MANAGING CHANGE EFFECTIVELY WITH ERP: The impact on 5 key business functions

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Growth through Focus: A Blueprint for Driving Profitable Expansion

Rather than seek increased revenues and profits by expanding products and markets, companies should follow a seven-step strategy for achieving more with less.

by Sanjay Khosla and Mohanbir Sawhney

Illustration by Philippe Lardy

Faced with economic headwinds, many global corporations are struggling to grow their businesses profitably. In the consumer packaged goods business, for example, the worldwide recession has hurt premium brands as consumers have traded down to cheaper brands, private labels, or generics. In the retailing business, same-store sales are flat or declining for numerous companies. Meanwhile, many business leaders continue to seek growth by extending their existing product lines and brands, as well as by entering new geographic regions. After all, growth is supposed to be about “more” — more products on the shelf, more categories, more brands, and more markets.
However, this approach is exactly the opposite of what business leaders should do to drive increased revenues and profits. A typical “growth through more” strategy diffuses the organization’s efforts. It increases the complexity of the organization and its operations. We have found that “growth through less,” or more precisely “growth through focus,” is the best prescription for growth, regardless of the economic environment. This conclusion is based on our own experience in three well-known companies — Kraft Foods, Unilever, and Fonterra Brands (a dairy products business based in New Zealand) — on three continents over 10 years. In all three cases, a deliberate strategy of focusing on a few markets, brands, and categories produced impressive revenue and profit expansion. We have learned that seemingly mature businesses can be energized by making fewer but larger bets and by focusing relentlessly on executing a simple but powerful vision.
Growth through focus is not as easy as choosing what strategic bets to make. Rather, it requires the leadership team to follow a systematic approach that spans everything from strategy and vision to execution and measurement. We propose a framework that consists of seven steps that an organization must go through in its quest for growth through focus. Our framework is grounded in three key ideas: focus in strategy, simplicity in communication, and empowerment in execution.........

Building Support for Change

A successful change management initiative requires commitment from all the organization’s leaders, not just the CEO.

by Matt Palmquist

To study the effect of leadership on organizational change, the authors explored the results of a change management initiative at Kaiser Permanente, a California-based HMO with more than 1 million members, 3,000 physicians, and 19 medical centers. Historically, Kaiser Permanente’s business plan had been predicated on its expansive relationships with a huge number of patients and providers, which enabled the company to offer competitive healthcare at reduced costs. But by 2001, management found that patients generally viewed Kaiser Permanente as bureaucratic and impersonal. Under a new CEO in 2002, the company attempted a significant shift, refocusing on quality and service. This meant introducing a new scheduling system, revamping call centers to improve responsiveness throughout the organization, and improving communication links between physicians and patients. After tracking the results of the initiative over two years (2001–03) in real time, the researchers concluded that efficient, thorough organizational changes resulted not because of the technology or procedures being introduced, but because of the commitment of Kaiser Permanente’s leaders — and not just those at the very top level.
The researchers used data from detailed satisfaction surveys of 50,000 patients and more than 300 physicians to gauge the success of the new plan. The study followed physicians in eight departments — including emergency medicine and pediatrics — at six Kaiser Permanente medical centers. At Kaiser Permanente, physicians report to a department chief (also an M.D.), whose immediate boss is the physician-in-charge (PIC), the executive responsible for the overall operations of the individual medical center. Kaiser Permanente’s CEO oversees all the PICs. The physician surveys explored how well the supervisors at all three leadership levels articulated a vision, set measurable goals, rewarded progress, dealt with organizational hurdles, and motivated employees. The research found that the more physicians perceived their department chief and PIC to be competent managers in all aspects of their job, the more they supported the strategy shift; in addition, patient access and service ratings improved most when physicians viewed both the CEO and PIC as effective leaders. However, when physicians felt that their bosses were less than adept, their performance on patient satisfaction surveys was markedly lower. Although the CEO imparted the same call for transformation in responding to patients throughout the organization, physicians who lacked respect for their managers tended to interpret this change agenda more negatively. Overall, patient ratings improved over the two-year study period.
It has long been assumed that CEOs drive organizational change, and that success or failure hinges on how well a single leader can articulate his or her vision. But this paper finds that organizations are much more nuanced, and leaders at many different levels can have a significant impact on whether their departments embrace or shun new initiatives. The authors advise CEOs to spend time making sure their leaders throughout the organization are fully informed, committed, and effective before undertaking a major change initiative.
Bottom Line: Organizational change is much more effective when leaders at all levels of a company are united behind the shift in strategy. Although CEOs can articulate an overall vision, the success of a new initiative often depends on the competence of managers at lower leadership levels.

