Академический Документы
Профессиональный Документы
Культура Документы
Guiding principles
Point to point
Strategy to budget
Playing to win
Data arteries
Value
2
LIVING THE VALUES - WALKING THE TALK
Values form the basis for enterprise behavior because they describe a
system of management's beliefs that set expectations for individual
behavior, establish positions and priorities, and provide a framework for
decision making. Values statements must be well crafted and unambiguous
to be useful to employees.
The notion of management living the values and walking the talk
establishes an environment for employee motivation, assuming that the
employees agree with what is being espoused. If management doesn't live
the values and doesn't walk the talk, then the employees will display
superficial allegiance to the enterprise. If individual employees don't agree
with the values, perhaps they should lobby for change, or seek
employment elsewhere.
Once there is a fit between stated and enacted values among the members
of management as a team, values-based behaviors should cascade
throughout the enterprise. When everybody is living the values, an
advantage occurs in the marketplace because employees, customers, and
suppliers learn is negotiable, and what isn't. The policies of the enterprise
should not be ambiguous because decisions can be made in the context of
the values.
3
Walking the talk is an example of "management by walking around." The
concept of management by walking around was a principle espoused by
Bill Hewlett and Dave Packard when they established The Hewlett-
Packard Company in 1939.
An illustrative set of values includes statements for the enterprise itself, its
constituencies, and the environmental ecosystem within which it operates:
Enterprise:
Constituencies:
● Listening to customers
4
Ecosystem:
If management does not live the values, lack of trust and cynicism set in
among employees because of perceived (and hence real) double standards.
Such double standards can cause breakdowns leading to poor
performance, misconduct, including conflicts of interest, and even the risk
of fraud and embezzlement.
5
VALUES-BASED GOVERNANCE DISCIPLINES
- A THREE-LEGGED STOOL
The Governance function, which consists of the board of directors and the
chief executive of a corporation, the members of a limited liability
company, or a sole proprietor, has the ultimate responsibility for an
enterprise to its investors. This responsibility includes taking care of the
affairs of the enterprise, and protecting its assets.
6
Strategy addresses the beneficial positioning of an enterprise in the
marketplace so as to deliver value over time. It begins by establishing the
values and guiding principles, mission, vision, and value proposition, and
ends with delivered value. The results are only as good as the underlying
assumptions.
Values form the basis for behavior within the enterprise, because they
describe a system of management's beliefs that set expectations for
individuals, establish positions and priorities, and provide a framework for
decision making. As a consequence, the governance disciplines must be
values-based, because if management doesn't live the values, nobody else
will.
Performance excellence means doing the right things, and then doing
those things well.
7
Planning and policy development, deployment, and performance
measurement...
8
Full compliance with laws and regulations is an essential performance
criterion, and should be measured; otherwise values are meaningless.
Control mechanism...
The values of the enterprise must promulgate the notion of trust and
integrity; management has the responsibility to behave accordingly. Such
behavior includes being willing to fully disclose both satisfactory and
unsatisfactory performance and results.
9
VALUES, PURPOSE AND DIRECTION
- BUILDING ASPIRATIONAL ADVANTAGE
Higher-order effects are events or situations that could not have been
envisioned or anticipated at the beginning of an endeavor, but become
apparent as activity proceeds. They provide additional opportunities or
threats.
For example, the operator of a cafe learns after opening that it is necessary
to establish a high volume catering business unit to help cover the fixed
costs of the "on premises" business unit.
10
Followers are not limited to employees. Customers, suppliers, and
investors are attracted too if an enterprise's aspirational and inspirational
statements are influential enough.
For example, Apple, Inc. has created a strong following among its
customers; its logo is memorable and instantly recognizable. HSBC
Holdings, plc, defines itself as "the world's local bank," and Delta Air
Lines, Inc. offers "a world of possibilities." The customers of Federal
Express Corporation called it "Fed Ex," thus causing a name change to
FedEx Corporation. The verb "to fedex" is a proprietary eponym, derived
from the corporate name, meaning "to ship a package overnight."
11
For example, Prudential Financial, Inc. uses the "rock" as its logo.
Both suppliers and investors perceive that defaults are less likely with
enterprises that have loyal employee and customer bases that can generate
and process transactions reliably on an ongoing basis.
12
GUIDING PRINCIPLES FOR
ACHIEVING PERFORMANCE EXCELLENCE
Values set expectations for behavior, establish positions and priorities, and
provide a framework for decision making. Guiding principles aid the
process. To ensure alignment with constituencies, values must be set
within context of the societal cultures of the markets within which the
enterprise has a presence.
