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An Executive’s Guide
Darrell K. Rigby
Management Tools 2011
An Executive’s Guide
Darrell K. Rigby www.bain.com
Inc. MA 02116 . No part of this book may be reproduced in any form or by any means without permission in writing from Bain & Company. Inc.Copyright © Bain & Company. 131 Dartmouth Street Boston. Published by: Bain & Company. 2011 All rights reserved.
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....................................................................................................................Table of Contents Preface ..................................................................................................................................................14 Related topics: • Best Demonstrated Practices • Competitor Profiles Business Process Reengineering......18 Related topics: • Cultural Transformation • Organizational Change • Process Redesign Core Competencies ...............................................................................................................................................................22 Related topics: • Collaborative Commerce • Customer Retention • Customer Segmentation • Customer Surveys • Loyalty Management Tools Customer Segmentation ..............................................20 Related topics: • Core Capabilities • Key Success Factors Customer Relationship Management ....16 Related topics: • Cycle-Time Reduction • Horizontal Organizations • Overhead-Value Analysis • Process Redesign Change Management Programs ....................................................................12 Related topics: • Management by Objectives • Mission and Vision Statements • Pay for Performance • Strategic Balance Sheet Benchmarking......10 Balanced Scorecard ..................................................................................................24 Related topics: • Customer Surveys • Market Segmentation • One-to-One Marketing 6 ........................
...................Decision Rights Tools .....................................................................................................................................................................................................................32 Related topics: • Groupware • Intellectual Capital Management • Learning Organization • Managing Innovation Mergers and Acquisitions ..................28 Related topics: • Layoffs • Reengineering • Rightsizing Enterprise Risk Management ........................38 Related topics: • Collaborative Innovation • Crowdsourcing • New Product Development • Open-Market Innovation 7 ...........................36 Related topics: • Corporate Values Statements • Cultural Transformation • Strategic Planning Open Innovation...............26 Related topics: • Governance Roles • Job Descriptions • Organization Design Downsizing..............30 Related topics: • Risk Governance • Scenario and Contingency Planning • Strategic Planning • Supply Chain Management Knowledge Management ...............................................................34 Related topics: • Merger Integration Teams • Strategic Alliances Mission and Vision Statements ........................................................................................................................................................................................................
.............................................................................................................................................................................................................................................................................................................48 Related topics: • Crisis Management • Disaster Recovery • Groupthink • Real-Options Analysis • Simulation Models Shared Service Centers .........46 Related topics: • Customer and Employee Surveys • Customer Loyalty and Retention • Customer Relationship Management • Net Promoter® Scores • Revenue Enhancement Scenario and Contingency Planning.50 Related topics: • Joint Ventures • Offshoring • Outsourcing • Performance Improvement • Strategic Partnerships 8 ..............42 Related topics: • Demand-Based Management • Pricing Strategy • Revenue Enhancement Rapid Prototyping .................40 Related topics: • Collaborative Commerce • Core Capabilities • Offshoring • Strategic Alliances • Value-Chain Analysis Price Optimization Models ........44 Related topics: • Computer-Aided Design • Design Thinking • Discovery-Driven Innovation • Managing Innovation Satisfaction and Loyalty Management ............................................................Table of Contents continued Outsourcing .........................................................................
..................................52 Related topics: • Blogs • Multimedia Chat Rooms • Online Communities • Social Gaming Networks Strategic Alliances...................................................62 Author Index ..........................................................................................60 Related topics: • Continuous Improvement • Malcolm Baldrige National Quality Award • Quality Assurance • Six Sigma Subject Index ...............Social Media Programs .....................................................................................................................56 Related topics: • Core Competencies • Mission and Vision Statements • Scenario and Contingency Planning Supply Chain Management ................58 Related topics: • Borderless Corporation • Collaborative Commerce • Value-Chain Analysis Total Quality Management ............................................................................................................................65 9 .....................................................................................54 Related topics: • Corporate Venturing • Joint Ventures • Value-Managed Relationships • Virtual Organizations Strategic Planning.........................................................................................
Whether trying to boost revenues. we’ve conducted research to identify 25 of the most popular and pertinent management tools. products and services—and result in superior performance and profits. groundless hype makes choosing and using management tools a dangerous game of chance. Successful use of such tools requires an understanding of the strengths and weaknesses of each tool as well as an ability to creatively integrate the right tools. • The information they need to identify. therefore. Every year or two since. In this guide. The secret is not in discovering one magic device. To help inform managers about the tools available to them. We also conduct one-on-one follow-up interviews to learn the circumstances in which each tool is most likely to produce the desired results. We determine through our research the extent to which each tool is being deployed and its rate of success. increase efficiencies or plan for the future. at the right time.Preface Over the past three decades. in the right way. improve quality. To do this successfully. the need to find the right tools to meet these challenges. executives have looked for tools to help them. innovate. In the absence of objective data. The current environment of globalization and economic turbulence has increased the challenges executives face and. The selection process itself can be as complicated as the business issues they need to solve. management tools have become a common part of executives’ lives. and how and when to use it. Our objective was to provide managers with: • An understanding of how their current application of these tools and subsequent results compare with those of other organizations across industries and around the globe. we’ve defined the tools and how they are used. implement and integrate the optimal tools to improve their company’s performance. They must choose the tools that will best help them make the business decisions that lead to enhanced processes. executives must be more knowledgeable than ever as they sort through the options and select the right management tools for their companies. but in learning which mechanism to use. 10 . select. in 1993 Bain & Company launched a multiyear research project to gather facts about the use and performance of management tools.
Rapid Prototyping and Social Media Programs.com/tools. We also found other important trends from the 2009 survey: • Nearly all executives believe innovation is vital to their company’s success. Boston. but few feel they have learned to harness its power effectively. • Many executives have serious concerns about how their organizations gather customer insights and manage decision making. Detailed results from the 2009 Management Tools & Trends survey are available at www. We hope that you will find this reference guide a useful tool in itself. • Managers who switch from tool to tool undermine employees’ confidence. Among them: • Overall satisfaction with tools is moderately positive. MA 02116 tel: 617 572 2771 fax: 617 572 2427 email: darrell. • Management tools are much more effective when they are part of a major organizational effort. Social Media has grown rapidly and we look forward to understanding how companies are using it. • Decision makers achieve better results by championing realistic strategies and viewing tools simply as a means to a strategic goal. Survey results may be obtained by contacting: Darrell Rigby. effectiveness. but managers may find them more relevant in the current economic environment. • No tool is a cure-all.Over time.com 11 .rigby@bain. Enterprise Risk Management.bain. our research has provided a number of important insights. ease of implementation. Director Bain & Company. The insights from this year’s global survey and field interviews will be published separately. Change Management Programs and Enterprise Risk Management are not new tools. Our efforts to understand the continually evolving management tools landscape have led us to add four new tools to this year’s guide: Change Management Programs. Inc. and whether they believe it is an effective business tool for improving results. but the rates of usage. strengths and weaknesses vary widely. 131 Dartmouth Street.
earnings.. customer satisfaction measures. managers should: • Articulate the business’s vision and strategy. customer loyalty). • Identify the performance categories that best link the business’s vision and strategy to its results (e. • Establish objectives that support the business’s vision and strategy. operations. • Create appropriate budgeting. These measures typically include the following categories of performance: • Financial performance (revenues. • Develop effective measures and meaningful standards. timeliness). cash flow). • Customer value performance (market share. turnover. The Balanced Scorecard translates Mission and Vision Statements into a comprehensive set of objectives and performance measures that can be quantified and appraised. rate of improvement index). financial performance. • Employee performance (morale. return on capital.Balanced Scorecard Related topics • • • • Management by Objectives Mission and Vision Statements Pay for Performance Strategic Balance Sheet Description A Balanced Scorecard defines what management means by “performance” and measures whether management is achieving desired results. tracking. employee performance). Methodology To construct and implement a Balanced Scorecard. • Collect and analyze performance data and compare actual results with desired performance. quality measures. establishing both short-term milestones and long-term targets. • Take action to close unfavorable gaps. communication and reward systems. • Internal business process performance (productivity rates. 12 . • Ensure companywide acceptance of the measures. knowledge.g. use of best demonstrated practices). • Innovation performance (percent of revenue from new products. innovation. employee suggestions.
• Increase companywide understanding of the corporate vision and strategy. 13 . 2002 to present (bimonthly). and David P. 2004. Paul R. Balanced Scorecard Step-by-Step: Maximizing Performance and Maintaining Results. Harvard Business School Press.. Kaplan.” Harvard Business Review.Common uses A Balanced Scorecard is used to: • Clarify or update a business’s strategy. Harvard Business School Press. “Harvard Business Review Balanced Scorecard Report. Robert S. and David P. 2006. pp. July 2005. 2d ed. Robert S. April 1998.. • Compare performance of geographically diverse business units. Marc. Alignment: Using the Balanced Scorecard to Create Corporate Synergies. Norton. 2000. 190–203. • Link strategic objectives to long-term targets and annual budgets. Niven. Robert S. Niven.” Harvard Business Review. Kaplan. Paul R. The Strategy-Focused Organization: How Balanced Scorecard Companies Thrive in the New Business Environment. Balanced Scorecard Diagnostics: Maintaining Maximum Performance. • Incorporate strategic objectives into resource allocation processes. • Track the key elements of the business strategy. Kaplan. Norton. Norton. John Wiley & Sons. • Facilitate organizational change. “The Balanced Scorecard: Measures That Drive Performance. 2005. 71–79. and David P. and David P. and Jean-François Manzoni. Norton.. 2006.” European Management Journal. “Implementing Corporate Strategy: From Tableaux de Bord to Balanced Scorecards. Strategy Maps: Converting Intangible Assets into Tangible Outcomes. Harvard Business School Press. John Wiley & Sons. Selected references Epstein. Robert S.. Kaplan. pp.
Adapt and implement the best practices. Benchmarking helps companies focus on capabilities critical to building strategic advantage. Benchmarking identifies methods of improving operational efficiency and product design. • Understand relative cost position. Companies then improve their performance by tailoring and incorporating these best practices into their own operations—not by imitating. 14 . Identify the key performance metrics. • Increase the rate of organizational learning. • Gain strategic advantage. Analyze the data and identify opportunities for improvement. Collect data on performance and practices.Benchmarking Related topics Description • Best Demonstrated Practices • Competitor Profiles Benchmarking improves performance by identifying and applying best demonstrated practices to operations and sales. Choose companies or internal areas to benchmark. setting reasonable goals and ensuring companywide acceptance. Benchmarking involves the following steps: • • • • • • Select a product. The objective of Benchmarking is to find examples of superior performance and to understand the processes and practices driving that performance. service or process to benchmark. Benchmarking brings new ideas into the company and facilitates experience sharing. Benchmarking reveals a company’s relative cost position and identifies opportunities for improvement. but by innovating. Methodology Common uses Companies use Benchmarking to: • Improve performance. Managers compare the performance of their products or processes externally with those of competitors and best-in-class companies and internally with other operations within their own firms that perform similar activities.
Iacobucci. 1995. 15 . AMACOM. Jr. James. Camp.Selected references American Productivity and Quality Center. 24–25. Robert J. John Wiley & Sons. “Selection Bias and the Perils of Benchmarking.. Mohamed. 2006. 1996. 1998. Benchmarking: The Search for Industry Best Practices That Lead to Superior Performance. McGraw-Hill. November/December 2000. Mardi. McGraw-Hill. Benchmarking for Best Practice: Continuous Learning Through Sustainable Innovation. pp. American Productivity and Quality Center. Benchmarking for Competitive Advantage. Benchmarking Strategies: A Tool for Profit Improvement. April 2005. David. 1994. Czarnecki. Robert C. Robert C. www. Benchmarking for Best Practices: Winning Through Innovative Adaptation. Denrell.” Harvard Business Review. 1994. Chris Gardner. Camp. The Complete Benchmarking Implementation Guide: Total Benchmarking Management. Lisa Higgins. Business Process Benchmarking: Finding and Implementing Best Practices. pp. Rob. “Is Your Benchmarking Doing the Right Work?” Harvard Management Update. and Christie Nordhielm. 2000.” Harvard Business Review..apqc. Bogan. 1–4. Coers. 114–119. English. Dawn. Stauffer. Zairi. Benchmarking: A Guide for Your Journey to Best-Practice Processes. Mark T. Boxwell. “Creative Benchmarking. Jerker. pp. and Cynthia Raybourn. Reider. 2001.org. September 2003. American Society for Quality. McGraw-Hill. H. ButterworthHeinemann. Productivity Press. Managing by Measuring: How to Improve Your Organization’s Performance Through Effective Benchmarking. Christopher E. Harrington. 1999. and Michael J.
