Course 13 PPT

Course Meeting 13, July 1, 2009Pre RecordedManagement 2600C. Howell-Vischer : Course Meeting 13, July 1, 2009Pre RecordedManagement 2600C. Howell-Vischer

The Value ChainContinued : 2 The Value ChainContinued

What is a Value Chain? : 3 What is a Value Chain? A sequential process of value-creating activities A categorization of the generic value adding activities of an organization A concept described and popularized by Michael Porter in his 1985 best-seller, “Competitive Advantage: Creating and Sustaining Superior Performance” It defines the organization’s activities as being either primary or support activities

The Value Chain : 4 The Value Chain General administration Human resource management Technology development Procurement Inbound logistics Operations Outbound logistics Marketing and sales Service

Primary Activities : 5 Primary Activities Associated with receiving, storing and distributing inputs to the product Location of distribution facilities Material and inventory control systems Systems to reduce time to send “returns” to suppliers Warehouse layout and designs

Primary Activities : 6 Primary Activities Associated with transforming inputs into the final product form Efficient plant operations Appropriate level of automation in manufacturing Quality production control systems Efficient plant layout and workflow design

Primary Activities : 7 Primary Activities Associated with collecting, storing, and distributing the product or service to buyers Effective shipping processes Efficient finished goods warehousing processes Shipping of goods in large lot sizes Quality material handling equipment

Primary Activities : 8 Primary Activities Associated with purchases of products and services by end users and the inducements used to get them to make purchases Highly motivated and competent sales force Innovative approaches to promotion and advertising Selection of most appropriate distribution channels Proper identification of customer segments and needs Effective pricing strategies

Primary Activities : 9 Primary Activities Associated with providing service to enhance or maintain the value of the product Effective use of procedures to solicit customer feedback and to act on information Quick response to customer needs and emergencies Ability to furnish replacement parts Effective management of parts and equipment inventory Quality of service personnel and ongoing training Warranty and guarantee policies

Support Activities : 10 Support Activities Typically supports the entire value chain and not individual activities Effective planning systems Ability of top management to anticipate and act on key environmental trends and events Ability to obtain low-cost funds for capital expenditures and working capital Excellent relationships with diverse stakeholder groups Ability to coordinate and integrate activities across the value chain Highly visible to inculcate (fix in people’s minds) organizational culture, reputation, and values

Support Activities : 11 Support Activities Activities involved in the recruiting, hiring, training, development, and compensation of all types of personnel Effective recruiting, development, and retention mechanisms for employees Quality relations with trade unions Quality work environment to maximize overall employee performance and minimize absenteeisn Reward and incentive programs to motivate all employees

Support Activities : 12 Support Activities Related to a wide range of activities and those embodied in processes and equipment and the product itself Effective R&D activities for process and product initiatives Positive collaborative relationships between R&D and other departments State-of-the art facilities and equipment Culture to enhance creativity and innovation Excellent professional qualifications of personnel Ability to meet critical deadlines

Support Activities : 13 Support Activities Function of purchasing inputs used in the firm’s value chain Procurement of raw material inputs Development of collaborative “win-win” relationships with suppliers Effective procedures to purchase advertising and media services Analysis and selection of alternate sources of inputs to minimize dependence on one supplier Ability to make proper lease versus buy decisions

Question : Question What would Slow Food’s Value Chain look like? 14

Resource-Based View of the Firm : 15 Resource-Based View of the Firm Two perspectives The internal analysis of phenomena within a company (SWOT) An external analysis of the industry and its competitive environment (PEST) Three key types of resources Tangible resources Intangible resources Organizational capabilities

Types of Resources : 16 Types of Resources Relatively easy to identify, and include physical and financial assets used to create value for customers Financial resources Firm’s cash accounts Firm’s capacity to raise equity Firm’s borrowing capacity Physical resources Modern plant and facilities Favorable manufacturing locations State-of-the-art machinery and equipment

Types of Resources : 17 Technological resources Trade secrets Innovative production processes Patents, copyrights, trademarks Organizational resources Effective strategic planning processes Excellent evaluation and control systems Types of Resources Relatively easy to identify, and include physical and financial assets used to create value for customers

Types of Resources : 18 Types of Resources Difficult for competitors (and the firm itself) to account for or imitate, typically embedded in unique routines and practices that have evolved over time Human Experience and capabilities of employees Trust Managerial skills Firm-specific practices and procedures

