Value Creation Copyright 2008 Alex Coman Value Creation Profit, People, Planet Arena: Business, Regulator, Information Supply chain Focus: Pareto, Ease/Value Vision/Megatrends: Leadership = Vision+ Ability to execute Political, Economic, Social, Technological Creative destruction: Groupthink, Analysis Paralysis Polarity (internal conflict) SWOT: good model; No tools Opportunities: Ansoff = Generator Innovation funnel = Investment Forecasting = Value assessment
Threats: Sources/Destination Stress test Prevent/Mitigate Strengths/Weaknesses: Event Factor Analysis Root Causes/Core competences Scorecard Control cycle = P4A: Process 6 Performance measures Pareto Problems=Ishikawa Fishbone Action Learning Curve
Note Hyperlink to slides Alex@Coman.org Tel:(972)3-510-1768 -2- WWW.Coman.Org Value Creation Value Creation Copyright 2008 Alex Coman Horizontal Value Chain: Integration: Vertical Control Information Relationships: Business Monopoly/ Regulatory Agency Entities: Market Firm/Coalition Drugs Teva Farmer Dairy Distributor Retailer Consumer Low High FDA Syntax Vocabulary Structure Concise: Link Markets rather than Firms Business implies information flow. Titles on significant arrows. Pertinent entities only. Web ARENA Canonical Form Up Back Push Down Forward Pull Alex@Coman.org Tel:(972)3-510-1768 -3- WWW.Coman.Org Value Creation Value Creation Copyright 2008 Alex Coman Distributors Care Corporate Arena - Health Drug Manufacturers Innovative Generic GSK Teva FDA Ministry of Health GMP CTS Lemon Health Management Org. Clalit Vitamed Macabi Physicians Public Prescription List Pharmacies Macabi Prescription Drugs Over the Counter ShorTab Advertising IMS SuperPharm Web Product Specialists Glaxo IL Teva Ivax Disease Management American Hospital Supplies Tele medicine Shahal eMed EDI Admin Alex@Coman.org Tel:(972)3-510-1768 -4- WWW.Coman.Org Value Creation Value Creation Copyright 2008 Alex Coman Textile Arena Garment Manufacturers Far East Labels Victorias Secret Customers Retailers Fabric GAP GAP Far East CK Macys Benetton Benetton Benetton Walmart Inditex79 23 Robot cut & Die #3 >40% Zara 467Stores Zara 75 400 Small Shops >50% Delta Delta H&M 900 suppliers H&M Inner Secret Tefron HiTex St.Michael M&S Solog 25-35years Anti Gap Older& Wealthier College Crowd Trendy Urban Late Teens Cost Conscious Girls 12+Up Cheap cool Alex@Coman.org Tel:(972)3-510-1768 -5- WWW.Coman.Org Value Creation Value Creation Copyright 2008 Alex Coman shoring - Virtual Firm: off South Korea: Spinning Five Tai sewing workshops Shipper Distributor Japanese plant in Guangdong China: zippers Customer European fashion designer Orders thousands of garments (Virtual Firm) Agility: Value Net Li&Fung: 3,600 employees in 37 countries: Logistics Li&Fung Alex@Coman.org Tel:(972)3-510-1768 -6- WWW.Coman.Org Value Creation Value Creation Copyright 2008 Alex Coman Pareto S h a r e
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Income Group 80% 100% B 30% of population 10% of resources C 50% of population 10% of resources 20% 90% 30% 50% 100% A Significant few: 20% of population 80% of resources B C Classify Differentiate Alex@Coman.org Tel:(972)3-510-1768 -7- WWW.Coman.Org Value Creation Value Creation Copyright 2008 Alex Coman Pareto 0 20% 40% 60% 80% 100% 1 4 5 15% 25% 50% 4 15% 25% 50% 5 S h a r e
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Income Group 20% 40% 60% 80% 100% Distribution of US federal Income-tax revenue by income group Alex@Coman.org Tel:(972)3-510-1768 -8- WWW.Coman.Org Value Creation Value Creation Copyright 2008 Alex Coman Focus: 25% / 25% Value Expected High 80% Oyster 4% Pearl 16% 4%Effort=64%Value Low White Elephant 64%E= 4%V Quick Wins 64% Difficult 80% Easy Ease to Implement Alex@Coman.org Tel:(972)3-510-1768 -9- WWW.Coman.Org Value Creation Value Creation Copyright 2008 Alex Coman Ansoff Ansoff Product Line Old New M A R K E T New Market Development: Diversification: (3/4 failure) Old Market Penetration Product Development: The Firm Old Market Old Firm Old Market Old The Firm Old Market Old New Market Old New Firm New Market New Firm Old Market Old Firm Breadth Market Development Product Development Depth Vertical Depth Depth Boutique Penetration Diversification Alex@Coman.org Tel:(972)3-510-1768 -10- WWW.Coman.Org Value Creation Value Creation Copyright 2008 Alex Coman BritVic Alex@Coman.org Tel:(972)3-510-1768 -11- WWW.Coman.Org Value Creation Value Creation Copyright 2008 Alex Coman Reckitt Benckiser Alex@Coman.org Tel:(972)3-510-1768 -12- WWW.Coman.Org Value Creation Value Creation Copyright 2008 Alex Coman Governance