Author Profile:

• Matt Palmquist was a founding staff writer and is currently a contributing editor at Miller-McCune magazine. Formerly, he was an award-winning feature writer for the San Francisco–based SF Weekly.

For More See>>

Title: How Leadership Matters: The Effects of Leaders’ Alignment on Strategy Implementation
Author: Charles A. O’Reilly (Stanford University) et al.
Publisher: The Leadership Quarterly, vol. 21, no. 1
Date Published: February 2010

Global Innovation 1000: How the Top Innovators Keep Winning

The Global Innovation 1000: How the Top Innovators Keep Winning

Booz & Company’s annual study of the world’s biggest R&D spenders shows why highly innovative companies are able to consistently outperform. Their secret? They’re good at the right things, not at everything.

by Barry Jaruzelski and Kevin Dehoff

Illustration by Otto Steininger

Why are some companies able to consistently conceive of, create, and bring to market innovative and profitable new products and services while so many others struggle? It isn’t the amount of money they spend on research and development. After all, our annual Global Innovation 1000 study has shown time and again that there is no statistically significant relationship between financial performance and innovation spending, in terms of either total R&D dollars or R&D as a percentage of revenues.
What matters instead is the particular combination of talent, knowledge, team structures, tools, and processes — the capabilities — that successful companies put together to enable their innovation efforts, and thus create products and services they can successfully take to market. This year’s edition of the Global Innovation 1000, our sixth, analyzes the capabilities systems that the most successful innovators have assembled to execute their distinct innovation strategies, and the ways they have aligned those capabilities with their overall business strategies. Innovators that have achieved this state of coherence, we have found, consistently and significantly outperform their rivals on several financial measures.
We believe that this assessment of key innovation capabilities comes at a particularly opportune time. This year, for the first time in the more than a decade we have been tracking global R&D spending, total corporate R&D spending among the Global Innovation 1000 declined, from US$521 billion in 2008 to $503 billion in 2009, or 3.5 percent. (See “Profiling the 2009 Global Innovation 1000,” below.) Clearly, the global recession, which had not yet taken its toll on the world of innovation in 2008, finally came home to roost last year. Yet that decline makes it even more imperative that companies spend their available R&D dollars wisely. Our goal this year is to examine the capabilities needed to maximize the impact of a company’s innovation efforts in good times and bad, and to highlight the benefits both of focusing on the short list of capabilities that generate differential advantage, and of clearly linking the specific decisions within innovation to the company’s overall capabilities system and strategy..........

Billion-dollar Ideas: Finding Tomorrow’s Growth Engines Today

To create growth in uncertain times, use this disciplined and market-focused methodology. It can help you discover and distill attractive new ideas and build a business case for implementing the best of them.

by Greg Lavery and Chris Manning 

 

After several years of survival mode for many companies, growth is back on the agenda. But the requirements for success have changed. In today’s conditions — uncertain recovery, limited capital, and many new competitors — companies must find new ways to grow.
There’s no going back to the growth ideas that were bouncing around the organization before the global financial crisis. Executives need a robust framework to help them rapidly develop a long list of opportunities and then choose the very best ideas from it. The process must be comprehensive, efficient, rigorous, collaborative, and focused on “market-back” opportunities designed to meet customers’ needs. And it must be bold — the company must resist the temptation to do what has been done in the past.
Booz & Company has created a methodology for this, based on five lenses used for evaluating growth strategies. The five lenses — share of wallet, new regulations, technology and applications, distinctive capabilities, and business models — represent discrete and complementary ways to find and judge unconventional and unseen ideas. This approach has already been used successfully by companies in many industries and geographies...

