Effective Strategy Execution: Improving Performance with Business Intelligence PDF
Preview Effective Strategy Execution: Improving Performance with Business Intelligence
Management for Professionals Bernd Heesen Eff ective Strategy Execution Improving Performance with Business Intelligence Second Edition Management for Professionals Moreinformationaboutthisseriesat http://www.springer.com/series/10101 Bernd Heesen Effective Strategy Execution Improving Performance with Business Intelligence Second Edition Prof.Dr.(UniversityofPhoenix)BerndHeesen PrescientGmbH Nuremberg,Germany ISSN2192-8096 ISSN2192-810X (electronic) ManagementforProfessionals ISBN978-3-662-47922-3 ISBN978-3-662-47923-0 (eBook) DOI10.1007/978-3-662-47923-0 LibraryofCongressControlNumber:2015946236 SpringerHeidelbergNewYorkDordrechtLondon #Springer-VerlagBerlinHeidelberg2016 Thisworkissubjecttocopyright.AllrightsarereservedbythePublisher,whetherthewholeorpartof the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilarmethodologynowknownorhereafterdeveloped. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publicationdoesnotimply,evenintheabsenceofaspecificstatement,thatsuchnamesareexempt fromtherelevantprotectivelawsandregulationsandthereforefreeforgeneraluse. Thepublisher,theauthorsandtheeditorsaresafetoassumethattheadviceandinformationinthis book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, express or implied, with respect to the material contained hereinorforanyerrorsoromissionsthatmayhavebeenmade. Printedonacid-freepaper Springer-Verlag GmbH Berlin Heidelberg is part of Springer Science+Business Media (www.springer.com) Preface Turbulenttimescreateathreatforthesurvivaloforganizationswhilealsooffering newopportunities.Whydosomanycompaniesfailtoadapt?Howcancompanies create an environment in which their management receives alerts early enough to adjust their strategy execution before a business tsunami hits? Which communi- cation infrastructure should be established to support the required changes in planning and execution on all affected organizational levels? What kind of IT infrastructure is needed to make this happen? This book presents many examples to demonstrate how an improved strategic management approach, leveraging established management concepts in conjunction with innovative technology solutions,canleadtoimprovedresults. Even in non-turbulent times, strategy execution can only be effective if the strategy is understood by the actors, how else should they be able to support it. While vision and mission statements are typically nice to read, they rarely specify in detail what is intended to be accomplished by when and who will be accountableformakingithappen.Oftenstrategicgoals,e.g.,short-termandlong- termfinancialobjectives,areconflictingwitheachother;forexample,investments in research and development may lead to superior new products and revenue in future but lead to a reduced profit for this fiscal period. Without clearly defined strategic objectives, management will find itself in dilemmas and will struggle to make the right strategic decisions. I have been in executive positions myself and experienced the negative effects this can have on the business. Opportunistic interests may also interfere with the interests of the organization. This effect can bemoderatedbyreflectingtheexpectedaddedvalueandpotentialsideeffectswhen evaluatingtheconsequencesofstrategicdecisions.Iwillintroducetheconceptof theValueScorecard™,1ascorecardwhichisnotonlybalancedbutfocusesonthe attainment of maximum value, whatever the ultimate goal may be for an organ- ization.Valuecanbemeasureddifferentlydependingonthekindoforganization. Forprofitcompanies,financialmeasureslikerevenuegrowth,earningspershare,or returnonsalesmightbeused.Governmentorganizationsmightmeasurevaluetobe the quality of life of their citizens. A nonprofit organization collecting and 1ValueScorecard™istrademarkedbyBerndHeesen/Prescient. v vi Preface distributing donations to people in need, like Aidmatrix (Aidmatrix, 2010), might countthenumberoffoodservingsormedicalservicesprovidedastheirmeasureof value to save a maximum number of lives. Improvement of these ultimate goals typically depends on improvements in supporting processes, which can be measured as well. Organizations like Aidmatrix (Aidmatrix, 2010) for example focusonimprovingtheirefficiencyinoperationstohaveminimaloverheadcostso