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Tag Archives: Competitive Advantage

The Devil is in the Details: Your Primer to a Lean Culture

3 Jul

Culture is essential today in helping employees and management survive in today’s environment. Survival has become a strong word today. Without culture, everyone in the organization would act or behave differently. No one would be able to anticipate someone else’s behavior, and no one would understand why people behave the way they do. When this happens, the organization’s performance would be very chaotic.

What is culture? Organizational Culture is a learned process and is developed by the organization as a response to the working environment established by the organization’s leadership and management team. It is established in all organizations, regardless of whether its development is guided or unguided. Either way, culture can have a positive or negative impact on the organization’s performance.

A Take Away at Corporate Culture and a Lean Culture

Corporate culture is a set of standards shared by members of an organization. It produces behavior that falls within a range that the organization considers proper and acceptable. Having the right culture will increase the organization’s chance to survive.

What is a Lean Culture? Lean Culture is a total system and represents a complete and comprehensive culture change in the organization. A Lean Culture enables lean implementation and represents a completely new way of managing the organization through Lean Management.

The development of a Lean Culture starts with a Lean Culture Framework.

The Lean Culture Framework

The development of a Lean Culture starts with a definition of a Continuous Improvement Lean Culture. As a starting point, the Lean Culture Framework consists of 5 essential elements.

  1. Definition. This element ensures that the organization gets to properly define what Continuous Improvement Lean Culture really means for the entire organization. When this is undertaken, improvement becomes a part of the organization’s culture.
  2. Translation and Integration. The second element ensures that culture is well translated and integrated into values and related behaviors. It is important for organizations to understand that strong values can guide the behaviors of people.
  3.  Strategic Applications. This basically refers to the strategic application of cultural elements. If problem-solving is one of the cultural elements, the strategic plan of the organization can take a problem-solving approach to achieve key targets.
  4. Diligent Development. This element focuses on the diligent development of a comprehensive culture. This ensures the alignment of programs with a long-term problem-solving culture of improvement of the organization and eliminates conflicting messages.
  5. Reinforcement. The fifth element ensures that reinforcement is undertaken with regular recognition. When this is done, the organization can expect to gain more improvements.

The five (5) elements of the Lean Culture Framework must be properly structured to ensure its effective implementation. In today’s business environment where Competitive Advantage and Operational Excellence is gaining ground towards sustainability, organizations just need to learn how to operate smartly and effectively. This can be done when a Lean Culture Framework is established and implemented.

The Devil is in The Details: The Implementation

Culture change typically is not greeted with open arms. To be successful, a Lean Culture change initiative must have a few DO-NOT-PASS-GO items. A few of these are leadership involvement and engagement, cultural dynamics, and education. Implementation of a Lean Culture Framework may seem easy but it is not. It requires care, patience, a bottomless energy source, and an iron will to succeed. It can be of advantage if organizations are well guided in undertaking a culture change. A well developed and thought-of plan can highly help organizations go through culture change with just a few bumps along the way.

Interested in gaining more understanding of Lean Culture? You can learn more and download an editable PowerPoint about Lean Culture 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.

Developing an Organizational Design that Works: The Galbraith Star Model

28 Jun

“A problem well framed is a problem half-solved.” — Jay Galbraith

Organizational Design is more than just structures. It is having policies and strategies that are aligned with one another.  When this is achieved, it allows organizations to operate at maximum efficiency and achieve Operational Excellence.

The Galbraith Star Model™ is the foundation on which a company bases its design choices. The organization’s design framework consists of a series of design policies that are controllable by management and can influence employee behavior.

Organizations use the Star Model™ framework to overcome the negatives of any structural design. Every organizational structure has positives and negatives associated with it.  If management can identify the negatives of its preferred option, it can better design other policies around the Star Model™ to counter the negatives while achieving the positives.

Understanding the Galbraith Star Model

Galbraith Star Model™ is the organization’s design framework for effective strategy execution. It consists of 5 major components.

