Rizal Nangoy 1
If The Only Tool You Have Is a Hammer, You Treat Everything Like a Nail
Abraham Maslow
Rizal Nangoy 2
Management Cycle
Objectives Objectives gap
Generation of responses Selection
Perception of trends
Measurement of performance
Programming
Analysis of consequences
Diagnosis
Communication and leadership
To others in the firm External
environmentAnsoff, 1990
Rizal Nangoy 3
Manager Archetypes
Leader
Administrator
Entrepreneur
Statesman
Planner System Architect
Ansoff, 1990
Rizal Nangoy 4
Selecting a management system to fit the firm
Productive units
Compliance monitoring
Action instructions
Implementation decision
Implementation management
Rizal Nangoy 5
Selecting a management system to fit the firm
Historical control management
Productive units
Compliance monitoring
Action instructions
Implementation decision
Control decision
Performance evaluation
Historical standards
Performance measurement
Rizal Nangoy 6
• Productive units
• Compliance monitoring
• Action instructions
• Implementation
decision
• Control
decision
• Performanc
e evalua
tion
• Performance and resour
ce foreca
st
• Performanc
e measuremen
t
Goals
Profit budgets Resource budgets
Action programs
Feasibility
Envi ronment
Selecting a management system to fit the firm
Extrapolative management
Rizal Nangoy 8
Business
Products / Services
E X P E R I E N C E S
CONSISTENCY ?
Benefits
Brand
Images
T R U S T I S O
Accelerating Factor
MANAGEMENT SYSTEM
Rizal Nangoy 12
Economic needs Purchase situationPsychological variables Social influences
Need awareness
Problem solving• Information search• Identify alternatives• Set criteria• Evaluate alternatives
Purchase decision
Experience after
purchase
Marketing mixes All other stimuli
Consumer decision process
Postpone decision
Feedback based on experience
Rizal Nangoy 14
Risk
Job security
Comfort
Individual’sneeds
Career advancement
Money/Rewards
Other needs
OverlapIn
needs
Company’sneeds
Innovation
Survival
Customer satisfaction
Growth
Profit
Other needs
Rizal Nangoy 15
What does she
THINK AND FEEL?
what really countsmajor preoccupationsworries & aspirations
What does she
SEE?environment
friendswhat the market offers
What does she
SAY AND DO?
attitude in publicappearance
behavior toward others
What does she
HEAR?
what friends saywhat boss say
what influencers say
PAIN GAINFears, frustrations, obstacles Wants/need
measures of success
Rizal Nangoy 16
Managing Risk
•Internal risk•Controllable and ought to be eliminated or avoided
Preventable Risk
•Voluntarily accepts by the company in order to generate superior return from its strategy
Strategy Risk
•Some risks arise from events outside the company and are beyond its influence or control
External Risk
Kaplan 2012
Rizal Nangoy 17
Company Resources
Performance
Organizational
Capabilities
Intangible assets
Tangible assets
Rizal Nangoy 18
VRIO Framework
Value
• Does it provide customer value and competitive advantage ?
Rareness
• Do other competitors posses it ?
In-imitability
• Is it costly for others to imitate ?
Organization
• Is the firm organized to exploit the resource ?
Barney, 1994
Rizal Nangoy 19
What makes a resource valuable ?
Demand
AppropriabilityScarcity
Value creation zone
Collis et al, 1995
Rizal Nangoy 21
ORGANIZATION CAPABILITY
COMPETENCE CLIMATE
LEADER
BIG COMPANY :-Annual sales > 500 bilion-Employee > 100 persons
SMALL COMPANY :-Annual sales < 500 bilion-Employee < 100 persons
MMGD?
FORMAL SYSTEM, PROCEDURE, SOP, STRUCTURE
INFORMAL, SYSTEM RELATIONSHIP, CULTURE, COHESIVENESS,
Rizal Nangoy 22
. The greatest danger in times of turbulence is not the
turbulence … it is to act with yesterday’s logic
Peter Drucker
Dynamic Business
Complexity
Pattern
Structure
Learning Org.