E x t e r n a l
Threat Internal Strategic Financial Market Operational Prevent Mitigate Crisis Value-at-Risk Alex@Coman.org Tel:(972)3-510-1768 -13- WWW.Coman.Org Value Creation Value Creation Copyright 2008 Alex Coman Probability Stress: Exposure/ Value At Risk Threat Position0 Crisis Capture H e d g e
Threat Position1 E n g a g e
Bar Threat Governance Alex@Coman.org Tel:(972)3-510-1768 -14- WWW.Coman.Org Value Creation Value Creation Copyright 2008 Alex Coman Event-Factor-Review EFR Event Factors Outcome Description Value Strengths Weaknesses Success Failure Alex@Coman.org Tel:(972)3-510-1768 -15- WWW.Coman.Org Value Creation Value Creation Copyright 2008 Alex Coman Event-Factor-Review Factor Event Weaknesses Strengths Description Outcome Product not differentiated enough. New markets require education. Rapid multidisciplinary product development. Good engineering and production. Good interdisciplinary communications. Winning a tier 1 customer contract Success
Sales to market leaders. Technological innovation and professionalism. Choice people working in a creative atmosphere. High employee motivation. Leading a significant technical standards committee The firm is losing money. Strong sales department. High sales growth rate. Exceeding sales targets Alex@Coman.org Tel:(972)3-510-1768 -16- WWW.Coman.Org Value Creation Value Creation Copyright 2008 Alex Coman Event-Factor-Review Factor Event Weaknesses Strengths Description Outcome Small player in giants playground. Technological leadership. Failure to sell to the leading company in the market Failure Product over-specification and over-design. No access to the end-user Insufficient R&D strategic gating. High burn rate.
Losing money over a period of 3 years Excessive technological orientation. No awareness of mergers and acquisition (M&A) potential.
Failure in M&A negotiations with a leading player in the industry Alex@Coman.org Tel:(972)3-510-1768 -17- WWW.Coman.Org Value Creation Value Creation Copyright 2008 Alex Coman Core-Competence-Tree - CCT Owner Value was created High Sales Growth rate Sales to Market Leaders Strong Sales Department Good Engineering And Production Good Inter-functional Communications Technological Innovation and Professionalism Influence in Standards Committee Rapid multidisciplinary System view Development High employee Motivation Sales and Partnership with Leading Firms Technological Leadership Vision, Leadership and Managerial Ability Choice People working in an atmosphere of excellence Core Competencies Alex@Coman.org Tel:(972)3-510-1768 -18- WWW.Coman.Org Value Creation Value Creation Copyright 2008 Alex Coman Root Problems Current-Reality-Tree - CRT Firms Market Value is Insufficient The Firm is Losing Money No Exit New markets Require Education Product Not Differentiated Enough No access to The end User Low Profitability Not enough Strategic Gating in R&D Product Over-Specification and Over-Design No Awareness to M&A Objectives Excessive Technology Orientation High Burn Rate Small Player In Giants Arena Focus on single New Technology Alex@Coman.org Tel:(972)3-510-1768 -19- WWW.Coman.Org Value Creation Value Creation Copyright 2008 Alex Coman Current-Reality-Tree Current-Reality-Tree: CRT Major Un-Desired Effect 8-12 Un-Desired Effects (UDE): Brainstorm Current Concrete Undesired Under our influence
Schema Arrows pointing from cause to effect. Effects at top, Causes at bottom. Root Problems 3 Feedback loops. Alex@Coman.org Tel:(972)3-510-1768 -20- WWW.Coman.Org Value Creation Value Creation Copyright 2008 Alex Coman Long Development Process Tree - Reality - Current High Product Cost Low Forecast Reliability Lack of DFX Planning High mix Low volume Expensive Infrastructure Market Conditions Competition Buyers Market Business Measurement ($) Information Flow in org. Lack of Synchronization Information systems Forgiveness Lack of Structured processes Incomplete development Lack of knowledge Marketing policy Lack of commonality No value engineering Outdated technology Low Product Maturity Resource management Org. size & complexity Culture TTM Market conditions Sales Process management Alex@Coman.org Tel:(972)3-510-1768 -21- WWW.Coman.Org Value Creation Value Creation Copyright 2008 Alex Coman Alex@Coman.org Tel:(972)3-510-1768 -22- WWW.Coman.Org Value Creation Value Creation Copyright 2008 Alex Coman Process Performance Control Chart Pareto P4A: Control Cycle W I P