Business Process Reengineering Related topics • • • • Cycle-Time Reduction Horizontal Organizations Overhead-Value Analysis Process Redesign Description Business Process Reengineering involves the radical redesign of core business processes to achieve dramatic improvements in productivity. In Business Process Reengineering. they redesign functional organizations into cross-functional teams. Business Process Reengineering is a dramatic change initiative that contains five major steps. Reorganization by teams decreases the need for management layers. often using information technology to enable improvements. cycle times and quality. 16 . Managers should: • Refocus company values on customer needs. • Reorganize a business into cross-functional teams with end-to-end responsibility for a process. Business Process Reengineering improves quality by reducing the fragmentation of work and establishing clear ownership of processes. companies start with a blank sheet of paper and rethink existing processes to deliver more value to the customer. • Redesign core processes. Companies reduce organizational layers and eliminate unproductive activities in two key areas. they use technology to improve data dissemination and decision making. Second. • Improve business processes across the organization. They typically adopt a new value system that places increased emphasis on customer needs. Methodology Common uses Companies use Business Process Reengineering to improve performance substantially on key processes that impact customers. • Rethink basic organizational and people issues. accelerates information flows and eliminates the errors and rework caused by multiple handoffs. Business Process Reengineering can: • Reduce costs and cycle time. First. Business Process Reengineering reduces costs and cycle times by eliminating unproductive activities and the employees who perform them. • Improve quality. Workers gain responsibility for their output and can measure their performance based on prompt feedback.
“Business Process Reengineering: A Tutorial on the Concept. Reengineering the Corporation: A Manifesto for Business Revolution. Peter G. Best Practices in Reengineering: What Works and What Doesn’t in the Reengineering Process. and Judy Wade. David K.. Hammer. Gene. 193–213.Selected references Al-Mashari. “Business Process Reengineering: A Survey of International Experience. November 2001. 1997. 1995. Hall. Michael. pp. and Other Business Realities. Collins. Champy. and Mohamed Zairi. Not Just Cost Savings. James. Reengineering Management: The Mandate for New Leadership. Davenport. 17 . J. pp. Thomas H. 437–455. revised and updated. Davidson. 1992. pp. Evolution. and Henry J. and Manuj K. Varun. HarperBusiness. Hammer. Malhotra. 2002. 119–131. 1997. 1995. The Process Edge: Creating Value Where It Counts. Keen. Process Innovation: Reengineering Work Through Information Technology. Michael. Majed. 2003. pp. Frame. 3–6. Jossey-Bass. Complexity. August 1997. Grover. Jim Rosenthal. Method.W. Harvard Business School Press. “Reengineering Tries a Comeback— This Time for Growth. Carr. “How to Make Reengineering Really Work.” Harvard Business Review. McGraw-Hill. Johansson. Zahir Irani.” Harvard Management Update. Harvard Business School Press. Kirsten D. HarperCollins.” Journal of Operations Management. Sandberg. and James Champy. Beyond Reengineering: How the ProcessCentered Organization Is Changing Our Work and Lives. Technology and Application.” Business Process Management Journal. The New Project Management: Tools for an Age of Rapid Change. November/December 1993. December 2001.
Companies follow through and monitor the progress of each change initiative to tell if it is following the intended path or veering off course. companies enlist multiple sponsors to provide all individuals with access to—and the influence of—a sponsor. measure and manage the risk of change. In times of change. Maintain a goal-oriented mindset by establishing clear. Companies identify employees most impacted and also work to predict. making and executing the most important decisions. • Continuously monitor progress. A Change Management Program allows leaders to help people succeed. showing where and when trouble is likely to occur and laying out a strategy for mitigating risks and monitoring progress. • Identify and overcome barriers to change. Methodology 18 . leaders alter communication frequency and methods to manage how a shaken workforce perceives and reacts to information: – Ensure sponsorship throughout the organization. implementing the initiatives as seamlessly as possible and generating a repeatable model for ensuring continued success in future change efforts.Change Management Programs Related topics • Cultural Transformation • Organizational Change • Process Redesign Description Change Management Programs enable companies to control the installation of new processes to improve the realization of business benefits. These programs involve devising change initiatives. generating organizational buy-in. – Reorganize around decision making. • Repeatedly communicate simple. Change Management Programs require managers to: • Focus on results. powerful messages to employees. Companies develop a system for identifying. To allow sponsorship to reach all levels of an organization. non-negotiable goals and designing incentives to ensure these goals are met.
• Implement new process initiatives. EPIC Change: How to Lead Change in the Global Age. Clark. Worley. 2006.Common uses Companies use a Change Management Program to: • Implement major strategic initiatives to adapt to changes in markets. Kotter. III. Kotter. Berrett-Koehler Publishers. Harvard Business Press. Built to Change: How to Achieve Sustained Organizational Effectiveness. Harvard Business School. Terms of Engagement: Changing the Way We Change Organizations. 2008. Selected references Axelrod. 2002. The Heart of Change: Real-Life Stories of How People Change Their Organizations. Timothy R. Richard H. Harvard Business Review on Leading Through Change. 19 . John P. • Align and focus an organization when going through a major turnaround. Edward E. Cohen. Jossey-Bass. 2006. 2000. Lawler.. Harvard Business Press. and Dan S. and Christopher P. 1996. Harvard Business Press. customer preferences. technologies or the competition’s strategic plans. Jossey-Bass. Leading Change. John P.
and invest accordingly to develop and sustain valued strengths. • Compare itself with other companies with the same skills to ensure that it is developing unique capabilities. They can be used to: • Design competitive positions and strategies that capitalize on corporate strengths. It embodies an organization’s collective learning. • Encourage communication and involvement in core capability development across the organization. • Develop an understanding of what capabilities its customers truly value. acquisitions and licensing arrangements that will further build the organization’s strengths in core areas. To develop Core Competencies a company must: • Isolate its key abilities and hone them into organizationwide strengths. particularly of how to coordinate diverse production skills and integrate multiple technologies. • Outsource or divest noncore capabilities to free up resources that can be used to deepen core capabilities. • Pursue alliances. 20 .Core Competencies Related topics Description • Core Capabilities • Key Success Factors A Core Competency is a deep proficiency that enables a company to deliver unique value to customers. Core Competencies also contribute substantially to the benefits a company’s products offer customers. Such a Core Competency creates sustainable competitive advantage for a company and helps it branch into a wide variety of related markets. Methodology Common uses Core Competencies capture the collective learning in an organization. Understanding Core Competencies allows companies to invest in the strengths that differentiate them and set strategies that unify their entire organization. • Preserve core strengths even as management expands and redefines the business. • Create an organizational road map that sets goals for competence building. The litmus test of a Core Competency? It’s hard for competitors to copy or procure.
Andrew. James Brian. Schoemaker. 79–91. Gary. May 1990. 2002.K. Drejer. Anders. pp. pp. 47–54. and improve the transfer of knowledge and skills among them.” T + D. Chris. Competing for the Future.” Harvard Business Review. Free Press. • Enhance image and build customer loyalty. pp. and Richard Montier. “How to Link Strategic Vision to Core Capabilities. pp. 47–50. and Gary Hamel. Quinn. Diana Kramer. Michael J. and Kathleen Sommers-Luch. “Strategic Outsourcing. Paul J. pp. Critelli. “The Core Competence of the Corporation. 21 .” Sloan Management Review. Campbell.• Unify the company across business units and functional units. pp. “Competency Models Develop Top Performance. 66–75. Hamel. Fall 1992. 43–45. Core Competency Based Strategy. 1994.” Harvard Business Review. “Back Where We Belong. Prahalad. James Brian. • Integrate the use of technology in carrying out business processes. Summer 1994. 1992.K. • Widen the domain in which the company innovates. 67–81. Quorum Books. • Make outsourcing. Harvard Business School Press. Hilmer.. July 2006. “Finding Your Next Core Business. Prahalad.” Sloan Management Review. and spawn new products and services. International Thompson Business Press. and C. • Help employees understand management’s priorities. Strategic Management and Core Competencies: Theory and Applications. • Invent new markets and quickly enter emerging markets. Selected references Alai. Intelligent Enterprise. divestment and partnering decisions. Quinn. May 2005. C.H. • Decide where to allocate resources. David. and Frederick G.” Harvard Business Review. April 2007. 1997. Zook.
Assess whether the benefits of the CRM information outweigh the expense involved. such as supply chain management and new product development.Customer Relationship Management Related topics • • • • • Collaborative Commerce Customer Loyalty and Management Tools Customer Retention Customer Segmentation Customer Surveys Description Customer Relationship Management (CRM) is a process companies use to understand their customer groups and respond quickly—and at times. CRM requires managers to: • Start by defining strategic “pain points” in the customer relationship cycle. Aggressively monitor participation of key personnel in the CRM program. • Design incentive programs to ensure that personnel are encouraged to participate in the CRM program. put measurement systems in place to track the Methodology 22 . CRM data also provide companies with important new insights into customers’ needs and behaviors. These are problems that have a large impact on customer satisfaction and loyalty. Information gathered through CRM programs often generates solutions to problems outside a company’s marketing functions. • Measure CRM progress and impact. and calculate the cost of implementing it and training employees to use it. • Evaluate whether—and what kind of—CRM data can fix those pain points. allowing them to tailor products to targeted customer segments. In addition. Calculate the value that such information would bring the company. CRM technology allows firms to collect and manage large amounts of customer data and then carry out strategies based on that information. • Select the appropriate technology platform. Data collected through focused CRM initiatives help firms solve specific problems throughout their customer relationship cycle—the chain of activities from the initial targeting of customers to efforts to win them back for more. where solutions would lead to superior financial rewards and competitive advantage. instantly—to shifting customer desires. Many companies have discovered that realigning the organization away from product groups and toward a customer-centered structure improves the success of CRM.
and Lasting Value. 2001. 101–109. pp. November 2004.” Harvard Business Review. Loyalty Rules! How Leaders Build Lasting Relationships in the Digital Age. Darrell K. Darrell K. Harvard Business School Press. 1996. “Which Way Should You Grow?” Harvard Business Review. Once the data are collected. share the information widely with employees to encourage further participation in the program. February 2002. The Loyalty Effect: The Hidden Force Behind Growth. and Dianne Ledingham. Rigby. “CRM Done Right. The CRM Handbook: A Business Guide to Customer Relationship Management. with Thomas Teal. Fred. John Wiley & Sons. July/August 2004. Common uses Companies can wield CRM to: • Gather market research on customers. Reichheld. and redirect spending accordingly. 23 Selected references . Customer Relationship Management: A Databased Approach. • Design effective customer service programs. • Coordinate information quickly between sales staff and customer support reps.. Addison-Wesley Publishing Company. Harvard Business School Press. 2005. pp. • Generate more reliable sales forecasts. in real time if necessary. Fred. • Enable sales reps to see the financial impact of different product configurations before they set prices.. “Avoid the Four Perils of CRM. 2001. 24–26. increasing their effectiveness. • Improve customer retention. George S. Kumar.” Harvard Business Review. 118–129. V. and Werner Reinartz.improvement in customer profitability with the use of CRM. Profits.. and Phil Schefter. Reichheld. • Feed data on customer preferences and problems to product designers. pp. Jill. Day. • Increase sales by systematically identifying and managing sales leads. Dyche. Fred Reichheld. Rigby. • Accurately gauge the return on individual promotional programs and the effect of integrated marketing activities.
service and delivery programs. marketing. • Invest resources to tailor product. Customer Segmentation is most effective when a company tailors offerings to segments that are the most profitable and serves them with distinct competitive advantages.and low-profit customers. Companies that identify underserved segments can then outperform the competition by developing uniquely appealing products and services. service. Methodology Common uses Companies can use Customer Segmentation to: • • • • Prioritize new product development efforts. A company can use Customer Segmentation as the principal basis for allocating resources to product development. Customer Segmentation requires managers to: • Divide the market into meaningful and measurable segments according to customers’ needs. 24 . • Measure performance of each segment and adjust the segmentation approach over time as market conditions change decision making throughout the organization. This prioritization can help companies develop marketing campaigns and pricing strategies to extract maximum value from both high. Customer Segmentation can be a powerful means to identify unmet customer needs. Establish appropriate service options. marketing and distribution programs to match the needs of each target segment. their past behaviors or their demographic profiles.Customer Segmentation Related topics Description • Customer Surveys • Market Segmentation • One-to-One Marketing Customer Segmentation is the subdivision of a market into discrete customer groups that share similar characteristics. Choose specific product features. • Target segments according to their profit potential and the company’s ability to serve them in a proprietary way. Develop customized marketing programs. • Determine the profit potential of each segment by analyzing the revenue and cost impacts of serving each segment.