  1. Strategy. This component is the company’s formula for winning. It is the goals and objectives to be achieved, as well as values and missions to be pursued. It defines the basic direction of the company. Strategy Development is essentially important in specifying sources of Competitive Advantage.
  2. Structure. The second component, the Structure, determines the location of the decision-making power. It is the placement of power and authority in the organization.
  3. Processes. Information and decision processes is a component that cuts across the organization’s structure. It is a means of responding to information technologies. Management processes can either be vertical or lateral. Either way, these are designed around a workflow from new product development to the fulfillment of a customer order. If the structure is the anatomy of the organization, processes are its physiology or functioning.
  4. Rewards. The fourth component provides motivation and incentive for the completion of the strategic direction of the organization. Rewards are recognition that influence the motivation of people to perform and address organizational goals.  It becomes effective only when they form a consistent package in combination with other design choices.
  5. People. People is the fifth component that focuses on influencing and defining an individual’s mindset and skills. It looks into the human resource policies of recruiting, selection, training, and development of people needed by the organization to achieve its strategic direction. HR policies work best when these are consistent with the other connecting design areas.

The five components are essentially important. Each component has its underlying purpose and impact.  How the organization can effectively align the components with each other makes a huge difference in achieving an impact. Further, in this fast-changing business environment, organizations must be keenly aware of the implications of implementing the Star Model™ framework. The Star Model may have its implications, including the interweaving nature of the lines that form the star shape.

The Man Behind the Organizational Design Framework

Dr. Jay Galbraith was an internationally recognized expert on Strategy and Organizational Design.  With more than 45 years of research and practical experience, Dr. Galbraith’s extensive knowledge came from his background in information processing systems, chemical engineering, and organizational behavior.  As the original creator of the Star Model and the Front-Back organization structure, Dr. Galbraith transformed organizations across a broad span of industries including consumer goods, manufacturing, health care, financial services, and telecommunications, among others.

Interested in gaining more understanding of Galbraith Star Model™? You can learn more and download an editable PowerPoint about Galbraith Star Model™ 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.

Modernize Your Board’s Role in M&A and Achieve the Greatest Deals

11 Mar

Many large corporations depend on M&A for growth and executives can boost the value that deals create. But poorly executed M&A can saddle investors with weak returns on capital for details. In fact, the margin between success and failure is slim.

Many Boards are reluctant to cross the line between governance and management. The level of engagement is often outside the comfort zone for some executives and directors. As such, they miss opportunities to help senior executives win at M&A.

There is a need to modernize the Board’s role in M&A. Modernizing the role of the Board in M&A can result in the alignment of the Board and management on the need for bolder transactions with more upside potential. Further, this is essential in achieving a competitive advantage.

The 3 Core Opportunities in M&A

There are 3 core opportunities for the Board to play an impactful role in M&A.

  1. Potential for Value Creation. The first core opportunity, potential for Value Creation enables the Board to challenge the executive’s thinking on potential transactions. This is an opportunity for the Board to maintain constant touch with the company’s M&A strategy, the pipeline of potential targets, and emerging deals.
  2. PMI Plans. This is an essential core opportunity that enables the Board to boost value creation to as much as 2-3x the net value. Post-merger Integration (PMI) Plans represent an opportunity to pressure test against stretch growth and cost goals before and after a deal. Greater variation in the quality of post-merger plans exist compared to financial analysis and pricing of transactions.
  3. Competitive Advantage in M&A. Competitive Advantage is a core opportunity that is unrelated to a transaction’s deadline. This is an opportunity to create a competitive advantage through M&A skills. These are corporate assets that can be difficult to copy. Making that decision to create a competitive advantage through M&A can lead to bolder decisions with more upside results.

The 3 core opportunities can promote greater Board engagement. When this happens, discrete deals can be converted into ongoing deal processes and dialogues that can deliver greater value from M&A.

Maximizing Core Opportunities to Attain the Greatest Deal

The potential of the 3 Core Opportunities to embolden the role of the Board in M&A is great. Organizations just need to have a good understanding of each core opportunity and the underlying key areas or dimensions of each key area. Let us take a look at the 1st Core Opportunity: Potential for Value Creation.

The Potential for Value Creation has 3 critical key areas that can challenge that lead opportunistic transaction to succeed. One critical key area is Strategic Fit.

Strategic Fit is key to determining why a company is a better owner than competing buyers. Deals driven by strategy succeed more often when they are part of a stream of similar transactions that support that strategy. This is a key element in Strategy Development.

