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Future Questions.....??? How do companies think - 1

The book starts off with a flyer describing the various facets used by the companies for competing in the future and that are usually restructuring and Reengineering. There have been good picks in regard to the actual scenario of the Industries and about the senior management like the questions asked to them and the answers given, definitely don’t suffice for the future. The questions are:-

·         What percentage of your time is spent on external, rather than internal issues?

·         The time spent looking outward, how much of it is spent considering how the world could be different in the five or ten years, as opposed to worrying about winning the next big contract or how to respond to a competitor’s pricing?

·         The time devoted to looking outward and forward, how much of it is spent in consultation with colleagues, where the objective is to build a deeply shared, well tested view of the future than a personal and idiosyncratic view?

       For competing the main theme highlighted is the use of Restructuring and reengineering, they have more to do with shoring up today’s businesses than creating tomorrow’s industries. Neither is a substitute for creating the future. These are usually followed when companies face a competitiveness problem - stagnant growth, declining margins and falling market share.

     How these are used is explained here. Now to increase their profits the companies have a formula = (net income)/ (investments or capital employed). Now the numerator is where reengineering should be done and mostly what is followed is the denominator rule where restructuring happens. Reengineering aims to root out needless work and get every process in the company pointed in the direction of customer satisfaction, reduced cycle time and total quality. So, it provides at least hope, if not always the reality, of getting better and smaller. Any company that is more successful at restructuring will find itself getting smaller faster than it is getting better. The point is that in many companies, process reengineering and advantage-building efforts are more about catching up than getting out in front. It is not enough for a company to get smaller and better and faster than, as important as these tasks may be; a company must also be capable of fundamentally reconceiving itself, of regenerating its core strategies, and of reinventing its industry. In short, a company must also be capable of getting different. The real competitive problem is laggards versus challengers, incumbents versus innovators, the inertial and initiative versus the imaginative. Successfully managing the task of organizational transformation can make a firm lean and fleet-footed; it cannot turn a firm into an industry pioneer. And although being a fast follower is better than being a slow follower, neither is a recipe for extraordinary growth and profitability. To be a leader, a company must take charge of the process of industry transformation. Only when restructuring and reengineering fail to halt corporate decline do most companies consider the need to regenerate their strategy and reinvent their industry which till then marks a negative step for the organization as they are left behind to set the industry standards

To compete successfully for the future, senior managers must first understand just how competition for the future is different from competition for the present. The differences are profound. They challenge the traditional perspectives on strategy and competition. Competing for the future requires not only a redefinition of strategy, but also a definition of top management’s role in creating strategy. How can one maximize market share in an industry where the product or service concept is still under defined, where customer segments have yet to solidify, and customer preferences are still poorly understood?

Competition for the future is competition for opportunity share rather than market share. Competition for the future is not product versus product or business versus business, but company versus company. To make the company competitive, future opportunities are unlikely to fit neatly within existing SBU boundaries, competing for the future must be a corporate responsibility, and not just the responsibility of individual business unit heads. Second, the competencies needed to access the new opportunity arena may well be spread across a number of business units, and it is up to the corporation to bring the new competencies necessary to access tomorrow’s markets may well tax the resources and patience of a single business unit. So the questions for top managers are:- “How do we orchestrate all the resources of the firm to create the future?” or “What can we do that other companies might find difficult to do?” Companies that see strategy as primarily a positioning exercise are industry rule-takers rather than rule breakers and rule-makers; they are unlikely to be the defining entity in their industry, now or ever. But to create the future, a company must first be able to forget some of its past.