Gerard du Toit. Yankelovich. 122–131. 3–6. 2004. Myers.. Don. ESOMAR. Managing Customer Value: Creating Quality and Service That Customers Can See. Currency/ Doubleday. Gale. “Finding the Right Job for Your Product. and James Allen.” Harvard Business Review. Butterworth-Heinemann. pp. Markey. “The Incumbent’s Advantage. The One to One Future: Building Relationships One Customer at a Time. and David Meer. McDonald. Philip. pp. October 2008. Planning.. Kotler. Daniel. The Marketing Imagination. Implementation and Control. Peppers. Gerald Berstell. and Paul Markowitz. “Find Your Sweet Spot. 38–47. and Denise Nitterhouse. Free Press. Anthony. pp. Marketing Management: Analysis. Steve. Selected references Christensen. 595–612. Prentice Hall Press. 1999. American Marketing Association. pp. MacMillan. and Larry Selden. Bradley T.• Design an optimal distribution strategy. Free Press. Segmentation and Positioning for Strategic Marketing Decisions. Market Segmentation: How to Do It. pp. How to Profit From It. Rob. • Determine appropriate product pricing. James H. and Ian Dunbar. February 2006. “Rediscovering Market Segmentation. Cohen. Spring 2007.” Harvard Business Review. and Martha Rogers. “Renewing Market Segmentation: Some New Tools to Correct Old Problems. Levitt. Scott D. 1986. 1996. 1994. November 2006. 25 . Ian C.” MIT Sloan Management Review. Theodore.” Harvard Management Update. 1996.” ESOMAR 2002 Congress Proceedings. 111–121. Malcolm. Clayton M.
who should follow through and what is beyond their scope. and then recommend a decision or action. otherwise they undermine speed and authority. • Perform: Performers are accountable for making a decision happen once it’s been made.g. • Input roles should be assigned only to those with knowledge. Each person involved in the decision-making process should be assigned one of the five decision-making roles: • Recommend: Recommenders gather and assess the relevant facts. • Input: Inputers combine facts and judgment to provide input into a recommendation.. • Each decision has one individual who leads the process to develop a recommendation. obtaining input from appropriate parties. • Agree: Agreers formally approve a recommendation and can delay it if more work is required. typically only in extraordinary circumstances (e. regulatory or legal issues). 26 Methodology . factoring in all relevant input. These assignments should factor in the following: • Each decision should have only one Decider with singlepoint accountability.Decision Rights Tools Related topics Description • Governance Roles • Job Descriptions • Organization Design Decision Rights Tools help companies to organize their decision making and execution by setting clear roles and accountabilities and by giving all those involved a sense of ownership of decisions: when to provide input. experience or access to resources that are so important for a good decision that it would be irresponsible for the decision maker not to seek their input. Clear decision rights allow companies to cut through the complexity often clouding today’s global structures by ensuring that critical decisions are made promptly and well and result in effective actions. • Agree roles should be used sparingly. • Decide: Deciders make the ultimate decision and commit the organization to action.
with minimal frustration. 55–62. Gary L. identify implementation issues and enable upfront planning. 2010. June 2010. international roll out. Rogers. • Create a healthy debate on critical decisions. Harvard Business Press. Common uses Decision Rights Tools allow companies to: • Eliminate decision bottlenecks. but through processes that feel productive. Marica. pp. Michael C.” Harvard Business Review. “The Secrets to Successful Strategy Execution. and different functions. Selected references 27 . Decide & Deliver: Five Steps to Breakthrough Performance in Your Organization.” Harvard Business Review... • Provide a common vocabulary to discuss decisions in a constructive manner across units. “Who Has the D? How Clear Decision Roles Enhance Organizational Performance. Michael.). Martin. etc.• Consider soliciting input from those with perform roles in order to engage early. Blenko. Karla L.” Harvard Business Review. September 2001. pp. Blenko. • Have agility and flexibility in decision making and execution to respond to dynamic circumstances. product development. 61–70.. C Mankins and Paul Rogers. “Make Better Decisions. January 2006.” Harvard Business Review. 53–61. Marcia.” Harvard Business Review. Mankins and Paul Rogers. Garvin. pp. and Marcia Blenko. 117–122. and Michael A. pp. June 2008. global versus regional versus local units. Neilson. David A. “What You Don’t Know About Making Decisions. November 2009. and Elizabeth Powers. Thomas H.g. Paul. Davenport. • Make higher-quality decisions. 108–116. • Make faster decisions resulting in faster operational performance (e. such as those that often occur between the center versus business units. pp. “The Decision Driven Organization. Roberto.
the ultimate goal should be to eliminate nonessential company resources while minimizing the negative impact on the remaining organization. Although downsizing is effective for significant cost reduction. unpaid vacations and temporary plant closures. The number of layoff events in the United States in September 2008 was the highest since September 2001. future rightsizing hiring costs and an inability to capitalize quickly on opportunities when the economy improves.300 separate events. poor public relations. it often produces unintended side effects. restricted overtime hours. Managers must calculate the present value of all costs and benefits associated with the cuts. salary cuts or freezes. according to the Bureau of Labor Statistics). Investing in areas customers care about—while competitors are cutting back—helps position the company to take or sustain the lead once conditions 28 Methodology .Downsizing Related topics Description • Layoffs • Reengineering • Rightsizing In the face of slowing or declining sales. eventual rehiring expenses. Creative efforts to avoid downsizing include hiring freezes. Skillful downsizing should help a company emerge from challenging economic conditions in stronger shape. including severance packages. shareholders and the media. Successful downsizing requires managers to: • Evaluate the overall impact of downsizing. In 2007. The total cost of downsizing—including both financial and non-financial costs—must be taken into account. When downsizing proves unavoidable. Companies must be careful to avoid sending the wrong messages to employees. future rightsizing costs and the lost opportunity costs associated with not having the appropriate manpower to accelerate out of the downturn. such as damaged employee morale. Downsizing can be effective if implemented appropriately. nearly one million employees lost their jobs in a mass layoff (50-plus employees) in the United States (an average of 180 workers in approximately 5. shortened workweeks. lower employee productivity due to disorder or talent loss. companies often downsize their employee base as a means of cutting costs to boost profitability.
Burke. Karen E.. 1995. Gretchen M. Vol. Charlie O. and Mitchell Lee Marks. 2008. Acquisitions. Free Press. pp. Pfeiffer. • Signal that the company is taking proactive steps to adjust to changing business needs. Haworth Press. Grow to Be Great: Breaking the Downsizing Cycle. and Downsizings. “Preserving Employees Morale During Downsizing. pp. • Develop a smooth downsizing process. A company typically forms a committee to determine the appropriate level of downsizing and creates a process that takes into account the best interests of the company and the shareholders. and Privatization. The value created from downsizing should exceed the cost of lower employee morale and potential damage to the company’s reputation. 2. 83–95. Cooper. 259–276. Mishra. and Anthony J.. No. • Release the least-productive resources. Common uses • Reduce costs. The Aftermath of Reengineering: Downsizing and Corporate Performance. Charging Back Up the Hill: Workplace Recovery After Mergers.. Spreitzer. Winter 1998. 2003. 2000.” Academy of Management Journal. Tony.. Resizing the Organization: Managing Layoffs. Cary L. 51. The Organization in Crisis: Downsizing. and Joao Baptista. Marks. “Keeping Your Headcount When All About You Are Losing Theirs. Mitchell Lee. and Aneil K. 2002. It is crucial that managers invest aggressively in upfront planning for the job cuts. Restructuring. Divestitures.” Sloan Management Review. Nyberg. Carter. 1999. Mishra. • Rightsize resources relative to market demand. Other important activities are training managers to conduct layoffs and assisting former employees in their job searches. Trevor. Selected references 29 . and Ronald J. and Closings. Gertz. Blackwell.. John Wiley & Sons. • Take advantage of cost synergies after a merger. Kenneth P. Dwight L.improve. De Meuse.
Enterprise Risk Management Related topics • • • • Risk Governance Scenario and Contingency Planning Strategic Planning Supply Chain Management Description Enterprise Risk Management (ERM) is an approach to making strategic and business decisions after considering major risks and opportunities. They decide whether to avoid the exposure completely. all parts of the organization contribute vital perspectives: • Senior executives determine the level of risk a company is willing to take. ERM now is also used to help companies decide between alternative business lines and strategic growth options. equity or assets. • Managers separate risk-taking and risk-monitoring responsibilities to avoid potential conflicts of interest.g. business. through a transfer to another party) or use the company risk insight and risk management capabilities as an opportunity to generate extra profit from the exposure. continuously examines the potential impact of various risks (e. financial and operational risks) on the organization. effectively mitigate it (for example. • The risk organization. identifying creative approaches to succeed in a world of uncertainty. They express their risk appetite in concrete terms such as earnings volatility and potential losses of capital. in cooperation with line managers. strategic. ERM considers everything from credit risk to operational and supply chain risk. ERM examines decisions through a risk lens. • Line managers embed risk management principles into everyday business decisions and activities. Originally focused simply on managing the losses and downside.. Methodology 30 . Companies are using the tool to take a more valuefocused (rather than loss-focused) approach to risk management amid increasing volatility and uncertainty. To build an Enterprise Risk Management system.
Nassim N. October 2009. Enterprise Risk Management: Today’s Leading Research and Best Practices for Tomorrow’s Executives. Wiley. Frigo.” Harvard Business Review. Optimize returns on capital.Common uses Companies use Enterprise Risk Management to: • • • • • Take a proactive approach to protecting assets and organizations.. and Mark W. Douglas W. Selected references Fraser. Allow regulators and debt-rating agencies to analyze a company’s risk management processes. Spitznagel. The Black Swan: The Impact of the Highly Improbable. Simkins (eds). Enterprise Risk Management: A Methodology for Achieving Strategic Objectives. James. Surviving and Thriving in Uncertainty: Creating the Risk Intelligent Enterprise. 2009. 2009. Enterprise Risk Management: From Incentives to Controls.” Harvard Business Review. The Failure of Risk Management: Why It’s Broken and How to Fix It. Wiley. Wiley. Taleb. “Strategic Risk Management: The New Core Competency. Taleb. Daniel G. Frederick. January 2009. 78–81. Funston. Random House. “The Six Mistakes Executives Make in Risk Management. 2010. Monahan.org. AMACOM. 2007. Lam. 2010. pp. Formalize risk governance. Wiley. and Betty J. Determine which opportunities are worth pursuing. 2003. Hubbard. Nassim Nicholas. Mark L. Manage Exposure. 2008. Goldstein. and Stephen Wagner. Hampton. John J. and Seize Opportunity. Fundamentals of Enterprise Risk Management: How Top Companies Assess Risk. http://hbr. 31 . Gregory. Wiley. John.
• Strengthen and extend current competencies through intellectual asset management. • Assess the impact of such systems on leadership.Knowledge Management Related topics • • • • Groupware Intellectual Capital Management Learning Organization Managing Innovation Description Knowledge Management develops systems and processes to acquire and share intellectual assets. • Determine which competencies will be key to future success and what base of knowledge is needed to build a sustainable leadership position therein. Methodology Common uses Companies use Knowledge Management to: • Improve the cost and quality of existing products or services. Knowledge Management maintains that successful businesses are a collection not of products but of distinctive knowledge bases. Knowledge Management seeks to accumulate intellectual capital that will create unique core competencies and lead to superior results. it can maximize the value of an organization’s intellectual base across diverse functions and disparate locations. • Improve and accelerate the dissemination of knowledge throughout the organization. culture and hiring practices. In addition. • Apply new knowledge to improve behaviors. Knowledge Management requires managers to: • Catalog and evaluate the organization’s current knowledge base. 32 . • Encourage faster and even more profitable innovation of new products. • Invest in systems and processes to accelerate the accumulation of knowledge. actionable and meaningful information and seeks to increase both individual and team learning. • Codify new knowledge and turn it into tools and information that will improve both product innovation and overall profitability. This intellectual capital is the key that will give the company a competitive advantage with its targeted customers. It increases the generation of useful.
