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Which Work Areas are Going to be Affected the Most by Automation in Future?

12 Nov

Disruptive technologies are helping companies automate work. Robotic Process Automation and Artificial Intelligence are taking up jobs which were in the past earmarked only for smart humans. Driver-less cars, automated check-in kiosks at airports, and autopilots steering the aircrafts are just few instances of how automation is transforming our world.

However, automation presents unique challenges that organizations need to identify and mitigate appropriately. These include costs associated with job losses; confidentiality of data; quality and safety risks stemming from automated processes; and regulatory implications.

Other critical factors to consider before investing in automation are adoption, pace of development of automation, and readiness of organizational leadership in redefining processes and roles to support automation.

The key question is how automation will impact our work in future. Should we anticipate benefits — e.g., efficiency gains and quality of life improvements — or dread further disruption of established business and job cuts?

Research by McKinsey suggests that Robotic Process Automation will impact 4 workplace areas the most:

  1. Workplace Activities
  2. (Re)definition of Work
  3. High-wage Jobs
  4. Creativity and Meaning
https://flevy.com/browse/flevypro/impact-of-robotic-process-automation-rpa-3980

Now, let’s discuss the first two key areas in further detail.

Workplace Activities

Research findings (based on the US labor market data) reveal that the future does not likely hold complete automation of individual jobs, but rather automation of certain activities within specific occupations. The assumption that only routine, codifiable activities can be easily automated — and those that necessitate implicit knowledge will be unaffected — is misleading. Automation has already reached (or surpassed) the median level of human performance in some cases.

Capital or hardware-intensive industries — under stringent regulatory control — are slow and expensive to automate and need more time to reap return on investments. Whereas, the sectors where automation is mostly software based (e.g., financial services) may create value at a far lower cost and within rather shorter span of time.

(Re)definition of Work

The current level of automation can potentially transform a number of occupations to a certain level, but it requires redefinition of job roles and activities. Research reveals that only about 5% of occupations can be completely automated with the current level of technology.

In spite of this, automation can boost human productivity even in the highest paid occupations by taking care of repetitive daily tasks — e.g., analyzing paperwork, reports, data and evaluating applications based on criteria — and freeing up time for people to focus more on high value work that involves human emotions and creativity.

For instance, Automation and Machine Learning can automate diagnosis of common ailments, thereby enabling the doctors to concentrate more on acute or complicated problems. Likewise, lawyers can employ data mining tools to sift through piles of documentation to isolate the most relevant cases for their review.

Interested in learning more about the other key areas most impacted by Robotic Process Automation? You can download an editable PowerPoint on Impact of Robotic Process Automation here on the Flevy documents marketplace.

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You can download this and hundreds of other consulting frameworks and consulting training guides from the FlevyPro library.

7 Key Imperatives to Design a Breakthrough Customer Experience

1 Nov

The constant advancement in technology has raised the expectations of customers in terms of their interaction with companies.  This digital disruption is also forcing businesses to develop new capabilities and explore innovative ways and means to deliver improved Customer Experiences.

Organizations can overhaul their Customer Journeys by embracing latest digital insights and practices.  To develop a truly exceptional, breakthrough Customer Experience, organizations should work towards adopting 7 key imperatives:

  1. Develop Customer Empathy
  2. Design the Complete Customer Experience
  3. Reinvent the Customer Experience
  4. Lead the Way with Industry Rules
  5. Become an Agile Organization
  6. Continuously Improve and Iterate
  7. Foster a Culture of Collaboration

An organization does not need to execute all 7 of these imperatives—it varies from case to case depending on the circumstances, market, and customer requirements.

Let’s, now, discuss the first 4 imperatives in further detail.

Develop Customer Empathy

Many firms use surveys and face-to-face interviews to gather firsthand customer insights to enhance their Customer Experiences.

However, when designing Customer Journeys—in addition to customer data—companies need to understand their customers’ behaviors deeply and put themselves in their customers’ shoes.  This entails knowing the complexities the customers face during various journeys and developing new ways to understand Customer Journeys—for instance, by making researchers accompany customers while shopping, by asking customers to report their activities and provide feedback as they interact with various offerings, and involving customers to provide their input on early versions of proposed offerings.

Design the Complete Customer Experience

Most people consider that design pertains only to good artwork, outlook, and appearance of products.

However, it involves not just the look and feel of a product but also the way it operates.  To render breakthrough Customer Experience, companies need to fundamentally shift the way design is perceived—not just the user interface design rather designing the overall Customer Experience.

Great Customer Experience design encompasses crafting every interface the customers have with the provider from the minute they consider a purchase.  It warrants enrolling all people that can make a difference to the customer (especially from the operations and IT units), mapping out customer touchpoints, and transforming fundamental systems and processes.

