© The Delos Partnership 2007 page 1 Integrated Enterprise Leadership A workshop carried out for Trinity Biotech

© The Delos Partnership 2007 page 1

Integrated Enterprise Integrated Enterprise LeadershipLeadership

A workshop carried out for Trinity Biotech


ABC CompanyABC Company“We want to be market leader through providing the best levels of customer service in the industry, which

means delivering the highest quality products, competitively priced, delivered on time. We will provide a continuous stream of new products. We will achieve this through a genuine partnership with suppliers, who will be part of our team. Our employees are empowered to make the most of their skills, and will operate in a fun environment, satisfied with their work. We will take a responsible attitude to the environment, ensuring that we contribute positively to the sustainability of the planet. In this way we will achieve superior long-term returns for our stakeholders.” said the mission statement at the entrance.

Marketing is in the middle of a special promotion, which has suddenly been arranged to meet year-end targets. The artwork – as usual - is having to be arranged at short notice for the packaging. Sales have just quoted for a big contract which will mean significant extra business above the business plan. It is two months until year end, and if they get the order then the Sales and Marketing Director will get a bonus for exceeding her target. Customer Services will be working late tonight to catch up with the backlog of orders, shipping whatever can be shipped, having been chased by the Sales Director and the Operations director, keen to meet this month’s targets.

The Operations Manager had heard the rumour about a 'big order‘ in the canteen at lunch. But they've heard about these before. So they are proceeding with their plans to cancel overtime. The Operations Director meets monthly, individually, with the marketing managers to get a feel for the market. Then he meets with his Production Planner, compares his ideas with past history and they finalise the forecast and production plan, largely based on history.


ABC Company.. ABC Company.. Cont’dCont’d

Corporate are short on cash flow, and hence have told the division to implement a cost reduction programme, and to reduce inventory by 20%. The Finance Director is working on ways to do this, however is reluctant to make any write-offs of current obsolete inventory, so is wanting to restrict any further purchases. Suppliers’ payment terms are being lengthened.

The Manufacturing Manager has just come back from a course with ideas on Total Productive Maintenance, and Operating Equipment Effectiveness. He wants a smaller product range and bigger batches. His basic manufacturing philosophy is that lower costs are achieved through maximising utilisation of machines, keeping direct labour at maximum levels of output. The Distribution manager believes that demand is increasing, so is going to open a large new Central Distribution centre.

The Development department are working on a massive increase in the product portfolio, and are in the middle of developing a revolutionary new product, that will dramatically increase market share. However, a minor modification to the product will reduce costs, and enhance the quality. Customer response so far is excellent. Unfortunately it will delay the launch to Quarter 3 of the next year.

The Chairman and the Chief Financial Officer just met with a key group of Stock-market analysts, and have said that cash-flow will improve this year through a radical cost reduction and inventory management programme. Sales and Profit will rise by 20 % next year, which should mean an increase of 25 % in Earnings per share, due to an exciting new product to be launched in Quarter 1 next year.

What are your observations on this company ?What are your observations on this company ?


Conflicting objectivesConflicting objectives

Inventory

Customer Service

ManufacturingCosts

ManufacturingFlexibility


Conflicting objectivesConflicting objectives

Finance

Marketing

Manufacturing Sales


Vertical Functional OrganisationVertical Functional OrganisationMD

Sales Marketing Technical Operations Finance HR

R& D

MKTG

SALES

OPS

ACCTS

HR

Directors

Managers

Supervisors/Team Leaders


Functional MeasuresFunctional Measures

Actual Volumevs Budget

Actual Salesvs Budget

InventoryLevel

ProjectCosts

Leads to Silo Management Mentality

Manufacturing Director

Sales Director

Finance Director

Development Director

ManagingDirector


Disintegrated Business PlanningDisintegrated Business Planning

Long termplan

Short termPlan

Medium TermPlan


Lack of VisibilityLack of Visibility

05

101520253035404550

Sales Cont'n Net Profit

Last YrBudgetYTD

Year to date is below budget and last year, and therefore there is an urgent need to cut costs, and reduce inventory, in order to improve cash flow…


The informal companyThe informal company• Multiple sets of numbers• Multiple spreadsheets• Multiple ways of working• Confusion over real objectives• Defensive functional behaviour• Rumours around the corridor• Ad hoc communication• Short-term focus• Heroes are favourites

Silo Silo ManagementManagement


Objectives of Integrated Enterprise Objectives of Integrated Enterprise LeadershipLeadership

• Vision and Strategy supported by :• One set of numbers at all times• Integrated Plans• Realistic Plans

• Visibility and transparency• Teamwork• Decisions made in timely fashion• More planning, less fire-fighting• Consistent performance measures• Delivery of the strategy• Top Down and bottom up


Prerequisites for effective IELPrerequisites for effective IEL• Integration of systems• Accurate data• Adherence to formal processes• Process not function• Long-termism and not short-termism• Realism• Honesty and trust• Commitment

If you say you will do it, you will If you can’t do it say so.