Thomas A. Etienne. Groff. 2005. MIT Press. 2d ed. Palgrave Macmillan. 2003. Firestone. Kurt Matzler. Herman (eds. Cultivating Communities of Practice. Davenport. Todd R. and Hans Hinterhuber (eds. Kevin C. The Fifth Discipline: The Art and Practice of the Learning Organization. Butterworth-Heinemann.Selected references Collison. 1997. and Yukika Awazu. The Future of Knowledge Management. and Laurence Prusak. Stewart. Richard McDermott. and William M. Working Knowledge: How Organizations Manage What They Know. Key Issues in the New Knowledge Management. Harvard Business School Press. Quinn. 1998. Flinn. 2006. Kamiz... Organizing Business Knowledge: The MIT Process Handbook. and George A. Renzl. Capstone. Chris. Peter M. McElroy.). Learning to Fly: Practical Lessons from One of the World’s Leading Knowledge Companies. 2006. Jones. Ichijo. Free Press. 33 . Frappaolo. Palgrave Macmillan. Carl. Knowledge Management. Knowledge Management in Theory and Practice. Dalkir. revised. 2d ed.. Currency. Kazuo. Kevin Crowston. Joseph M. 2006. Palgrave Macmillan. and Thomas P. 2006.. 2010. Snyder. Introduction to Knowledge Management: KM in Business. Butterworth-Heinemann. 2003.). 2003. James Brian.. Intelligent Enterprise. 2005. Desouza. Birgit. Harvard Business School Press. and Geoff Parcell. and Mark W. 1992. Thomas W. The Learning Layer: Building the Next Level of Intellect in Your Organization. Knowledge Creation and Management: New Challenges for Managers. Wenger. Thomas H. Intellectual Capital: The New Wealth of Organizations. Butterworth-Heinemann. Senge. Malone. Capstone Publishing. 2002. 2005. Engaged Knowledge Management: Engagement with New Realities. Oxford University Press. Currency/Doubleday. and Ikujiro Nonaka. Steven D.
such as understanding brand positioning and product growth opportunities. acquirers need to perform rigorous due diligence—a review of the targeted company’s assets and performance history—before the purchase to verify the company’s standalone value and unmask problems that could jeopardize the outcome. To increase chances of the deal’s success. a merger typically involves two relative equals joining forces and creating a new company. Acquisitions occur when a larger company takes over a smaller one. they are heavily regulated. often requiring government approval. Most mergers and acquisitions are friendly. A merger is considered a success if it increases shareholder value faster than if the companies had remained separate. • Aggressively implement the integration plan: by Day 100. • Articulating and communicating the deal’s vision by merger leaders. redefine a business model and sacrifice speed to get the model right. Mergers and Acquisitions (M&As) have reached unprecedented levels as companies use corporate financing strategies to maximize shareholder value and create a competitive advantage. but a hostile takeover occurs when the acquirer bypasses the board of the targeted company and purchases a majority of the company’s stock on the open market. • Designing the new organization and operating plan. the merged company should be operating and contributing value. Successful integration requires understanding how to make trade-offs between speed and careful planning and involves: • Setting integration priorities based on the merger’s strategic rationale and goals. Because corporate takeovers and mergers can reduce competition.Mergers and Acquisitions Related topics Description • Merger Integration Teams • Strategic Alliances Over the past decade. Methodology Common uses Mergers are used to increase shareholder value by: • Reducing costs by combining departments and operations. and trimming the workforce. • Customizing the integration plan to address specific challenges: Act quickly to capture economies of scale. 34 .
• Increasing revenue by absorbing a major competitor and winning more market share; • Cross-selling products or services; • Creating tax savings when a profitable company buys a money-loser; • Diversifying to stabilize earning results and boost investor confidence.
Bruner, Robert F., and Joseph R. Perella. Applied Mergers and Acquisitions. Wiley Finance, 2004. Frankel, Michael E.S. Mergers and Acquisitions Basics: The Key Steps of Acquisitions, Divestitures, and Investments. John Wiley & Sons, 2005. Gaughan, Patrick A. Mergers: What Can Go Wrong and How to Prevent It. John Wiley & Sons, 2005. Gole, William J., and Paul J. Hilger. Corporate Divestitures: A Mergers and Acquisitions Best Practices Guide. John Wiley & Sons, 2008. Harding, David, and Sam Rovit. Mastering the Merger: Four Critical Decisions That Make or Break the Deal. Harvard Business School Publishing Corporation, 2004. Harding, David, Sam Rovit, and Alistair Corbett. “Avoid Merger Meltdown: Lessons from Mergers and Acquisitions Leaders.” Strategy & Innovation, September 15, 2004, pp. 3–5. Kanter, Rosabeth Moss. “Mergers That Stick.” Harvard Business Review, October 2009, pp. 121–125. Lajoux, Alexandra Reed, and Charles M. Elson. The Art of M&A Due Diligence: Navigating Critical Steps and Uncovering Crucial Data, 2d ed. McGraw-Hill, 2010. Lovallo, Dan, Patrick Viguerie, Robert Uhlaner, and John Horn. “Deals Without Delusions.” Harvard Business Review, December 2007, pp. 92–99. Miller, Edwin L. Mergers and Acquisitions: A Step-by-Step Legal and Practical Guide. Wiley, 2008. Rosenbaum, Joshua, Joshua Pearl and Joseph R. Perella. Investment Banking: Valuation, Leveraged Buyouts, and Mergers and Acquisitions. Wiley, 2009. Schweiger, David M. M&A Integration: A Framework for Executives and Managers. McGraw-Hill, 2002.
Mission and Vision Statements
Related topics Description
• Corporate Values Statements • Cultural Transformation • Strategic Planning A Mission Statement defines the company’s business, its objectives and its approach to reach those objectives. A Vision Statement describes the desired future position of the company. Elements of Mission and Vision Statements are often combined to provide a statement of the company’s purposes, goals and values. However, sometimes the two terms are used interchangeably. Typically, senior managers will write the company’s overall Mission and Vision Statements. Other managers at different levels may write statements for their particular divisions or business units. The development process requires managers to: • Clearly identify the corporate culture, values, strategy and view of the future by interviewing employees, suppliers and customers; • Address the commitment the firm has to its key stakeholders, including customers, employees, shareholders and communities; • Ensure that the objectives are measurable, the approach is actionable and the vision is achievable; • Communicate the message in clear, simple and precise language; • Develop buy-in and support throughout the organization.
Mission and Vision Statements are commonly used to: Internally • Guide management’s thinking on strategic issues, especially during times of significant change; • Help define performance standards; • Inspire employees to work more productively by providing focus and common goals; • Guide employee decision making; • Help establish a framework for ethical behavior.
Externally • Enlist external support; • Create closer linkages and better communication with customers, suppliers and alliance partners; • Serve as a public relations tool.
Abrahams, Jeffrey. The Mission Statement Book: 301 Corporate Mission Statements from America’s Top Companies. Ten Speed Press, 2004. Collins, Jim, and Jerry I. Porras. “Building Your Company’s Vision.” Harvard Business Review, September/October 1996, pp. 65–77. Collins, Jim, and Jerry I. Porras. Built to Last: Successful Habits of Visionary Companies. Collins Business, 2004. Horan, James T. The One Page Business Plan: Start with a Vision, Build a Company! One Page Business Plan Company, 1998. Jones, Patricia, and Larry Kahaner. Say It and Live It: The 50 Corporate Mission Statements That Hit the Mark. Currency/Doubleday, 1995. Kotter, John P. “Leading Change: Why Transformation Efforts Fail.” Harvard Business Review, March/April 1995, pp. 59–67. Kotter, John P., and James L. Heskett. Corporate Culture and Performance. Free Press, 1992. Nanus, Burt. Visionary Leadership. Jossey-Bass, 1995. O’Hallaron, Richard, and David O’Hallaron. The Mission Primer: Four Steps to an Effective Mission Statement. Mission Incorporated, 2000. Raynor, Michael E. “That Vision Thing: Do We Need It?” Long Range Planning, June 1998, pp. 368–376. Wall, Bob, Mark R. Sobol, and Robert S. Solum. The MissionDriven Organization. Prima Publishing, 1999. Zimmerman, John, with Benjamin Tregoe. The Culture of Success: Building a Sustained Competitive Advantage by Living Your Corporate Beliefs. McGraw-Hill, 1997.
higher-quality ideas from a wide array of world-class experts to improve the speed. • Increase innovation imports. minimize duplicative efforts and advance teamwork. vendors and even competitors—Open Innovation enables the laws of comparative advantage to drive the efficient allocation of R&D resources. Allocate resources to the opportunities with the best potential to strengthen the core businesses. Establish incentives and processes to assess objectively the fair market value of innovations. higher-quality innovations. • Improve the circulation of innovation ideas. quality and cost of innovation. Methodology Common uses Companies use Open Innovation to: • Clarify core competencies. This approach allows the business to refocus its own innovation resources where it has clear competitive advantages. • Increase innovation exports. raise additional cash and strengthen relationships with trading partners. a company can import lowercost. Carefully structure joint ventures and strategic alliances to protect the company’s rights.Open Innovation Related topics Description • • • • Collaborative Innovation Crowdsourcing New Product Development Open-Market Innovation Open Innovation applies the principles of free trade to innovation. • Decide quickly and efficiently whether to buy or sell patents and other intellectual capital. By reaching beyond corporate borders. 38 . Open Innovation requires companies to: • Focus resources on its core innovation advantages. joint ventures. • Maximize the productivity of new product development without increasing R&D budgets. By collaborating with outsiders—including customers. advancing new ideas through the use of tools such as partnerships. Develop information systems to capture insights. improve the company’s collaborative abilities and build its reputation as an innovative partner. Ideas also are exported to businesses that can put them to better use. licensing and strategic alliances. reduce R&D risks and raise the returns on innovation capital. Gain access to valuable new ideas. complement core innovation advantages. • Promote faster.
Huston. 43–49. Sirkka Jarvenpaa. Nambisan. pp. Davenport. pp. The Wisdom of Crowds. “Toward an Innovation Sourcing Strategy.. Anchor. Wharton School Publishing. 2009.” Harvard Business Review. pp. Prahalad. The Future of Competition: Co-Creating Unique Value with Customers. Henry William. Harvard Business School Press. 82–91.. pp. The Global Brain: Your Roadmap for Innovating Faster and Smarter in a Networked World. and Chris Zook. III. “Open-Market Innovation. Surowiecki.. “Productive Friction: How Difficult Business Partnerships Can Accelerate Innovation. Summer 2003. C. and Mohanbir Sawhney. December 2009. Hagel. Raynor.” Harvard Business Review. “Manage CustomerCentric Innovation—Systematically.” Harvard Business Review. and John Seely Brown. 80–89. 2007. Chesbrough. Harvard Business School Press. Linder. Harvard Business School Press. March 2006.” MIT Sloan Management Review. 68–76. 58–66. 2006. Larry. and Venkat Ramaswamy. Terwiesch. Satish. Rigby. 108–116. and Nabil Sakkab. Open Innovation: The New Imperative for Creating and Profiting from Technology. Christensen. and Michael E. February 2005. Chesbrough. Larry. Garman. 2003. Harvard Business School Press. 2004. April 2006. Innovation Tournaments: Creating and Selecting Exceptional Opportunities. 2003. The Innovator’s Solution: Creating and Sustaining Successful Growth. and Andrew R. “How Open Innovation Can Help You Cope in Lean Times. Selden. James.K. MacMillan.” Harvard Business Review. October 2002. “Connect and Develop: Inside Procter & Gamble’s New Model for Innovation. and Ian C. Open Business Models: How to Thrive in the New Innovation Landscape.. 39 . 2005. John. Darrell K. Clayton M. Henry W. pp. Henry William.” Harvard Business Review.Selected references Chesbrough. pp. and Thomas H. Harvard Business School Press. Christian and Karl Ulrich. Jane C.