Reinvent the Customer Experience

Improving current Customer Journeys enables achieving incremental cost reductions and quality enhancements.

However, to improve Customer Journeys there is a need to shift the way Customer Journeys are perceived—from merely addressing the issues in a Customer Journey and streamlining a process to completely transforming the entire Customer Experience.

This should be done by carefully deliberating on and thoroughly analyzing all journeys from a customer’s perspective, drawing inspirations and studying benchmarks from other industries, and addressing customers’ needs.

Lead the Way with Industry Rules

Financial institutions are, to this day, quite cautious of utilizing technology to verify customers’ identification documents for deposit account opening.  Compliance teams at these institutions often resist the efforts to transform customer account opening journeys, as they exercise extreme care to ensure regulatory compliance.  Some banks make the customers fill their applications online but ask them to visit a branch with the completed paperwork, resulting in a cumbersome Customer Experience that is no longer acceptable as we enter the Fourth Industrial Revolution.

Leading organizations strictly adhere to laws but demonstrate to the regulatory authorities how technology has helped them break the status quo surrounding regulatory compliance and develop innovative solutions to manage risks and compliance better.

Interested in learning more about the other imperatives key to developing a breakthrough Customer Experience?  You can download an editable PowerPoint on Breakthrough Customer Experience (CX) here on the Flevy documents marketplace.

Are you a Management Consultant?

You can download this and hundreds of other consulting frameworks and consulting training guides from the FlevyPro library.

Are You Able to Maximize Impact of Customer Experience on Value Creation?

30 Oct

Digital-savvy startups are disrupting markets and threatening conventional businesses.  They are doing this by utilizing technology to offer new products and services and providing tailored yet uncomplicated experiences for their customers.

Likewise, large traditionally-run firms will have to keep evolving their Customer Experience approaches to secure additional avenues of revenue and to stay competitive.  To accomplish this, they will need to develop capabilities to effectively utilize insights on customer preferences and design offerings as per the customers’ preferences.

Many organizations, today, are undertaking Digital Transformation programs to improve their Customer Experiences.  However, a majority of these Digital Transformation initiatives fall short of securing their maximum value potential due to focusing only on improving specific touchpoints instead of confronting the entire customer journeys—spanning across several departments and channels.

To make their Customer Experience sustainable and to become Customer-centric Organizations need to clearly transform their ways of doing business, operations, and employee behaviors.  It is critical to improve these fundamental support processes before embarking on initiating any Customer Experience optimization initiatives.

Customer Experience optimization facilitates in gaining more satisfied/paying customers, additional value, and better retention rates.  Research reveals that the companies that have higher Customer Satisfaction levels can achieve four times growth in value compare to those that rank lower in Customer Satisfaction.

Customer Experience (CX) Approach to Value Creation

The following pragmatic 5-phase approach to Customer Experience Management and Value Creation is of great benefit to organizations aspiring to enrich their Customer Experience, achieve clear-cut differentiation, and capture the most potential value:

  1. Understand What Customers Value
  2. Simplify and Streamline Offerings
  3. Link Customer Value to Operational Drivers
  4. Focus on Most Important Customer Journeys
  5. Adopt Continuous Improvement (CI) Thinking

Let’s now delve deeper into the first 3 phases of the approach.

Understand What Customers Value

Ascertaining the key drivers of Customer Satisfaction is the foremost step in improving Customer Experience.  A flawed approach—that many companies still employ—at the onset of a Customer Experience optimization initiative is to reduce costs associated with internal processes and exploring customer pain points.  This doesn’t assist in maximizing Value Creation.

Customer-centric organizations, on the other hand, devote their time in developing a clear understanding of what really matters to their customers.  This helps in deciding where to focus, rationalizing their processes, and creating new experiences for the customers to generate additional value.

Great Customer Experience necessitates much more than just satisfactory interactions.  Customer Satisfaction should be mapped along the entire customer journey—spanning multiple functions and channels—as customers use various channels to communicate with companies before making a transaction.

Simplify and Streamline Offerings

Alongside rationalizing the processes, it is equally important to carry out a detailed analysis of the brands, offerings, and price structures is essential to tap value from Customer Experience.  After all, even the most pleasing Customer Experience cannot offset an unpredictable or exorbitantly expensive product.

Once these fundamentals are in order, organizations should investigate which interactions and Customer Journeys carry the most significance in a Customer Experience; evaluate how the organization is rated in each journey; identify and focus on the operations that need to be overhauled to improve the overall Customer Experience.