How can we enhance the role of the Board relative to this key area? The Board can play a vital role in clarifying the relationship between a potential transaction and strategic planning. They are also in the best position to define how the deal will support organic-growth efforts in target markets and provide complementary sources of value creation.

The other key areas under the Potential for Value Creation are Financial Statements and Risks vs. Rewards. The Financial Statements is a key area that can correct the Board’s tendency to put emphasis on price-to-earnings multiples which can be limiting. The Risks vs. Rewards, on the other hand, is a key area that challenges the Board to acknowledge uncertainties in pro forma.

The other 2 Core Opportunities also have their own essential points or dimensions the Board must focus on. Only then can these core opportunities be of the maximum potential of modernizing the Board’s role in M&A and gaining the greatest value.

Interested in gaining more understanding of achieving Board Excellence through M&A? You can learn more and download an editable PowerPoint about Board Excellence: M&A 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.

Strategy Classic Series: Porter’s Five Forces

20 Feb

competition-Ice Hockey

Michael Eugene Porter—a Professor at the Institute for Strategy and Competitiveness, Harvard Business School—is widely acclaimed for his unmatched prowess in competitive strategy, strategic planning, global economic development, and the application of competitive principles and strategic approaches.  Renowned as the father of modern day strategy, Dr. Porter is an author of 18 books and a number of articles.

His scholarly writings on management and competitiveness are ranked as the most influential pieces of work till date.  Dr. Michael Porter is widely known for his Porter’s Five Forces framework, which is a useful tool to evaluate the competitiveness of an organization with respect to its rivals.  Competition is part and parcel of every industry, and for the existence of an enterprise it is important to know its rivals and how their product / service offerings and marketing strategies affect the market.  It is a common foundational framework used in Strategy Development.

The Five Forces framework emphasizes on 5 critical elements that determine the attractiveness of a business against its rivals in the industry:

  1. Threat of New Entrants
  2. Supplier Power
  3. Buyer Power
  4. Threat of Substitution
  5. Competitive Rivalry

Threat of New Entrants

This element examines the simplicity or complexity of an industry for the competitors to jump in.  High-return industries are more appealing to new entrants.  A market with easy access for new entrants poses greater risk—of market share diminishing—for established businesses.  New entrants in an industry are able to dent the profitability of established players unless the incumbents retaliate strongly and make the entry of new firms challenging.

A serious threat to entry also relies on the existing barriers in the industry.  If the market entry barriers are high and there is an expected sharp response from the entrenched competitors, the newcomers will think twice before entering the market.  Another important factor for new entrants is the requirement for large capital for branding, advertising and creating product demand, which limits their entry in a niche market.  Aspiring market entrants should thoroughly analyze and understand all the critical barriers to entry before entering an industry—such as economies of scale, product differentiation, capital investment, access to distribution channels, and government policies and regulations.

There 6 prevalent types of barriers to entry:

  1. Economics of scale
  2. Product differentiation
  3. Capital requirements
  4. Cost disadvantages (independent of size)
  5. Access to distribution channels
  6. Government / regulatory policy

Supplier Power

Suppliers are a powerful force that influences the competitiveness of an industry.  They create immense pressure on market players by slashing the quality of goods and by increasing prices, thereby squeezing the margins of manufacturers.  For instance, by jacking up the price of soft drink concentrate, suppliers erode profitability of bottling companies.  The bottlers, in turn, don’t have much leverage to raise their own prices because of intense competition from fruit drinks, powdered mixes, and other beverages.

The power of a supplier group amplifies if it’s dominated by a few firm, has differentiated and unique products; and has built up switching costs that buyers face when changing suppliers, for making investments in specialized equipment, or in learning how to operate a supplier’s equipment.  The supplier group also thrives when there isn’t much competition for sale to the industry, or when the industry is not its major customer, as this saves the supplier from selling at a bargain and investing in R&D and lobbying for the industry.

Buyer Power

Buyer or customer groups also impact the competitiveness of an industry landscape by exercising their power to bring the prices down, insist on higher quality, or demand more service.  A buyer group is powerful if it buys in large volumes in an industry characterized by heavy fixed costs and buys undifferentiated or standard products.  Buyers have the ability to put one supplier against another and find alternative suppliers.