13
The individuals within the organizational units must share the values and
vision of the enterprise, and must be aligned with each other in order to
achieve a tight fit. Sharing values and vision promotes the notion of
stewardship. Stewardship is the responsibility for the performance of an
enterprise and the delivery of value to its constituencies. It involves the
administration of affairs and the protection of assets. Employees cannot
be stewards unless they share values and vision. If they cannot be
stewards, they belong elsewhere.
14
Makes fact-based decisions through open discussions, and with the
risk/return assumptions of opportunities and threats in mind...
Facts are data about events and conditions, and provide information about
situations that are assumed to be true, and can evaluated objectively. Facts
describe the past and the present. Whether facts can predict the future is a
matter of experience and judgment. It may not be possible to obtain full
knowledge of the facts due to time or cost considerations - an enterprise
that gets tied up with "analysis paralysis" may miss opportunities that are
staring it in the face. Sometimes it is necessary to move ahead with little
information and break from tradition.
● With the knowledge of the facts that are available under the
circumstances
15
Applies core competencies to competitive advantage...
Core competencies are activities done well that can give an enterprise a
competitive advantage - it should hone and promote them.
Focuses on results...
16
STRATEGIC POSITIONING FROM POINT TO POINT
Values and guiding principles should always be developed first because all
downstream activities are dependent upon them. Values provide the basis
for how the employee, customer, supplier, investor, regulator, and
competitor constituencies are to be treated.
17
The aspirational statements provide the foundation for industry position
and posture. Thus the competitive position and posture in selected markets
with specific products and/or services can be determined. The
performance improvement component of strategy sets the agenda for
continuous improvement between breakthroughs through repositioning,
restructuring, and reengineering activities.
These activities address both revenue increase and cost and expense
reduction opportunities aimed at excellence. Strategy is further elaborated
in constituency-based objectives, goals, and strategic initiatives that form
the basis for collaborative and cooperative relationships.
Strategic plans are translated into tactical functional plans that lay out the
steps for the achievement of both short-term and long-term vision.
The time frame required for new innovations and technologies to fully
mature and be common in the marketplace is about ten-to-fifteen years.
For example, debit cards, mobile phones, personal computers, and even
the internet have taken at least a decade to become widely accepted and
used.
When management divides time frames for strategic plans into three-to
five-year chunks, the likelihood of success increases. With technology
rapidly changing the methods by which business is conducted, even five
years can be a long time. Therefore one-to-three years may be best in
highly technological environments. However, management may be
surprised at how long it really takes to develop new products and/or
services, and for the marketplace accept them.
18
Most major product development projects run behind schedule. For
example, the projects to develop the Airbus A380 and Windows Vista both
delivered results much later than anticipated. Both the projects and the
products were extremely complicated. Many software products have to
migrate through several rewrites until they are usable by the community-
at-large. These rewrites are necessary because of the difference between
the process-orientation of the developers and the people-orientation of the
users, which affects usability.
Starting from the first point of departure, a strategic plan targets a point of
arrival three-to-five years out. Quick hits should be identified from the
point of departure to one-to-three years out.
The actual point of arrival will most likely differ from the planned point in
terms of what is delivered and when. However, management can
determine from that point of departure what the characteristics of the next
point of arrival will be.
Higher order effects are events or situations that could not have been
envisioned or anticipated at the point of departure, but impact the point of
arrival. They arise from competitive, economic, environmental, political,
regulatory, social, and technological issues. Higher order effects often
reveal where the real opportunities or threats lie.
19
STRATEGY TO BUDGET
- SEVEN TYPES OF PLANS FOR
BUILDING SUSTAINABLE ADVANTAGE
20
● Tactical plans: activities to implement strategy - tactical decisions are
those made in the present about the present, and are about doing
things well.
21
Periodic checkpoints should be established to review progress and
measure performance as plans are deployed and executed. A feedback
loop should be established between performance measurement and
planning and policy development activities so that adjustments can be
made in estimating guidelines, projections, and assumptions accordingly.
22
PLAYING TO WIN - STRATEGY TO BUILD COMPETITIVE,
COLLABORATIVE, AND COOPERATIVE ADVANTAGE
Strategy is a set of actions derived from both plans and policies to gain
advantage including:
23
Strategy formulation should begin early and continue throughout the life
of an enterprise - as vision becomes reality, there is more experience to
draw upon. However, building sustainable advantage means being able to
enact change, either by causing or responding to it, on an ongoing basis.