A right to win: Undisputed competitive advantage.

The Right to Win

Business strategy is at an evolutionary crossroads. It’s time to resolve the long-standing tension between the inherent identity of your organization and the fleeting nature of your competitive advantage.

by Cesare Mainardi with Art Kleiner

Photo illustration by Holly Lindem

It’s 8 a.m. in the executive conference room of a large global packaged-foods manufacturer (a real company, its name withheld to preserve confidentiality). For the past two months, a team made up of 15 senior people has been exploring options for growth, winnowing them down to three basic strategies. Each is now summed up in a crisp 20-minute presentation.
The first option focuses on innovation. The company would rapidly develop and launch many new types of snacks and foods, packaged in new and interesting ways, offering leading-edge nutrition and convenience.
Under the second option, the company would get closer to its customers, producing the food people ask for. It could incorporate ideas gathered online into its offerings and provide busy working families with customizable, convenient, and well-balanced meals.
The third option would involve transforming the dynamics of the relevant food sectors by competing more aggressively. The company would become a category leader by investing in new process technology, rightsizing operations to push costs down, and completing key acquisitions.
After the screen goes blank, the CEO leans forward and asks a simple question: “Which strategy would give us the greatest right to win?” His tone, calm and direct, makes everyone sit up a little straighter. And they probably should, for this is the core question underlying every business strategy, although it isn’t always phrased that way.
A right to win is the ability to engage in any competitive market with a better-than-even chance of success — not just in the short term, but consistently....

Making Change Happen, and Making It Stick

Five factors make the greatest difference in fostering the new behaviors needed for a transformation. All of them reflect the basic importance of people in implementing and embedding change.

by Ashley Harshak, DeAnne Aguirre, and Anna Brown 

 

Few organizations have escaped the need for major change in the past decade, as new technologies and global crises have reshaped entire industries. However, the fact that change has become more frequent does not make such changes any easier.
Change is, at its core, a people process, and people are creatures of habit, hardwired to resist adopting new mind-sets, practices, and behaviors. To achieve and sustain transformational change, companies must embed these mind-sets, practices, and behaviors at every level, and that is very hard to do — but it has never been more important.
Some organizations have managed to develop approaches to change management that address change comprehensively. A successful business transformation effort must capture the hearts and minds of people who need to operate differently to deliver the desired results. The good news is that it can be done...

The Best-of-class Financial Systems Strategy

The Best-of-class Financial Systems Strategy: An Alternative to ERP Platforms

This white paper features insight from the UNIT4 group (which includes the CODA Financials software suite) about the issues facing companies that need an adaptable financial system but not necessarily a full-blown enterprise resource planning (ERP) solution.
Also featured in this white paper: TEC's suggestions for identifying financial system functionality that will support your organization's changing processes. The latter portion of this white paper includes a descriptive checklist for soliciting such information about enterprise software solutions.
TEC recognizes the thought leadership role and industry expertise of the UNIT4 group. However, this document should not be construed as an explicit TEC endorsement of the CODA Financials software suite.

Introduction

For better or worse, most companies have purchased financial software from large-scale enterprise resource planning (ERP) platform suppliers over the last decade. But as companies search for ways to lower costs and respond to a difficult business climate, the merits of implementing large-scale ERP platforms have come under closer scrutiny. This paper will examine an alternative approach that may be more appropriate and strategically sound for many companies: a best-of-class systems strategy.
With that notion in mind, this paper will contemplate the following questions:

• Have ERP platforms grown too unwieldy for some organizations?
• Does ERP make sense for all types of business, especially in today's fast-changing and frugal business environment?
• Are ERP platforms being sold to companies that simply don't need it?
• Have technological advances eliminated some of the reasons for ERP platforms in the first place?
• Is the drive for competitive differentiation causing companies to develop more of their own operational systems, thereby eliminating the value of ERP?
• What does a best-of-class strategy entail, and what are the advantages?