In most cases.Outsourcing Related topics • • • • • Collaborative Commerce Core Capabilities Offshoring Strategic Alliances Value-Chain Analysis Description When Outsourcing. it is unwise to outsource something that creates a unique competitive advantage. Methodology 40 . The contract should include clearly established performance guidelines and measures. a company uses third parties to perform noncore business activities. a company can access the state of the art in all of its business activities without having to master each one internally. given their focus and scale. • Choose an Outsourcing partner and contract the relationship. When Outsourcing. Through Outsourcing. A complete financial analysis should include the impact of increased flexibility and productivity or decreased time to market. • Evaluate the financial impact of Outsourcing. • Assess the nonfinancial costs and advantages of Outsourcing. Candidates should be qualified and selected according to both their demonstrated effectiveness and their ability to work collaboratively. Many companies find that Outsourcing reduces cost and improves performance of the activity. Third parties that specialize in an activity are likely to be lower cost and more effective. Benefits include the ability to leverage the outside expertise of a specialized outsourcer and the freeing up of resources devoted to noncore business activities. A key risk is the growing dependence a company might place on an outsourcer. Contracting third parties enables a company to focus its efforts on its core competencies. Managers will also want to qualitatively assess the benefits and risks of Outsourcing. thus limiting future flexibility. take the following steps: • Determine whether the activity to outsource is a core competency. Outsourcing likely offers cost advantages if a vendor can realize economies of scale.
132–139. particularly under uncertainty. Increase manufacturing productivity and flexibility.outsourcing. The Offshore Nation: Strategies for Success in Global Outsourcing and Offshoring. and Scott Wilson. Instill operational discipline.. The Services Shift: Seizing the Ultimate Offshore Opportunity. Kate. 2005. and Karl B. 2010. Nearshore or Offshore Strategy. 2006. Greaver. Palgrave Macmillan. and Tom Roloff. Douglas. pp. Kevin Desouza. Kogan Page. The Black Book of Outsourcing: How to Manage the Changes. February 2005. Leverage the expertise and innovation of specialized firms. Inc. Smartsourcing: Driving Innovation and Growth Through Outsourcing. www. Strategic Outsourcing: A Structured Approach to Outsourcing Decisions and Initiatives. 13–28. AMACOM. Global Outsourcing: Executing an Onshore. Robinson. John Wiley & Sons. and Ajay Sharma. Kennedy. Challenges. and Avinash Vashistha. and Carlo Bonifazi. 1999. • Release resources—people. Mark J. Manrodt. capital and time—to focus on core competencies.. and Opportunities.Common uses Companies use Outsourcing to: • • • • • Reduce operating costs. Gottfredson.” Sloan Management Review. Atul.com. The Outsourcing Handbook: How to Implement a Successful Outsourcing Process. Mivar Press. 2005. Encourage use of best demonstrated practices for internal activities. pp. and Suresh Sharma. Selected references Brown. “Strategic Sourcing: From Periphery to the Core. 41 .. Koulopoulos. 2009. Marcia. The Outsourcing Institute. Vested Outsourcing: Five Rules That Will Transform Outsourcing..” Harvard Business Review. Thomas M. Power. and Stephen Phillips. Summer 2000. Vashistha. Robert E. James Brian. FT Press. Maurice. Mike Ledyard. 2006. Platinum Press. Rudy Puryear. Mark. Quinn. “Outsourcing Innovation: The New Engine of Growth. McGraw-Hill. • Avoid capital investment. Ravi Kalakota. Vitasek. 2006.
Given the complexity of pricing thousands of items in highly dynamic market conditions. product availability. run and revise the model. The modeling allows companies to use pricing as a powerful profit lever. including product volumes. which often is underdeveloped. seasonal conditions and fixed and variable cost details. Price Optimization Models can be used to tailor pricing for customer segments by simulating how targeted customers will respond to price changes with data-driven scenarios. develop pricing and promotion strategies. • Monitor results and upgrade data input to continuously improve modeling accuracy. and tactics that manage all elements impacting profitability. • Load. modeling results and insights helps to forecast demand. competitors’ prices. then combine that data with information on costs and inventory levels to recommend prices that will improve profits. • Establish decision-making processes that incorporate modeling results without alienating key decision makers. Price Optimization Models should factor in three critical pricing elements: pricing strategy. the value of the product to both buyer and seller. the company’s prices and promotions. economic conditions. control inventory levels and improve customer satisfaction. • Collect historical data. Methodology 42 . Practitioners should: • Select the preferred optimization model and determine desired outputs and required inputs. • Clarify the business’s value proposition and set strategic rules to guide the modeling process.Price Optimization Models Related topics Description • Demand-Based Management • Pricing Strategy • Revenue Enhancement Price Optimization Models are mathematical programs that calculate how demand varies at different price levels.
Sodhi. hotels. products bundled together in special promotions and loss leaders. E. Kinni.Common uses Price Optimization Models help businesses determine initial pricing. 2006. • Promotional price optimization helps set temporary prices to spur sales of items with long lifecycles—newly introduced products. FT Press. 2005. Nagle. and Mark Burton. 2008. promotional pricing and markdown (or discount) pricing: • Initial price optimization works well for companies with a stable base of long life-cycle products—grocery stores. drug chains. “Setting the Right Prices At the Right Time. 4th ed. and John Hogan. ManMohan S. • Markdown optimization helps businesses selling short lifecycle products subject to fashion trends and seasonality— airlines. Phillips. The Future of Pricing: How Airline Ticket Pricing Has Inspired a Revolution. Reed. Robert. Ronald J. Six Sigma Pricing: Improving Pricing Operations to Increase Profits. The Strategy and Tactics of Pricing: A Guide to Growing More Profitably. 43 .. Stanford Business Books. John Wiley & Sons. office-supply stores and commodities manufacturers. Pricing on Purpose: Creating and Capturing Value. specialty retailers and mass merchants. Andrew. 4–6.” Harvard Management Update. 2007. Pricing and Revenue Optimization. Wiley. Holden. December 2003. pp. Thomas T. Sodhi. Prentice Hall.. Selected references Baker. Boyd. Palgrave Macmillan. 2007. 2005. Theodore. and Navdeep S. Pricing With Confidence: 10 Ways to Stop Leaving Money on the Table.
lowest-cost methods for testing hypotheses. Redesign prototypes based on customer reactions. Instead of the traditional approach—building expensive. It creates real-world tests by quickly putting models in front of customers and then making improvements based on their responses. consider adding new features suggested by customers and continuously improve the prototype with repeated testing to improve quality and features. development teams should: • Identify the most important and risky elements of an innovation project. reducing postlaunch risks that the new product fails to meet customer needs. Methodology 44 . nearly complete archetypes before testing them with customers— Rapid Prototyping uses digital simulations and simple models to test customer reactions quickly and inexpensively. accelerating an innovation’s time to market. • Determine what hypotheses must be tested before making substantial investments. more effective and lower-cost method of designing and testing an innovation hypothesis before the product launch. • Test. The methodology reduces the design cycle time and enables multiple tests on a design with less expense. their reactions generate useful information that can be rapidly incorporated in the product’s design. • Design the fastest. learn and modify. To build a Rapid Prototype system. Because the models give customers more of a real-world experience.Rapid Prototyping Related topics • • • • Computer-Aided Design Design Thinking Discovery-Driven Innovation Managing Innovation Description Rapid Prototyping is a faster.
2007. “Design Thinking. • Lower innovation costs with less costly prototypes.” Harvard Business Review. Tim. Winter 2001. • Reduce risks of failing to meet customer needs by incorporating customer feedback early in the product development cycle. MacMillan. pp. 75–84. “Product-Development Practices That Work: How Internet Companies Build Software. 45 . Hopkinson. and Eric von Hippel. 84–92. Discovery-Driven Growth: A Breakthrough Process to Reduce Risk and Seize Opportunity. “Customers as Innovators: A New Way to Create Value. April 2002. Liou. and Philip Dickens. June 2008. Wiley.” Harvard Business Review. Selected references Brown. Stefan. pp. freeing up development teams to conduct testing that’s more thorough and to explore more ideas. MacCormack. 74–81. Rapid Manufacturing: An Industrial Revolution for the Digital Age. McGrath.Common uses Rapid Prototyping is used to: • Speed innovation through real-world testing before the product launch. Frank W. 2006. and Ian C. helping to ensure that a product is delivered on time and on budget. CRC Press. Rita Gunther. Thomke. Alan. Rapid Prototyping and Engineering Applications: A Toolbox for Prototype Development.” MIT Sloan Management Review. Richard Hague. Neil. pp. Harvard Business School Press. 2009.
and track them rigorously.. Loyalty programs measure and track the loyalty of those groups. Satisfaction and Loyalty Management quantifiably links financial results to changes in retention rates. • Systematically communicate survey feedback throughout the organization. • Develop new programs to reduce customer and employee churn rates. planning and budgeting systems. • Benchmark current loyalty levels against those of competitors. they ask current customers how likely they would be to recommend the company to a friend or a colleague. Methodology Net Promoter® is a registered trademark of Bain & Company. • Reach out to investors and suppliers to learn what drives their loyalty. A comprehensive Satisfaction and Loyalty Management program requires companies to: • Regularly assess current loyalty levels through surveys and behavioral data. Inc. • Revise policies that drive short-term results at the expense of long-term loyalty. diagnose the root causes of defection among them and develop ways not only to boost their allegiance but turn them into advocates for the company. The most effective approaches distinguish mere satisfaction from true loyalty. maintaining that even small shifts in retention can yield significant changes in company profit performance and growth. • Identify the few dimensions of performance that matter most to customers and employees. • Build loyalty and retention targets into the company’s incentive. 46 . Fred Reichheld and Satmetrix Systems. employees and investors. and frontline employees whether they believe the organization deserves their loyalty.Satisfaction and Loyalty Management Related topics • • • • • Customer and Employee Surveys Customer Loyalty and Retention Customer Relationship Management Net Promoter® Scores Revenue Enhancement Description Loyalty Management tools grow a business’s revenues and profits by improving retention among its customers. Inc. such as high service fees and discounts given only to new customers.
32–42. • Improve productivity. Jossey-Bass. Reichheld. “The Value of Loyalty. and Tim Phillips. Winter 2006. pp. Richard.” Optimize. and Laura L. V.” Harvard Business Review. Clive. Kogan Page. and V. December 2003. and decrease recruitment and training costs. 4–12. • Attract and retain employees whose skills. “The One Number You Need to Grow.. • Improve long-term financial performance and shareholder value. Andrew Peterson. Kumar. and capture a larger share of their business. pp. J. • Generate sales growth by increasing referrals from customers and employees. The Ultimate Question. April 2003. Fred. Kumar. Reinartz. pp. 2003. 2d ed. 2006. Werner. Scoring Points: How Tesco Continues to Win Customer Loyalty. pp. Dixon. knowledge and relationships are essential to superior performance. Owen. pp.” Harvard Business Review. “The Microeconomics of Customer Relationships. Fred. and Dr. 139–146. Selected references Dinsdale. “How Valuable Is Word of Mouth. Answering the Ultimate Question: How Net Promoter Can Transform Your Business. Matthew. Terry Hunt. “Stop Trying to Delight Your Customers. Fred. pp. customers.” MIT Sloan Management Review.” Harvard Business Review. • Strategically align the interests and energies of employees. 2008. Leone. July 2002. 46–54. Fred. Jim Taylor. Karen Freeman. 2008. Reichheld. and Nicholas Toman.” Harvard Business Review. Reichheld. Harvard Business School Press. suppliers and investors in a self-reinforcing cycle. Harvard Business School Press. 116–122. October 2007. Scott. 73–78. Brooks. and Robert P.Common uses Well-executed Satisfaction and Loyalty Management programs enable companies to: • Build lasting relationships with customers who contribute the most to profitability. “The Mismanagement of Customer Loyalty. J. 47 . Reichheld. July/August 2010. Loyalty Rules: How Today’s Leaders Build Lasting Relationships. Humby.
Methodology Common uses By using Scenario and Contingency Planning.Scenario and Contingency Planning Related topics • • • • • Crisis Management Disaster Recovery Groupthink Real-Options Analysis Simulation Models Description Scenario Planning allows executives to explore and prepare for several alternative futures. managers can brainstorm together and challenge their assumptions in a nonthreatening. By raising and testing various “what-if” scenarios. • Raise and challenge both implicit and widely held beliefs and assumptions about the business and its strategic direction. • Identify key levers that can influence the company’s future course. • Incorporate globalization and change management into strategic analysis. • Test the impact of key variables in each scenario. • Develop a clearer view of the future. yet plausible. Key steps in a Scenario and Contingency Planning process are: • Choose a time frame to explore. Scenario and contingency plans avoid the dangers of simplistic. shared experience. • Identify the current assumptions and thought processes of key decision makers. Contingency Planning assesses what effect sudden market changes or business disruptions might have on a company and devises strategies to deal with them. • Create varied. scenarios. • Monitor events as they unfold to test the company’s strategic direction. • Turn long-range planning into a vital. Scenario and Contingency Planning allows management to pressure-test plans and forecasts and equips the company to handle the unexpected. one-dimensional or linear thinking. • Develop action plans based on either the most promising solutions or the most desirable outcome the company seeks. • Be prepared to change course if necessary. 48 . hypothetical environment before they decide on a certain course of action. a company can: • Achieve a higher degree of organizational learning. It examines the outcomes a company might expect under a variety of operating strategies and economic conditions.