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Action Deployment Who What When B o t t l e n e c k
Problems: CRT P4A Exploit: Strategic Gating Utilize: Garbage Subordinate: DBR Tactical Gating Elevate: Offload J o b
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Alex@Coman.org Tel:(972)3-510-1768 -23- WWW.Coman.Org Value Creation Value Creation Copyright 2008 Alex Coman Value Measures
6 Value drivers Financial: Throughput = Sales Direct Expenses; Operating Expenses: less people or more productivity Competitive: Lead Time=Time(FinishStart)=Work + Wait. Due-Date-Performance Functional: Inventory: Raw materials+Work-In-Process+Finished Goods Quality Robust: Problems per Million Agile: Customization Alex@Coman.org Tel:(972)3-510-1768 -24- WWW.Coman.Org Value Creation Value Creation Copyright 2008 Alex Coman .1 Process: Aircraft Turnaround Critical Path Model ONBLOCK Aircraft Unloading 32 minutes Connecting Stairs/Jetty 7 minutes Deplaning Passengers 17 minutes Recharge Catering 22 minutes Cleaning Aircraft 33 minutes Fueling Aircraft 32 minutes Cabin Security Check 8 minutes Boarding Passengers 38 minutes Aircraft Loading 44 minutes OFFBLOCK B747 ONBLOCK Connecting Stairs/Jetty 7 minutes Deplaning Passengers 17 minutes Cleaning Aircraft 33 minutes Cabin Security Check 8 minutes Boarding Passengers 38 minutes OFFBLOCK 8 3 . 5 7 8 . 9 8 0 . 6 8 5 . 1 9 1 . 8 8 6 . 2 8 5 . 3 6 7 . 9 8 2 . 5 7 1 . 7 7 0 . 0 8 3 . 6 8 4 . 0 7 9 . 4 0 10 20 30 40 50 60 70 80 90 100 May '05 Jun '05 Jul '05 Aug '05 Sep '05 Oct '05 Nov '05 Dec '05 Jan '06 Feb '06 Mar '06 Apr '06 May '06 Jun '06 Jul '06 Aug '06 Frontier Performance Industry Best Industry Average Industry Worst On Time Arrival Performance U.S. DEPARTMENT OF TRANSPORTATION PERFORMANCE RANKINGS FRONTIER OPERATIONAL PERFORMANCE vs. The Industry P e r c e n t a g e
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Rankings shown above compare major carriers with similar operations. These carriers include: Frontier Airlines, Northwest Airlines, American Airlines, AirTran Airways, Southwest Airlines, Delta Airlines, US Airways, Alaska Airlines, JetBlue Airways, United Airlines, Continental Airlines & ATA Airlines. Over the last 15 months, Frontier has led all major carriers in On Time Performance 8 times. 2. Performance Alex@Coman.org Tel:(972)3-510-1768 -26- WWW.Coman.Org Value Creation Value Creation Copyright 2008 Alex Coman 0% 10% 20% 30% 40% 50% 60% R e a c t i o n a r y
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O t h e r . Pareto 3 Reactionary Technical Air Traffic Control Operations Weather Passengers Other Alex@Coman.org Tel:(972)3-510-1768 -27- WWW.Coman.Org Value Creation Value Creation Copyright 2008 Alex Coman . Problems 4 Ishikawa / Fishbone Analysis Reactionary Delay Reactionary Delay AIRCRAFT ROTATION late arrival of aircraft from another flight or previous sector LOAD CONNECTION awaiting load from another flight THROUGH CHECK-IN ERROR passenger and baggage CABIN CREW ROTATION awaiting cabin crew from another flight CREW ROTATION awaiting crew from another flight (flight deck or entire crew) OPERATIONS CONTROL re-routing, diversion, consolidation, aircraft change for reasons other than technical Alex@Coman.org Tel:(972)3-510-1768 -28- WWW.Coman.Org Value Creation Value Creation Copyright 2008 Alex Coman Swimming lanes Alex@Coman.org Tel:(972)3-510-1768 -29- WWW.Coman.Org Value Creation Value Creation Copyright 2008 Alex Coman . Action 5 Action Deployment Gap
Process Resource I n s t r u m e n t S y n t h e s i s & A n a l y s i s L a b o r a t o r y PRICE H Cost Model, p30 Final Version 25 April 2003 MAXIM Periscope Module MAXIM Periscope Module Learning Curves Learning Curve Next Unit Production Cost $0 $500,000 $1,000,000 $1,500,000 $2,000,000 $2,500,000 $3,000,000 $3,500,000 $4,000,000 17 1 3 1 9 2 5 3 1 3 7 4 3 4 9 5 5 Production Unit MAXIM PRICE H 90% Learning Curve 85% Learning Curve 75% Learning Curve Alex@Coman.org Tel:(972)3-510-1768 -31- WWW.Coman.org Control Cycle: P4A Control Cycle: P4A Copyright 2006 Dr.Alex Coman Robust Design Cost of [Lack of] Quality: X10 Law 250%: 380% Spec General Planning Coding Acceptance Testing 1 10 100 1000 Specifications Detailed Design Test Runs Operation 3 25 6 55 185 100% Code 70% Use 75% Test 47% None 240 Exposed 1 Complaint 24 Damaged TOC: Theory Of Constraints