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									Strategy Tools
     Core Tools




         0
Table of Contents

1      ANALYSIS PLAN                       16   KEY PERFORMANCE INDICATORS
2      BREAKTHROUGH MODEL                  17   MARKET PROFITABILITY
3      COMPETITIVE BENCHMARKING            18   PORTFOLIO ANALYSIS
4      COMPETITIVE POSITIONING             19   REAL OPTIONS/STRATEGIC OPTION
5      CORE COMPETENCTY ANALYSIS           20   SCALE CURVE
6      CUSTOMER SEGMENTATION               21   SCENARIO ENVISIONING
7      EXPERIENCE CURVE                    22   SENSITIVITY ANALYSIS
8      FINANCIAL MODELING                  23   SEVEN S FRAMEWORK
9      FIT VS. ATTRACTIVENESS MODEL        24   STAKEHOLDER ANALYSIS
10     FIVE FORCES ANALYSIS                25   SWOT
11     GANTT CHART                         26   VALUE BASED MANAGEMENT
12     GAP ANALYSIS                        27   VALUE CHAIN ANALYSIS
13     GROWTH SHARE MATRIX                 28   VALUE TREE
14     INDUSTRY VALUE CHAIN ANALYSIS       29   VOICE OF THE CUSTOMER
15     ISSUE TREE/ISSUE MAP




                                       1
Analysis Plan
Analysis Plan Summary

The analysis plan details a problem-solving process and specific analysis which must be developed to assess a hypothesis.
The analysis plan must be flexible and that the analyses to be conducted and the deliverables to be produced may change
during the course of the project.



                           CLIENT EXAMPLE: HYPOTHESIS/ANALYTICAL PLAN


                                        Hypothesis                                 Analysis                                Info. Required                         Info. Source                              End Products


                              Overall Hypothesis
                              Organizational philosophy needs to be
                              modified




                              Supporting Hypothesis                                                                                                                                                 Business System Diagrams
                              Existing organization does not          • Define business system,                     • Key activities, processes by LOB   • Management interviews
                              adequately support the business           operating environment                       • CSFs along business system by      • Secondary research
                              strategy                                • Define CSFs, organizational                   LOB                                • HR documents
                                                                        requirements along business                 • Existing organizational elements
                                                                        system                                        impacting business system
                                                                      • Define how existing organization
                                                                                                                                                                                              Activity   ~~~~         ~~~~      ~~~~
                                                                        supports business system, CSFs
                                                                                                                                                                                                         ~~~~         ~~~~      ~~~~

                                                                                                                                                                                              CSF        ~~~~         ~~~~      ~~~~
                                                                                                                                                                                                         ~~~~         ~~~~      ~~~~




                                                                                                                                                                                                             Financial Metrics
                              Even after adjusting for asset write-up, • Financial performance vs.                  • Historic and projected financial   • Annual reports, 10Ks, 10Qs, etc.
                              financial performance has not met          competitors, budget/plans                    data                               • Company financial reports
                              corporate expectations or competitive • Overview of cost structure (e.g.,             • Asset write-up information         • Financial department interviews
                              standards due to an inappropriate          fixed vs. variable costs)                  • Summary cost, volume info for
                              organization (and cost) structure        • ROA, NI adjusted for asset write-ups         production units




                                                                                                                                                                                                    Data/Info Flows          Org Charts
                              The increasing complexity of business • Define actual vs. perceived vs. “real”        • Key decisions                      • Management interviews
                              and the evolving importance of, and      organization chart, decision-making          • Key individuals involved in        • Organization charts
                              coordination required between            process/responsibilities; identify gaps        decision-making process            • Memos/documents on
                              specialized expertise requires changes • Define expertise, info required to make      • Information flows                    management processes
                              in the decision-making process and       decision, organizational requirements                                             • System flow charts
                              information flows                      • Define evolving nature of organization and
                                                                       information flows




                                                                                                                                   2
Analysis Plan
When To Apply

When it is necessary to lay out problem-solving process in depth/detail and identify the analyses which need to be undertaken
to validate the selected hypotheses


Approach


• Define an issue on which a specific action depends and phrase it as a “yes” or no” question
• Establish a hypothesis: a statement of likely resolution of the issue including the reasons for answering “yes” or “no”
• Develop an analysis statement that outlines the “models” that will be explored in order to prove or disprove the hypothesis
• Identify the likely location or means of obtaining data to accomplish the analysis
• Develop end products (presentations) to graphically represent the output of the analysis