Link Customer Value to Operational Drivers

Technology and customer input provides the stimulus to streamline offerings and Customer Experience.  However, the real value comes from linking the Customer Experience to core operational processes.  Seeing journeys from the customer perspective aids in focusing on what they need and linking internal processes, structures, and KPIs to customer facilitation.

This necessitates deeper insights on elements that are of most value to the customer across a journey, pinpointing drivers of business costs and revenues, and—most importantly—inculcating the right mindsets across the organization.  This detailed evaluation of customer journeys facilitates in determining operational improvements that bear the most positive effect on Customer Experience.

Interested in learning more about the other phases of the approach to managing Customer Experience?  You can download an editable PowerPoint on the Customer Experience (CX) Approach to Create Value here on the Flevy documents marketplace.

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The 8 Most Critical Levers to Pull to Manage & Sustain Change

28 Oct

Most Transformation initiatives fail to achieve their anticipated objectives.

Change Management is all about engaging and rallying people — at all levels in the organization — to make the transition and sustain that change. It is critical to ensure that the entire workforce is eager and ready to embrace the required new behaviors. More often than not, the technical side of a change initiative is well planned, but it’s the implementation part that fails — particularly, changing the mindsets and behaviors of the entire workforce to enable change to stick.

Managing change is not an occasional affair; it is an iterative process that works on motivating human behavior to accept and adjust to a desired state of mind. The process is naturally evolving as it adapts in accordance with the feedback from the people.

Change Management demands a thorough yet organized approach to enable the “people side” of change to work — essential for accommodating and sustaining Business Transformations. This entails assisting people incorporate new mindsets, processes, policies, practices, and behaviors.

A methodical approach to make the entire workforce accept and support change constitutes 8 critical levers:

  1. Defining the Change
  2. Creating a Shared Need
  3. Developing a Shared Vision
  4. Leading the Change
  5. Engaging and Mobilizing Stakeholders
  6. Creating Accountability
  7. Aligning Systems and Structures
  8. Sustaining the Change
https://flevy.com/browse/flevypro/8-levers-to-change-management-3847

Now, let’s discuss the first 4 levers in detail.

1. Defining the Change

The first step entails outlining the rationale, scope, and results of the change initiative for the enterprise, key departments, and roles. There is a need to define critical elements, including the requirements from the initiative, the execution planning, and the adjustments needed to encourage people to work better.

The project sponsors need to clearly outline the essence of the proposed Transformation initiative, to realistically embed Change Management into the design of the program, and develop effective Change Management plans. An initial baseline of the expected effect of the program on people should be performed. The baseline also helps analyze the impact of the change program — in terms of skills inventory, head-count indications, adjustments in accountabilities and relationships, shifts in incentives and pay structures, and future learning needs.

2. Creating a Shared Need

Once the change and its impact has been delineated, the next thing to do is to create a shared understanding of the rationale for Transformation across the organization. To create a shared need for the Transformation endeavor, the change sponsor needs to build awareness of the necessity for change amongst the senior team, key stakeholders, and the entire organization; demonstrate to the people the benefits of change; and set up a feedback mechanism across the organization. The alignment afforded by developing a shared need for change helps build a strong footing for Transformation.

3. Developing a Shared Vision

An essential element of implementing transformation entails delineating a clear vision that outlines critical actions and the anticipated outcomes. It helps in encouraging and involving the workforce in the Transformation initiative, giving them a sense of purpose by becoming a part of something bigger. The vision of the organization after Transformation should be coherent with the company values and mission.

4. Leading the Change

This lever entails developing change leadership and implementation skills needed to drive and enable sustainable change. Engagement and commitment of senior leaders is essential for leading change. They are responsible for planning their and the entire workforce’s actions, demonstrating or role modeling the new mindsets and actions, designating program sponsors — e.g., business unit leaders who are enthusiastic about the Transformation initiative and also act as change agents — motivating others to support transformation, and setting up a road map for the change leaders to steer the organization to achieve the anticipated performance milestones.

Interested in learning more about these levers to Change Management? You can download an editable PowerPoint on 8 Levers to Change Management here on the Flevy documents marketplace.

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You can download this and hundreds of other consulting frameworks and consulting training guides from the FlevyPro library.

Aiming to Become a Customer-centric Organization, Then Where’s the Customer Department?

26 Oct

Transforming a product-driven firm to a customer-driven enterprise is inevitable in order to stay ahead in today’s extremely competitive markets. The days of mass marketing, mass media communications, and little-to-none direct interface with customers are long gone. The emphasis, now, should be on maximizing customer relationships and becoming customer-driven organizations rather than merely selling products. The technological advancements of this age offer potent tools for organizations to utilize in order to engage with the customers directly; gather and mine information; and tailor their products and services appropriately.

