Realizing Realizing Operational Operational Efficiency Efficiency

Realizing Realizing Operational Operational Efficiency Efficiency

Dr. Elspeth MurrayDr. Elspeth MurrayAssociate Professor & Managing Director, Associate Professor & Managing Director, Queen’s Centre for Business VenturingQueen’s Centre for Business Venturing

Queen’s School of BusinessQueen’s School of Business

In partnership with

Queen’s School of Business

Why Are You Here?Why Are You Here?

““Many more individuals of Many more individuals of each species are born than each species are born than

can possibly survive. can possibly survive. Consequently, there is a Consequently, there is a

frequently recurring struggle frequently recurring struggle for existence, and it follows for existence, and it follows that any being, if it varies that any being, if it varies

however slightly in any however slightly in any manner profitable to itself manner profitable to itself

under the complex under the complex

conditions of life, will have aconditions of life, will have a better chance of surviving, better chance of surviving,

and thus be naturally and thus be naturally selected.”selected.”

Charles Darwin, The Origin of the Charles Darwin, The Origin of the SpeciesSpecies

EM-506

The Simple Message?The Simple Message?

Change before you have to!Change before you have to!

AgendaAgenda

Great Organizations – Long term Great Organizations – Long term success success

Your Radar Screen: Key TrendsYour Radar Screen: Key TrendsKnow when & what to change….Know when & what to change….

Your Edge: Critical Implications Your Edge: Critical Implications …….and in what ways.and in what ways

Defined & Defined & forward lookingforward looking

strategystrategy

InnovativeInnovativeapproachesapproaches

DynamicDynamiccultureculture

EstablishEstablishdirectiondirection

Expect changesExpect changes

Create newCreate newrulesrules

Pride, passionPride, passion

Raise theRaise thebarbar

AdjustAdjustalong thealong the

way way

Outwit theOutwit thecompetitioncompetition

EnergyEnergy

Ability toAbility toinvent theinvent the

futurefuture

Ability toAbility tomake itmake ithappenhappen

Visionary Visionary leadersleaders

PR-103

What Was Darwin Really What Was Darwin Really Saying?Saying?

The Executive "Balancing Act"The Executive "Balancing Act"

Create and Create and build for the build for the

futurefuture

Manage today's Manage today's business business

efficiently and efficiently and effectivelyeffectively

EM-507

IIf you don't know what to do with many of the papers piled on f you don't know what to do with many of the papers piled on your desk, stick a dozen colleagues initials on them and your desk, stick a dozen colleagues initials on them and

pass them along. When in doubt, route.pass them along. When in doubt, route.

~ ~ Malcolm S. Forbes Malcolm S. Forbes ~~

Forward Thinkers: Their Radar Forward Thinkers: Their Radar ScreenScreen

Increasing expectations from all Increasing expectations from all stakeholder groupsstakeholder groups

Post-911 fallout Post-911 fallout

Post-corporate scandal fallout Post-corporate scandal fallout

Technological shifts Technological shifts

Demographic shifts Demographic shifts

Globalization Globalization

PR-604

Your “Radar Screen”: Stakeholder Your “Radar Screen”: Stakeholder ExpectationsExpectations

Shareholders – push for quarterly Shareholders – push for quarterly returns, ‘what have you done for me returns, ‘what have you done for me lately’lately’

EmployeesEmployees – ‘what’s in it for me?’ – ‘what’s in it for me?’

CustomersCustomers – better, faster, cheaper – better, faster, cheaper customized, high quality customized, high quality

Partners – easy to do business with Partners – easy to do business with

Suppliers – want ‘your’ attention, lock Suppliers – want ‘your’ attention, lock you in you in

Important Innovations by Important Innovations by CustomersCustomers

CategoryCategory

Health ProductsHealth Products

Personal CarePersonal Care

SportsSports

FoodFood

OfficeOffice

ComputersComputers

Apparel Apparel

ExampleExample

GatoradeGatorade

Protein-based ShampooProtein-based Shampoo

Mountain BikeMountain Bike

Chocolate MilkChocolate Milk

White-out LiquidWhite-out Liquid

E-mail, Desktop E-mail, Desktop PublishingPublishing

Sports Bra Sports Bra

How Often Do Users Innovate?How Often Do Users Innovate?

