If The Only Tool You Have Is a Hammer, You Treat Everything Like a Nail

Abraham Maslow

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Management Cycle
Objectives Objectives gap Diagnosis

Generation of responses

Analysis of consequences

Selection

Programming

Measurement of performance Communication and leadership Perception of trends

Ansoff, 1990

To others in the firm

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External environment

Manager Archetypes
Leader

Administrator

Statesman

Planner

System Architect

Entrepreneur
Ansoff, 1990
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Selecting a management system to fit the firm

Implementation decision

Compliance monitoring

Action instructions

Productive units

Implementation management
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Selecting a management system to fit the firm

Historical control management

Control decision

Performance evaluation

Implementation decision

Historical standards

Performance measurement

Compliance monitoring

Action instructions

Productive units
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Selecting a management system to fit the firm

Goals

E n v i r o n m e n t

Control decision

Profit budgets

Resource budgets

Action programs

Performance evaluation

Feasibility

Implementation decision

Performance and resource forecast

Performance measurement

Compliance monitoring

Action instructions

Productive units
Rizal Nangoy Extrapolative management 6

Rizal Nangoy

Business
Products / Services CONSISTENCY ? Benefits Brand Accelerating Factor Images TRUST I S O
E X P E R I E N C E

MANAGEMENT SYSTEM

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Sales Process

Sell Your Self

Sell Your Company

Sell Your Products

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Smarter Sales
Insight-based selling

Solution-based selling

Product-based selling

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10

Needs

Wants

Expectation

Fears
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Marketing mixes

All other stimuli

Economic needs

Psychological variables

Social influences

Purchase situation

Consumer decision process

Need awareness Problem solving Information search Identify alternatives Set criteria Evaluate alternatives Purchase decision Experience after purchase

Postpone decision Feedback based on experience

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Buyers

Users

Buying Center

Influencers

Gatekeepers

Deciders

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Risk Job security Comfort Individuals needs Career advancement Money/Rewards Other needs Overlap In needs

Innovation Survival Customer satisfaction Companys needs Growth Profit Other needs

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What does she

THINK AND FEEL?

what really counts major preoccupations worries & aspirations What does she

What does she

HEAR?
what friends say what boss say what influencers say

SEE?
environment friends what the market offers

What does she

SAY AND DO?

attitude in public appearance behavior toward others

PAIN
Fears, frustrations, obstacles
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GAIN
Wants/need measures of success
15

Managing Risk
Preventable Risk Strategy Risk
Internal risk Controllable and ought to be eliminated or avoided Voluntarily accepts by the company in order to generate superior return from its strategy

External Risk

Some risks arise from events outside the company and are beyond its influence or control
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Kaplan 2012

16

Company Resources

Tangible assets Intangible assets

Organizational Capabilities

Performance
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VRIO Framework
Value Does it provide customer value and competitive advantage ? Rareness Do other competitors posses it ?

In-imitability Is it costly for others to imitate ?

Organization Is the firm organized to exploit the resource ?
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Barney, 1994

18

What makes a resource valuable ?

Value creation zone

Demand

Scarcity

Appropriability

Collis et al, 1995

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Organizational Capability
Managers
Mentality

Climate
Culture

Competence
Problem solving

Power

Distribution of power Informal system

Management systems Organizational structure Reward and incentives Information and technology

Competence

Capacity

Ansoff, 1990 Organizational capacity

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20

ORGANIZATION CAPABILITY
LEADER

MMGD
?
BIG COMPANY : -Annual sales > 500 bilion -Employee > 100 persons SMALL COMPANY : -Annual sales < 500 bilion -Employee < 100 persons

COMPETENCE
FORMAL SYSTEM, PROCEDURE, SOP, STRUCTURE
Rizal Nangoy

CLIMATE
INFORMAL, SYSTEM RELATIONSHIP, CULTURE, COHESIVENESS,
21

.
The greatest danger in times of turbulence is not the turbulence it is to act with yesterdays logic

Peter Drucker

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22

Professional Knowledge

carewhy knowwhy knowhow knowwhat

Pattern

Learning Org.
Learning how to alter Mental Model

Double-loop Learning

Dynamic Business Complexity

Systems Thinker

Structure

Time
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CLASSES OF ASSETS
FINANCIAL PHYSICAL HUMAN

REPUTATION

KNOWLEDGE

RELATIONSHIPS
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Discipline of Market Leader

Best product Product Leadership Product differentiation

Operational Competence

Customer Responsive

Operational Excellence Best total cost

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Customer Intimacy Best total solution

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Strategic Fit

. . . . . .
Strategic gap
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Environmental Turbulence
leaders competence climate