Leading organizations are making huge investments in data analytics and transforming their strategies to focus on the customers’ evolving needs. They are striving hard to improve their customer retention and deepen their relationships utilizing rich customer insights, tailoring products according to the personalized needs of the customers, and presenting the offerings in a variety of store formats.

The Customer Department

To become customer-centric organizations, companies need to transform their traditional marketing function into a new unit called the “Customer Department.” The Customer Department should be created to deliver maximum profits to the customers and nurturing customer relationships instead of pushing products.

This necessitates transforming the organizational structure, culture, strategy, and reward programs in line with the shift in focus from managing transactions to cultivating customer relationships. Specifically, there is a need to add the position of Chief Customer Officer (CCO) — under the CEO — and various Customer Managers underneath the CCO. The roles and responsibilities of these positions should be:

Chief Customer Officer (CCO)

The most prominent shift in a customer-centric organization is replacing the traditional Chief Marketing Officer (CMO) role with the Chief Customer Officer (CCO) role. Reporting to the CEO, the CCO is primarily responsible for devising and executing the customer relationship strategy, directing all the client-facing roles, and fostering a customer-driven culture in the organization. The main tasks of the CCO position include ensuring smooth flow of customer information, increasing productivity utilizing various metrics, and regularly interacting with the customers to understand their concerns.

Customer Managers

In a customer-centric organization, the Customer Managers (CMs) are in charge of various customer segments. They are accountable for enhancing the value of a customer relationship by ascertaining customers’ product needs. To make this role effective, there is a need to realign resources — people, budgets, authority — from product managers to the CMs.

The main tasks of the CM position include defining customer needs, extracting and interpreting customer insights utilizing various sources — e.g., mining customer forums, blogs, and online purchasing data — , and striving to improve the lives of the customers.

Additional Responsibilities of the Customer Department

Customer-centric organizations make the Customer Department accountable for some of the critical customer-facing functions which were once considered an integral part of the Marketing Department. These functions include:

  1. Customer Relationship Management (CRM)
  2. Market Research
  3. Research & Development (R&D)
  4. Customer Service
https://flevy.com/browse/flevypro/customer-centric-organization-the-customer-department-3860

Customer Relationship Management (CRM)

Traditionally, the CRM function belongs to the Information Technology Department owing to the technicalities involved in managing the CRM systems. The function demands evaluating the customer requirements and behaviors — which is a core function of the Customer Department alongside gathering and analyzing data necessary to execute a customer-development strategy.

Market Research

In customer-centric organizations, the Market Research function goes all the way from the marketing unit to other units that deal with customers — e.g., Finance for payments, Distribution for delivery. These organizations take a more granular view of customers’ behaviors, and gather and incorporate clients’ feedback to further improve customer lifetime value and equity.

Research & Development (R&D)

The R&D function should also report to the Customer Department, as, nowadays, the traditional R&D-driven new product development models are conceding to creative collaboration between the client (users) and producers. It’s not a good idea anymore to pack tons of features into a product and cause feature fatigue to customers. What’s more appropriate is to seek and incorporate customers’ input into product features by involving them into the product design process.

Customer Service (CS)

CS is another function that should be handled by the Customer Department to guarantee quality of service and to nurture long-term relationships. This important function isn’t worth outsourcing overseas as this often causes negative impact to the clients and organizations alike, due to poor customer service.

Interested in learning more about Customer Metrics, Customer Department, and Customer-centric Organizations? You can download an editable PowerPoint on Customer-centric Organizations: The Customer Department here on the Flevy documents marketplace.

Are you a Management Consultant?

You can download this and hundreds of other consulting frameworks and consulting training guides from the FlevyPro library.

Nudge Theory: An Effective Way to Transform Negative Behaviors

24 Oct

Changing the behaviors of people is the foremost issue with every transformation initiative.

Nudge theory is a novel Change Management model that underscores the importance of understanding the way people think, act, and decide. The model assists in encouraging human imagination and decision making, and transforming negative behaviors and influences on people. The approach helps understand and change human behavior, by analyzing, improving, designing, and offering free choices for people, so that their decisions are more likely to produce helpful outcomes for the others and society in general.

Nudge theory helps reform existing (often extremely unhealthy) choices and influences on people. The theory is quite effective in curtailing resistance and conflict resulting from using autocratic ways to change human behavior. The model promotes indirect encouragement and enablement — by designing choices which encourage positive helpful decisions — and avoids direct enforcement. For instance, playing a ‘room-tidying’ game with a child rather than instructing her/him to tidy the room; improving the availability and visibility of litter bins rather than erecting signs with a warning of fines.