                                                                  3
Analysis Plan
Citations - Client and Industry Experience                    Source List

• Compaq/Technology/Vasu Krishnamurthy                        • Robert M. Grant, “Contemporary Strategy Analysis”,
                                                                3rd Edition
• Galileo/Travel/ Spencer Lin & Vasu Krishnamurthy

• Post Office Counters Ltd./Transportation Services/KIT
  database

• XYZ MCS/Consulting/Vasu Krishnamurthy

• United Airlines/Travel/Vasu Krishnamurthy




                                                          4
Breakthrough Model
Breakthrough Model Summary

The Breakthrough model focuses attention on most substantial opportunities for creating value for customers and shareholders.




                                                  Industry                                     Company


                                                                    Market/Product
                                            Trends in the
                              External      economic
                                                                    Repositioning         Market/product
                                                                            3             strategy and basis
                                            environment in
                                                                                          for competition
                                            which the markets
                                            exist
                                                                      Industry                           Enterprise
                                                                   Transformation                        Alignment
                                                                                                 1
                                                                       4




                              Internal      Best practices                           Capabilities of the company’s
                                            across this and           2              people, processes,
                                            similar industries                       technology, systems and
                                                                 Best Practice       structure
                                                                 Performance




                                                                        5
Breakthrough Model
When To Apply

Utilize the Breakthrough model to identify and categorize all opportunities to create substantial incremental shareholder value.



Approach

When creating a Breakthrough model, the following criteria should be considered:

• Summarize all opportunities to improve business performance from other analyses

• Categorize them into four groups:

       • Enterprise alignment
       • Best practice performance

       • Market/product repositioning

       • Industry transformation

• Determine approximate economic value of each type of strategy




                                                                 6
Breakthrough Model
Citations - Client and Industry Experience       Source List

Non-XYZ:
                                                 • Paul Elkin, “Mastering Business Planning and
• Toyota: the lean production system               Strategy: The Power and Application of Strategic
• Frito-Lay: end-to-end supply chain               Thinking”
   management and the use of
   advanced technology
• Intel: high velocity product
   development
• Amazon.com: Internet based
  channels of distribution
  on behalf of shareholders.




                                             7
Competitive Benchmarking
Competitive Benchmarking Summary

Competitive Benchmarking is used to identify and measure the factors that determine why a process has specific cost, quality
or timing attributes and incorporate the best practices into an actionable change plan. It does so in part, by comparing a
company’s performance in key areas with respect to its competitors’ performance.

Examples of presenting Competitive Benchmarking findings:



    NEW PRODUCT DEVELOPMENT CYCLE TIME


             20
                                                                                                               = Maximum
             18                                                                                              # = Average or Most Common
                                                                                                                                                         Average Speed of Answer                                        Call Abandon
                                                                                                               = Minimum
                                                                                                                                                                (seconds)                                                    (%)
             16
                                                                                                                                                                                        Apex                                     Georgia
             14                                                                                                                                                              TARP       Power                                    Power    TARP
                                               13.5
                                                                                                                                          Company                             800-        &    ICSA                               Dell     800-   ICSA
                                                                                                                                                                                        Light Bench-
             12
                                                                                                                                            95%                              Number                                             Computer Number Bench-
  Months
             10
                                                                                    10.5
                                                                                                                                           greater       Acme                Survey      80% marking     Company         Boston   90%     Survey marking
                                                                   9.0                                                                      than         Power              (median)    within Study     estimate        Edison within   (median) Study
              8
                                                                              7.0                                  Average = 6.7
                                                                                                                                             60            45                 28         20    17             19          7.0      6.0          5.0    3.7
                                         6.5          6.0
              6
                             5.0                                                           6.0   6.0
                                   4.5                       5.0
                                                                                                       4.5
              4
                      3.5                                                                                                                  60                                 17                       20%                                      3%
              2

              0                                                                                                                                         Calls Handled In One Session                                Average Calls/Rep/Day
                  A         B      C     D     E      F      G      I     J          K     L     M     N                                                            (%)
                                                                                                                                              ICSA
                            Home Goods                      Perishables                    Apparel                                           Bench-                                                                       TARP
                                                                                                                                            marking                                                                        800-   ICSA
                                                                                                                                           Study with    Company                GE                                        Number Bench-                GE
                                                                                                                                             89% of     (Advertiser           Answer          Acme                        Survey marking Georgia      Answer
           Best Practices                                                                                                                 respondents     Survey)     GTE     Center          Power    Company           (median) Study Power         Center
           • ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~                                                                                            >50           62         70           85          98        34                 53     65          76      100
           • ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
           • ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~                                                                                               50%                             100%                   30                                100