Org

Strategy

Igor Ansoff, 1991

26

Organization Effectiveness 7S, McKinsey

strategy
structure systems

shared values skills staff style

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27

External Environment

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Issue Priority Matrix

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Industry Analysis

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Industry Analysis

Bargaining Power of Buyers -Buyer is powerful when: Buyer purchases large proportion of sellers products Buyer has the potential to integrate backward Alternative suppliers are plentiful Changing suppliers costs very little Purchased product represents a high percentage of a buyers costs Buyer earns low profits Purchased product is unimportant to the final quality or price of a buyers products
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Industry Analysis
Bargaining Power of Suppliers -Supplier is powerful when: Supplier industry is dominated by a few companies but sells to many Its product is unique and/or has high switching costs Substitutes are not readily available Suppliers are able to integrate forward and compete directly with present customers Purchasing industry buys only a small portion of the suppliers goods.
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Corporations Value Chain

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33

SWOT Matrix

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34

Porters Competitive Strategies

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35

Risk of Generic Strategies

Risks of Cost Leadership
Cost leadership is not sustained: Competitors imitate. Technology changes. Other bases for cost leadership erode. Proximity in differentiation is lost. Cost focusers achieve even lower cost in segments. Risks of Differentiation Differentiation is not sustained: Competitors imitate. Bases for differentiation become less important to buyers. Cost proximity is lost. Differentiation focusers achieve even greater differentiation in segments. Risks of Focus The focus strategy is imitated: The target segment becomes structurally unattractive: Structure erodes. Demand disappears. Broadly targeted competitors overwhelm the segment: The segments differences from other segments narrow. The advantages of a broad line increase. New focusers subsegment the industry.

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36

8 Dimensions of Quality

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37

BCG Matrix (Portfolio Analysis)

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38

GE Business Screen (Portfolio Analysis)

High Winners A Winners B C Question Marks D

Winners E
Medium

Average Businesses F Losers

Losers G Low Profit Producers Strong Average

Losers Weak

Business Strength/Competitive Position

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Staffing & Directing

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40

Evaluation and Control

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41

Financial Perspective
Long-term Shareholders Value

The Balanced Scorecard Framework

Kaplan & Norton (2004)

Cause-and-Effect Relationship
Revenue Growth Defines the chain of logic by which intangible assets will be transformed to tangible value.

Productivity

Customer Perspective
Product/Service Attributes Price Quality Time Function Relationship Partnership Image Brand

Customer Value Proposition

Clarifies the conditions that will create value for the customer.

Internal Process Perspective

Manage Operations Manage Customers Manage Innovation Manage Regulatory and Social Processes

Value-Creating Processes
Defines the processes that will transform intangible assets into customer and financial outcomes.

Learning and Growth Perspective

Human Capital

Information Capital

Organization Capital
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Clustering of Assets and Activities

Defines the intangible assets that must be aligned and integrated to create the value.
42

Financial Perspective
Long-Term Shareholder Value

Productivity Strategy

Growth Strategy

Improve Cost Structure

Increase Asset Utilization

Expand Revenue Opportunities

Enhance Customer Value

Reduce cash Eliminate defects; improve yields

Manage capacity from existing assets Make incremental investments to eliminate bottlenecks

New sources of revenue (new products, markets, partners)

Improve profitability of existing customers

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43

Customer Perspective

Customer Profitability

Market Share Account Share

Customer Acquisition

Customer Retention

Customer Value Proposition

Price Quality Availability Selection Functionality Service Partnership Brand Image

Product/Service Attributes

Relationship

Customer Satisfaction

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44

Internal Perspective

Operation Management Processes Processes that produce and deliver products and services Supply Production Distribution Risk management

Customer Management Processes Processes that enhance customer value

Innovation Processes Processes that create new products and services Opportunity ID R&D portfolio Design/develop Launch

Regulatory and Social Processes Processes that improve communities and the environment Environment Safety and health Employment Community

Selection Acquisition Retention Growth

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45

Learning and Growth Perspective

Creating Alignment

Strategic Job Families

Strategic IT Portfolio

Organization Change Agenda

Creating Readiness

Human Capital Skills Training Knowledge

Information Capital Systems Databases Networks

Organizational Capital Culture Leadership Alignment Teamwork

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47

Financial Measurement
Total assets. Total assets per employee. Profit as a % of total assets. Return on net assets. Return on total assets. Revenues/total assets. Gross margin. Net income. Profit as a % of sales. Profit per employee. Revenue. Revenue from new products. Revenue per employee. Return on equity (ROE). Return on capital employed (ROCE). Return on investment (ROI). Economic value added (EVA). Market value added (MVA).
Rizal Nangoy