And forgetting the past starts from within. Often that precedents, enacted into policy manuals, corporate processes and training programs often outlive the particular industry context that created them.  An industry full of clones is an opportunity for any company that isn’t locked into the dominant managerial frame. Land is a mystery to fish and by the time a fish discovers land, it is usually too late-the poor creature’s on a hook. In the same way, a company’s genetic coding limits its perception of novel opportunities and non-traditional competitors. A company following into these footsteps falls into a laggard and then out of the market. A laggard is a company where senior management has failed to write off its depreciating intellectual capital fast enough and has underinvested in creating new intellectual capital. A laggard is a company where senior managers believe they know more about how the industry works than they actually do and where what they do know is out of date. So to remove this the company has to do something they have never done or say do it in different manner like leaving a bit of play in administrative procedures or being a bit more reluctant to use the lessons of the past to train employees for the future or it may mean a greater willingness to hire and promote individuals who aren’t “just like us”. Although much in vogue, creating a “learning organization” is only half the solution. Just as important is creating an “unlearning” organization. A firm’s stake in the past is economic as well as emotional. For a successful firm, the definition of served market, the value proposition put forward to customers, the margin and value-added structure, the particular configuration of assets and skills that yield those margins and supporting administrative systems together constitute an integral and well-tuned profit engine. To escape the gravitational pull of the past, managers must be convinced that future success is less than inevitable. No company will walk away from some of its past unless it feels that repeating the past won’t guarantee future success. Unlearning happens when employees are confronted with the potential disconnect between the success recipes of the past and the competitive challenges of the future.    

While unlearning and exploring into new horizons the company should pave a way for the employees for the future. To successfully compete for the future a company must be capable of enlarging its opportunity horizon. This requires top management to conceive of the company as a portfolio of core competencies rather than a portfolio of individual business units. Business units are typically defined in terms of a specific product-market focus, whereas core competencies connote a broad class of customer benefits. Any company that can’t conceive of markets, both the existing and potential, in functionality terms isn’t likely to create the future.  To move and set the industry future, the company should look to integrate the core competence and functionality thinking that points a firm forward toward unexplored competitive space. It is core competence and functionality thinking that allow companies to move beyond what is to what could be. When it comes to creating the future, one wide eyed innocent may be worth ten sophisticated scenario planners. What makes the future difficult to anticipate is not that the future is inherently unknowable, but that the forces conspiring to produce the future often lie well outside top management’s purview. Any group charged with finding the future needs to encompass an eclectic mix of individual perspectives. No one functional group, no single geographic entity and no one business unit can find the future on its own. Each is partially blind. There are 3 types of companies looking beyond the customer led , first , companies that try to lead customers where they don’t want to go; second, companies that listen to customers and then respond to their articulated needs and companies that lead customers where they want to go, but don’t know it yet. Companies that create the future do more than satisfy the customers, they constantly amaze them.

For amazing the customers, not only must the future be imagined, it must be built; hence the term “Strategic Architecture”. It is not a detailed plan. It identifies the major capabilities to be built, but doesn’t specify exactly how they are to be built. It is broad opportunity approach plan. “Sometimes trying to tune up the old engine is like putting lipstick on a pig!” To words that describe the edge of a company over others is Globalize implies an ability to use information technology to span geographical, cultural and organizational boundaries. Informationalize implies helping customers convert data into information, information into knowledge and knowledge into effective action. Individualize refers to the mass customization of information services and products by and for individuals.

      To make a strategic architecture the companies should first do a bit of content analysis by pulling together answers from the managers. First, how did they interpret the word future? Did it mean next year, Five year plan, or a decade hence? In other words, how far out do the headlights of your management team shine? How much foresight does it actually have? Second, how encompassing is its view of the future? How broad it its conception of the industry and of the forces that might reshape it? Is the team trapped in the myopia of currently served markets, or does it see a broad vista of new opportunities? Third, how competitively unique is its view of the future? Would it surprise competitors unique is its view of the future? Would it surprise competitors or provoke a yawn? Fourth, what degree of consensus exists about how the future might be different? Without a fair degree of consensus, it’s easy to spend money on everything, but not really commit to anything. Any fifth, have the implications of potential industry changes been considered in enough detail so the short term implications for action are clear? Making an analysis of the answers the strategic intent forms a big part to implement the strategy.    