StudyStudy

Scientific InstrumentsScientific Instruments

Process MachineryProcess Machinery

Tractor ShovelsTractor Shovels

Plastics Plastics

First Device Used in FieldFirst Device Used in Field

Developed and Built By:Developed and Built By:ProductProduct ProductProduct

UserUserManufacturersManufacturers

77%77% 23%23%

67%67% 33%33%

6%6% 94%94%

0%0% 100% 100%

Source: E.v. Hippel, The Sources of Innovation, Oxford University Press, 1988

Innovation Patterns Innovation Patterns Documented Documented

77% of Innovations

Developed byUsers

First firmBringing

Product toMarkets 5 – 7 Year

Transfer Lag

Example: Scientific Instruments

Implications of Customer Implications of Customer LoyaltyLoyalty

77%77%

21%21%

1%1%0%0% 0%0%

100%100%

Of those who rated:Of those who rated:• A very satisfied rating, 77% would definitely recommendA very satisfied rating, 77% would definitely recommend• A satisfied rating, 21% would definitely recommendA satisfied rating, 21% would definitely recommend• Neither satisfied nor dissatisfied rating, 1% would Neither satisfied nor dissatisfied rating, 1% would definitely recommenddefinitely recommend• A dissatisfied or very dissatisfied rating, 0% wouldA dissatisfied or very dissatisfied rating, 0% would definitely recommenddefinitely recommend

VeryVerySatisfiedSatisfied

SatisfiedSatisfied NeitherNeitherSatisfiedSatisfied

nor nor DissatisfiedDissatisfied

DissatisfiedDissatisfied VeryVeryDissatisfiedDissatisfied

High Employee Satisfaction Equals High Employee Satisfaction Equals Customer Satisfaction -> LoyaltyCustomer Satisfaction -> Loyalty

CustomerCustomerSatisfactionSatisfaction

RatingRating

5.05.0

3.673.67

3.803.80

4.014.01

LowLow2.5 - 3.02.5 - 3.0

Employee Satisfaction RangeEmployee Satisfaction Range

PR-300

AverageAverage3.0 - 3.53.0 - 3.5

LeadersLeaders3.5 - 4.53.5 - 4.5

Drivers of Employee Drivers of Employee SatisfactionSatisfaction

Ability to satisfy Ability to satisfy customer needscustomer needs

Possesses the Possesses the appropriate skills and appropriate skills and knowledgeknowledge

Ability to influence the Ability to influence the workplaceworkplace

PR-461

EmployeeEmployeeSatisfactionSatisfaction

OutstandingOutstandingServiceService

SatisfiedSatisfiedCustomersCustomers

CustomerCustomerLoyaltyLoyalty

Job Job InvolvementInvolvement

ProfitabilityProfitabilityIdeasIdeas

ProductivityProductivityContinuousContinuous

ImprovementImprovement

Employee/Customer Employee/Customer Satisfaction Drives Profitability Satisfaction Drives Profitability - Two Ways- Two Ways

Your “Radar Screen”: Post-911 FalloutYour “Radar Screen”: Post-911 Fallout

More hassles at the border More hassles at the border – the future of JIT in – the future of JIT in jeopardy?jeopardy?

More regulation of More regulation of transportation industry – transportation industry – cost pressures, H/R cost pressures, H/R pressures pressures

Greater scrutiny of Greater scrutiny of transported goods – more transported goods – more delays, Homeland Security, delays, Homeland Security, “where is your stuff” “where is your stuff”

““North American” North American” standards and compliance – standards and compliance – increased costs of increased costs of coordination coordination

Your “Radar Screen”: Post-Your “Radar Screen”: Post-corporate corporate scandal fallout scandal fallout

Corporate governance – Corporate governance – tough to find directors, tough to find directors, more ‘fingers in’ the more ‘fingers in’ the businessbusiness

SOX compliance – SOX compliance – bureaucracy & controls bureaucracy & controls abound taking ‘eyes’ off abound taking ‘eyes’ off the businessthe business

Environmental liabilityEnvironmental liability

Your “Radar Screen”: Technological Your “Radar Screen”: Technological ShiftsShifts

RF id (item)RF id (item)NanotechnologNanotechnology y Electronic Electronic Paper/Digital Paper/Digital Ink Ink On-Demand On-Demand Software Software

Your “Radar Screen”: Demographic & Your “Radar Screen”: Demographic & Social Shifts Social Shifts

