Rizal Nangoy 1

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

Abraham Maslow

Rizal Nangoy 2

Management Cycle

Objectives Objectives gap

Generation of responses Selection

Perception of trends

Measurement of performance

Programming

Analysis of consequences

Diagnosis

Communication and leadership

To others in the firm External

environmentAnsoff, 1990

Rizal Nangoy 3

Manager Archetypes

Leader

Administrator

Entrepreneur

Statesman

Planner System Architect

Ansoff, 1990

Rizal Nangoy 4

Selecting a management system to fit the firm

Productive units

Compliance monitoring

Action instructions

Implementation decision

Implementation management

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Selecting a management system to fit the firm

Historical control management

Productive units

Compliance monitoring

Action instructions

Implementation decision

Control decision

Performance evaluation

Historical standards

Performance measurement

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• Productive units

• Compliance monitoring

• Action instructions

• Implementation

decision

• Control

decision

• Performanc

e evalua

tion

• Performance and resour

ce foreca

st

• Performanc

e measuremen

t

Goals

Profit budgets Resource budgets

Action programs

Feasibility

Envi ronment

Selecting a management system to fit the firm

Extrapolative management

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Rizal Nangoy 8

Business

Products / Services

E X P E R I E N C E S

CONSISTENCY ?

Benefits

Brand

Images

T R U S T I S O

Accelerating Factor

MANAGEMENT SYSTEM

Rizal Nangoy 9

Sales Process

Sell Your Self

Sell Your

Company

Sell Your

Products

Rizal Nangoy 10

Smarter Sales

Insight-based selling

Solution-based selling

Product-based selling

Rizal Nangoy 11

Needs

Wants

Expectation

Fears

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Economic needs Purchase situationPsychological variables Social influences

Need awareness

Problem solving• Information search• Identify alternatives• Set criteria• Evaluate alternatives

Purchase decision

Experience after

purchase

Marketing mixes All other stimuli

Consumer decision process

Postpone decision

Feedback based on experience

Rizal Nangoy 13

Buying Center

Buyers

DecidersGatekeepers

InfluencersUsers

Rizal Nangoy 14

Risk

Job security

Comfort

Individual’sneeds

Career advancement

Money/Rewards

Other needs

OverlapIn

needs

Company’sneeds

Innovation

Survival

Customer satisfaction

Growth

Profit

Other needs

Rizal Nangoy 15

What does she

THINK AND FEEL?

what really countsmajor preoccupationsworries & aspirations

What does she

SEE?environment

friendswhat the market offers

What does she

SAY AND DO?

attitude in publicappearance

behavior toward others

What does she

HEAR?

what friends saywhat boss say

what influencers say

PAIN GAINFears, frustrations, obstacles Wants/need

measures of success

Rizal Nangoy 16

Managing Risk

•Internal risk•Controllable and ought to be eliminated or avoided

Preventable Risk

•Voluntarily accepts by the company in order to generate superior return from its strategy

Strategy Risk

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

External Risk

Kaplan 2012

Rizal Nangoy 17

Company Resources

Performance

Organizational

Capabilities

Intangible assets

Tangible assets

Rizal Nangoy 18

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 ?

Barney, 1994

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What makes a resource valuable ?

Demand

AppropriabilityScarcity

Value creation zone

Collis et al, 1995

Rizal Nangoy 20

Organizational Capability

Managers

Mentality

Power

Competence

CapacityAnsoff, 1990

Rizal Nangoy 21

ORGANIZATION CAPABILITY

COMPETENCE CLIMATE

LEADER

BIG COMPANY :-Annual sales > 500 bilion-Employee > 100 persons

SMALL COMPANY :-Annual sales < 500 bilion-Employee < 100 persons

MMGD?

FORMAL SYSTEM, PROCEDURE, SOP, STRUCTURE

INFORMAL, SYSTEM RELATIONSHIP, CULTURE, COHESIVENESS,

Rizal Nangoy 22

. The greatest danger in times of turbulence is not the

turbulence … it is to act with yesterday’s logic

Peter Drucker

Dynamic Business

Complexity

Pattern

Structure

Learning Org.

Learning how to alter Mental Model

Time

care- why

know-what

know- how

know-why

Professional Knowledge

Systems Thinker

Double-loop Learning

23Rizal Nangoy

Rizal Nangoy 24

CLASSES OF ASSETS

FINANCIAL

RELATIONSHIPS

HUMAN

KNOWLEDGE

PHYSICAL

REPUTATION

Rizal Nangoy 25

“Best total cost”

Discipline of Market Leader

Product Leadership

Customer IntimacyOperational Excellence

Product differentiation

Customer ResponsiveOperational Competence

“Best product”

“Best total solution”

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Strategic Fit

EnvironmentalTurbulence

Strategy. ..

Strategic gap

Orgleaderscompetenceclimate

.

Igor Ansoff, 1991

. .