Types of Resources : 19 Types of Resources Innovation and creativity Technical and scientific skills Innovation capacities Reputation Effective strategic planning processes Excellent evaluation and control systems Difficult for competitors (and the firm itself) to account for or imitate, typically embedded in unique routines and practices that have evolved over time

Types of Resources : 20 Types of Resources Competencies or skills that a firm employs to transform inputs to outputs, and capacity to combine tangible and intangible resources to attain desired end Outstanding customer service Excellent product development capabilities Innovativeness of products and services Ability to hire, motivate, and retain human capital

How Resources & Capabilities Lead to Advantages : 21 How Resources & Capabilities Lead to Advantages

Adding Value : 22 Adding Value

Adding Value : 23 Adding Value Adding value means making the customer feel like they are getting real value for their money. This can happen by/through: understanding and being close to the customer committing to quality maintaining a high level of all around service reacting speedily to competitive opportunities and threats constant innovation

Examples of Adding Value : 24 Examples of Adding Value warranties extra car features (rust filter) airlines (mix of offerings in seat choices) taking away features seen as a nuisance (handy features) services (grocery delivery) (Peapod) convenience packaging (salad in a bag) cleanliness, value, quality, service (formerly McDonalds) ambience/lifestyle (Starbucks)

Opportunities for Adding Value : 25 Opportunities for Adding Value changes in industry regulation marketing (segmentation/globalization) operations (technology, cost reduction, service, quality) people (exploiting expertise, encouraging innovation) finance (globalization of financial markets, better use of assets) information (exploiting the potential of information technology) acquisition and restructuring strategies co-operation strategies

Scenario Planning : 26 Scenario Planning

Slide 27 : “This present moment used to be The unimaginable future” Stewart Brand The Clock of the Long Now

Thinking About the Future : 28 Thinking About the Future “Futurism is an art of re-perception. It means recognizing that life will change, must change, and has changed, and it suggests how and why. It shows that old perceptions have lost their validity, while new ones are possible.” ---------------Bruce Sterling, science fiction writer

Why think about the future? : Why think about the future? What we don’t know we don’t know What we know we don’t know What we know All our knowledge is about the past, but all our decisions are about the future Most of what we need to know to make good decisions today is outside our comprehension: we don’t even know it’s there

Types of Futures : Possible - “might” happen (future knowledge) Plausible – “could” happen (current knowledge) Probable - “likely to” happen (current trends) Preferable - “want to” happen (value judgements) Types of Futures

Types of Futures : Types of Futures Time Today

Relationship between possible, probable and desired future : 32 Relationship between possible, probable and desired future

What is Foresight? : Foresight, put simply, is an approach to thinking about the future which lets you: free up your thinking beyond the here and now; explore plausible futures (ie always more than one, because “the” future is not pre-determined); and think about implications for decision making today What is Foresight?

Scenario Thinking/Planning : 34 Scenario Thinking/Planning A powerful process for organizations to plan for the future in an uncertain world Assumes that the future is unpredictable, that change will happen, and that organizations benefit by thinking about alternative futures through potential scenarios

Scenarios : 35 Scenarios Are hypotheses, not predictions, created and used in sets of multiple stories, usually three or four, that capture a range of possibilities, good and bad, expected and surprising Are designed to stretch our thinking about the opportunities and threats the future might hold, and to weigh those opportunities and threats when making both short- and long-term strategic decisions

Dr. Paul Schoemaker : Dr. Paul Schoemaker Videos Why Scenario Planning? http://www.youtube.com/watch?v=YuqN9wWYm5E&feature=related What a Scenario Planning Session Involves http://www.youtube.com/watch?v=ZPd8ZbZIbR8&feature=related 36

Scenario planning is the combination of scenario analysis for strategic purposes and strategic planning based on the outcome of the scenario phase : 37 Scenario planning is the combination of scenario analysis for strategic purposes and strategic planning based on the outcome of the scenario phase

Scenario in Business : Scenario in Business 22% of “Fortune 1000”, were using scenario analysis in the 1970s 75% of these firms adopted the approach after the oil embargo in 1973 It is essential to keep the number of factors that are considered to a minimum

History : History

Time Horizon for Scenarios : Time Horizon for Scenarios Scenario analysis has been used primarily in long-term forecasting Most firms that used scenario analysis employed 5-year horizon Exceptions: Xerox 15-year Shell, 15-year at least The content of scenario becomes progressively more vague as the time horizon lengthens The ideal time horizon of scenario analysis is specific to the industry, product or market under consideration