        Strategic intent is strategic architecture’s capstone. A strategic architecture may point the way to the future, but it’s an ambitious and compelling strategic intent that provides the emotional and intellectual energy for the journey. Strategic architecture is the brain; Strategic intent is the heart. It implies a significant stretch for the organization. Current capabilities and resources are manifestly insufficient to the task. Whereas the traditional view of strategy focuses on the “fit” between existing resources and emerging opportunities, strategic intent creates, by design, a substantial “misfit” between resources and aspirations. The most often problem in the strategic implementation when not going the way as desired is they just don’t seem to have a clear idea of where they are trying to get to. To remove such problem the company should personalize strategic intent by setting clear corporate challenges that focus everyone’s attention on the next key advantage or capability to be built. It is sometimes said that the pursuit of total quality is the key to management innovation. To the uninitiated this must sound strange indeed. What has quality got to do with innovation in management methods? The connection is simple. The foundation of a quality program is a willingness to trace every quality problem back to its roots. The fact is that those roots usually reach far beyond the immediate vicinity of the problem. They reach into areas like supplier relationships, process design, information systems, physical infrastructure and the like. And it is those closest to the quality problems that are best placed to offer real insight into how corporate processes and system could be improved. Whenever the strategy goes wrong, what often happens is that the blame is on the all the employees and there are layoffs and pay cut in the bottom line is the first to happen, whereas when a leading Japanese company runs into unexpected financial difficulties: Top management takes the biggest pay cut, and first line employees the smallest. This approach more accurately represents who really is at fault for falling to anticipate and respond to changed circumstances. Strategic planning and capital budgeting are, in essence, used to reject goals when the means for achieving those goals are not readily at hand. A view of strategy, as we have outlined, helps bridge the gap that exists between those who see strategy as a “grand plan, thought up by great minds”, those who see strategy as a pattern in a stream of incremental decisions. Strategy as stretch is strategy by design in the sense that top management does have a relatively clear view of the goal line and a broad agenda of the capability building challenges that lie between today and tomorrow. It is strategy by incrementalism to the extent that top management cannot predetermine every single step of the journey to the future. It recognizes the essential paradox that while leadership cannot be entirely planned for, neither does it happen in the absence of a clearly articulated and widely shared aspiration.

Leveraging at each every point makes a core competence for the future. Tactical creativity is the child of resource scarcity. Resource leverage can be achieved in five fundamentals ways: by more effectively concentrating resources on key strategic goals, by more efficiently accumulating resources, by complementing resources of one type with those of another to create higher order value, by conserving resources where ever possible, and by rapidly recovering resources by minimizing the time between expenditure and payback. Obtaining resource leverage needs convergence of the resources. Convergence requires an understanding of how all the resources of the firm can be orchestrated to achieve a stretch goal, one that firms with a more fragmented sense of corporate priorities cannot hope to achieve. Resource leverage comes only if the efforts of individuals, teams, functions and businesses are additive across organizational units as well as through time. The principle is quite simple: One doesn’t achieve resource leverage by going around in circles. Dividing meagre resources across a wide range of medium term operational goals is a recipe for mediocrity across a broad front. Take a simple example. Suppose that someone standing three yards away suddenly hurls five golf balls at your head. What’s your immediate reaction? Unless you are a world class juggler, your first instinct is to duck. This is the same reaction middle managers have when top management attempts to push down five or six key improvement goals of undifferentiated priority. Now imagine someone throwing one golf ball at you, waiting the few seconds it takes you to catch it, then another and another. All five will be successfully caught in about half a minute. Where there is convergence and focus, individual mediocrity may well sum up to collective brilliance. In their absence, individual brilliance may well sum up to collective mediocrity. Resource leverage comes not just from better amortizing of past investments or a particular skill set, but from creating entirely new forms of functionality and, thereby, value added. To be balanced, a company, like a stool, must have at least three legs: a strong product development capability, a capacity to produce its products or deliver its services at world class levels of cost and quality, and a sufficiently widespread distribution, marketing and service infrastructure; in short, a capacity to invent, make, and deliver. If any leg is much shorter than the others, the firm will be unable to fully exploit the investment it has made in its areas of strength. The leverage impact comes when, by gaining control over complementary resources, the firm is able to multiply the profits it can extract out of its own unique resources.