Learning how to alter Mental Model
Time
care- why
know-what
know- how
know-why
Professional Knowledge
Systems Thinker
Double-loop Learning
23Rizal Nangoy
Rizal Nangoy 25
“Best total cost”
Discipline of Market Leader
Product Leadership
Customer IntimacyOperational Excellence
Product differentiation
Customer ResponsiveOperational Competence
“Best product”
“Best total solution”
Rizal Nangoy 26
Strategic Fit
EnvironmentalTurbulence
Strategy. ..
Strategic gap
Orgleaderscompetenceclimate
.
Igor Ansoff, 1991
. .
Rizal Nangoy 27
Organization Effectiveness 7S, McKinsey
skills
strategy
structure systems
sharedvalues
staff
style
Rizal Nangoy 31
Bargaining Power of Buyers --
Buyer is powerful when:Buyer purchases large proportion of seller’s productsBuyer has the potential to integrate backwardAlternative suppliers are plentifulChanging suppliers costs very littlePurchased product represents a high percentage of a
buyer’s costsBuyer earns low profitsPurchased product is unimportant to the final quality
or price of a buyer’s products
Industry Analysis
Rizal Nangoy 32
Industry Analysis
Bargaining Power of Suppliers --
Supplier is powerful when:Supplier industry is dominated by a few
companies but sells to manyIts product is unique and/or has high switching
costsSubstitutes are not readily availableSuppliers are able to integrate forward and
compete directly with present customersPurchasing industry buys only a small portion
of the supplier’s goods.
Rizal Nangoy 36
Risk of Generic Strategies
Risks of Cost LeadershipCost leadership is not sustained:• Competitors imitate.• Technology changes.• Other bases for cost leadership erode.Proximity in differentiation is lost.Cost focusers achieve even lower cost in segments.
Risks of DifferentiationDifferentiation is not sustained:• Competitors imitate.• Bases for differentiation become less important to buyers.Cost proximity is lost.Differentiation focusers achieve even greater differentiation in segments.
Risks of FocusThe focus strategy is imitated:The target segment becomes structurally unattractive:• Structure erodes.• Demand disappears.Broadly targeted competitors overwhelm the segment:• The segment’s differences from other segments narrow.• The advantages of a broad line increase.New focusers subsegment the industry.
Rizal Nangoy 39
GE Business Screen (Portfolio Analysis)
AWinners Winners
B
C
Question Marks
D
F
Average Businesses
EWinners
Losers
GLosers H
LosersProfit
Producers
Strong Average Weak
Low
Medium
High
Business Strength/Competitive Position
Indu
stry
Att
racti
vene
ss
Rizal Nangoy 42
The Balanced Scorecard FrameworkFinancial Perspective
Productivity
Long-termShareholders
Value RevenueGrowth
Customer Perspective
Price Quality Time Function Partnership Brand
Product/Service Attributes Relationship Image
Internal Process Perspective
ManageOperations
Manage Customers
Manage Innovation
Manage Regulatory and Social Processes
Learning and Growth PerspectiveHumanCapital
InformationCapital
OrganizationCapital+ +
Cause-and-Effect RelationshipDefines the chain of logic by which intangible assets will be transformed to tangible value.
Customer Value PropositionClarifies the conditions that will create value for the customer.
Value-Creating ProcessesDefines the processes that will transform intangible assets into customer and financial outcomes.
Clustering of Assets and ActivitiesDefines the intangible assets that must be aligned and integrated to create the value.