 

Customer Management Insights

Customer Strategist Çağlar Gogus: What the C-Suite Needs to Know About Customer Management

from Strategy Speaks: a Peppers and Rogers Blog by Customer Strategist

 

C-level executives have enormous demands on their time and focus. But if they're concerned about the operational performance of their organizations, as most senior executives are, then it would serve them well to pay greater attention to customer management issues, especially on a more granular level.
With the recent economic turmoil, there is a significant loss of trust amongst customers towards several industries. Recent turmoil also reminded regulator bodies around the world to put the customer back on top of the focus for several industries and also for those businesses in which customers are the only source of organic growth. In such an environment, are executives taking ownership of their customers sufficiently?

Why Putting existing customers first is important?

Although unemployment rates continue to remain high and some market sectors, such as real estate, have not yet rebounded, most corners of the economy continue to gain strength. As corporate financial performance improves, many CEOs are focusing on expanding product sales or diversifying into new markets.
That type of thinking is a common knee-jerk approach most decision-makers often make in the early stages of an economic recovery. Ultimately, however, it's a misguided methodology.
The best advice for the C-suite is to avoid the mistakes of the past and shift away from product-centric, short-term financial strategies to a longer-term, customer-focused approach. As consumer spending ticks up, CEOs should be evaluating customer behaviors and attitudes to help them develop a more comprehensive understanding of what customers want from their company and then tailor products to meet their needs. Such a customer-centric strategy, which has paid enormous dividends to companies such as Apple during the recent recession, can go a long way towards helping CEOs achieve longer-term goals and generate sustainable revenues for their businesses.

The Mechanics of a Robust e-mail Marketing Strategy

Customer Strategists Kurt Neckebrouck and Isabelle Jansen: Building a Sticky Email Marketing Strategy

from Strategy Speaks: a Peppers and Rogers Blog by Customer Strategist

Compared to paper-based customer communications, email marketing is often considered to be a more cost-efficient tool. Still, many marketing leaders continue to struggle with effective approaches for delivering relevant email content to recipients to help boost opt-ins and response rates.
These challenges are further complicated as email - and by association, email marketing - continue to compete with social media for consumers' mindshare. According to MarketingSherpa's 2010 Email Marketing Benchmark Survey, while 81 percent of executives polled say they believe that social media helps to extend the reach of email content to new markets, 71 percent of decision-makers say this ongoing battle for eye-share between email marketing and social media will increase in importance over the coming year.
As the survey results suggest, decision-makers must continually fine-tune their email marketing strategies to help ensure that their message resonates with their intended audience and helps companies to meet their goals. When considering those objectives, decision-makers need to ask themselves the following questions:

Revenue Management and Customer Centricity

Don Peppers and Martha Rogers Ph.D. invented one-to-one business strategy over 15 years ago. Today, they are recognized gurus, acclaimed authors and globally sought-after speakers.

Topic:

Customer Strategist Dietrich Chen: Revenue Management and Customer Centricity -- Imperatives in an Era of Consolidation

Customer Strategist Dietrich Chen: Revenue Management and Customer Centricity -- Imperatives in an Era of Consolidation

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The recent news about Southwest and Airtran merging, which was closely followed by the approval of the pending merger between United and Continental, continues the consolidation in the airline industry that started in 2008 with the Delta and Northwest merger. These changes provide more than opportunity; they signal a need for change. Airlines today must integrate their revenue management and loyalty program data to gain a competitive advantage. Doing so will help to increase customer value, profitability, and retention.

We won't rehash in detail the pros and cons of these airline mergers as every news publication has laid them out already for their readers. A still-recovering economy has continued to put enormous pressure on the travel industry, and while price points and occupancy levels seem to be slowly recovering, they are still a far cry off from the industry's heyday. Economies of scale, access to new markets, and the growth imperatives dictated by Wall Street surely played an important role in the recent merger fever. It would not come as a surprise if there is more to come in the near future as other airlines, primarily American Airlines, see their market position eroded and threatened by the recent merger activities. Alaska Airlines, USAir, or perhaps even JetBlue are all potential merger candidates.