Whatever the nature of the imbalance- whether strong on distribution or weak on product development, strong on manufacturing and weak on distribution, or another combination- the logic is the same. A firm cannot fully leverage its accumulated investment in any one dimension if it does not control, in a meaningful way, the other two dimensions. Control doesn’t have to mean ownership, but it typically requires something more than temporary, arm’s length contracting. Rebalancing leads to leverage when the additional profits captured by gaining control over critical complementary assets are more than covers the cost of acquiring those resources. A wise general ensures that his or her troops are not exposed to unnecessary risks: One doesn’t attack a heavily fortified position, one disguises one’s true intentions, carefully reconnoitres the territory before advancing, diligently studies the enemy’s weaknesses, feints to draw the enemy’s forces away from the intended point of attack, exploits the element of surprise and so on. The greater the numerical advantage held by an enemy, the greater the incentive to avoid a frontal confrontation. The goal is to maximize the losses inflicted on an enemy while minimizing the risk to one’s own forces. This is the notion of “protecting”.

The commitment a firm makes to building a new core competence is a commitment to creating or further perfecting a class of customer benefits, not commitment to a specific product-market opportunity. Competence-building represents more cumulative learning than great leaps of inventiveness, it is difficult to “time compress” competence building. Product cycles may be getting ever shorter, but the quest for core competence leadership is still more likely to be measured in years than in months. Competition for competence is not product versus product or even business versus business. It is corporation versus corporation. A core competence is just what the name implies: an aptitude, a skill. A business may possess many advantages vis-a-vis competitors that don’t rest on skills and aptitudes. This doesn’t make these advantages any less valuable or critical to success, but it does mean they will be managed in quite a different way than people-embodied competencies.

Think of an archer shooting at a target shrouded by a veil of fog. Intent on hitting the bull’s eye the archer has two choices: wait till all the fog has cleared or shoot a series of arrows in the general direction of the target, each time adjusting one’s aim as one receives feedback about where the arrow landed. As each arrow flies into the distance and a shout comes back “right of target” or “a bit to high”, more arrows are shot and more advice comes back until the cry is “bull’s eye.” Although waiting for the fog to clear may guarantee that the arrow hits the target, the patient archer is likely to find that a rival’s already blanket the target. What counts most in expeditionary marketing is not hitting a bull’s eye the first time, but how quickly one can improve one’s aim and get another arrow on the way to the target. Failure is as often the child of unrealistic expectations as it is of managerial incompetence. If the goal is to build brand awareness and customer credibility in the minimum possible time and with the greatest possible efficiency, it makes no sense to totally fragment brand building efforts across a range of product specific brands. Use product brands to communicate specific product attributes and overlay this with a corporate brand to communicate integrity and quality. The capacity for pre-emption rests not only on a physical ability to move the product quickly to rapidly communicate the advantages of the new product in each country managers around the world, to ensure that adequate sales and marketing resources are devoted to the new product in each country, and to quickly spot where the new innovation is not taking root and take corrective action.

          

       

Note:- Taken from "Competing for Future" by Hamel and Prahalad 

Laconic and Lucid of "The Critical Chain" Part 3

What is a problem?

A problem is not precisely defined until it can be presented as a conflict between two necessary conditions.

At the same time we have to be careful with are analogies. When we move back to organizations we can easily see that there are two different cases. The first one is where we can identify the constraint as physical (Bottleneck). In that case, strengthening the weakest link will mean to help the bottleneck to do more. But the other case should not be overlooked. Where it turned out that the constraint we identified is an erroneous policy. In that case, strengthening the weakest link cannot be interpreted as helping the erroneous policy to do more. So this doesn't mean we will start questioning every policy which is not satisfying our needs. But sometimes we need to replace the policy.           