Kaplan & Norton (2004)
Rizal Nangoy 43
Financial Perspective
Long-Term Shareholder Value
Productivity Strategy Growth Strategy
Improve Cost Structure
Increase Asset Utilization
Expand Revenue Opportunities
Enhance Customer Value
• Reduce cash• Eliminate defects; improve yields
• Manage capacity from existing assets• Make incremental investments to eliminate bottlenecks
• New sources of revenue (new products, markets, partners)
• Improve profitability of existing customers
Rizal Nangoy 44
Customer Perspective
Customer Value Proposition
Price Quality Availability Selection Functionality Service Partnership Brand
Product/Service Attributes Relationship Image
• Customer Profitability
• Market Share• Account Share
• Customer Acquisition
• Customer Retention
• Customer Satisfaction
Rizal Nangoy 45
Internal Perspective
Operation ManagementProcesses
Customer ManagementProcesses
Innovation Processes
Regulatory and Social Processes
• Supply• Production• Distribution• Risk management
• Selection• Acquisition• Retention• Growth
Processes that createnew products and
services
Processes that improve communities and the environment
• Opportunity ID• R&D portfolio• Design/develop• Launch
• Environment• Safety and health• Employment• Community
Processes that produceand deliver products and
services
Processes that enhance customer value
Rizal Nangoy 47
Learning and Growth Perspective
Human Capital Information Capital Organizational Capital+ +
• Skills• Training• Knowledge
• Systems• Databases• Networks
• Culture• Leadership• Alignment• Teamwork
Strategic Job Families
Strategic IT Portfolio
Organization Change Agenda
Creating Alignment
Creating Readiness
Rizal Nangoy 48
Financial MeasurementTotal assets. Total assets per employee. Profit as a % of total assets.Return on net assets.Return on total assets.Revenues/total assets.Gross margin.Net income.Profit as a % of sales.Profit per employee.Revenue.Revenue from new products.Revenue per employee.Return on equity (ROE).Return on capital employed (ROCE).Return on investment (ROI).Economic value added (EVA).Market value added (MVA).
Value added per employee.Compound growth rate.Dividends.Market value.Share price.Shareholder mix.Shareholder loyalty.Cash flow.Total cost.Credit rating.Debt.Debt to equity.Times interest earned.Days sales in receivables.Accounts receivable turnover.Days in payables.Days in inventory.Inventory turnover ratio
Rizal Nangoy 49
Customer Related Measurement
Customer satisfaction.Customer loyalty.Market share.Customer complaints.Complaints resolved on first contact.Return rates.Response time per customer request.Direct price.Price relative to competition.Total cost to customer.Average duration of customer relationship.Customers lost.Customer retention.Customer acquisition rates.Percentage of revenue from new customers.Number of customers.Annual sales per customer.
Win rate (sales closed/sales contacts).Customer visits to the company.Hours spent with customers.Marketing cost as a % of sales.Number of ads placed.Number of proposals made.Brand recognition.Response rate.Number of trade shows attended.Sales volume.Share of target customer spending.Sales per channel.Average customer size.Customers per employees.Customer service expense per customer.Customer profitability.Frequency (number of sales transaction).
Rizal Nangoy 50
Internal Operation Measurement
Time.On-time delivery receipt.Order cycle time.Order cycle time variability.Response time.Forecast/planning cycle time.Planning cycle time variability.
Quality.Overall customer satisfaction.Processing accuracy.Perfect order fulfillment. On-time delivery Complete order Accurate product selection Damage-free Accurate invoiceForecast accuracy.Planning accuracy.Schedule adherence.
Cost.Finished goods inventory turns.Days sales outstanding.Cost to serve.Cash to cash cycle time.Total delivery cost. Cost of goods Transportation costs Inventory carrying costs Material handling costs All other costs Information systems AdministrativeCost of excess capacity.Cost of capacity shortfall.
Other/Supporting.Approval exceptions to standard. Minimum order quantity Change order timingAvailabiltiy of information.
Rizal Nangoy 51
Internal Operation Measurement ( cont’d)
Average cost per transaction.On-time delivery.Average lead time.Inventory turnover.Environmental emissions.Research and development expense.Community involvement.Patents pending.Average age of patents.Ratio of new products to total offerings.Stockouts.Labor utilization rates.Response time to customer requests.Defect percentage.Rework.Customer database availability.
