.

4. Where you offshore depends on what you offshore.

5. The obstacles to successful offshoring are increasingly internal and organizational.

The reports also says that higher skilled jobs (like R&D, Marketing, and Design) won’t go away because of this growing global talent shortage. Instead firms will compete globally for brain power, regardless of location.

Sorry, I don’t buy that. China’s working hard on educating the next generation of designers, and in India you’re going to see the next generation of innovation. (I’ll get John Hagel to talk about this soon.)

December 25th, 2006