Rizal Nangoy 27

Organization Effectiveness 7S, McKinsey

skills

strategy

structure systems

sharedvalues

staff

style

Rizal Nangoy 28

External Environment

Rizal Nangoy 29

Issue Priority Matrix

Rizal Nangoy 30

Industry Analysis

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Bargaining Power of Buyers --

Buyer is powerful when:Buyer purchases large proportion of seller’s productsBuyer has the potential to integrate backwardAlternative suppliers are plentifulChanging suppliers costs very littlePurchased product represents a high percentage of a

buyer’s costsBuyer earns low profitsPurchased product is unimportant to the final quality

or price of a buyer’s products

Industry Analysis

Rizal Nangoy 32

Industry Analysis

Bargaining Power of Suppliers --

Supplier is powerful when:Supplier industry is dominated by a few

companies but sells to manyIts product is unique and/or has high switching

costsSubstitutes are not readily availableSuppliers are able to integrate forward and

compete directly with present customersPurchasing industry buys only a small portion

of the supplier’s goods.

Rizal Nangoy 33

Corporation’s Value Chain

Rizal Nangoy 34

SWOT Matrix

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Porter’s Competitive Strategies

Rizal Nangoy 36

Risk of Generic Strategies

Risks of Cost LeadershipCost 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 DifferentiationDifferentiation 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 FocusThe focus strategy is imitated:The target segment becomes structurally unattractive:• Structure erodes.• Demand disappears.Broadly targeted competitors overwhelm the segment:• The segment’s differences from other segments narrow.• The advantages of a broad line increase.New focusers subsegment the industry.

Rizal Nangoy 37

8 Dimensions of Quality

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BCG Matrix (Portfolio Analysis)

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GE Business Screen (Portfolio Analysis)

AWinners Winners

B

C

Question Marks

D

F

Average Businesses

EWinners

Losers

GLosers H

LosersProfit

Producers

Strong Average Weak

Low

Medium

High

Business Strength/Competitive Position

Indu

stry

Att

racti

vene

ss

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Staffing & Directing

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Evaluation and Control

Rizal Nangoy 42

The Balanced Scorecard FrameworkFinancial Perspective

Productivity

Long-termShareholders

Value RevenueGrowth

Customer Perspective

Price Quality Time Function Partnership Brand

Product/Service Attributes Relationship Image

Internal Process Perspective

ManageOperations

Manage Customers

Manage Innovation

Manage Regulatory and Social Processes

Learning and Growth PerspectiveHumanCapital

InformationCapital

OrganizationCapital+ +

Cause-and-Effect RelationshipDefines the chain of logic by which intangible assets will be transformed to tangible value.

Customer Value PropositionClarifies the conditions that will create value for the customer.

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

Clustering of Assets and ActivitiesDefines the intangible assets that must be aligned and integrated to create the value.

Kaplan & Norton (2004)

Rizal Nangoy 43

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

Rizal Nangoy 44

Customer Perspective

Customer Value Proposition

Price Quality Availability Selection Functionality Service Partnership Brand

Product/Service Attributes Relationship Image

• Customer Profitability

• Market Share• Account Share

• Customer Acquisition

• Customer Retention

• Customer Satisfaction

Rizal Nangoy 45

Internal Perspective

Operation ManagementProcesses

Customer ManagementProcesses

Innovation Processes

Regulatory and Social Processes

• Supply• Production• Distribution• Risk management

• Selection• Acquisition• Retention• Growth

Processes that createnew products and

services

Processes that improve communities and the environment

• Opportunity ID• R&D portfolio• Design/develop• Launch

• Environment• Safety and health• Employment• Community

Processes that produceand deliver products and

services

Processes that enhance customer value

Rizal Nangoy 47

Learning and Growth Perspective

Human Capital Information Capital Organizational Capital+ +

• Skills• Training• Knowledge

• Systems• Databases• Networks

• Culture• Leadership• Alignment• Teamwork

Strategic Job Families

Strategic IT Portfolio

Organization Change Agenda

Creating Alignment

Creating Readiness

Rizal Nangoy 48

Financial MeasurementTotal 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).

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

Rizal Nangoy 49

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 50

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.

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

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 AdministrativeCost of excess capacity.Cost of capacity shortfall.

Other/Supporting.Approval exceptions to standard. Minimum order quantity Change order timingAvailabiltiy of information.

Rizal Nangoy 51

Internal Operation Measurement ( cont’d)

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.

Rizal Nangoy 52

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)

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.

Rizal Nangoy 56

Maslow’s Hierarchy Of Needs

Esteem needs

Belongingness needs

Security needs

Physiological needs

Self-actualization needs

Rizal Nangoy 57

Expectancy Theory of MotivationValence

0.0-1.0 x 0.0-1.0 x Sum of all outcomes

Effort-to-performance expectancy

Performance-to-outcome expectancy

Performance OutcomesEffort

Effort-to-performance expectancy

Ability

Environment

Performance-to-outcome expectancy

Valence of all outcomes

Rizal Nangoy 58

Remuneration Principles

Parties Should be noted

Needs and Values

Rizal Nangoy 59

People Motivation

Rizal Nangoy 60

Remuneration Components

Pay for POSITION

FIX

• Fixed• Cash • Periodic, routine

Pay for PERFORMANCE• Variable• Cash • Periodic, routine

Pay for PEOPLE • Fixed and Variable• Cash and Non Cash• Periodic, routine, Incidental

