Tuesday, May 8, 2012

How can we move from Cost cutting mode to Value

Growth and New Business generation are the real issue for the organization. To achieve both if we concentrate on Value creation the rate of progress will be significant.

Let us look into below areas.
How we are performing as on today?
Organizations must be assessed on how well they improve performance across a wide variety of dimensions, such as quality, cost, cycle time, productivity, and profitability.

b) In terms of Adaptability, how well we are doing?
Organizations must be assessed on how well they anticipate industry change and initiate and manage industry transformations. This is dramatically different from managing to enhance performance in an existing industry or being the “best of breed” in a given industry segment.

c) Where are the Opportunities?
Organizations must be assessed on how well they create new businesses, pioneer new markets, and discern and communicate strategic direction. The defining challenge for organizations aspiring to global leadership is their capacity to identify, create, and exploit fundamentally new business opportunities that do not exist in today’s industry.

d) What is the capacity of my organization to anticipate and manage the transformation of the industry?
Unless managers seriously challenge their capacity to understand the project industry change, they are destined to be followers rather than leaders.
Organization has to come up with different steps to address above areas.

1. Understanding the environment.
2. Competing to win in the marketplace.

Organization need to rethink the logic underlying their business portfolios as well as their price performance assumptions in each business.

While firms are coping with the performance and adaptability gaps, they have to address simultaneously the
1. Managing the aspiration level.
2. Leveraging resources.
3. Creating new competitive space.
4. Energizing the whole organization.

Managing the Aspiration Level:
Organizations can accomplish unprecedented achievements when they are motivated to do so. Therefore, a fundamental challenge for top managers is: How can they foster a high aspiration level in terms of a strategic intent, so that their
organization will push or entice its members to strive for goals that are beyond all prior achievements?

Motivation for change results from an aspiration or broadly defined goal that all employees can identify with and feel committed to. Aspirations must represent a stretch; they must exceed the current resources of the company. Therefore, by
design, strategic intent must cause a “misfit” between aspirations and current resources/current approaches to using resources. The aspiration must focus the energies of the organization toward building its position in the marketplace through
internal business development and marketplace innovation. This can occur when the business team finds a way to change the rules of the competitive game in a particular industry setting.

Leveraging Resources:
A high aspiration level (compared to the resources available) leads to the need for resource leverage. Thus, another fundamental challenge faces managers:
How do they acquire and use resources most effectively to generate new marketplace opportunities?

The process of resource leverage is best accomplished through defining and developing a
strategic architecture. A strategic architecture necessitates identifying and fostering core competencies and core products.

Creating New Competitive Space:
An internal capacity to leverage resources is a prerequisite for inventing new businesses. This may be called

Creating new competitive space and managing growth efficiently are the essence of “competing for the future.”

The commitment to create new businesses requires:

A framework for identifying new opportunities.
A break with the organization’s old ways of looking at the world.
A focus on functionalities rather than on current products and services.
A dramatic altering of the price performance relationships in an industry.
creating new competitive space. The required management skills are different from those needed to compete more effectively in existing businesses. The strategic intent is to shape a new business context, to provide unique offerings or solutions for customers.

Energizing the Whole Organization:
This new approach to managing strategically is not just a technical task or a senior management task; it is a task for the
members, at all levels, in all functions, and in all countries. One key step is to develop a shared mindset and shared goals.

Another is to develop strategies for competency acquisition and development.
Senior managers must therefore focus on these questions:
How do we stretch the imagination of all employees?
How do we challenge the organization?
How do we enhance the motivation of individuals and teams and link them to the corporation’s aspirations?

Strategic Intent:
Strategic intent is the articulation of the organization’s aspirations. It provides a means for stretching the imagination of the total organization. It creates a Focus for developing “barrier-breaking” initiatives such as identifying radical new directions for investigation of business opportunities. It provides a way of creating an obsession with winning in the marketplace that encompasses all participants at all levels and functions of the organization.

Core Competencies:
A strategic architecture allows managers to identify

How does an organization identify its core competencies? Three simple tests or sets of questions can reveal the key

characteristics of core competencies:
1. Is the competence a significant source of competitive differentiation? Does the competence generate distinct value and
benefits for customers? Core competencies manifest themselves to customers in the form of the firm’s products and their
2. Does the competence transcend a single business? Does it cover a range of businesses, both current and new? A core
competency should provide access to a variety of product marketplaces.
3. Is the competence hard for competitors to imitate? Is it difficult for others to learn how the firm does what it does?
which core competencies they have and which ones they need to develop. Core competencies reside at the heart of the process of leverage and the creation of new business opportunities.

Competence = (Technology × Governance process × Collective learning)

Strategy must be aimed at growth; growth must be the new agenda for corporate management. Dramatic growth will not take place if the focus is on technology alone; it will take place only if the focus is on competencies, with technology as a component and as a result of all creation of Value to the customer.

whole organization. The role of top management, therefore, is essentially one of energizing the entire organizational
They must profitably deploy resources to create new markets and new businesses and establish a broad strategic direction.

How Value Creation is coming into picture? How organization can tap the various opportunities?

Organization need to look into the below areas.
opportunity gap. How are they going to initiate new business opportunities that lie outside the purview of their current product portfolio?

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