Linking Your Business Strategy to Your Technology Strategy Smart man learns from his mistakes Wise man learns from smart man s mistakes Chinese proverb Webinar
Survey What specifically do you want to learn today? What are three key components in a good technology strategy? Growth Strategy Partners www.growthstrategypartners.com 1
Objectives for this Hour Communicate proven growth disciplines Define how to build a good business strategy Identify how to link the technology strategy to the business strategy Growth Strategy Partners www.growthstrategypartners.com 2
An Introduction to Growth Strategy Partners Value Proposition: We can help you grow your business faster and more efficiently than you can on your own. Our Definition of Growth Revenues Profit Talent Our Differentiators Growth research based consulting firm Has unique and proprietary diagnostic and rapid implementation tools Accomplished Consultants Partners with clients to develop long term, sustainable growth Selected by Inc. magazine to be their growth strategy consulting practice Growth Strategy Partners www.growthstrategypartners.com 3
Research Drives Our Approach What winners do, and how they do it Ten Years of Proprietary Research with over 500 CEOs of America s Fastest Growing Private Companies Other growth lists 3 Over 25 sources Growth Disciplines Experiences of Growth Strategy Partners Consultants who have been highly successful CEOs and business executives Growth Strategy Partners www.growthstrategypartners.com 4
Three Growth Disciplines Right People In the Right Seats Right Seats 1. Functional 2. Level Right People 1. Skills 2. Knowledge 3. Behaviors 4. Results Implementing Right Practices 1. Effective Growth Planning Process 2. Advanced Customer Management 3. Robust Processes 4. Differentiated Products and Services 5. Strong Core Values Ability to Execute 1. Limited Initiatives 2. Aligned Resources 3. Linked Incentives 4. Culture of Discipline Over 80% of most companies are not effectively implementing the Three Growth Disciplines. Those who do are growing faster and more efficiently. Christopher DiCenso Growth Strategy Partners www.growthstrategypartners.com 5
Developing An Effective Strategy Strategies Fail to Deliver Due To Failures In Planning Recent research published in the Harvard Business Review suggests that organizations on average deliver only 60% of what their strategies promise. More than one-third of these companies achieved less than 50%. Companies are delivering only about two-thirds of their potential due to failures in planning and execution... CFO.com Strategies Fail To Deliver Due To Poor Articulation Surveys show that 70% to 90% of organizations fail to successfully execute their strategies. In most cases, the failure is one of execution, not of the strategy itself. Our own research traces this failure to two causes. The first is that since there is no generally accepted way to describe a strategy, organizations are attempting to execute something that isn t even articulated. Balanced Scorecard Collaborative Companies With An Effective And Articulated Strategy Grow 66% of fast growth companies have a strategic plan. These companies are 40% larger and 45% more productive than comparison companies. PricewaterhouseCoopers Are you failing to plan or planning to fail? Growth Strategy Partners www.growthstrategypartners.com 6
What Are the Keys to a Good Strategy? Understanding of a company s core competence/method of competition Product leader, Customer intimacy, Operational excellence Understanding of operational strategy Catalog orders Custom orders High volume Low volume Large line item orders Small line item orders Mix Clearly defining and communicated objectives, tactics and activities Financial, customer, process, people Customer groups, markets, geographies, products, services Owners of objectives Leadership team Incentives linked to objective PROCESS to react to and implement strategic decisions Growth Strategy Partners www.growthstrategypartners.com 7
Method of Competition Definitions Product Leadership Definition: Continuously introduce innovative products and services. Goal of obsoleting their own products or services (before the competition does). Examples: Intel, Gillette, BMW, J&J Customer Intimacy Be Great at One and Good at the Other Two (based on customer perspective) Definition: Providing unique and tailored products and services to specific segments of the market. Views lifetime value of customer experience. Examples: Nordstrom, Disney World, USAA*, Charles Schwab Operational Excellence Definition: Price and convenience leader. Strategic approach to the production and delivery of products and services. Always seeking ways to reduce inefficiencies and optimize cross function and organizational processes. Examples: Amazon, Dell, Wal-Mart * also mastered operational excellence Growth Strategy Partners www.growthstrategypartners.com 8
Method of Competition Prioritized Where Should You Focus Your Strategies and Resources For Growth? Priority Weighting Current Score Winning Score Score Gap Weighted Gap Product Leadership 3 9% 39 48 9 5% Customer Intimacy 2 26% 58 73 15 25% Operational Excellence 1 65% 75 92 17 70% Weighted gap = winning score current score x weight Sum of weighted gap Growth Strategy Partners www.growthstrategypartners.com 9