Fahey.H. Paul J.” Harvard Business Review. Bood. 633–647. Earthscan Publications. 2005. Ron Bradfield. Rafael.. Gill. Nolan. Lindgren. pp. “Be Prepared. Robert B. and Hans Bandhold. Handfield. Learning from the Future: Competitive Foresight Scenarios. Robert. “Scenario Planning: A Tool for Strategic Thinking. Currency/Doubleday. November/December 1985. Goodstein. Craighead. Applied Strategic Planning: An Introduction. pp. Schoemaker. Winter 1995. 49 . Elkins. Scenario Planning: The Link Between Future and Strategy. and Kees van der Heijden. Scenarios: The Art of Strategic Conversation. Ringland. John W. van der Heijden. 2004. Wack. 2002. Mats.” European Management Journal. Harvard Business School Press. 1996. 46–53. Pfeiffer. and Theo Postma. John Wiley & Sons. 25–40. and George Wright. “18 Ways to Guard Against Disruption. and How to Prevent Them. “Scenarios: Shooting the Rapids. The Art of the Long View: Paths to Strategic Insight for Yourself and Your Company.” Sloan Management Review.Selected references Bazerman. Peter. pp. 20–21. Timothy N. Randall (eds. John Wiley & Sons. Business Planning in Turbulent Times: New Methods for Applying Scenarios.” Supply Chain Management Review. 139–150. Jennifer Blackhurst. 2d ed. November 2003. The Sixth Sense: Accelerating Organizational Learning with Scenarios. and Robert M. Leonard. “Strategic Learning with Scenarios. Fuld. Debra. George Burt. Kees. pp. George Cairns.” Harvard Business Review. 1997. and Michael D. Predictable Surprises: The Disasters You Should Have Seen Coming. 2006. 2009. John Wiley & Sons. 2005. Max H. January 1. 2010. John Wiley & Sons. pp. Scenario Planning: Managing for the Future. 2d ed. 2008. 2d ed. Liam.. and Jeanette Goodstein. 2d ed. Pierre.). Leonard D. Palgrave Macmillan. van der Heijden. Schwartz. Ramirez. Kees. Selsky. December 1997. Watkins. and Christopher W.
• Reengineer systems: The first cost savings usually come from reduced headcounts and redesigned processes. these functions offer a common opportunity for an SSC model. customer service and human resources—into a shared operation. information technology. services and customer satisfaction. and consolidating and moving SSCs to countries with lower labor costs. making it easier to provide support for multiple business units. Because of the need of every corporate department for finance and human services.Shared Service Centers Related topics • • • • • Joint Ventures Offshoring Outsourcing Performance Improvement Strategic Partnerships Description Shared Service Centers (SSCs) reduce costs by consolidating one or more back-office operations used by multiple divisions of the same company—such as finance. Despite the success of Shared Service Centers. • Consolidate processes and people without losing key employees and disrupting services. • Win buy-in from departments that will use SSC. Many of the savings come from standardizing technology and processes on a national and regional basis. some SSC pioneers are moving to variations on the model: outsourcing back-office operations to a third-party provider. By creating a standalone or semi-autonomous Shared Service Center. • Communicate clear vision and early successes by top management. reduce personnel and improve the speed and quality of service. The transition should: • Standardize processes before the shift. companies can eliminate redundant activities and improve efficiency. A successful move to a Shared Service Center model requires a carefully planned and managed transition. Methodology 50 .
and James S.Common uses Shared Service Centers are used not only to improve cost savings. Jr. Kennedy. Quinn. Gower Publishing Limited. Bergeron. Shared Services: Mining for Corporate Gold. and Andrew Kris. Shared Services in Finance and Accounting. Essentials of Shared Services. Robert Cooke. The Services Shift: Seizing the Ultimate Offshore Opportunity. Financial Times Management. How to Get Best Value from HR: The Shared Services Option. Andrew.com. John R. • Increasing standardization and use of leading-edge technologies. Irene. 51 . Donniel S. Melchior. 2005. February 2005. Reilly. John Wiley & Sons.. Gower Publishing Limited. Tham. 1999. Schulman. • Freeing up employees to spend more time and resources on their core jobs. Shared Service Centres: Delivering Value from Effective Finance and Business Processes. Kris. 2003. 2009. Financial Times Prentice Hall. “Shared Services: Getting it Right. • Enabling rapid integration of new acquisitions. Lusk. FT Press. Bryan. Dunleavy. • Capturing economies of scale. • Providing flexibility to add quickly new business units and expand geographically. 2003. Tom Olavi.. 2008. Harmer. http://www. and Martin Fahy. Barbara.” MIS Magazine. and Tony Williams. they also help companies respond to the marketplace and pursue rapid growth strategies by: • Delivering higher-quality service and improved customer satisfaction. Selected references Bangemann..misweb. Shared Services: Adding Value to the Business Units. Martin J. and Ajay Sharma.. Peter A. 2003. John Wiley & Sons. Shared Services: A Manager’s Journey. John Wiley & Sons. Robert E. 2000. Daniel C.
Use customer feedback to improve services and increase loyalty. • Integrate targeted messages. • Promote the new tools. friends. • Deploy Social Media tools across all aspects of the customer experience. Develop insights into customer behaviors and needs with research and analytics. Attract and retain customers by allowing them to share and rate new products. Ensure that Social Media methods and messages are consistent with the company’s brand positioning and other marketing campaigns. Social Media is rapidly changing and is used for four primary purposes: communication (driving awareness. Social Media options include everything from online community pages and micro-blogging platforms to company-operated websites and forums to social gaming. employees and other targeted audiences. • Develop testing and learning capabilities. Prioritize the four primary purposes and determine which Social Media tools to apply to which purposes in collaboration with which partners. make purchases or receive advice from the company about using the product. customers and partners electronically across a range of devices. sharing content and providing customer service).Social Media Programs Related topics • • • • Blogs Multimedia Chat Rooms Online Communities Social Gaming Networks Description Social Media Programs allow individuals and organizations to interact with their employees. Methodology 52 . commerce (selling products directly and getting referrals). managers need to take the following steps: • Understand what Social Media tools your customers are using. Raise awareness of new tools with customers. To use Social Media effectively. Determine what they are saying about you. • Decide which additional tools are most valuable. collaboration (sharing ideas and getting feedback) and communities (fostering connection with the company and within customer and employee groups).
Francois. Twitterville: How Businesses Can Thrive in the New Global Neighborhoods. Portfolio. 2010. Naked Conversations: How Blogs Are Changing the Way Businesses Talk with Customers. 2009. Jim. and Ted Schadler. Groundswell: Winning in a World Transformed by Social Technologies. Wiley. Communicate with customers and employees. Solicit feedback. Cultivate. Harvard Business Press. Josh. Trust Agents: Using the Web to Build Influence. 94–101. Wiley. and Shel Israel. Scoble. Wiley. July/August 2010. Charlene. 2008.Common uses • • • • • • • • Strengthen branding. pp. 2006. Build communities. and Ed Moran. 2010. 2010. Sell products. Chris and Julien Smith. Shel. 2010. Wiley. Share ideas. Solis. McGraw-Hill. The Hyper-Social Organization: Eclipse Your Competition by Leveraging Social Media. and Josh Bernoff. Israel. Gossieaux. “Empowered. Social Media Metrics: How to Measure and Optimize Your Marketing Investment.” Harvard Business Review. Robert. Generate product awareness. Improve Reputation. Li. Engage: The Complete Guide for Brands and Businesses to Build. 53 . and Earn Trust. and Measure Success in the New Web. Selected references Bernoff. Brian. Brogan. Sterne. Obtain referrals.
companies can improve competitive positioning. Net Gain: Expanding Markets Through Virtual Communities. To form a Strategic Alliance. companies should: • Define their business vision and strategy in order to understand how an alliance fits their objectives. • Evaluate and select potential partners based on the level of synergy and the ability of the firms to work together.. competitors. 54 . supplement critical skills and share the risk or cost of major development projects. • Enter new markets. suppliers. Companies may form Strategic Alliances with a wide variety of players: customers. and John Hagel III.Strategic Alliances Related topics • • • • Corporate Venturing Joint Ventures Value-Managed Relationships Virtual Organizations Description Strategic Alliances are agreements among firms in which each commits resources to achieve a common set of objectives. Through Strategic Alliances. • Inhibit competitors. • Develop a working relationship and mutual recognition of opportunities with the prospective partner. • Increase access to new technology. • Improve quality. Harvard Business School Press. • Negotiate and implement a formal agreement that includes systems to monitor performance. gain entry to new markets. Arthur G. universities or divisions of government. • Reduce cycle time. • Improve research and development efforts. Selected references Armstrong. Methodology Common uses Strategic Alliances are formed to: • Reduce costs through economies of scale or increased knowledge. March 1997.
Jeffrey H. 96–108. 37–43. Strategic Alliances: Three Ways to Make Them Work. Kanter. with Jeff Hook. pp.” Journal of American Academy of Business.. Sage Publications. Segil. and Harbir Singh. Kuglin.. Darrell K.. March 2006. Harvard Business School Press. Darrell K. Yves L. and Chris Zook. Summer 2001. 114–120. Building.). Jordan D. Free Press. July/August 1994. pp. 108–115. Reuer (eds.. 2008. “How to Make Strategic Alliances Work. 2005. Measuring the Value of Partnering: How to Use Metrics to Plan. Trusted Partners: How Companies Build Mutual Trust and Win Together. Buchanan. and Bjarne Rugelsjoen. and Robin W. January 2010. Wen-Long. “When to Ally and When to Acquire. “Putting More Strategy into Strategic Alliances. “Open-Market Innovation. Dyer. AMACOM. Dyer. “Managing Alliances with the Balanced Scorecard. Shenkar.” Directors and Boards. and Jeffrey J. July 2004. 2004. and Harbir Singh. Doz. 80–89. and Gary Hamel.Chang. Prashant Kale. Kaplan. and Jasmine Yi-Hsuan Hsin. Handbook of Strategic Alliances. “Collaborative Advantage: The Art of Alliances. Rosabeth M. Alliance Advantage.” Harvard Business Review. Fred A. American Management Association. March 2000. 14–19. Norton.. pp. Steinhilber. Lewis. October 2002. Steve. Robert S. Rigby. Winter 1994. Larraine.T. 126–133. Leading and Managing Strategic Alliances. 1998.. “The Study of the Motivation and Performance of the Incubators’ Strategic Alliances: Strategic Groups Perspective. and Implement Successful Alliances. Harvard Business School Press.” MIT Sloan Management Review. pp. 2002. Oded. pp. Develop. David P. pp..” Harvard Business Review. Jeffrey H. 55 . Prashant Kale.” Harvard Business Review. Rigby. pp.” Harvard Business Review.