Enterprise:
Performance improvement:
● Repositioning in markets
● Reengineering processes
24
Constituency-based objectives, goals, and strategic initiatives:
● Employees
● Customers
● Suppliers
● Investors
● Regulators
● Competitors
Functional:
● Enterprise
● Legal
● Finance
● Human Resources
● Information Technology
● Research and Development (program management and engineering:
market, product, infrastructure)
● Operations (procurement, manufacturing or equivalent, distribution)
● Business Development (marketing, sales, service)
Governance:
● Legal vehicles
● Organizational structure (functions and business units)
● Standard of ethics
● Sustainability - environmental, economic, and social
25
Key performance indicators:
26
DATA ARTERIES - ENABLING BUSINESS STRATEGY
THROUGH INFORMATION TECHNOLOGY
27
Information technology comprises the analytical and operational
application systems, databases, and technical infrastructure (hardware and
networks) of an enterprise. Not all computer technologies are information
based. Computer technology is used for process control applications in
special purpose equipment. However, connectivity is essential as
applications become more integrated. As digital construction and
manufacturing practices develop through such technologies as computer-
aided design/computer-aided manufacturing (CAD/CAM), the processes,
the control of processes, and the products and/or services delivered by
processes all rely upon information technology for connectivity.
For example, in the manufacturing industry, not only can design and
manufacturing work be conducted through integrated CAD/CAM
processes with electronic linkages to carriers, such as FedEx and UPS, but
the entire project and process management activities can be monitored
electronically from ideation to product delivery.
28
Developing an information technology strategy document is essential for
describing the requirements and for educating users because:
29
For example - for the development of a:
30
The work breakdown structure for downstream development,
enhancement, and maintenance projects decomposes into planning,
analysis, design, construction, implementation, and performance
measurement phases. The performance measurement phase can be
conducted in parallel with the other phases, and each must end with a
performance review. A feedback loop to future planning activities must be
established so that lessons learned from the past can be reflected in future
initiatives.
31
Key questions and deliverables by information technology strategy project
and downstream phases include:
Key questions:
Deliverables include:
Key questions:
32
Deliverables include:
● Process models
● Function models
● Data models
● Information models
● Economic evaluation
● Scope of analysis projects and schedules
Key questions:
Deliverables include:
● Functional requirements
● Economic evaluation
● Scope of design projects and schedules
33
Design phase (project level):
34
Deliverables include (by system):
● Trained users
35
Deliverables include (by system):
36
THE BASIC LANGUAGE OF VALUE
The basic language of value comprises the concepts of net worth and
exchange.
Net asset value is also the difference between the value of total assets and
total liabilities less an adjustment in some cases for certain intangible
assets that do not provide for economic opportunities in the future.
For assets, valuation is based upon fair value when it is necessary to mark-
to-market, or historical cost less depreciation, amortization, depletion, or
impairment. For almost all liabilities, valuation is based upon fair value.
37
Fair value of an asset or liability
Item
Market price
Market value
Capitalization
The book value of the equity of an enterprise plus the fair value of its
long-term debt.
Market capitalization
For a publicly traded enterprise, the market price per share of stock
multiplied by the number of shares outstanding, including restricted stock,
but not treasury stock. It is a measure of the market's perception of the
value of an enterprise. Market capitalization fluctuates as market prices of
shares change.
38
Equity value
The market capitalization of the enterprise adjusted for the dilution effects
of warrants, options, and convertible securities (including bonds and
preferred stock) less the conversion costs.
Enterprise value
The equity value of the enterprise plus the fair value of its long-term debt
plus minority interests in affiliates less minority interests of affiliates and
cash and cash equivalents.
Residual value
Exchange
Price
The exchange value offered by the seller for an item or earned based upon
an accepted bid.
Cost
The exchange value bid by the buyer for an item or incurred when
accepted - the value that must be given up to acquire an item.
Expense
Direct cost
39
Quality
Value proposition
Economic value
The difference between the exchange value and the cost of the value
exchanged.
Earned value
Added value
The difference between the exchange value earned for an item and the
actual cost of the work performed and the direct materials and supplies.
Added value is analogous to gross profit.
The cost of the effort applied to transform materials and supplies into a
item of greater value, as measured by earned value.
40
Value added - perceptual
The earned value of an item plus the added value. The exchange value
earned for an item equals the total value added plus the cost of direct
materials and supplies when the actual cost of work performed equals the
budgeted cost. If the actual cost of work performed is more than budgeted,
then either both the added value and total value added are reduced, or the
exchange value earned must increase by the variance to accommodate the
loss in value caused by the overrun.
Value chain
The value added activities that earn value and add value to materials and
supplies. The activities produce a component of a product, or a finished
product and deliver it to a customer. The value chain is defined by a
process/function model. The model represents the plan, whereas the chain
represents reality.
***
41
For more information...
42
About Nigel A.L Brooks...
www.nigelalbrooks.com
www.bldsolutions.com
43
THE BUSINESS LEADERSHIP DEVELOPMENT CORPORATION
13835 NORTH TATUM BOULEVARD 9-102
PHOENIX, ARIZONA 85032 USA
www.bldsolutions.com
(602) 291-4595