• Genuine focus on adding value to the customer


The Delos ModelThe Delos ModelFor Business Integration For Business Integration

InnovationInnovation

VisionVision

StrategyStrategy

PrioritisationPrioritisation

DemandDemand

SupportSupport

SupplySupply


An Alice in Wonderland World?An Alice in Wonderland World?

“Cheshire Puss” – said Alice – “ Would you tell me, please, which way I ought to go from here?”

“That depends a good deal on where you want to get to” said the cat.

“I don’t much care where, so long as I get somewhere” said Alice

“Then it doesn’t matter which way you go” said the Cat.


Vision and StrategyVision and Strategy

• Vision Clear statement of direction Understood by all

• Strategy Means of getting there Requires clear focusfocus


Setting the VisionSetting the Vision

•Simple•Owned by the Chief Executive•Understood by everyone•Visible•Relevant


A Vision or…A Vision or…

“We don’t so much have a vision,more a hallucination, really.”

Anonymous senior manager, anonymous Anonymous senior manager, anonymous multinationalmultinational


Suppliers’ Suppliers’ BargainingBargaining

PowerPower

Threat o

f

Threat o

f

NewNew

supplie

r

supplie

r

ss

Customers’ Customers’ BargainingBargaining

powerpower

Industry Industry competitive competitive

situationsituation

The forces of competitionThe forces of competitionProduct

Product andandServiceService

substituti

substitutionon

Freedom

FreedomOfOfEmployee

Employee

movement

movement

Governme

Governme

ntnt

Legisl

ation

Legisl

ation


Leverage our Product P

and Product L assets

Protect and expand our

Product Family F

franchise

Grow our Product Family B business

Develop / acquire

innovative products and technologies

Achieve a profitable leadership position in

key countries

Derive 70% of company sales from top 10 markets by 2006

Maintain our leading position in S. America & France, Canada, UK, and Italy

Optimize public policy, regulatory, and communications to drive growth

Finalize Corea market strategy by 2003

Articulate a new Branding strategy

Meet timelines on bulk mfg. facility and packaging outsourcing for Bd

Acquire market knowledge in key countries

Develop/acquire Product Bk

Ensure launch of Bd Child by 2008

Develop ATO strategy

Develop Product P end-game strategy that maximizes Industrial utilisation

Accelerate the conversion from extP to intP

Consolidate and optimize ATO strategy to support Product P end-game and extP conversion

Slow competitor XX uptake in US

Develop comprehensive product delivery strategy

Institutionalize the Technology Visioning process

Ensure appropriate upstream / downstream balance

Ensure full alignment of Sales, Development, Legal Affairs and Marketing activities

Implement Goodwill optimization organization

Maximize existing assets for Product Fa and Fc

Ensure leadership in Family F delivery systems

Ensure optimal

capacity, quality and customer

satisfaction

Develop/ Upgrade Quality systems to ensure 50% yearly reduction in rejects and rebuild

Maximize utilization of existing capacity

Achieve Delos Platinum level at all sites

Implement Delos Global Integrated Enterprise Leadership

Explore continuous improvement approaches

Defend, and then expand, our leadership position through sustainable profitable growth.

Launch Product N

and Product M in 2005; >50% of sales

from new products by

2012

Achieve all critical path milestones to ensure 2005 launches

Complete Product N and product M pre-launch activities

Upgrade sales and marketing competencies for adult markets

Develop trust and transparency between IO and R&D groups

implement programs to accelerate the product development process.

Maximize our key assets

Continue to develop and implement e-strategies to enhance the effectiveness of Company corporate strategy. Align our capacity and capital investment with our strategy.

Rapidly upgrade our technical and

leadership competencies

Aggressively fill the competency and values gap

Become a truly global organization

Empower through broad spans of control in a flat organization

Differentiate rewards and career opportunities based on performance

Regain our leadership position Regain our leadership position in product development and in product development and

approval approval Reliably supply quality XXX Reliably supply quality XXX Foster a culture that Foster a culture that

demands excellence demands excellence Continue to lead in Continue to lead in

marketing and sales marketing and sales


Strategy vs. ExecutionStrategy vs. Execution

““It is not so much the strategy that causes It is not so much the strategy that causes the failure. 80 % of companies fail to the failure. 80 % of companies fail to execute their strategy”execute their strategy”

- - Kaplan and Norton: Kaplan and Norton:

““Strategy Focussed OrganisationStrategy Focussed Organisation””


The Delos ModelThe Delos ModelFor Business Integration For Business Integration

InnovationInnovation

VisionVision

StrategyStrategy

PrioritisationPrioritisation

DemandDemand

SupportSupport

SupplySupply


CCUUSSTTOOMMEERRSS

Processes link customers to suppliersProcesses link customers to suppliers

SSUUPPPPLLIIEERRSS

CoreCore

VisionVisionAnd StrategyAnd Strategy

SupportingSupportingFinanceFinance

Human ResourcesHuman Resources

Information TechnologyInformation Technology

Product DevelopmentProduct Development

Business WinningBusiness Winning

Customer Order FulfillmentCustomer Order Fulfillment

After Sales ServiceAfter Sales Service


Management of InnovationManagement of InnovationIntegrated Project Management – Programme Management