• Target potential business arenas and explore each market for emerging threats and opportunities. • Understand the current and future priorities of targeted customer segments. irrevocable resource commitment decisions.Strategic Planning Related topics Description • Core Competencies • Mission and Vision Statements • Scenario and Contingency Planning Strategic Planning is a comprehensive process for determining what a business should become and how it can best achieve that goal. vision and fundamental values. • Plan for and respond to contingencies or environmental changes. • Define stakeholder expectations and establish clear and compelling objectives for the business. Strategic Planning offers a systematic process to ask and answer the most critical questions confronting a management team—especially large. A successful Strategic Planning process should: • Describe the organization’s mission. decision processes. • Identify and evaluate alternative strategies. • Develop an advantageous business model that will profitably differentiate the company from its competitors. • Allocate resources to develop critical capabilities. • Monitor performance. 56 . • Analyze the company’s strengths and weaknesses relative to competitors and determine which elements of the value chain the company should make versus buy. • Encourage fact-based discussions of politically sensitive issues. information and control systems and hiring and training systems. • Prepare programs. It appraises the full potential of a business and explicitly links the business’s objectives to the actions and resources required to achieve them. Methodology Common uses Strategic Planning processes are often implemented to: • Change the direction and performance of a business. • Establish supportive organizational structures. policies and plans to implement the strategy.
and Michael G. • Increase confidence in the business’s direction. 1994. November/December 1996. “What Is Strategy?” Harvard Business Review. Mintzberg. The Rise and Fall of Strategic Planning: Reconceiving Roles for Planning. John Wiley & Sons. Competing for the Future. Mintzberg. Joseph Lampel. Gary. “Can You Say What Your Strategy Is?” Harvard Business Review. Michael E. Drucker. Rukstad. Mark. Andrew Campbell. Goold. Making Strategy Work: Leading Effective Execution and Change. Competitive Strategy: Techniques for Analyzing Industries and Competitors. Gottfredson. and Bruce Ahlstrand. 1998. Managing in a Time of Great Change. pp. Planners. 1998. 1994. Michael.” Harvard Business Review. Henry. Free Press. 2009. “Stop Wasting Valuable Time.. • Set a proper context for budget decisions and performance evaluations. Michael C. Porter. 61–78. 2005. September 2004. Selected references Collis. 2008. Hrebiniak. Harvard Business Press. pp. Harvard Business School Press. Lawrence G. Corporate-Level Strategy: Creating Value in the Multibusiness Company. Daniel J. • Train managers to develop better information to make better decisions. 58–65.K. and C. Collins Business. April 2008. Henry. and Steve Schaubert. pp. 82–90. Michael E. 57 . Prahalad.• Create a common framework for decision making in the organization. Free Press. Strategy Safari: A Guided Tour Through The Wilds of Strategic Management. Porter. and Marcus Alexander. Free Press. Hamel. Peter F. Wharton School Publishing. Plans. 1994. Breakthrough Imperative: How the Best Managers Get Outstanding Results. Mankins.
The approach often relies on technology to enable seamless exchanges of information. It leverages the core competencies of each player. It creates more accurate. distributors. inventory levels. Companies typically implement Supply Chain Management in four stages: • Stage I seeks to increase the level of trust among vital links in the supply chain. The goal is to establish such strong bonds of communication and trust among all parties that they can effectively function as one unit. automates information exchange. production schedules. • Stage IV identifies and implements radical ideas to transform the supply chain completely and deliver customer value in unprecedented ways. dealers. manufacturers. up-to-date knowledge of demand forecasts. reduces inventory levels. improves forecasting. goods and services across organizational boundaries. • Stage III expands efforts to manage the supply chain as one overall process rather than dozens of independent functions. customers. delivery dates and other data that could help supply chain partners improve performance. cuts cycle times and involves customers more deeply in the Supply Chain Management process. It forges much closer relationships among all links in the value chain in order to deliver the right products to the right places at the right times for the right costs. This stage often leads to longer-term commitments with preferred partners. capacity utilization. and so on—involved in meeting a customer’s needs.Supply Chain Management Related topics Description • Borderless Corporation • Collaborative Commerce • Value-Chain Analysis Supply Chain Management synchronizes the efforts of all parties— suppliers. Methodology 58 . fully aligned to streamline business processes and achieve total customer satisfaction. Managers learn to treat former adversaries as valuable partners. eliminates unproductive activities. changes management processes and incentive systems. • Stage II increases the exchange of information.
The New Science of Retailing: How Analytics Are Transforming the Supply Chain and Improving Performance. Robert J. McGraw-Hill. Essentials of Supply Chain Management. October 2004.. better and less expensively. 2d ed. “Aligning Incentives in Supply Chains. outsourcing of noncore activities. Supply Chain Strategy. 114–121. 2006. Edward. Strategic Supply Management: Creating the Next Source of Competitive Advantage. James. Michael H. pp. Harvard Business Press. “Leading a Supply Chain Turnaround. 2006. 2007. 149. managers turn to Supply Chain Management to help them deliver products and services faster. Selected references Ayers. Frazelle. pp. and Ananth Raman. Wiley. and Ananth Raman. McGraw-Hill Professional. J. but that only limited improvement can be achieved by any single company. Handbook of Supply Chain Management.” Harvard Business Review. V.G. 2001. Narayanan. Fisher. 2006. 94–102. Hugos. Martin. Auerbach.” Harvard Business Review. Supply Chain Management capitalizes on many trends that have changed worldwide business practices. supplier consolidation and globalization. Slone. James B. Reuben E. Lean Six Sigma for Supply Chain Management. including justin-time (JIT) inventories. electronic data interchange (EDI). 59 . 2006. Ross Publishing. 2d ed. Harvard Business School Press. Trent.Common uses Recognizing that value is leaking out of the supply chain. November 2004. Marshall. 2010. Harvard Business Review on Supply Chain Management.
• Design products and services that cost-effectively meet or exceed those needs. customer satisfaction and profits. Decrease customer service problems. • Develop feedback mechanisms to ensure continuous improvement. 60 . • Develop effective measures of product and service quality. Methodology Common uses TQM improves profitability by focusing on quality improvement and addressing associated challenges within an organization. Lower scrap and rework costs. Decrease time-to-market cycles. • Train employees to use the new processes. TQM can be used to: • • • • • • Increase productivity. TQM then aims to produce these specifications with zero defects. This creates a virtuous cycle of continuous improvement that boosts production. Increase competitive advantage. Deliver quality • Identify the key problem areas in the process and work on them until they approach zero-defect levels. • Promote a zero-defect philosophy across all activities. Improve product reliability. • Create incentives linked to quality goals.Total Quality Management Related topics • • • • Continuous Improvement Malcolm Baldrige National Quality Award Quality Assurance Six Sigma Description Total Quality Management (TQM) is a systematic approach to quality improvement that marries product and service specifications to customer performance. In order to succeed. TQM programs require managers to: Assess customer requirements • Understand present and future customer needs. • Encourage management to lead by example.
MIT Press. Prentice Hall. David L. 25–35. Glen Besterfield. Davis. 3d ed. Juran. 1994.M. Routledge. Free Press. Total Quality Management.. J. and Orlando C. Choi.. Imai. 1982. Masaaki. Cesar. 2005. Free Press. 4/5/6. and Ghopal K. Processing. 1986. “TQM’s Challenge to Management Theory and Practice. and Services. Carol Besterfield-Michna. Malcolm Baldrige National Quality Award. February 1997. Behling. W. McGraw-Hill. 1998. Dale H. Managing Customer Value: Creating Quality and Service That Customers Can See. 479–493. and Stanley B. 2009.. Vol. Perigree.Selected references Besterfield. Robert M. Grant. Khanji.. “Total Quality Management and Cultural Change: A Model of Organizational Development. Goetsch. Mary.nist. Feigenbaum. pp. Quality Management: Introduction to Total Quality Management for Production. 16. 1991. Armand V.gov/baldrige Walton.. Edwards. “Top Managers and TQM Success: One More Look After All These Years. Gale. Rami Shani. 61 . Krishnan. 1986. Bradley T. Total Quality Control. 6th ed. pp. Kai Kristensen. 2002. 1992.” Academy of Management Executive. Camison. Quality. Juran on Quality by Design: The Next Steps for Planning Quality into Goods and Services. Productivity.” International Journal of Technology Management. Dahlgaard. pp. 4th ed. Jens J. The Deming Management Method. Random House. Fundamentals of Total Quality Management. Kaizen: The Key to Japan’s Competitive Success. 37–47. and Competitive Position. Winter 1994.” Sloan Management Review. and R. www. Deming. Prentice Hall. No. and Mary Besterfield-Sacre. Thomas Y.
40 Disaster Recovery See Scenario and Contingency Planning. 30 Decision Rights Tools. 14 Cultural Transformation See Change Management Programs. 22 See Customer Segmentation. 56 Downsizing. 52 Customer and Employee Surveys See Satisfaction and Loyalty Management. 22 See also Satisfaction and Loyalty Management. 58 Customer Loyalty and Retention See Satisfaction and Loyalty Management. 12 Benchmarking. 18 See Mission and Vision Statements. 22 Change Management Programs. 58 Customer Segmentation. 46 Borderless Corporation See Supply Chain Management. 20 See also Strategic Planning. 26 Demand Based Management See Price Optimization Models. 54 E Crisis Management See Scenario and Contingency Planning. 22 Customer Surveys See Customer Relationship Management. 14 Best Demonstrated Practices See Benchmarking. 44 D Contingency Planning See Enterprise Risk Management. 16 Customer Relationship Management. 36 Blogs See Social Media Programs. 48 Enterprise Risk Management. 24 Collaborative Innovation See Open Innovation. 44 Core Capabilities See Core Competencies. 14 Computer-Aided Design See Rapid Prototyping. 42 Continuous Improvement See Total Quality Management. 20 See Outsourcing. 48 Discovery-Driven Innovation See Rapid Prototyping.Subject Index B Crowdsourcing See Open Innovation. 46 C Customer Retention See Customer Relationship Management. 46 Business Process Reengineering. 16 Competitor Profiles See Benchmarking. 60 Design Thinking See Rapid Prototyping. 30 62 . 36 Corporate Venturing See Strategic Alliances. 44 Core Competencies. 28 Corporate Values Statements See Mission and Vision Statements. 18 Collaborative Commerce See Customer Relationship Management. 38 Cycle Time Reduction See Business Process Reengineering. 38 Balanced Scorecard. 22 See Outsourcing. 40 See Supply Chain Management. 24 See also Customer Relationship Management.
60 Groupthink See Scenario and Contingency Planning. 26 Multimedia Chat Rooms See Social Media Programs. 40 Market Segmentation See Customer Segmentation. 54 N Net Promoter® Scores See Satisfaction and Loyalty Management. 32 Online Communities See Social Media Programs. 34 See Knowledge Management.G Governance Roles See Decision Rights Tools. 50 See Strategic Alliances. 16 See also Knowledge Management. 44 Groupware See Knowledge Management. 22 See Satisfaction and Loyalty Management. 26 M Malcolm Baldrige National Quality Award See Total Quality Management. 24 Merger Integration Teams See Mergers and Acquisitions. 50 One to One Marketing See Customer Segmentation. 28 See Outsourcing. 38 63 . 12 See also Strategic Planning. 52 Loyalty Management Tools See Customer Relationship Management. 32 O Offshoring L Layoffs See Downsizing. 40 See Shared Service Centers. 32 Managing Innovation H I Horizontal Organizations See Business Process Reengineering. 20 Key Success Factors Knowledge Management. 52 Joint Ventures See Shared Service Centers. 34 Mission and Vision Statements. 38 Open Market Innovation See Open Innovation. 36 See also Balanced Scorecard. 32 Intellectual Capital Management Mergers and Acquisitions. 38 See Core Competencies. 24 Learning Organization See Knowledge Management. 32 See also Rapid Prototyping. 46 K New Product Development See Open Innovation. 12 See Knowledge Management. 32 See Rapid Prototyping. 48 Management by Objectives See Balanced Scorecard. 56 J Job Descriptions See Decision Rights Tools. 46 Open Innovation.
12 Social Gaming Networks See Social Media Programs. 26 S Organizational Change See Change Management Programs. 56 See also Enterprise Risk Management. 16 See Change Management Programs. 28 V Value Chain Analysis See Outsourcing. 30 See also Mission and Vision Statements. 30 See also Strategic Planning. 40 See Supply Chain Management. 58 Revenue Enhancement See Price Optimization Models. 44 Real Options Analysis See Scenario and Contingency Planning. 50 Overhead Value Analysis See Business Process Reengineering. 60 Reengineering See Downsizing. 56 Outsourcing. 54 Risk Governance See Enterprise Risk Management. 40 See also Shared Service Centers. 36 Quality Assurance See Total Quality Management. 18 Strategic Partnerships See Shared Service Centers. 30 Rapid Prototyping. 50 Simulation Models See Scenario and Contingency Planning. 42 Pricing Strategy See Price Optimization Models. 48 P Six Sigma See Total Quality Management. 12 Process Redesign See Business Process Reengineering. 42 Strategic Balance Sheet See Balanced Scorecard. 52 Performance Improvement See Shared Service Centers. 52 Strategic Alliances. 54 See also Mergers and Acquisitions. 46 Scenario and Contingency Planning. 50 Social Media Programs. 28 Virtual Organizations See Strategic Alliances. 60 Supply Chain Management. 54 Rightsizing See Downsizing.Subject Index continued Organization Design See Decision Rights Tools. 60 Pay for Performance See Balanced Scorecard. 48 T Total Quality Management. 58 See also Enterprise Risk Management. 40 Price Optimization Models. 30 64 . 48 See also Enterprise Risk Management. 18 Satisfaction and Loyalty Management. 42 See Satisfaction and Loyalty Management. 46 Value Managed Relationships See Strategic Alliances. 50 Q R Strategic Planning. 16 Shared Service Centers. 34 See also Outsourcing.