Organizations are increasingly using behavioral economics to optimize their employee and client behavior and well-being. Nudge units or behavioral science teams are being set up in the public and corporate sectors to influence people to address pressing issues. For instance, to increase customer retention by changing the language of support center staff to motivate customers to consider long-term benefits of a product; or to make employees to follow safety procedures by placing posters of watching eyes to remind them of the criticality of the measure.

An effective Nudge initiative necessitates much more than deploying a few experts in heuristics and statistics. The senior leadership should lay out a conducive environment for successful behavioral transformation. This entails assisting the Nudge unit to focus, place it appropriately, create awareness, train and de-bias people, implement effective rewards, and follow high ethical standards.

The leadership needs to think about and prepare to tackle 6 key challenges Nudge units face when implementing effective behavioral transformation initiatives:

  1. What should be the focus of the Nudge unit?
  2. Should the Nudge unit be placed at the headquarters or at the business unit level?
  3. Which resources be made part of the Nudge unit?
  4. What are the critical success factors to consider for the unit?
  5. How to communicate the results and early wins?
  6. What should be done to tackle skepticism and resistance to change?
https://flevy.com/browse/flevypro/nudge-theory-key-challenges-3895

Leaders who are able to confront these challenges improve the chances that the unit’s nudges will cause real change in the organization and in its productivity.

Let’s, now, dive deeper into the first 3 key challenges.

What should be the focus of the Nudge unit?

The foremost action in creating a Nudge team is to clearly spell out the value proposition for the unit. The leadership needs to define the purpose of creating a Nudge unit. They need to clearly outline whether the Nudge team will focus on employees, on customers, or on both. For instance, the purpose of its creation could be to deal with workforce motivation, to make better decisions in boardrooms, to increase the internal capabilities, or to improve the behavior of employees. The focus on customer issues, for example, entails encouraging better pension provision, inculcating behavioral science into the marketing mix, or to analyze the experiences of customers and employees — e.g., in-store service initiatives, digital operations, and HR processes.

Should the Nudge unit be placed at the headquarters or at the business unit level?

The second challenge is to decide where to deploy the Nudge unit. The placement of the Nudge unit depends on the strategic purpose of creating the unit. At some companies, it is housed centrally within the corporate headquarters as a global Nudge operations center; a few have accommodated the unit within the R&D or marketing department; some have benefited by moving the unit away from the corporate center so as to be closer to products and services; whereas other practitioners believe that the customer-focused behavioral science team should sit within the product management domain.

Regardless of where the Nudge unit resides, its flexibility and assimilation with other methods of behavioral change — e.g., cognitive neuroscience, social psychology, and personality-trait science — are critical.

Which resources be made part of the Nudge unit?

Another critical element for the success of the Nudge unit is hiring and deployment of right resources. At the commencement of the program when key capabilities are typically not available in-house, most organizations hire people from the outside for their Nudge units. A few companies have recruited solely from the in-house due to the criticality of institutional knowledge and the long learning curve required to acquire it, whereas some have recruited across different geographies. On average, the unit comprises of 3 to 8 members, however, larger organizations can have more people scattered globally.

The ideal composition of the Nudge team is to include behavioral scientists and specialists in psychology, marketing, and advanced data analytics. The team should include people with the right attitude and abilities — e.g., curiosity, can-do attitude, problem solving, entrepreneurial mindset, ownership, and communication skills.

Interested in learning more about the Nudge Theory? You can download an editable PowerPoint on Nudge Theory: Key Challenges here on the Flevy documents marketplace.

Are you a Management Consultant?

You can download this and hundreds of other consulting frameworks and consulting training guides from the FlevyPro library.

Traditional Value-Based Management vs. Value Creation through Relative Shareholder Return

22 Oct

Value-Based Management (VBM) has been regarded traditionally as a tool to help investors evaluate firms, optimize performance management, and maximize shareholder value.

However, there are mixed opinions on whether to utilize VBM as a mandatory investment or management tool. Many investors, analysts, and executives, to this day, are skeptical of the influence and role of VBM in confronting the dot-com bubble or other financial downturns. They are even cynical of the efficacy of VBM as a robust management approach for the future or its effectiveness in creating competitive advantage for them.

The following are some shortcomings associated with the traditional VBM approaches that leaders should negotiate:

  • An inadequate link between VBM practices and capital markets realities — absence or lack of analysis of the capital markets to expose gaps between a company’s intrinsic value and actual stock price.
  • Aligning VBM with the organizational systems and its culture for value creation.
  • A broken process for managing the controls that govern value creation — traditional VBM offers rich insights on managing economic principles, but lacks a process on how to further align strategic, cultural, and behavioral levers.