The commodity crunch in consumer packaged goods

Packaged-goods companies have been socked by rising commodity prices. Executives in other industries can learn from their experience.

 Richard Benson-Armer, Peter Czerepak, and Tim Koller

Source: Consumer Packaged Goods Practice

For almost 40 years, the US consumer goods sector was among the safest of havens for investors. It rewarded them with annual returns well above the market average—second only to those of the energy sector—and in a bumper period from 1985 to 2002 outperformed the S&P 500 index by almost 20 percent annually. Since then, the sector has barely outpaced the index, despite persistent attempts by companies to find winning strategies. While inadequate cost controls and a failure to deliver significant value from a wave of mergers and acquisitions haven’t helped, one factor is the dominant culprit for the current malaise: the industry’s response to changing commodity prices.

Losing control

From 1985 to 2002, consumer-packaged-goods companies regularly passed on to consumers increases in the price of inputs (including aluminum, cereals, oil, and paper) while holding the line on prices when raw-material costs declined. In this way, these companies maintained profit margins when input costs rose and enjoyed expanding margins when they fell. In fact, we estimate that between 1996 and 2002, the strategy of passing on commodity price increases was responsible for two-thirds of net margin expansion in the sector, or roughly $10 billion in value.
The tables turned in 2002. From that year until 2007, industry players passed on price increases of just 15 percent as cumulative commodity costs grew by 40 percent (exhibit). As a result, we estimate that the failure to pass on commodity price increases was responsible, during that period, for 75 percent of the sector’s margin contraction, which cost about $70 billion.¹

Back to top

A return to the days of passing commodity price increases on to consumers won’t come easily. The structural shifts that dampened the industry’s pricing power remain: consumers are increasingly value conscious, and large discounters still dominate the retail landscape. These retailers, using detailed analysis of data available from their point-of-sales systems and shopper research, today have a sophisticated understanding of the prices they want and of their ability to demand those prices.
The net result is that the industry continues to face downward pressure on prices. Some of the solutions aren’t complicated, but they are extremely difficult to implement and probably hold lessons for companies—in sectors ranging from consumer electronics to industrial chemicals to medical devices—currently facing an unfavorable and volatile environment for raw-material costs and pricing.

Regaining the initiative

Many economists and financial-market forecasters believe that continued price volatility amid a general rise in commodity prices is likely as the world economy recovers, so companies across many sectors may easily destroy value in the years ahead. Suppose that in consumer packaged goods, commodity prices increase by about 20 percent during the next five years, and companies hold prices constant in a quest to maintain market share. In that case, up to 4.5 percentage points of margin could be lost—or about 33 percent of current earnings before interest, taxes, depreciation, and amortization (EBITDA). Avoiding this fate will require iron-willed pricing resolve, which may be richly rewarded if the environment turns slightly more favorable. If commodity prices fall by 5 percent in the next five years but companies hold product prices steady, for example, we estimate that industry margins will increase by around 1 percentage point, and EBITDA will jump by 8 percent, reversing the current trend.
Conceiving, developing, and marketing category-changing products that consumers crave has long been the lifeblood of leading consumer-packaged-goods companies—and, for that matter, a priority for companies in a great many industries. An important question for all is how to capitalize on the opportunity that such innovations present to reset prices upward across relevant product categories, as P&G managed to do when the company introduced its Swiffer cleaning product.² Capitalizing on innovations isn’t easy. But in an industry like packaged goods, it’s probably critical for companies that aim for a financially sustainable innovation pipeline, for consumers who seek a steady stream of new products that satisfy new needs, and for retailers that hope to benefit from greater demand for new and existing products.

About the Authors

Richard Benson-Armer is a director in McKinsey’s New Jersey office, Peter Czerepak is an associate principal in the Boston office, and Tim Koller is a principal in the New York office.