Carol. Mark T. Laura L.. 33 Davenport. 25 Armstrong. Jr. Douglas. 39 Davis... Arthur G. Edwards. 27 Bogan. 57 Carr. Orlando C. Timothy R. 29 Corbett. 45 Bruner... Dan S. 19 Ayers. 43 C Cairns. Mardi.D. Kevin. James B. 61 Denrell. 49 Burton. 21 Alexander. Jennifer. 57 Collison. David. 61 Christensen. 35 D Dahlgaard. Andrew. Tom Olavi. Joao. 25. 61 Day. 33 Czarnecki.. Henry William. Kamiz.. 37 Ahlstrand. 15 Campbell. Carlo. 51 Cooper. 39 Choi. 57 Allen. 29 Champy. 39 Brown. 29 Bazerman... 61 Dalkir. 55 Chesbrough. Tony. 25 Al-Mashari. Marcus. Christopher W. Robert.. Stanley B. Ronald J. Dale H. 47 Brown. Cesar. George S. 29 Burt. 29 Deming. Cary L. Hans. Tim. George. 49 Bangemann. 15 65 . W.Author Index A Abrahams. 61 Besterfield.. Gerald. 21 Crowston. Glen. 19 Cohen.. 25 Collins. Andrew. 49 Blenko. 53 Brooks. Wen-Long. 37 Collis. Jens J. 33 Axelrod.. Ph. Scott D. Marcia. 39 Clark. 15 B Baker. 59 Buchanan.. 49 Camison. 54 Awazu. Thomas H.. 55 Burke. Yukika.. David K.. Kenneth P. 17. 25 Besterfield. George. 61 Besterfield-Michna. 19 Coers. Clayton M.. 57 Alai. 27. Mary.. 49 Boxwell.. Robert J. Daniel J. 61 Camp. 21. 61 Blackhurst. James. 51 Bernoff. Ronald J. 41 Brown.. 17 Carter. Robin W.. Chris. Robert F. 35 Craighead. Alistair. Thomas Y. 49 Brogan. 17 Anthony... Steve. 15 Cohen. Chris. Josh. Richard H. 33 Cooke. 41 Bood. James. 51 Baptista. Bruce. 53 Berstell.. Jim.. 15 Bonifazi. Majed. Jerker.. 43 Bradfield. Ron. 23 De Meuse. Bryan. 15 Boyd. 33. Michael J. 49 Behling. E. 49 Critelli. 17 Chang.T. 61 Besterfield-Sacre.. Mark. Christopher E. Jeffrey. Max H.. 61 Bergeron. Robert. Robert C.. 43 Bandhold. John Seely.
Terry. III. 47 Hunt.. Leonard. 35 Hrebiniak. 49 Elson.. 49 Funston. Debra. Chris. 59 Humby.. 13 H Hagel. 51 Feigenbaum.. Gene. Paul J. 55 Hubbard. Dwight L. Davidson. 15 Hilger. Michael J. Jeanette. Edward. 33 Fraser. 45 Dinsdale. George A. 17 Frankel. John. 49 Fahy. Richard. Scott. 15 Epstein. 31 Hugos.. Douglas W. 59 Freeman. 47 Doz.. 47 Huston. 35 Goodstein. Larry. John. 53 Gottfredson. John J. 33 Heskett. John R. 41. 25 Dunbar. Michael E. 55 Hopkinson. 49 Harding. Jeffrey H. Jill.. 39 F Fahey.. 31 Gole.. Steven D. Peter F.S. David. Robert M. Matthew.. 35 Harmer. Lisa. Michael. Ian... 15 Garman. H... Martin J. 57 du Toit.. Kevin C. Michael. 31 G Gale. 55. Neil. Todd R. 35 English. 21 Hinterhuber. Mark. 29 Goetsch. Bradley T. 57 Hsin. 17 Hamel. 37 Higgins. 54 Hague. Charles M.. Frederick. Marc.. John. Michael H. David A.. 39. Frederick G. 21 Drucker. Anders. 37 Horn. James L.. Robert B. Karen. 47 Dixon. 33 Frame.. Yves L. James T.. 35 Gertz. John. 31 Frazelle. 45 Horan. 49 Goold.. David L.Author Index continued Desouza. 61 Firestone. 33 Holden. J. 35 Frappaolo. Jeff.. 47 Frigo. 21. 51 Dyche. 43 Hogan.. Gerard. 57 Grant. 55 Drejer. James. 17 E Elkins.. Hans. 31 Handfield. Lawrence G... 27 Gaughan. 41 Groff. 25 Dunleavy.. 25. 61 Greaver.. Philip. Maurice. Armand V. 49 Goodstein. 23 Dyer. Patrick A... J. Daniel G. Carl. 45 Hall. 17 Hampton. Joseph M. William J.. 57 Gossieaux. Reed. 41 Dickens. Mark L.. Leonard D. Andrew R. Jasmine Yi-Hsuan. 33 Fisher. 43 Hook. 59 Flinn. Francois. 61 Goldstein. Clive.. 57 Hammer. Marshall. 39 66 . Liam. 31 Fuld. 55 Garvin. Varun. 35 Hilmer. Gary. Martin. 61 Gardner. 51 Harrington. 33 Grover. 15 Herman. 33.
Zahir. 21 Moran. Karen E. Karl B. 57 Manrodt. 25 Lewis. 41 Leone.. John P.. 45 Lovallo. Edwin L. Edward E. Dianne. 41 Manzoni. 43 Kotler. 29 Monahan. V. 25. Theodore. Diana. David. Alexandra Reed. Ghopal K. 57 Mishra. 25 Marks. 27. 21 Kris.. 33 McDonald. 59 Martin. Ian C. 57 Lawler. 31 Lampel. 35. 27 Matzler. 53 Myers. III. 41. 61 Irani. 17 Israel.. Robert S. 31 Montier. 55 Kaplan. 55 Li. Alan. Larry. 51 Miller. 33 McGrath. Michael C... 33 Mankins.. 55 Kumar. 25 Markowitz. R. 17 Kennedy. Thomas M. Charlene.I Iacobucci.. Prashant. Kurt.. Masaaki. Ravi. Rob. 53 J Jarvenpaa. Mike. 29 Mishra. Jean-François. Frank W. 51 Khanji. Robert P.. Aneil K... Karla L. Jr.. 37 Jones. Andrew. 39 Johansson. 51 M MacCormack.. 19 67 . 41 Kale. 37 Kalakota. 35 Lusk. Dawn. Mats... 45 Malhotra. 25 McElroy. Rosabeth Moss.. 35 Mintzberg. 61 Ledingham. James S. 15 Ichijo.. 47 Levitt..M.. 45 Meer. Philip. Kai. 55 Kanter. 33 McDermott. 39. Rita Gunther. 49 Liou. Kazuo. 29 Martin. Joseph. 33 Juran. 61 Kinni.W.. Fred A.. 17 Jones. 13. 33 Imai.. 41 Kramer. Sirkka. 37 Koulopoulos. Jane C. 51 Krishnan. Ed... 39 Lindgren. Thomas P. J. Patricia.. 35 Lam. Henry. Richard. 25 Kotter.. Peter G. 45 MacMillan. 53 Linder. 19. Thomas W. Henry J. Shel.. Richard. 25 Melchior.. 47 L Lajoux. James.. Robert E. Paul.. 61 Kristensen. 23 Ledyard. 13 Markey. Malcolm. 61 Kuglin. 23. Mitchell Lee. Daniel C. 25 K Kahaner. Gregory. Manuj K. James H. Theodore. Dan. 17 Malone. Jordan D. 55 Keen. James.. Mark W.
Anthony J. 35 Peterson. Rafael. Peter A. 37. 41 S Sakkab. 23. 39 Reichheld. 17 Sawhney. 49 Raybourn. 35 Rugelsjoen. 37 Owen. 43 Phillips. 55 Ringland.. 55 Rukstad. 23 Schoemaker.. C.. Jerry I. Denise. 21. Stephen. 23. Don.. Mohanbir. 41 Rosenbaum. Geoff. Ananth. Michael G. Werner. 33 Pearl. Donniel S. 35 Peppers. 27 Roloff. 57 Postma. 47 Reider. Elizabeth. 17 Rovit.. 33 Puryear.. Paul R. 47 P Parcell. Mark J. 59 Ramaswamy.. Bjarne. Cynthia. 39 Nanus. David P. 27 Nitterhouse... Rob. Sam. Rudy. Barbara. Darrell K. 51 68 . 51 Quinn. Gill. Birgit. Burt. 13 Nolan. Christie. Tom. Ikujiro. Joseph R. Laurence. 49 Nonaka. Martha. Fred. 13.. 23. Theo. L. Tim. Michael A. Nabil.. 25 Niven.. 51 Reinartz. Richard. James Brian. 21. J. 53 Schaubert. Ted. 35 Rosenthal. Richard.. 49 Schulman. 59 Neilson. 57 Prusak.. 39 Ramirez. 55 Nyberg. 41 R Raman. 43 Nambisan.. 33. 39.G. Joshua. Phil. 25 Perella. David. 33 Nordhielm. 21. 39. 41 Phillips. Steve. 27 Robinson. Venkat. 29 Q Quinn... 37 Narayanan. 49 Roberto. Paul. Andrew.. 39 Schadler. Joshua. 47 Renzl. Paul J.. Kirsten D. 15 Reilly. 57 O O’Hallaron. 47 Porras. 25 Rogers. Timothy N. Gary. Jim. Robert. 37 Porter. 47 Phillips. 33 Reuer. 55 Rigby. Michael E. 57 Schefter. V. Marcia. 37 O’Hallaron.. 39 Sandberg. 41 Rogers. 27 Prahalad.H. Jeffrey J. 49 Randall.. 49 Power. 41 Powers. Satish. Michael E. 15 Raynor. 15 Norton.. Thomas T. Robert M.K.Author Index continued N Nagle.
Michael D. 37 Zook. Ajay. 45 Toman. 21. 21 Spitznagel... Peter M.. Thomas A. Christian. 41 Viguerie. 25. 41 Vashistha. 19 Wright. Betty J. Mary. John W. Bob. Kees. 17 Zimmerman. 39. 41 von Hippel. 49 T Taleb. 51 Wilson. Charlie O. 17 Wagner. Chris. Jim. 37 Sommers-Luch. Tony. Gretchen M. Navdeep S. 61 Sharma. 33 Williams.. Karl.. 39 Selsky. 29 Y Yankelovich. Julien. Stephen. 49 Senge. 61 Watkins. John. Rami. ManMohan S. 47 Tregoe. 49 Wade.. Kathleen. 49 Wenger. Nassim Nicholas. 55 Simkins. Christopher P. 33 Shani. 39 U Uhlaner. 55 Selden. 49 Vashistha. Suresh. Oded. Robert S. 55 Slone. 55 69 .. Mark R. 25 Z Zairi. Pierre. 51 Thomke. Steve. 59 Trevor.. 35 Vitasek. 53 Segil. 45 W Wack. 53 Snyder. 31 Teal. James. Judy. Patrick. 33 Surowiecki. Benjamin. Larraine. Mark W.. 35 Ulrich. William M. 31 Wall.. 37 Walton. 43 Sodhi. Peter.. 37 Trent. 31 Spreitzer. 41. Eric.. Harbir. Irene. Daniel. Stefan. 15. Avinash. 39 V van der Heijden. 41 Shenkar. Robert J. David. 37 Sodhi. Robert. 53 Solum. George.. 15 Steinhilber.. 33 Sobol. Larry. Thomas. Reuben E.Schwartz. Mohamed.. Nicholas. 43 Solis. 23 Terwiesch. 53 Stewart. 59 Smith. 41 Worley.. 51 Sharma. Kate.. 49 Schweiger. Atul. Etienne. 31 Singh. Brian. Robert. 55 Sterne. 39 Tham. 29 Stauffer. Scott. 35 Scoble. David M.
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