Since we are dealing with Project Management, then TOC (Theory of Constraints) is bound to come into the picture. TOC’s is one of the most daring assumptions or I would say is the foundation about conflicts. If we witness a conflict, it is clear indication that someone has made a faulty assumption, a faulty assumption that can be corrected and by doing so the conflict removed.

A common thing seen in industry is that 8+8 = 20. Confused…???

Once the worker gives an estimate of the work including with some buffer, then the team leader adds 2 day buffer from his side then the project leader adds one day from his side and then the final completion projection reaches is 20, which should have been actually 16. This process is a prominent process and still we see that the projects are late. Since we already keeping so much buffer my do projects still get late. Why…??

Because what we do is time planning but not the resource planning and this makes projects late causing resource contention. Both these things have to go hand in hand else the projects are definitely going to go out of hand. Also the progress of our sequential steps deviations do not average out. Delays accumulate, while advances do not. This is one place where the safety disappears.   

Source:- The critical Chain from Eliyahu M. Goldratt

Note:- There are some excerpts that have been added from my side 

Laconic and Lucid of "The Critical Chain" Part 2

Since all the processes are interlinked with each other, we need to manage well; we must control cost and at the same time, must protect the throughput also. Controlling cost and protecting throughput require different mode of management. The process of a finished product represents our physical chain. What is the equivalent of throughput in our physical chain? What is determined not just by the links, but by fact that they interact with each other. It’s not just the weight (work done by individual link). If we remove all interaction, all linkages, and we are left with just a pile of links, the weight is still the same. So what property typifies a chain? It is the strength of the chain. If one link breaks, just one link, the chain is broken; the strength of the chain drops to zero. What determines the strength of a chain? The chain is as strong as your weakest link. Now suppose we have 7 links in the chain and link 4 is not the weakest link in the chain. So we try to strengthen link 4. What will be the impact on the chain? “Nothing,  Absolutely Nothing”.  So the local improvements do not contribute to the global improvements. And the organizations want improvement as a whole. Now we know that since any improvement requires attention and time and money, the way to improve the total organization is definitely not through inducing many local improvements, the more the better. That’s not the way.

There are two ways in which work in done in industries; Cost world and throughput world. What companies work is according to Cost world and at the end of the project throughput world? Cost world is where the companies produce taking into account the cost at every step and try to minimize it. Throughput world where companies produce according to the output needed, although cost world is also taken into picture but more emphasises is on the throughput (Output).  At the start of the month the companies produce according to the Cost world (Tight fist on overtime, batch Size) and in the last days of the month according to the throughput world (ship out however it is possible). Fewer and Fewer of these companies survive today. Why? Because compromises that were acceptable yesterday are intolerable today.     

Let’s not forget that in the throughput world the linkages are as important as the links. This means that if we decide to do something in one link, we have to examine the ramifications on the other link. It’s quite easy. Our intuition is in the throughput world and always was.

There are two assumptions about Cost Performance and Throughput Performance. Assumption 1- The only way to achieve good cost performance is through good local (Individual Process) performance everywhere. Assumption 2 is there is no way to achieve good throughput performance through good local performance everywhere.

Let us see how these assumptions are correct. Suppose we have one bottleneck and the other non-bottleneck. The bottleneck can produce 20 units in an hour and the non-bottleneck can produce 30 units in an hour. So now we make the non-bottleneck produce only 20 units because if we produce more than that we will have excess inventory which will increase our cost. So we produce less not to control throughput but to control cost. So to achieve good cost performance we have to make good local performances.   

Source:- The critical Chain from Eliyahu M. Goldratt

Note:- There are some excerpts that have been added from my side 

Six Sigma

The real power of Six sigma is simple because it combines people power with process power.

What is main work of Six Sigma?

 In football, you've got two ways to win games. The first thing is making more spectacular plays, like long passes and big runs and great interceptions. That’s the stuff that makes the highlight films. But you can also win games by making fewer mistakes: fewer penalties, fewer fumbles, fewer interceptions. It might not be as spectacular as all the big plays, but it’s just as important to bottom line. And the thing is, while you need spectacular players to make spectacular plays, anyone and everyone can focus on making fewer mistakes.