Aging workforceAging workforce

25% of business 25% of business owners retiring in next owners retiring in next 5 years 5 years

Work-life balance Work-life balance concerns concerns

Your “Radar Screen”: GlobalizationYour “Radar Screen”: Globalization

Outsourcing & Outsourcing & offshoring – not offshoring – not just goods but just goods but services alsoservices also

Key trends driving Key trends driving these views:these views:

Declining shipping Declining shipping costs & abundant costs & abundant and cheap and cheap bandwidth China bandwidth China and India and India emerging as emerging as economic forceseconomic forces

The Operations ChallengeThe Operations Challenge

Competition - Ruthless and Dynamic

We are getting better!

Are competitors getting better?

Faster?

PR-048

Time

Performance

So What Can You Do?So What Can You Do?

Good news and bad news – depends on Good news and bad news – depends on your perspective…..your perspective…..

Every industry is impacted, in different but Every industry is impacted, in different but significant ways significant ways

To lead and manage effectively in the face To lead and manage effectively in the face of all this change, operations professionals of all this change, operations professionals need to be very good at: need to be very good at:

Setting strategy – recognizing the need to Setting strategy – recognizing the need to change, creating a plan change, creating a plan

Fostering innovative & creative thinking Fostering innovative & creative thinking

Engaging employees Engaging employees

Leading and managing the changes that resultLeading and managing the changes that result

Your Radar Screen: Tracking Your Radar Screen: Tracking Leading Indicators Leading Indicators

Monitor performanceMonitor performanceExecute wellExecute well

Avoid complacencyAvoid complacency

Turnaround required:Turnaround required:Improve operating Improve operating

performanceperformanceRe-position the Re-position the

businessbusiness

Operating performanceOperating performancemay mask deterioratingmay mask deteriorating

strategic healthstrategic healthRe-formulate strategy Re-formulate strategy

Avoid long-term pain Avoid long-term pain for short-term gainfor short-term gain

Operational program:Operational program:Improve margins, costs,Improve margins, costs,

productivityproductivity

Strategic HealthStrategic HealthWeakWeak

StrongStrong

WeakWeak

OperationalOperationalHealthHealth

StrongStrong

Streamlined Strategic Planning Streamlined Strategic Planning ProcessProcess

EnvironmentMacroIndustryCompetition

Corporate• Capabilities

Business• Positioning• Critical successfactors

EnvironmentMacroIndustryCompetition

Corporate• Capabilities

Business• Positioning• Critical successfactors

Vision/mission

Objectives

Strategies

Initializing actionplansWhoWhatWhenHow much

Implementationissues

Vision/mission

Objectives

Strategies

Initializing actionplansWhoWhatWhenHow much

Implementationissues

Task Forces

Implementand Review

Discussions

Study Groups

‘Radar Screen’Review

InformalPre-Work

Size-UpWorkshop

StrategicIssue

Analysis

Strategic PlanDevelopment

Workshop

2-4 weeks 2-3 days 4-6 weeks 2-3 days

ManagementReviews

PR-029

CustomerSurveys

Benchmark

Engagement: Link to Business Engagement: Link to Business Results Results

Best EmployerBest Employer research has identified a strong and consistent link between research has identified a strong and consistent link between engagement and various performance measures. An analysis of the 2003 engagement and various performance measures. An analysis of the 2003 study results comparing the 50 organizations that were identified as the 50 study results comparing the 50 organizations that were identified as the 50 Best (“Best”) to the 78 organizations that did not make the top 50 list Best (“Best”) to the 78 organizations that did not make the top 50 list (“Rest”) indicated the following:(“Rest”) indicated the following:

Measure Best RestEngagement

- Percent of employees considered engaged 80% 57%Attraction

- Average number of job applications received per employee 8.2 5.8Retention

- Average rate of turnover 9% 17%Financial Returns*

- Total shareholder returns 4.6% 1.5%

- Total shareholder returns in excess of industry sub-index 11.2% 9.3%

* Information is based on total shareholder returns for publicly traded organizations over a five-year period (annualized over five years: 1997 to 2002).