Breakeven time.Cycle time improvement.Continuous improvement.Warranty claims.Lead user identification.Product and services in the pipeline.Internal rate of return on new projects.Waste reduction.Space utilization.Frequency of returned purchases.Downtime.Planning accuracy.Time to market of new products/ services.New products introduced.Number of positive media stories.
Rizal Nangoy 52
Learning and Growth Measurement
Employee participation in professional or trade associations.Training investment per customer.Average years of service.Percentage of employees with advanced degrees.Number of cross-trained employees.Absenteeism.Turnover rate.Employee suggestions.Employee satisfaction.Participation in stock ownership plans.Lost time accidents.Value added per employee.Motivation index.Outstanding number of applications for employment.Diversity rates.Empowerment index (number of managers)
Quality of work environment.Internal communication rating.Employee productivity.Number of Scorecards produced.Health promotion.Training hours.Competency coverage ratio.Personal goal achievement.Timely completion of performance appraisals.Leadership development.Communication planning.Reportable accidents.Percentage of employee with computers.Strategic information ratio.Cross-functional assignments.Knowledge management.Ethics violations.
Rizal Nangoy 56
Maslow’s Hierarchy Of Needs
Esteem needs
Belongingness needs
Security needs
Physiological needs
Self-actualization needs
Rizal Nangoy 57
Expectancy Theory of MotivationValence
0.0-1.0 x 0.0-1.0 x Sum of all outcomes
Effort-to-performance expectancy
Performance-to-outcome expectancy
Performance OutcomesEffort
Effort-to-performance expectancy
Ability
Environment
Performance-to-outcome expectancy
Valence of all outcomes
Rizal Nangoy 60
Remuneration Components
Pay for POSITION
FIX
• Fixed• Cash • Periodic, routine
Pay for PERFORMANCE• Variable• Cash • Periodic, routine
Pay for PEOPLE • Fixed and Variable• Cash and Non Cash• Periodic, routine, Incidental
The cost of expense ratios
Direct and Indirect Financial Payment
Rizal Nangoy 61
Situational Leadership
Supporting (Lo T, Hi R)
Delegating (Lo T, Lo R)
Directing (Hi T, Lo R)
Coaching (Hi T, Hi R)
M3 M1M2M4
Follower maturity
Task behaviors
Rela
tions
hip
beha
vior
s
Rizal Nangoy 62
Strategic Renewal and Organizational Change
Shifting CompetitiveEnvironment
NewOpportunities
Strategic RenewalOrganizational
Change
Altering BehaviorPatterns ofEmployees
Rizal Nangoy 63
ProspectiveAnalysis
AccountingAnalysis
BusinessEnvironment &
Strategy Analysis
IndustryAnalysis
StrategyAnalysis
FinancialAnalysis
Analysisof cash
flowsProfitability
Analysis
RiskAnalysis
Cost of Capital Estimate Intrinsic Value
Component Processes of Business Analysis
Rizal Nangoy 65
Conceptual map of strategic managementStrategic diagnosis
Evolution of systems
Strategic analysis
Strategic planningInformationSegmentation
Competitive postureStrategic port folio
Dispersed positioningTechnology strategySocietal strategy
Internationalization strategy
Issue management
Strong signalsWeak signals
Surprises
Organizational design
Design of functional capability
Design of general management
General managersSystemsStructure
Change management
Resistance to changeManaging Change
Institutionalizing change
Environmental turbulence
Environmental challenge Ansoff, 1990
Rizal Nangoy 66
Matching aggressiveness and responsiveness with turbulence
Environmental turbulence
Level 1 Repetitive
Level 2 Expanding
Level 3 Changing
Level 4 Discontinuous
Level 5 Surprising
Rizal Nangoy
Blue Ocean Strategy
67
Kim and Mauborgne (2005)
Costs
Buyer Value
The Simultaneous Pursuit of Differentiation and Low Cost
Value Innovation
Value Innovation: The Cornerstone of Blue Ocean Strategy
Rizal Nangoy
Blue Ocean Strategy
68
Kim and Mauborgne (2005)
Red Ocean Strategy Blue Ocean Strategy
Competing in existing market space. Create uncontested market space.