Forecasting Needs a Simple ProcessForecasting Needs a Simple Process

Filter Filter DemandDemand

ComputeComputeforecastforecast

CaptureCaptureActualActual

C O N S E N S U S C O N S E N S U S F O R E C A S TF O R E C A S T

Hold Demand ReviewHold Demand Review

Agree commercialAgree commercial plansplans

AgreeAgreeExceptional demandExceptional demand

AssumptionAssumptions written s written down and down and

agreedagreed

ReviewReviewAccuracyAccuracy


Supply Planning processSupply Planning process

Strategy

Master Scheduler

Sales Forecasts

CustomerOrders

ManufacturingPlan

PurchasingPlan

ERPSystem

Balanced Plan


Financial supportFinancial supportValue Stream A Value Stream B Total

Product 123 Product 456 Product 123 Product 456 Product123

Product456

Revenue 100 50 50 25 150 75

Advertising etc 10 5 5 3 15 8

Manufacturing Costs 30 15 15 8 45 23

Purchasing Costs 35 20 20 7 55 32

Accounts and Admin 4 1 1 0 5 1

HR and IT 1 1 1 1 2 2

Research and Devel. 6 2 2 0 10 2

Value Stream Contribution

14 6 6 6 20 12

Non Value Stream costs 3 3 3 2 6 5

EBITDA 11 3 3 4 14 7


Today’s Value ?Today’s Value ?Time is money ...

Time is waste ...


Traditional MeasuresTraditional Measures

• Sales versus budget• Machine Utilisation• Purchase Price Variance• Overhead Recovery• Headcount• Direct Labour Productivity• Inventory Level


The Delos Core MeasuresThe Delos Core Measures1.Customer Order Delivery – the “Perfect Order”2.Demand Forecast Accuracy3.Lead Time Reduction - Demand, Supply and

Change4.Quality, Right First Time – Demand, Supply and

Change5.Schedule Achievement – In-house and

outsourced6.New Product Introduction7.Velocity – all processes


TeamworkTeamwork

With a common vision and a strategy there is a chance to develop common

Objectives

Commitment

Team direction


People ValuesPeople Values

TraditionalTraditional NowNow FutureFutureProcess problemsProcess problems Not my job Ownership Accountability

Management StyleManagement Style Supervise Facilitator/Team Leader

Coach

Working StyleWorking Style Individual Team EmpoweredTeams

Training and Training and EducationEducation

Non-existent Luxury Necessity

KnowledgeKnowledge Ignorant Understands Expert

Attitude to PeopleAttitude to People Liability Cost Asset


Suppliers’ Suppliers’ BargainingBargaining

PowerPower

Threat o

f

Threat o

f

NewNew

supplie

r

supplie

r

ss

Customers’ Customers’ BargainingBargaining

powerpower

Industry Industry competitive competitive

situationsituation

Do these forces change ?Do these forces change ?Product

Product andandServiceService

substituti

substitutionon

Freedom

Freedom

OfOf

Employee

Employee

movemen

t

movemen

t

Governme

GovernmentntLegislation

Legislation


How do we react to change ?How do we react to change ?

• Panic• Crisis Management• Fire-fighting

• Routine management of crisis• Change identified, agreed and signed-off• Formal and timely decision-making

OR


Integration of ProcessesIntegration of ProcessesStrategic Review

IEL Review

Demand PlanMaster ScheduleProject Plan

MRP/CRP/Activities

WTL/Orders/Tasks

How Often Yearly Monthly Weekly Daily Hourly

Who Board Board Managers Computer Computer

Units £’s Families Families/Products

Parts/Activities

Parts/Tasks

Horizon 5 years 3 years 2 years 2 years 2 years

Focus 3-5 years 0-3 years 0 to Cum Lead Time

0 to Cum Lead Time

Part Lead Time

Time buckets

Years Months Weeks Days Hours

DetailDetail


Leadership – some quotesLeadership – some quotes"If you do not know where you are going, every road will get you nowhere." - Henry

Kissinger

"Management is efficiency in climbing the ladder of success; leadership determines whether the ladder is leaning against the right wall." - Stephen R. Covey

“A leader takes people where they want to go. A great leader takes people where they don't necessarily want to go, but ought to be.”-Rosalynn Carter

"As we look ahead into the next century, leaders will be those who empower others." - Bill Gates

"You manage things; you lead people." - Grace Murray Hopper

“Inventories can be managed, but people must be led.” – H. Ross Perot


Integrated Enterprise LeadershipIntegrated Enterprise Leadership• A vision and strategy – communicated to everyone and

supported by facts not hopes• Clear focus on strategic competency• All-embracing performance measures• Process not functional “orientation”• Integration of all of the business processes • Teamwork in pursuit of common objectives• Focus on delivery of customer and shareholder value• A process for managing change• Getting people to follow the changed direction without

appearing to launch too many “initiatives”.

Documents

© The Delos Partnership 2007 page 1 Integrated Enterprise Leadership A workshop carried out for Trinity Biotech