Value Creation Framework

The lack of trust in the effectiveness of VBM necessitates formulating a more thorough, fact-based approach to executing VBM. In developing a value creation agenda, it is quite uncomplicated to conceptually convince managers and employees that it is their main shared focus, but the core challenge is to devise a practical and integrated implementation approach.

The Value Creation Framework depends on 4 value creation levers that senior management can pull in order to effectively achieve their value creation goal. These levers are not autonomous and need to be activated in tandem:

  • Operational Effectiveness
  • Competitive Strategy
  • Portfolio Management
  • Investor Strategy

The framework first stresses the management team to agree on the shared aspirations, prioritized levers, and how the headquarters activities are to be aligned with the business units. This entails revisiting the assumptions, priorities, decisions, tools, and culture at all levels across an organization to harness VBM to achieve improved value creation. The framework warrants the VBM approach to be embraced as a culture to maximize value creation — which is measured in Relative Total Shareholder Return.

Relative Total Shareholder Return (RTSR)

Focusing and aligning the organizations around a shared mission is important for the leadership. Clearly laid out, compelling vision and aspirations — that are reinforced daily — have a profound positive impact on an organization’s value creation potential.

Value creation best practices necessitate establishing a single, long-term goal — the Relative Total Shareholder Return (RTSR) performance. The Relative Total Shareholder Return reflects a firm’s capital gains plus dividend yield relative to a peer group or market index.

The RTSR concept is not new, but practically most companies find it hard to implement RTSR as a goal-setting tool. The RTSR should be clearly quantified and communicated across the board as a long-term goal. The RTSR aspirations motivate and empower line management to work as entrepreneurs to achieve it, set objective targets, and connect business unit management to capital markets discipline. If done right, RTSR is a useful method to specify and communicate a firm’s objectives and the supporting execution plans.

Measuring RTSR Objective

Measuring the RTSR goal achievement at the corporate level can be done by ranking a firm’s TSR against its peers TSR. A RTSR target can be set to analyze the effect of corporate and business unit plans. This can be done by quantifying a subjective goal — e.g., top half or top quartile TSR — into a specific number. The calculations warrant developing a forward-looking RTSR target on the following 3 footings:

  • Anticipated 5-year company cost of equity — to gather an investor’s view of the risk-adjusted average expected return that a firm or market index is priced to deliver.
  • Anticipated spread to achieve relative TSR goal — calculating stretched, above-average TSR goal needs personal discretion. It can be done through superior performance improvements instead of maintaining superior absolute levels of performance.
  • Forward looking 5-year RTSR target — calculation of this goal requires 2 key considerations: RTSR probability of reaching above-median TSR and benchmarks to meet a cumulative top quartile TSR target over different time periods.

Interested in learning more about the Value Creation Framework? You can download an editable PowerPoint on Value Creation: Relative Total Shareholder Return here on the Flevy documents marketplace.

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You can download this and hundreds of other consulting frameworks and consulting training guides from the FlevyPro library.

Are You Able to Effectively Tap Corporate Social Responsibility (CSR) Opportunities?

20 Oct

Corporate Social Responsibility (CSR) is an organization’s commitment to produce an overall positive impact on society. CSR encompasses sustainability, social and economic impact, and business ethics. It makes a company socially accountable of its operations, stakeholders, and the public. Businesses undertake CSR programs to benefit society while boosting their own brands.

CSR affects every aspect of business operations and functions. Encouraging equal opportunities; partnering with organizations practicing ethical business methods; putting part of earnings back into environment, health, and safety initiatives; and taking care of communities and charity are all examples of CSR initiatives.

Communities, customers, employees, and media consider CSR vital and gauge companies based on these initiatives. Executives of leading companies consider CSR as an opportunity to deal with critical issues innovatively, reinforce their organizations, and serve the society simultaneously.

The Need for CSR Implementation

Organizations need to come up with a robust approach to unlock potential benefits and value from CSR for them and for the society. The organizations practicing Corporate Social Responsibility do that with one of the following 4 objectives in mind:

  • Philanthropy: These initiatives (e.g. corporate donations) make the companies and society feel good, but produce low value for the business — questionable repute building benefits to companies, but offer much to society.
  • Propaganda: These CSR initiatives are predominantly geared towards promoting a company’s standing, but offer little real value for the society. This form of CSR is more of advertisement and becomes risky if there are any gaps between the firm’s commitments and actions.
  • Pet Projects: Some companies engage in CSR initiatives that support the personal interests of senior executives. These initiatives are much touted about, but are actually of little value to the business or community.
  • Smart Partnering: These initiatives concentrate on common themes between the business and the community. Organizations, in this case, create innovative solutions by drawing synergies from partnerships to tackle major issues concerning all stakeholders.
https://flevy.com/browse/flevypro/corporate-social-responsibility-csr-opportunities-3940

Among these objectives, Smart Partnering offers maximum opportunities for shared value creation and finding solutions to crucial business and social challenges. Whereas for the society, smart partnering helps create more employment opportunities, improve livelihoods, and enhance the quality of life.