theyareabletospend96centperdonateddollarontheirhumanitarianprograms. Understandingthecorrelationsbetweenthesekeyperformanceindicators,howone affectstheother,cansignificantlyhelptobetterpredicttheimpactofadecisionon theoverallgoal.Afor-profitorganizationforexamplebenefitsfromunderstanding towhatextentanimprovementincustomersatisfactionorbrandvalueisexpected toleadtoincreased sales. TheValueScorecard™providesaframeworktodefine therelevantelementsofastrategyincludingthedefinitionofmeasurableobjectives andinitiativesandtodifferentiatebetweenthoseindicatorswhichcanbeimpacted directly and short-term (leading indicators) or indirectly with a delay (lagging indicators). An example is the investment in a new quality improvement program inmanufacturingwhichleadstoanincreaseinmanufacturingcostandthenumber of recognized errors in production (leading indicators) in the short term. Since malfunctions are recognized before the product is delivered to the customer, this leads to fewer customer complaints and returns and an improvement in customer satisfactionovertime(laggingindicators).Anumberofcasesinthebookwillhelp you to see how organizations have leveraged this kind of an understanding to improvetheeffectivenessoftheirstrategyexecution. Strategies are rarely static since they need to be adjusted to accommodate changed circumstances. This means that strategy formulation and execution are continuous, permanent tasks, which impact decisions regarding the allocation of resources via the budgeting process, establishment of goals via the planning process, and the execution of the business and initiatives to reach the strategic goals.Itisamanagementchallengetoalign allorganizationalmemberstopullin the same direction, toward the strategic objectives. The Strategic Alignment Process™2 helps managers step by step to focus on the most critical tasks to accomplish this task. The basic foundation of this process is the knowledge that managementtimeisscarceanddelegationandempowermentshouldbeleveraged totheextentpossible. Management in this sense is not limited to the executive level. Nowadays business decisions are made on all levels of the organizational hierarchy. Smaller teams are often used to be more reactive and flexible and business may be performed by profit centers, business divisions, and business units operating with muchautarchyandautonomy.Therefore,whenIusethewordmanagementinthis book,myunderstandingisinclusiveofeveryonewhoisadecisionmakerwithinthe organization. 2StrategicAlignmentProcess™istrademarkedbyBerndHeesen/Prescient. Preface vii A term of special importance, Management by Objectives (MBO), has been popularized by the management guru Peter Drucker in his book The Practice of Management (Drucker, 2006a) since 1954. Generations of management students haveheardaboutthisconcept.Buttowhichextentdidtheypracticeit?Thanksto theimprovementofITsystemscapabilities,itcannowbeputintopracticeonanew scale. I consider this to be the revival of the Management by Objectives in the twenty-firstcentury,whichIrefertoasMBO2.0™3Followingtheterminologyof Web 2.0, this naming indicates the availability of new innovative applications facilitating interactive and collaborative dialogue within the organization and withexternalstakeholders. TheWorldofStrategicBusinessIntelligence™4istheconceptualfoundation toaligntwoworldsandperspectivesthattoooftenexistinisolation,businessand IT.Many ITdepartmentsfollowtheir ownagendasnotsufficientlyunderstanding therequirementsoftheircolleaguesresponsibletoexecutethebusiness,whomthey support.Yes,ITisasupportfunction!Itsexistenceisjustifiedbyaddingmorevalue thancosttotheorganization.Theindividualsexecutingthestrategyshouldbeable toestablishperformancetargetsfortheirunitandtomeasureandmonitorit.Alerts shouldbetriggeredtomakemanagementawareofcriticaldevelopmentsthatneed managementattention,therebyfacilitatinganeffectiveuseofthescarcetimeofall decisionmakers.Tobeuseful,thisinformationneedstobecapturedanddistributed to the decision makers with minimal delay using advanced IT solutions including broadcasting, alerts, or management cockpits, which are easy to use and help to visualizecomplexinformation,e.g.,usingcolorcoding,trendindicators,andmaps todisplaygeolocationperformance. How can this be supported from an IT standpoint? While I do not intend to describe all technological details of relevance, I will share the basic architecture required to support