The power of a buyer group increases if it’s a low profit business—providing it the reason to be price sensitive and insist on lower purchasing costs—, if the industry’s product is insignificant to the quality of the buyers’ products or services, or if the product that suppliers provide does not save much for the buyer.  Buyers can also use the threat of self-manufacturing as a bargaining lever against the suppliers.

Threat of Substitution

Substitute product or service offerings restrict the capacity of an industry by placing an upper limit on prices it can charge.  The industry’s earnings and profits will continue to suffer lest it can enhance the quality of products or create differentiation through, for instance, aggressive marketing.

If substitute products offer more competitive price-performance trade-off, then the industry’s profitability gets limited or goes down.  For instance, the erosion of profits for the sugar industry due to substitution of sugar with commercialized high-fructose corn syrup.

Internal Rivalry

Internal Rivalry, existing at the center of Porter’s Five Forces framework, represents the competition between existing players often leads to rivals using manipulative tactics like price competition, new product launch, and advertising wars.  Companies can use strategic shifts to improve their competitive position—e.g., raising buyers’ switching costs, increasing differentiation, and focusing on low fixed costs areas.

Interested in learning more about the other critical elements of the Porter’s Five Forces and their role in in determining the state of competition and profit potential of an industry?  You can download an editable PowerPoint on Porter’s Five Forces 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.

Just Too Many Processes? Gain Back your Competitiveness through Global Process Optimization

24 Nov

Management processes–everything from how a company manages risk to how it gets supplies for factories to how it manages and develops people–are some of the primary ways that global companies impose order and consistency on a diverse set of global operations.  Companies believe that processes can help share knowledge across divisions and regions. Likewise, seamless delivery and service processes can be central to meeting customer expectations.

In a world where the pace of competition is increasing faster than ever, best-in-class processes can create competitive advantages when it comes to innovation and risk management. However, researches have shown that companies are particularly poor at managing processes. Often there are just too many processes. Worst, executives often do not know where to begin.

Global Process Optimization is the strategic approach to building a real Competitive Advantage.  However, it can be a challenge and there are pitfalls that organizations must face.

The Pitfalls of Organizations

Global organizations are particularly poor at managing processes. Processes are considered one of the 3 weakest aspects of organizations and strengthening them is crucial.

Based on a McKinsey survey of executives, executives do not know what their processes are.  Inasmuch as there are just too many processes, these processes do not reflect new customer needs. In fact, there exists a resistance to change that can be damaging to an organization.

Organizations have to understand that processes can go wrong on a global scale and it can bring in a lot of challenges to an organization.

The 3 Core Challenges to Global Organizations

Organizations are faced with 3 core challenges when dealing with processes and transforming them to a global scale.

  1. A Plethora of Processes. When there are a plethora of processes, there are just too many processes and too little value.  This happens when executives are unable to differentiate between processes that are essential to creating global value and those that are inessential but offer benefits if these are consistent.  Executives also fail to differentiate between processes that are crucial to customers or those that create value and those that do not. A plethora of processes is also created when the operation is in various locations or as a result of M&A activity.
  2. Overstandardization. How do you know that overstandardization exists? It is when processes are so rigid that they are slow to respond to new growth. As a result, there is a dramatic decrease in local responsiveness. This core challenge often arises because there is just too much concern about maximizing control and reducing risk.
  3. Resistance to Change. This is the third core challenge faced when change is introduced and there is resistance. Resistance to change often occurs when there is difficulty in changing customer-facing processes until the organization is faced with customer backlash. Executives often fail to understand customers’ preference for standard global service. The thinking is often directed towards country-specific variations which are not often what customers like.

Overcoming the 3 core challenges can be done. Organizations just need to take on a 3-phase approach that will ensure that all global processes are enabling performance. These are Prioritize, Optimize, and Implement. A 3-phase approach is an effective tool towards approaching Global Process Optimization in a strategic manner where value is maximized at minimal cost and complexity.

Interested in gaining more understanding of Global Process Optimization? You can learn more and download an editable PowerPoint about Global Process Optimization 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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