            Companies can make money in two ways. They can make more money by coming up with great inventions, hiring some real starts, or buying other companies. But good companies also focus on not making mistakes: not wasting time or materials, not making errors in production or service delivery.

What is Six Sigma?

It is a management philosophy focused on eliminating mistakes, waste and rework. It is not a “Do Better” program.  It establishes a measurable status to be achieved and embodies a strategic problem solving method to increase customer satisfaction and dramatically enhance the bottom line. It gives you discipline, structure and a foundation for solid decision making based on simple statistics. It also maximizes your return on investment and your Return on Talent – your people.

            So , Sigma is like a measurement, used to determine how good or bad the performance of process is; in other words, how many mistakes a company makes, doing whatever it does, from manufacturing steel to delivering the morning paper.

Implementation of Six Sigma....?

If we want to improve something, we have to know where we stand and where we want to go or else it isn't going to happen. But when we define those things in anything but numbers, the goal quickly becomes subjective and fuzzy. Numbers bring clarity.

Trying to improve something without having a goal- a numerical goal- is like trying to lose weight without having some scales.

Misconceptions about Six Sigma: Improving quality costs more Money

 Quality saves money, because there are fewer throw outs, fewer warranty payouts and fewer refunds. And doing that all that in turn increases the profits.

Six sigma is a management philosophy that covers a lot more than just defect rates.

There is also ISO 9000, which helps to document the work but doesn't seem to help much toward improving product or process quality.

Why goal is important?

Most of us try to promote continual improvement. These are just like “Can u please do your job a little better?” Another can be football coach yelling whose game plan consisted of yelling, “work harder!  Play Better! Good Luck!” without telling you what to do or giving you the help you need to do it!

Some companies try to focus only on the end product, where they try to identify bad biscuits and throw them out but that will take you till three or four Sigma not six. Rather try to find out why the bad biscuits are happening.

Six sigma doesn't try to manage the problem, it tries to eliminate it.

Six sigma is the role everyone plays. This is the people power side of equation. Any good football coach will tell you the same thing: every player must have a specific role, clearly defined with consequences for not coming through and rewards for doing their particular job well and that goes for everyone, from goalkeeper to the reserve.

Source :- "The Power If Six Sigma" By Subir Chowdhury

Laconic and Lucid of "The Critical Chain" Part 1

This Book is an excellent explanation of Project Management

This book has been a great help in understanding Project Management (PM) from a different perspective even after having the most uncertainties in the real life projects. I will be picking up some laconic from the book which can make us understand the PM in a better and simplified way. The first and most realistic “Uncertainty existing in every project is the underlying main cause for most problems”. During the tenure of the projects there are blame games everywhere which is a common phenomenon in the company and the lower the position of the manager the more the finger points not just outside (Uncertainty, Vendors, etc.) the company but inside as well.

Every company want its costs down and the companies try to cut it where ever possible but sometimes the cutting goes way off the track and they are so immersed in the mentality of saving money that they forget that the whole intention of a project is not to save money but to make money. Although I know most of the people reading, might know this but a reminder is what brings it back, until then it is lost somewhere in our sub-conscious mind.  

Now there is always been a fight when to use resources assuming we have it present whenever we want. Considering that we have a start of a project on Day 0 and there is parallel process (Process 2) which needs to be completed before it. The process 2 is not the critical path. The process 2 can be started at the time process 1 starts, then we will find that the process 2 has completed well ahead of time, when it can be used. Or the other can be we start the process 2 with a delay of sometime such that it completes almost the day before it is needed(not necessary to be completed on the day, can be a day earlier).  So the point is we have to weigh the savings from postponing an investment against the chance of damage resulting from finishing the project a little late. But also from experience it is seen if we start too many things at the same time, we are bound to lose focus and losing focus is one thing a project leader cannot afford.

Source:- The critical Chain from Eliyahu M. Goldratt
Note:- There are some excerpts that have been added from my side