Linking MOC to Strategy to Technology How Compete Strategy Product/Service Profile Key Processes Tools/Techy Product Leadership Customer Intimacy Operational Excellence Customers Markets Geography Custom Catalog Fast follower Early adopter Centralized Disruptive techy M&A vs internal growth Core competencies Transaction volume high / low Order Type Large orders Small orders Mixed Product Type Custom Catalog Mixed Product/service dev. Customer feedback Techy platforms dev. Customer intimacy Order processing Customer service Supply chain Order entry Order build Order delivery CE DFMA PDM CAE CRM SFA ERP ASP WMS Growth Strategy Partners www.growthstrategypartners.com 10
Sample Strategy Map and Balanced Scorecard Strategy Map Balanced Scorecard METHOD OF COMPETITION Operational Excellence Customer Intimacy Product Leadership Priority 1 2 3 Weighting 66% 26% 9% OBJECTIVE OWNER MEASURE TARGETS INITIATIVES BUDGET (Cumulative Annual Growth Rate) FINANCIAL Increase Net 25% Net Income increase Frank Net income 25% per year $ - To financially sustain our mission, what must we focus on? Increase Contribution Margin 20% / yr Income at 25% CAGR Keep overhead growth below 15% /yr 20% Contribution Margin increase Bill Contribution Margin 20% per year Action Plan Less than 15% overhead increase Sean OH growth rate under 15% $ - CUSTOMER Be competitively priced Frank Question on Customer Survey To achieve our vision, how should we appear to our customers? Be easy to do business with Be competitively priced Average score of 4.5 on this question Create and implement customer survey $ - Redesign rating card Be easy to do business with Frank Question on customer survey Average score of 4.5 on this question Restart rating card follow up program $ - Provide good quality work Provide good quality work Tom Question on customer survey Average score of 4.5 on this question Create and implement manager Quality Training $ 1,000 Create and implement Practical Training program $ 10,000 PROCESS Training of Miscrosoft Programs $ 2,000 Improve the selling and estimating process Dave Time to complete an estimate Reduce time needed by 15% Implementation of Dave's automated program by all managers $ 2,000 To satisfy our customers, which operational processes must we excel at? Improve the selling and estimating processes Improve the delivery process Improve the delivery process Bill CM productivity Define at mapping process Core process mapping process $ 7,500 Improve marketing and lead generation focus Improve marketing and lead generation focus Bob % increase in # of leads 18% increase in leads and 18% increase in leads over $200K Addition of lead generation to Team Player Plan; $ - Creation of cross-selling grid $ - LEARNING How wil we sustain our ability to change and improve? Improve selling skills Drive the Values through the business Improve trade and job mgmt skills Improve selling skills Chuck Success Ratio (Won Deals/Won Deals + Lost Deals) 40% Success Ratio Create and implement a defined Sales Process $ 1,000 Drive the Values through the business Steve % that can name the Values % that are living the Values Managers & up - 95% by 8/20/04 Rest of org. - 50% by 08/20/04 Develop and conduct Values survey $ 3,000 Managers & up - 50% by 11/31/04 Rest of org. - 35% by Implement "Ever-Present Reminders" of 11/31/04 Values Improve trade and job mgmt skills Bill Bonus hours earned/total hours worked 20% of hours are bonus hours Manager Training program $ 2,500 Time tracking, reporting and measurement process Growth Strategy Partners www.growthstrategypartners.com 11
Dashboard Performance View Are We Building Our Backlog? Are We Growing Revenues? Are Our Customers Happy? 12,000 10,000 8,000 6,000 4,000 2,000 0-2,000 TPM Backlog Change in TPM Backlog Revenue 12,000 10,000 8,000 6,000 4,000 2,000 0 $11,681,250 budget 20 15 10 5 - TPM Revenue/FTE Gross Profit /FTE TPM Contracted Backlog External Budget TPM Budget TPM Cumm Budget TPM Cumm. TPM Risk Adjusted Revenue Forecast Are Our Gross Margins Growing? Revenue Forecast by Function 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000-1,400 1,200 1,000 800 600 400 200 0 Jun Jul Aug Sept Oct Nov Dec Gross Profit Budget Gross Profit Contracted Wherego Stretch Lead track Cumm Budget Gross Profit Cumm Gross Profit Planning Design Design Build General Conditions 1,600 1,400 1,200 1,000 800 600 400 200 - Is Our Pipeline Growing? Are We Growing Profits? How are our Projects Doing? Count 30 25 20 15 10 5 0 Annalized Jan. Proposals Feb. Mar. Annalized Apr. Interviews May Budgeted Annualized Proposals Budgeted Annualized Interviews 300 200 100 0-100 -200-300 -400-500 -600 NI (Operating Income) Cumm Budget NI (Operating Income) Budget NI (Operating Income) Cumm. NI (Operating Income) 8% 6% 4% 2% 0% -2% -4% Fade Overall Project Profitability(GP) Budget Fade for 2005 How are the Sales People Doing? Are We Growing More Efficiently? How Happy Are Our People? 300 250 200 150 100 50-20 15 10 5 - (5) Retention Rate 101% 100% 99% 98% 97% 96% 95% 94% 93% TPM Revenue/Salesperson (FTE) 4.75 TPM Revenue/FTE Gross Profit /FTE Operating Income/FTE Retention Rate Growth Strategy Partners www.growthstrategypartners.com 12