Value added per employee. Compound growth rate. Dividends. Market value. Share price. Shareholder mix. Shareholder loyalty. Cash flow. Total cost. Credit rating. Debt. Debt to equity. Times interest earned. Days sales in receivables. Accounts receivable turnover. Days in payables. Days in inventory. Inventory turnover ratio
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Customer Related Measurement

Customer satisfaction. Customer loyalty. Market share. Customer complaints. Complaints resolved on first contact. Return rates. Response time per customer request. Direct price. Price relative to competition. Total cost to customer. Average duration of customer relationship. Customers lost. Customer retention. Customer acquisition rates. Percentage of revenue from new customers. Number of customers. Annual sales per customer. Win rate (sales closed/sales contacts). Customer visits to the company. Hours spent with customers. Marketing cost as a % of sales. Number of ads placed. Number of proposals made. Brand recognition. Response rate. Number of trade shows attended. Sales volume. Share of target customer spending. Sales per channel. Average customer size. Customers per employees. Customer service expense per customer. Customer profitability. Frequency (number of sales transaction). Rizal Nangoy 49

Internal Operation Measurement

Time.
On-time delivery receipt. Order cycle time. Order cycle time variability. Response time. Forecast/planning cycle time. Planning cycle time variability.

Cost.
Finished goods inventory turns. Days sales outstanding. Cost to serve. Cash to cash cycle time. Total delivery cost. Cost of goods Transportation costs Inventory carrying costs Material handling costs All other costs Information systems Administrative Cost of excess capacity. Cost of capacity shortfall.

Quality.
Overall customer satisfaction. Processing accuracy. Perfect order fulfillment. On-time delivery Complete order Accurate product selection Damage-free Accurate invoice Forecast accuracy. Planning accuracy. Schedule adherence.

Other/Supporting.
Approval exceptions to standard. Minimum order quantity Change order timing Availabiltiy of information.
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Internal Operation Measurement ( contd)

Average cost per transaction. On-time delivery. Average lead time. Inventory turnover. Environmental emissions. Research and development expense. Community involvement. Patents pending. Average age of patents. Ratio of new products to total offerings. Stockouts. Labor utilization rates. Response time to customer requests. Defect percentage. Rework. Customer database availability. Breakeven time. Cycle time improvement. Continuous improvement. Warranty claims. Lead user identification. Product and services in the pipeline. Internal rate of return on new projects. Waste reduction. Space utilization. Frequency of returned purchases. Downtime. Planning accuracy. Time to market of new products/ services. New products introduced. Number of positive media stories.
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Rizal Nangoy

Learning and Growth Measurement

Employee participation in professional or trade associations. Training investment per customer. Average years of service. Percentage of employees with advanced degrees. Number of cross-trained employees. Absenteeism. Turnover rate. Employee suggestions. Employee satisfaction. Participation in stock ownership plans. Lost time accidents. Value added per employee. Motivation index. Outstanding number of applications for employment. Diversity rates. Empowerment index (number of managers)
Rizal Nangoy

Quality of work environment. Internal communication rating. Employee productivity. Number of Scorecards produced. Health promotion. Training hours. Competency coverage ratio. Personal goal achievement. Timely completion of performance appraisals. Leadership development. Communication planning. Reportable accidents. Percentage of employee with computers. Strategic information ratio. Cross-functional assignments. Knowledge management. Ethics violations.
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Maslows Hierarchy Of Needs

Self-actualization needs Esteem needs Belongingness needs Security needs

Physiological needs
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Expectancy Theory of Motivation

Effort-to-performance expectancy 0.0-1.0 x x Performance-to-outcome expectancy 0.0-1.0 Sum of all outcomes Environment Valence

Valence of all outcomes

Effort

Performance

Outcomes

Ability Effort-toperformance expectancy

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Performance-tooutcome expectancy
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Remuneration Principles

Parties Should be noted

Needs and Values

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58

People Motivation

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Remuneration Components
Pay for POSITION
F I X Fixed
Cash Periodic, routine

Pay for PERFORMANCE

Variable Cash Periodic, routine

Direct and Indirect Financial Payment

Pay for PEOPLE

Fixed and Variable Cash and Non Cash Periodic, routine, Incidental

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60

Situational Leadership
Supporting (Lo T, Hi R)
Coaching (Hi T, Hi R)

Delegating (Lo T, Lo R)

Directing (Hi T, Lo R)

Task behaviors
M4 M3 M2 M1

Follower maturity
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Strategic Renewal and Organizational Change