these critical business needs. A solid overview will help managers responsible for strategy execution to develop a better understanding of whatcanbedoneandhowmuchofaneffortthismayrequireontheITandbusiness side.Intheend,newITsolutionsareonlybeneficialtotheorganizationiftheyare accepted by the users and used properly. A change management effort needs to accompany the introduction of new systems to explain the benefits and make end users understand what they can expect as well as any limitations, which may be resolved in future initiatives. Setting appropriate expectations and supporting all those affected by the change of processes, which may include the use of new systems, significantly improves the acceptance. Finally, I will share some state- of-the-art solutions of Business Intelligence or Decision Support Systems to allow you to envision how this could be potentially applied to the benefit of your organization. Now,whatisthevalueofconceptsiftheyarenotapplied?Idonotwanttoleave you just with a new framework for effective strategy execution but with new 3MBO2.0™istrademarkedbyBerndHeesen/Prescient. 4WorldofStrategicBusinessIntelligence™istrademarkedbyBerndHeesen/Prescient. viii Preface managementtoolswhichyoucanuserightaway.Inacomplexworld,management needs to remain in control and have visibility of all performance indicators in all theirorganizationalentitiesworldwidewithzerolatency.Isitnotenjoyabletouse theremotecontrolfortheTV?Wheneveryoumakeupyourmindaboutwhatyou liketoview,youjustclickonabuttonandyougetwhatyouwant.Itransferredthis concepttomanagement,which for obviousreasons is slightly morecomplex.But theideashouldbethesame.Ifanexecutiveormanagerhasaninformationneed,it should justbeaclick away. Now isthisrealistic? Howrealistic has been the idea fromPresidentKennedythatAmericansshouldputtheirfeetonthemoon?Onehas tohaveavisiontoworktowardinordertogetthere.Withthisinmind,anewtoolI invented is the Strategic Alignment Remote Control™5 which supports the preparationandexecution ofastrategy.Itallowsustoaccessallrelevantinform- ation at all levels of the organization across the globe allowing the management teamtofocustheirattentiononthemostrelevantproblemsaswellasopportunities. SevenCaseStudiesfromdifferentindustriesacrosstheglobeprovideexamples of how the new concepts can be applied to improve organizational performance. They include companies like Daimler, Wu¨rth, Tetra-Pak, Germany’s Federal EmploymentAgency,CityofAix-Les-BainsinFrance,andGiesecke&Devrient. AdditionalexamplesfromorganizationslikeDisney,Marriott,Volkswagen,Avis, FedEx, and Harrah’s help to demonstrate how the application of these concepts addsuniquevalue. This book provides new ideas and practical advice for anyone responsible for strategyexecution;itisaboutpracticallyrelevantconceptsandhowtoapplythem within the context of the real world. Effective Strategy Execution is intended for professionalsaswellasthosewhowanttopreparethemselvesfortheircareer,not justforexecutives.Peopledonotbecomeeffectiveinstrategyexecutionbyreading books; they become effective by applying new, superior concepts in their own environment. This book provides the foundation individuals need to be effective membersoftheirorganizationsaspractitionersorconsultantsinthefieldofstrategy formulationorexecution. Ihavehelpedmanyorganizationsonallcontinentsduringmyconsultingcareer. Improvingtheeffectivenessoftheirorganizationwasthecoreobjectiveinallthese cases.Thisrequiredtheorganizationstorecognizetheirownsuboptimaleffective- ness in the first place! Without the capability of self-reflection, improvements are rarely possible.Therefore, I wantto encourage you to participate inthe Big Data andStrategyExecutionEffectivenessSurvey.Thesurveywillhelpyoutoassess your organizational effectiveness in regards to strategy execution. Right after completingthesurvey,youwillhaveaccesstoasummaryofallsurveyresponses, whichallowsyoutocompareyourperformancewiththoseofotherorganizations. Thesurveyisavailableonthewebsitehttp://www.survey.prescient.pro. 5StrategicAlignmentRemoteControl™istrademarkedbyBerndHeesen/Prescient. Preface ix Oncetheopportunitiesforimprovementareuncovered, theonlytasklefttobe doneistoleveragetheopportunity!Ihopethatthisbookwillencourageyoutouse yourcreativityandcommitmenttoimprovetheeffectivenessofyourorganization. Nuremberg,Germany BerndHeesen 2015
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