Procedures• People Practices • Performance Review

Total Rewards• Pay• Benefits• Recognition

People• Senior Leadership• Manager• Co-workers

Opportunities• Career Opportunities• Development Opportunities

Quality of Life• Work / Life Balance• Physical Work Environment

• Intrinsic Motivation • Resources • Corporate Citizenship

Work / Values

EngagementEngagement

Engagement: 15 Related Engagement: 15 Related Drivers Drivers Hewitt’s Engagement Model Hewitt’s Engagement Model TMTM

The Importance of InnovationThe Importance of Innovation

“… the only sustainable competitive advantage is to innovate consistently …”

EM-369

… remember Digital Equipment Corporation?

… remember when gold was the precious consumer metal?

Different Levels of InnovationDifferent Levels of Innovation

High

Low

Degree of Difficulty

Incremental “Tinkering at the Edges”

Breakthrough “Outside the

Box”

Quantum “New Box(es)”

EM-733

Fostering Innovation Fostering Innovation

Intrinsically Intrinsically motivated peoplemotivated people

Objectives around innovation Objectives around innovation NOT just inventionNOT just invention

Stay ‘close’ to customers Stay ‘close’ to customers

Opportunities for diversity of Opportunities for diversity of perspectiveperspective

A disciplined process to A disciplined process to evaluate and fund new evaluate and fund new initiatives with potential and initiatives with potential and ‘weed out’ the rest ‘weed out’ the rest

Time for people who do the Time for people who do the work, to “think” creativelywork, to “think” creatively

““Strategies take on value only as committed people Strategies take on value only as committed people infuse them with energy”infuse them with energy”

EM-357

Philip SelznickPhilip Selznick

Managing Change: It’s Not Managing Change: It’s Not What You Do, It’s How You Do ItWhat You Do, It’s How You Do It

Family VacationsFamily VacationsWe all know what makes We all know what makes for a smooth journey on for a smooth journey on the drive across Canada: the drive across Canada: create the winning create the winning conditions conditions

PhysicsPhysicsIt’s all about momentum It’s all about momentum and overcoming inertia -and overcoming inertia -> GUIDANCE, SPEED & > GUIDANCE, SPEED & CRITICAL MASSCRITICAL MASS

HeterogeneityHeterogeneityThe workforce is The workforce is diverse, and typically diverse, and typically operates under the operates under the ’20:70:10’ principle ’20:70:10’ principle when it comes to when it comes to change change

Winning Conditions for ChangeWinning Conditions for Change

Guidance – share the itinerary Guidance – share the itinerary Establish the need, create shared understanding Establish the need, create shared understanding of the entire journey, make a planof the entire journey, make a plan

Speed – overcoming inertiaSpeed – overcoming inertiaCreate urgency, focus on a ‘critical few’, enable Create urgency, focus on a ‘critical few’, enable rapid decision making, deploy initiatives in rapid decision making, deploy initiatives in parallel parallel

Critical mass – gaining momentum Critical mass – gaining momentum Provide leadership, operationalize ’20-70-10’, Provide leadership, operationalize ’20-70-10’, deal with the ‘arsonists & saboteurs’ deal with the ‘arsonists & saboteurs’

Find the ‘Tipping Point’ Find the ‘Tipping Point’

Defined & Defined & forward lookingforward looking

strategystrategy

InnovativeInnovativeapproachesapproaches

DynamicDynamiccultureculture

EstablishEstablishdirectiondirection

Expect changesExpect changes

Create newCreate newrulesrules

Pride, passionPride, passion

Raise theRaise thebarbar

AdjustAdjustalong thealong the

way way

Outwit theOutwit thecompetitioncompetition

EnergyEnergy

Ability toAbility toinvent theinvent the

futurefuture

Ability toAbility tomake itmake ithappenhappen

Visionary Visionary leadersleaders

PR-103

Long Term Success Long Term Success

Staying Ahead – Reading ListStaying Ahead – Reading List

The EconomistThe Economist

MIT’s Technology ReviewMIT’s Technology Review

The Tipping Point (The Tipping Point (GladwellGladwell) )

Fast Forward: Organizational Change Fast Forward: Organizational Change in 100 Days (in 100 Days (Murray & RichardsonMurray & Richardson))

Built to Last (Built to Last (Collins & PorrasCollins & Porras))

Good to Great (Good to Great (CollinsCollins) )

Thank You!Thank You!

© 2004 Microsoft Corporation. All rights reserved.This presentation is for informational purposes only. Microsoft makes no warranties, express or implied, in this summary.