GROWTH PRACTICE Growth Disciplines Scorecard Effective Strategy Design and Execution Advanced Customer Management Robust Processes Innovative Products & Services Strong Core Values NON PERFORMING BEGINNER INDUSTRY AVERAGE ADVANCED EXPERT No strategic objectives or resemblance of goals. No formal budgeting Target customers and value proposition not clearly defined. Selling everything to everyone. Core processes not defined. Have not improved any processes in over 1 year. Products or services not differentiated. Value proposition not effectively defined. Core values not defined. Little interest from leadership CEO driven objectives, mostly undocumented, with little input from team. Some financial metrics summarized. Informal yearly review process. Budgeting exists. Target customers defined. Weak value proposition. Customer rationalization not clearly defined. No specific customer channels. Customer profitability not well defined. Core processes understood yet not defined or measured. Some process mapping. Improved a process or two in last year (focused effort). Product & service value proposition understood yet not clearly communicated. Profitability known yet not managed effectively. Weak product development process. Core values are communicated but not consistently. Not defined or documented. Strategic objectives defined, semi-effective annual review process, Objectives partially linked to rewards. Team involved in planning. Summary metrics reviewed. Some custom solutions to targeted customers. Customer segments managed. Some rationalization. Some customer feedback mechanisms. Top customer and product profitability. Core processes defined, documented (flowcharted) and measured. Some continuous improvement efforts. Processes are semi-effective or efficient. Products & Services differentiated with unique value proposition. Profitability managed. Some rationalization exists. Product development process exists. Core values documented defined, and communicated by leadership. Partial communication by employees. Partially living values. Strategic objectives set by team with bi-annual review and adjustment process. Objectives linked to incentives of top layer. Key metrics published. Targeting and managing customer segments with custom solutions. Customer and product profitability managed well. Some direct customer feedback. Unique customer channels defined. Core processes defined, documented, measured. Tools such as kaizen, six sigma or reengineering have been specifically applied. Continuous improvement efforts defined. Clear product/service differentiation and value proposition. Profitability managed well. Robust product development process. Pipeline of new product ideas exists Core values defined, documented and communicated by employees. Living some of the values. Strategic objectives set and reviewed/adjusted quarterly. Over 80% of objectives completed yearly. Incentives linked to objectives 2 layers down. KPIs in dashboard format. Custom solutions developed for targeted customers. Value proposition defined and known by customers. Customer profitability managed very well. Great customer feedback processes. Very discrete customer channels. Core processes very effective and efficient. Good measurements. Process improvement tools instituted (six sigma, etc). Technology applied to core processes. Core processes reviewed yearly for robustness. Superior products & services. Strong product development process. Maximization of product & service profitability. Technology leveraged. Steady stream of new products being introduced. Majority of employees can recite values and believe company is living them. Strong self-eject mechanism. Right Seats with Right People Ability to Execute Roles and responsibilities undefined. No organizational structure. No performance reviews. High turnover. Difficulty finding talent to fill openings Organizational design driven by existing talent availability. Ad hoc talent selection. Poorly defined roles and responsibilities. Ad hoc performance reviews. Difficulty competing for key talent Organizational design influenced by strategy. Formal talent selection. Job descriptions. Formal performance reviews measured against specific goals. Competes for key talent With no plans and no Focus on a long list of daily to Focus on a many initiatives, priorities, daily requirements dos. Few incentives. None most with objectives and are not always achieved. No linked to performance. No milestones but resources are Growth Strategy Partners www.growthstrategypartners.com tracking or discipline. performance standards. No performance incentives. not allocated. Incentives not linked to performance. Limited tracking and discipline Organizational design and talent aligned with strategy. Formal performance management system. Ad hoc leadership development programs. Employer of choice for key positions Focus on a few initiatives, with objectives, milestones and resources allocated. Incentives informally influenced by performance. Informal review of process. Continuous process for identifying, recruiting and developing high performance leaders. Active robust succession planning. Talent bank. Employer of choice for all positions Focus on a few initiatives, each with objectives, milestones and allocated resources. Incentives linked to performance, process of review and change, culture of discipline
Thank You!! For more information, please contact: Marcia Nita Doron Altico Advisors 508-485-5588 x107 mdoron@alticoadvisors.com Do what you can, with what you have, where you are. Theodore Roosevelt Growth Strategy Partners www.growthstrategypartners.com 14