What a Scenario is not….. : What a Scenario is not….. A scenario is not a forecast or a vision It does not seek numerical precision It usually provides a more qualitative and contextual description of how the present will evolve in to the future It is not assured Scenario analysis usually tries to identify a set of possible future, each of whose occurrence is plausible

Differences between scenarios, forecasts and visions : 42 Differences between scenarios, forecasts and visions

Scenarios versus Forecasts : Scenarios versus Forecasts

How many scenarios do we need? : How many scenarios do we need? Consensus says that three scenario are best The use of only two tend to lead to “good-and-bad” classifications More than three become unmanageable in the hands of users

Scenario Examples: Iran’s future up until 2006 : Scenario Examples: Iran’s future up until 2006 Three scenarios which were written by BMI (Business Monitor International) based upon a: Political Scenario Economic Scenario Business Scenario Note: that the SWOT analysis for each is written as a narrative

Slide 46 : Scenario, Maleki 46

Slide 47 : Scenario, Maleki 47

Slide 48 : Scenario, Maleki 48

Scenario Thinking : 49 Scenario Thinking Begins by identifying forces of change in the world that may have impact on the people served by the organization as well as the strategic direction of the organization itself These forces are combined in different ways to create a set of diverse stories about how the future could unfold

Guidelines : 50 Guidelines Long View Day-to-day work is usually driven by near-term concerns and urgent needs – scenario thinking requires looking beyond immediate demands and peering far enough into the future to see new possibilities – asking “what if……”

Guidelines : 51 Guidelines Outside-In Thinking – Most of us think from the inside out and about the things we would like to control or shape Outside-In Thinking or “thinking conversely” from the outside-in begins with pondering external changes that might, over time, profoundly affect your work

Guidelines : 52 Guidelines Multiple Perspectives The introduction of multiple perspectives Looking from the view of the various stakeholders Multiple perspectives is based on diverse voices that shed new light on strategic challenges, helps to better understand one’s own assumptions, and exposes new ideas that inform It gives us a new perspective which can help us to see the big picture of an issue or idea

Scenario Building : 53 Scenario Building Scenarios are tools to help us take a long view in an environment of uncertainty They are stories about the way(s) the world might turn out in the future…. …..that help us adapt to changing aspects of our environment; …..about different pathways to tomorrow Scenarios are memories of the future

Scenario Process : 54 Scenario Process Determine the key question Identify major factors in the environment Identify driving forces Rank by importance & uncertainty Develop scenarios Determine implications Identify leading indicators

Identifying Major Factors in the Environment : 55 Identifying Major Factors in the Environment Scientific innovation & technology Signs that public perception is changing What you see at the fringe of things Listen to music Opinions of the people you respect What surprises you?

Identifying Driving Forces and Uncertainties : 56 Identifying Driving Forces and Uncertainties Potential categories to think about: Society Economics Politics Environment Uncertainties

Rank By Importance & Uncertainty : 57 Rank By Importance & Uncertainty Two criteria should develop Aspects (factors) which are important to the issue Aspects (factors) which surround the issue but are uncertain The goal is to identify the two or three factors or trends that are most important and most uncertain

Develop Scenario Logics : 58 Develop Scenario Logics Once the fundamental axes of crucial uncertainties have been identified it can be useful to plot them on a spectrum (along one axes), or as a matrix (with two axes), or as a volume (with three axes)

Flesh Out the Scenarios : 59 Flesh Out the Scenarios Write stories – create a narrative Each key factor or trend should be given some attention

Establishing leading indicator questions to tell us that our scenario is changing or coming true : 60 Establishing leading indicator questions to tell us that our scenario is changing or coming true What should we look and listen for that will tell us a scenario is emerging/developing? What should we look and listen for that will tell us a scenario is changing?

Links to Scenario Planning : Links to Scenario Planning Videos by Dr. Paul Schoemaker (very good resource) http://www.youtube.com/watch?v=YuqN9wWYm5E&feature=related http://www.youtube.com/watch?v=ZPd8ZbZIbR8&feature=related Shell Oil http://www.shell.com/home/content/aboutshell/our_strategy/shell_global_scenarios/dir_global_scenarios_07112006.html A good example of Scenario Planning in Practice (PowerPoint) http://www.slideshare.net/whatidiscover/planning-for-the-futures 61