Guiding Principles for CSR Initiative Selection

An effective way for the companies to maximize benefits of their CSR efforts is to map the current initiatives; identify the objectives, benefits, and resources responsible for realizing value from those initiatives; and define the projects valuable for addressing key strategic challenges.

Pet projects, philanthropy, or propaganda are easy to plan and execute. However, the real issue is to implement CSR opportunities that bring value for the business as well as society (smart partnering). This goal can be achieved by applying these 3 guiding principles:

  1. Focus on the right segments

Real opportunities lie in the segments where the business collaborates with and influences the society the most. These segments help the business interpret mutual dependencies and uncover maximum mutual benefit.

2. Recognize challenges and benefits

After finalizing the opportunity segments, it is imperative to appreciate the potential for mutual benefit. The key is to find the right balance between the business and community and recognize the challenges that both sides face.

3. Find the right partners

Collaboration with right partners — who benefit from business endeavors and capabilities of each other — creates a win–win situation for both sides and motivates them to achieve mutual value. Sustainable collaboration demands long-term alliances and deeper insights on the strengths of each other.

These principles are helpful in selecting appropriate CSR opportunities, identifying societal and business needs to be addressed, and the required resources and capabilities.

The Case for CSR Benefits

The goal of unlocking mutual benefits — associated with CSR (specifically Smart Partnering) — is critical for long-term success of the program. As required by any other strategic initiative, the mutual value creation objective needs to be carefully assessed based on the true value-creation potential, prioritized, designed, staffed, and audited.

The next step is to outline the list of potential benefits for the business and community. A well-defined business case and a compelling story immensely helps involve and gain commitment from the senior leadership, investors, and employees.

Interested in learning more about how to tap CSR opportunities effectively? You can download an editable PowerPoint on Corporate Social Responsibility (CSR) Opportunities here on the Flevy documents marketplace.

Are you a Management Consultant?

You can download this and hundreds of other consulting frameworks and consulting training guides from the FlevyPro library.

Thinking of Undertaking an M&A? Here Are the 3 Critical Pre-merger Considerations

18 Oct

Takeovers can turnaround companies in a short period of time, but there is a significant degree of risk to be anticipated and mitigated prior to undertaking such transactions.

Lack of careful deliberation of the potential risks, insufficient planning, weak execution, and lack of focus on Post-merger Integration are the major reasons why many Merger & Acquisition deals fail to achieve their desired goals.

The course of an M&A transaction has to be set at an early stage, way before the actual deal closure. The period prior to the deal approval by the regulatory authorities and while due diligence is being done is most critical, and should be utilized by the leadership to clearly define the goals of integration, the potential risks, and a layout for the execution of the actual integration process. It is the right time to perform a structured evaluation of 3 core pre-merger considerations associated with such deals, i.e.:

  1. Strategic Objectives
  2. Organization & Culture
  3. Takeover Approach
https://flevy.com/browse/flevypro/post-merger-integration-pmi-pre-merger-considerations-3941

Understanding these PMI Pre-merger considerations helps the stakeholders ascertain the unique challenges and constraints related to M&A transactions and make informed decisions. These considerations assist in developing a systematic approach to undertaking a Post-merger Integration (PMI) — which is devoid of any “gut decisions,” and ensures realization of synergies and value. These considerations set the direction and pace of the post-merger integration process.

Now, let’s discuss the 3 core considerations in detail.

Strategic Objectives

Organizations undertake Mergers and Acquisitions as a way to accelerate their growth rather than growing organically. The foremost core consideration associated with an M&A transaction is the strategic objectives that the organizational leadership wants to achieve out of it.

M&A deals take place to fulfill one or more of these 5 strategic objectives:

  • Reinforcement of a segment
  • Extension in new geographies
  • Expansion of product range
  • Acquisition of new capabilities
  • Venturing into a new domain

The PMI approach needs to be tailored in accordance with the desired strategic objectives of the deal.

Organization & Culture

The senior management should be mindful of the significance of organizational and cultural differences in the two organizations that often become barriers to M&A deals. Small companies, typically, have an entrepreneurial outlook and culture where there aren’t any formal structure and the owner controls (and relays) all the information and decision making. Whereas, large corporations typically have formal structures and well-defined procedures.