Beat the competition. Make the competition irrelevant.
Exploit existing demand. Create and capture new demand.
Make the value-cost trade-off. Break the value-cost trade-off.
Align the whole system of a firm’s activities with its strategic choice of differentiation or low cost.
Align the whole system of a firm’s activities in pursuit of differentiation and low cost.
Red Ocean Versus Blue Ocean Strategy
Rizal Nangoy
Blue Ocean Strategy
69
Kim and Mauborgne (2005)
ReduceWhich factors should
be reduced well below the industry’s
standard?
CreateWhich factors should
be created that the industry has never offered?
EliminateWhich of the factors
that the industry takes for granted
should be eliminated?
RaiseWhich factors should
be raised well above the industry’s
standard?
A New Value Curve
The Four Actions Framework
Rizal Nangoy 70
Keep a compelling scoreboard
The 4 Discipline of Execution
Discipline 1Focus on the
wildly important
Discipline 4Create a
cadence of accountability
Discipline 2Act on the
lead measures
Discipline 3
McChesney, Covey, 2012
Rizal Nangoy 71
Leading Change
8. Anchoring New Approaches In The Culture
1. Establishing a Sense of Urgency
2. Creating The Guiding Coalition
3. Developing a Vision and Strategy
5. Empowering Broad-Based Action
4. Communicating The Change Vision
6. Generating Short-Term Wins
7. Consolidating Gains and Producing More Change
Kotter, 1996
Rizal Nangoy 72
Levels of Culture
Basic Underlying AssumptionsEspoused Belief and ValuesArtifacts
Schein, 2010
Rizal Nangoy 73
How Leaders Embed and Transmit Culture
Primary Embedding Mechanisms Secondary Articulation and Reinforcement Mechanisms
What leaders pay attention to, measure, and control on regular basis
Organizational design and structure
How leaders react to critical incidents and organizational crisis
Organizational systems and procedures
How leaders allocate resources Rites and rituals of the organization
Deliberate role modeling, teaching, and coaching
Design of physical space, facades, and buildings
How leaders allocate rewards and status Stories about important events and people
How leaders recruit, select, promote, and excommunicate
Formal statements of organizational philosophy, creeds, and charters
Schein, 2010
Rizal Nangoy 74
Six Thinking HatsThink of Paper•information•Facts and figures
Think of Fire. Think of Warmth. Think of Feelings•Emotional view•Feelings and intuition
Think of Caution•Risk, dangers, obstacles, potential problems, and the downside of a suggestion•Point out weaknesses in an idea
Think of Sunshine. Think of Optimism•Positive and constructive•Visioning and optimistic
Think of Vegetation. Think of Growth•Creativity and new idea•Alternative provocation
Think of Sky. Think of “Overview”•Concern with control•The organization of the thinking process, and the use of the other hats
De bono, 1985
Rizal Nangoy 75
Corporate ValuationValue to firm =
FCFFWACC - GROWTHFCFF =
EBIT ( 1 – Tax )+ depreciation
- initial investment- change in net working capital
WACC =Cost of equity+ cost of debt( proportion )
Cost of equityCAPM model
Er = Rf + β ( Rm - Rf )
Rm = indext – indext-1 Index t-1
Ri,t = α + β ( Rmt )
Cost of debt = Interest ( 1 – tax )
Growth =Ln(TAt) – Ln(TAt-1)
Ln(TAt-1)
Ri,t = Pi,t – Pi, t-1 Pi, t-1