Shifting Competitive Environment Organizational Change

Strategic Renewal

New Opportunities
Altering Behavior Patterns of Employees

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62

Component Processes of Business Analysis

Business Environment & Strategy Analysis

Industry Analysis Strategy Analysis

Financial Analysis Analysis of cash flows

Accounting Analysis

Profitability Analysis

Risk Analysis

Prospective Analysis

Cost of Capital Estimate

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Intrinsic Value
63

Analyzing Return on Assets-ROA

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Conceptual map of strategic management

Environmental challenge Information Evolution of systems Strategic planning Environmental turbulence Segmentation Competitive posture Strategic port folio Dispersed positioning Strategic analysis Strong signals Issue management Weak signals Surprises

Technology strategy Societal strategy Internationalization strategy

Strategic diagnosis
Organizational design

Design of functional capability

Design of general management

General managers

Systems
Structure

Resistance to change
Change management Managing Change Institutionalizing change

Ansoff, 1990

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65

Matching aggressiveness and responsiveness with turbulence

Environmental turbulence
Level 1 Repetitive

Strategic aggressiveness
Stable based on precedents

Responsiveness of capability
Custodial suppresses change

Level 2 Expanding

Reactive based on experience Anticipatory based on extrapolation Entrepreneurial based on expected futures Creative based on creativity

Production adapts to change

Level 3 Changing

Marketing seeks familiar change

Level 4 Discontinuous

Strategic

seeks new change

Level 5 Surprising

Flexible seeks novel change

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Blue Ocean Strategy

Kim and Mauborgne (2005)

Value Innovation: The Cornerstone of Blue Ocean Strategy

Costs

Value Innovation

Buyer Value The Simultaneous Pursuit of Differentiation and Low Cost

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Blue Ocean Strategy

Red Ocean Versus Blue Ocean Strategy
Red Ocean Strategy
Competing in existing market space. Beat the competition. Exploit existing demand. Make the value-cost trade-off.

Kim and Mauborgne (2005)

Blue Ocean Strategy

Create uncontested market space. Make the competition irrelevant. Create and capture new demand. Break the value-cost trade-off.

Align the whole system of a firms activities with its strategic choice of differentiation or low cost.

Align the whole system of a firms activities in pursuit of differentiation and low cost.

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Blue Ocean Strategy

The Four Actions Framework

Kim and Mauborgne (2005)

Reduce
Which factors should be reduced well below the industrys standard?

Eliminate
Which of the factors that the industry takes for granted should be eliminated?

A New Value Curve

Create
Which factors should be created that the industry has never offered?

Raise
Which factors should be raised well above the industrys standard?
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The 4 Discipline of Execution

Discipline 3

Keep a compelling scoreboard

Discipline 1 Focus on the wildly important Discipline 2 Act on the lead measures Discipline 4 Create a cadence of accountability

McChesney, Covey, 2012

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Leading Change

Kotter, 1996
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Levels of Culture
Basic Underlying Assumptions

Espoused Belief and Values

Artifacts

Schein, 2010
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How Leaders Embed and Transmit Culture

Primary Embedding Mechanisms Secondary Articulation and Reinforcement Mechanisms

What leaders pay attention to, measure, and control on regular basis
How leaders react to critical incidents and organizational crisis How leaders allocate resources Deliberate role modeling, teaching, and coaching How leaders allocate rewards and status How leaders recruit, select, promote, and excommunicate

Organizational design and structure

Organizational systems and procedures Rites and rituals of the organization Design of physical space, facades, and buildings Stories about important events and people Formal statements of organizational philosophy, creeds, and charters

Schein, 2010
Rizal Nangoy 73

Six Thinking Hats

Think of Paper
information Facts and figures

Think of Fire. Think of Warmth. Think of Feelings

Emotional view Feelings and intuition

Think of Caution
Risk, dangers, obstacles, potential problems, and the downside of a suggestion Point out weaknesses in an idea

Think of Sunshine. Think of Optimism

Positive and constructive Visioning and optimistic

Think of Vegetation. Think of Growth

Creativity and new idea Alternative provocation

Think of Sky. Think of Overview

Concern with control The organization of the thinking process, and the use of the other hats

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De bono, 1985

74

Corporate Valuation
FCFF = EBIT ( 1 Tax ) + depreciation - initial investment - change in net working capital

Rm = indext indext-1
Cost of equity Value to firm = FCFF WACC - GROWTH WACC = Cost of equity + cost of debt ( proportion ) Cost of debt = CAPM model Er = Rf + ( Rm - Rf ) Ri,t = + ( Rmt ) Index t-1

Interest ( 1 tax )
Ri,t = Pi,t Pi, t-1 Pi, t-1 Growth = Ln(TAt) Ln(TAt-1) Ln(TAt-1)

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