A takeover of a small firm by a large entity is bound to stir criticism and disagreement. M&A process often faces long delays between the offer, deal signing, and closing — due to antitrust reviews or management’s indecisiveness — triggering suspicion among people. This should be mitigated during the PMI process by orienting the people of the small firm with the new culture and giving them time to transition effectively.

For M&A deals to be effective, leadership needs to carefully evaluate the behavioral elements of the organizational culture and contemplate the overriding principles guiding a company.

Takeover Approach

Integrating the operations of two companies proves to be a much more difficult task in practice than it seems theoretically. Organizations have the option of selecting the takeover approach most suitable for them from the following 4 methodologies — based on their organizational structures, people, management, processes, and culture:

  1. Direct Hit
  2. Hiatus
  3. Deferred Decisions
  4. Quick and Unsympathetic Disposal

Interesting in learning more about the takeover approach and the pre-merger considerations in detail? You can download an editable PowerPoint on Post-merger Integration: Pre-merger Considerations here on the Flevy documents marketplace.

Are you a Management Consultant?

You can download this and hundreds of other consulting frameworks and consulting training guides from the FlevyPro library.

How to Enable PMI? Here Are the 8 Critical Decision Levers to Analyze First

16 Oct

Mergers and Acquisitions (M&A) are unique and complex endeavors. These initiatives demand tailored solutions keeping in view the varying environments, ways of doing business, culture of the two combining organizations, and internal and external forces influencing the deal.

These transactions necessitate making 8 important decisions based on thorough deliberation and analysis of all relevant factors well before the integration process. These fundamental decisions and relevant factors form the 8 decision levers of Post-merger Integration (PMI). These 8 decision levers of PMI are essential for devising an optimal integration approach and, subsequently, the success of an M&A initiative:

  1. Form of Synergy to Be Created: Cost-cutting versus growth
  2. Required Pace of Integration: Quick versus steady
  3. Degree of Integration: Extensive versus partial
  4. Nature of Integration: Buyout versus a merger
  5. Commencement of Integration: Urgent or delayed
  6. Integration Project Team Organization: Clean or shared
  7. Decision Making Style: Implicit and prompt versus lengthy and analysis based
  8. Transaction Change Management: Tacit versus one that requires comprehensive actions
https://flevy.com/browse/flevypro/post-merger-integration-pmi-8-decision-levers-3945

These decision considerations facilitate Post-merger Integration across all industries and organizations of various sizes. Let’s discuss the first 3 decision levers in detail now.

Lever 1 — Form of synergy to be created

The foremost element of a PMI is deciding on the type of synergy to be achieved through integration. The question is to either focus on achieving cost reduction or growth synergies.

If cost cutting is the objective of an M&A then the leadership of the combined organization needs to outline potential costing saving opportunities across the board. This should be followed by robust communication strategy to convey the implications of the M&A program. However, if the management’s objective is to unlock growth synergies from the acquisition, then the integration is to be treated as a strategic endeavor — e.g., understanding the customer needs, evaluating market potential, generating innovative business ideas, and developing execution plans.

Lever 2 — Required pace of integration

The 2nd lever demands from the senior leadership to determine the pace most appropriate for the integration of their newly combined enterprise — i.e., to choose between a fast track and a steadier integration approach.

A majority of executives believe that PMI should be executed as quickly as possible, so that upon completion of the initiative they could divert their center of attention back to business operations. This approach, however, involves decisions that aren’t backed by detailed analysis of facts and data, and is likely to face increased risks and uncertainties.

On the other hand, a slower pace of integration is beneficial in case of a friendly takeover or expansion in a new domain. A steadier pace of integration works well to reduce any apprehensions, cynicism, bottlenecks, and risks due to oversight.

Lever 3 — Degree of Integration

PMI necessitates gauging the appropriate degree of integration beneficial for the organization — i.e., choosing between extensive across the board versus partial integration.

An absolute focus on cost synergies warrants an extensive degree of integration across all departments and geographies. This puts extra pressure on teams in terms of work and risks dwindling enterprise focus on the customer. Committing more resources and setting the priorities right aids in offsetting the risks associated with an extensive degree of integration.

A partial integration, on the other hand, is simpler, less controversial, and predominantly warrants consolidation of sales or alignment of mission-critical processes. This typically works well in takeovers requiring new products acquisition or addition of new customer segments.

Interested in learning more about the other 5 decision levers of PMI? You can download an editable PowerPoint on Post-merger Integration (PMI): 8 Levers here on the Flevy documents marketplace.

Are you a Management Consultant?

You can download this and hundreds of other consulting frameworks and consulting training guides from the FlevyPro library.

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