How blue are the oceans? The Starwood experience

Robyn Pratt, Starwood An INSEAD article In search of blue oceans: The Starwood experience asks: Are companies using Blue Ocean Strategy to search for ‘uncontested market space’ and, if so, how? One group which has been exploring blue ocean thinking for the past three years is Starwood Hotels and Resorts. Jens Meyer In conjunction with Meyer, the company has developed a process through which employees are trained in Blue Ocean Strategy, effectively focusing on non-customers, before being given three to four months to apply the methodology. Projects are then proposed to the senior operating team at a so-called ‘Visual Strategy Fair’; black belts or master black belts then put together a business case to present those projects to the senior leadership team for a decision on whether to implement these.

How to Create Uncontested Market Space and Make Competition Irrelevant

The book ‘Blue Ocean Strategy: How to Create Uncontested Market Space and Make Competition Irrelevant’ has had a huge impact worldwide. Written by two INSEAD professors, W. Chan Kim and Renée Mauborgne, it sold more than a million copies within its first year of publication and has been translated into 39 languages, breaking Harvard Publishing records as the fastest selling book in print. In the lead up to writing the award-winning book, Kim and Mauborgne spent 15 years studying strategic moves by companies in more than 30 industries over a period spanning from 1880 to 2000. Traditionally competition has been at the heart of corporate strategy – country versus country, company versus company, and even business school versus business school.  The key question is usually how can a company outdo its rivals?

Strategy Execution in times of Uncertainty

In this unpredictable economic climate, leaders must be capable to lead their companies to quickly adapt to new market forces. Business models are changing to catch up with the emerging drivers of competition. Success hinges first and foremost on "Thinking-Ahead" strategy  and robust execution. Because execution plays such a critical role in success or failure, especially during a crisis, many companies are turning to new technology solutions to ensure they can deliver on strategies and emerge even stronger. Any company that fails to adapt quickly and efficiently to market changes can miss important opportunities ir risk their very survival. Here are some key points to consider:

Thinking Ahead Succession Planning - The Key to future success

"Thinking Ahead"  succession planning enables organizations to takeover new responsibilities in a much faster way and with least disruption in the business activities.	An article highlights four best practices to ensure effective succession planning that can be implemented in any company - Analysis; Development; Selection and Transition. Having a structure in place that carefully engages in those best practices will set the new leaders firmly towards future success. Link to article >
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Learning to Lead

Herminia Ibarra , Professor of Organizational Behavior, and Faculty Director of the INSEAD Leadership Initiative, contests that we learn to lead in relationship, by becoming a part of a community and network of leaders, but what we preach, however, is very different.   Let's draw some inferences by considering a few schools of thought:

Thinking Ahead as a True Leader

The ability to 'think ahead' and plan a strategy, implies keeping in touch with employee opinions, technological advances and market trends that will help shape your vision - to be shared. Leaders, by definition, must have followers that aspire to the leader’s vision. Once you’ve  'thought ahead' into the future, you need to communicate your vision with conviction and confidence, as to inspire, energize and unite your team. A leader must be capable of shaping internal politics that will support performance improvement initiatives. During times of change, uncertainty and fear reign supreme. As a result, leaders confronting strategic and organizational change, have to manage communication effectively. As a leader, you have to portray a compelling vision for the future, while implementing change.  Processes that build a shared vision of the future, create positive coalitions, and allow open expression of competing views will prepare people for the change. Motivating people to peak performance is a must of  leadership. But how can you unleash the full individual emotional commitment and collective potential of your people so that they achieve higher levels of performance? Generating emotional energy and commitment takes time and effort, as to ensure that the right balance between achieving the task, building the team and  sustaining morale.

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Strategic Innovation - The AVAC framework (Activities, Value, Appropriability, and Change)

In his book Strategic Innovation (Routledge, 2009), professor Allan Afuah provides us with a comprehensive strategic framework for assessing the profitability potential of a strategy or product.- the value of "new game" strategies -  in the face of rapid technological change and increasing globalization. It's not enough to create value in new and different ways, he says. Nor is it sufficient to merely capture value today. To compete and win, firms may need to rewrite the rules of the game altogether, overturning existing ways of both creating and appropriating value.  The most important thing, he stresses, is that a firm pursue the right new game strategy...