The cost of expense ratios

Direct and Indirect Financial Payment

Rizal Nangoy 61

Situational Leadership

Supporting (Lo T, Hi R)

Delegating (Lo T, Lo R)

Directing (Hi T, Lo R)

Coaching (Hi T, Hi R)

M3 M1M2M4

Follower maturity

Task behaviors

Rela

tions

hip

beha

vior

s

Rizal Nangoy 62

Strategic Renewal and Organizational Change

Shifting CompetitiveEnvironment

NewOpportunities

Strategic RenewalOrganizational

Change

Altering BehaviorPatterns ofEmployees

Rizal Nangoy 63

ProspectiveAnalysis

AccountingAnalysis

BusinessEnvironment &

Strategy Analysis

IndustryAnalysis

StrategyAnalysis

FinancialAnalysis

Analysisof cash

flowsProfitability

Analysis

RiskAnalysis

Cost of Capital Estimate Intrinsic Value

Component Processes of Business Analysis

Rizal Nangoy 64

Analyzing Return on Assets-ROA

Rizal Nangoy 65

Conceptual map of strategic managementStrategic diagnosis

Evolution of systems

Strategic analysis

Strategic planningInformationSegmentation

Competitive postureStrategic port folio

Dispersed positioningTechnology strategySocietal strategy

Internationalization strategy

Issue management

Strong signalsWeak signals

Surprises

Organizational design

Design of functional capability

Design of general management

General managersSystemsStructure

Change management

Resistance to changeManaging Change

Institutionalizing change

Environmental turbulence

Environmental challenge Ansoff, 1990

Rizal Nangoy 66

Matching aggressiveness and responsiveness with turbulence

Environmental turbulence

Level 1 Repetitive

Level 2 Expanding

Level 3 Changing

Level 4 Discontinuous

Level 5 Surprising

Rizal Nangoy

Blue Ocean Strategy

67

Kim and Mauborgne (2005)

Costs

Buyer Value

The Simultaneous Pursuit of Differentiation and Low Cost

Value Innovation

Value Innovation: The Cornerstone of Blue Ocean Strategy

Rizal Nangoy

Blue Ocean Strategy

68

Kim and Mauborgne (2005)

Red Ocean Strategy Blue Ocean Strategy

Competing in existing market space. Create uncontested market space.

Beat the competition. Make the competition irrelevant.

Exploit existing demand. Create and capture new demand.

Make the value-cost trade-off. Break the value-cost trade-off.

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

Align the whole system of a firm’s activities in pursuit of differentiation and low cost.

Red Ocean Versus Blue Ocean Strategy

Rizal Nangoy

Blue Ocean Strategy

69

Kim and Mauborgne (2005)

ReduceWhich factors should

be reduced well below the industry’s

standard?

CreateWhich factors should

be created that the industry has never offered?

EliminateWhich of the factors

that the industry takes for granted

should be eliminated?

RaiseWhich factors should

be raised well above the industry’s

standard?

A New Value Curve

The Four Actions Framework

Rizal Nangoy 70

Keep a compelling scoreboard

The 4 Discipline of Execution

Discipline 1Focus on the

wildly important

Discipline 4Create a

cadence of accountability

Discipline 2Act on the

lead measures

Discipline 3

McChesney, Covey, 2012

Rizal Nangoy 71

Leading Change

8. Anchoring New Approaches In The Culture

1. Establishing a Sense of Urgency

2. Creating The Guiding Coalition

3. Developing a Vision and Strategy

5. Empowering Broad-Based Action

4. Communicating The Change Vision

6. Generating Short-Term Wins

7. Consolidating Gains and Producing More Change

Kotter, 1996

Rizal Nangoy 72

Levels of Culture

Basic Underlying AssumptionsEspoused Belief and ValuesArtifacts

Schein, 2010

Rizal Nangoy 73

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

Organizational design and structure

How leaders react to critical incidents and organizational crisis

Organizational systems and procedures

How leaders allocate resources Rites and rituals of the organization

Deliberate role modeling, teaching, and coaching

Design of physical space, facades, and buildings

How leaders allocate rewards and status Stories about important events and people

How leaders recruit, select, promote, and excommunicate

Formal statements of organizational philosophy, creeds, and charters

Schein, 2010

Rizal Nangoy 74

Six Thinking HatsThink 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

De bono, 1985

Rizal Nangoy 75

Corporate ValuationValue to firm =

FCFFWACC - GROWTHFCFF =

EBIT ( 1 – Tax )+ depreciation

- initial investment- change in net working capital

WACC =Cost of equity+ cost of debt( proportion )

Cost of equityCAPM model

Er = Rf + β ( Rm - Rf )

Rm = indext – indext-1 Index t-1

Ri,t = α + β ( Rmt )

Cost of debt = Interest ( 1 – tax )

Growth =Ln(TAt) – Ln(TAt-1)

Ln(TAt-1)

Ri,t = Pi,t – Pi, t-1 Pi, t-1