                                                                                                                                                   8
Competitive Benchmarking
When To Apply

While not a comprehensive comparison, Competitive Benchmarking illustrates the efficiency of specific processes in
comparison to a company’s competitors. Select companies to benchmark against carefully - remember that companies outside
the client’s industry may be the best candidates. Ensure that data collected are comparable and the the right processes are
benchmarked; those which have the biggest impact on customer service/satisfaction/value.

Approach

• Examine the issues most important to the company’s situation to determine whether roles, processes, or strategic issues
  should by benchmarked

• Identify key performance variables and determine which companies to use for comparison (both within company’s
  industry and outside the industry)

• For process benchmarking, determine the metrics to be measured; these can be key performance indicators (KPI’s), or
  other measurements

• Establish data collection methodology (industry sources, on-line databases, on-site visits, phone interviews, survey
  questionnaires, competitors, etc.)

• Measure client company performance

• Measure performance of competitors and best practice leaders

• Illustrate the spectrum of performances on an appropriate graph

• Determine gaps and reasoning
• Develop action plans/recommendation to address gaps

• Implement actions and monitor progress



                                                                9
Competitive Benchmarking
Citations - Client and Industry Experience            Source List
                                                      • Paul Elkin, “Mastering Business Planning and Strategy: The
• Ball Corporation/Packaging /Vasu Krishnamurthy &      Power and Application of Strategic Thinking”
  Mike Weiss
                                                      • Liam Fahey, Robert M. Randall, “The Portable MBA in
• Motorola/Technology/Vasu Krishnamurthy                Strategy”

• XYZ MCS/Consulting/Vasu Krishnamurthy               • Robert M. Grant, “Contemporary Strategy Analysis”, 3rd
                                                        Edition
• United Airlines/Travel/Vasu Krishnamurthy
                                                      • Michael Gould, Andrew Campbell, Marcus Alexander,
                                                        “Corporate-Level Strategy: Creating Value in the
                                                         Multibusiness Company”




                                                     10
Competitive Positioning
Competitive Positioning Summary

Competitive Positioning analysis shows how a company is positioned in its industry relative to its competitors




                                      Positioning Map
                                      Example: Entertainment
                                                     High                                                           Studio F




                                                                                         Studio E


                                                                                                                        Studio C      Market Strength

                                                                                                                                            Low
                                          Channel
                                          Strength                                                                                          Medium
                                                                              Studio D

                                                                                                                                            High
                                                                                                         Studio B
                                                                       Studio G




                                                            Studio H                         Studio A


                                                     Low
                                                            Low                                                                High
                                                                              Content Strength
                                                                                 • Intellectual property strength
                                                                                 • Product strength




                                                                                                    11
Competitive Positioning
When To Apply

To show clients that you understand their market and position. Can also be used to develop strategic recommendations.



Approach



                           STEP                      DATA REQUIRED                      SOURCE(S)
                1. Choose axes that are      • Information on industry as a     • Trade associations
                   relevant to customer        whole
                                                                                • Trade periodicals and
                   decision-making (first)
                                             • Information on competing           publications
                   and those which
                                               companies’ strategies and
                   differentiate suppliers                                      • Information services
                                               positioning
                   (second)
                                                                                • Analyst reports
                2. Illustrate where
                                                                                • Various companies’ annual
                   competitors lie on
                                                                                  reports and other public
                   map(s)
                                                                                  information
                3. Interpret map for
                                                                                • Interviews with competitor
                   strategic implications
                                                                                  management
                   (e.g., clusters or open
                   spaces)                                                      • Industry experts




                                                                12
Competitive Positioning
Citations - Client and Industry Experience                Source List

• Barclays Global Investors (BGI)/Banking/KIT database    • Paul Elkin, “Mastering Business Planning and Strategy: The
                                                            Power and Application of Strategic Thinking”
• Blue Cross/Insurance/Mike Weiss
                                                          • Robert M. Grant, “Contemporary Strategy Analysis”
• Boots/Retail/KIT database
                                                          • Henry Mintzberg, James Brian Quinn, Sumantra Ghoshal,
• Galileo/Travel/ Spencer Lin & Vasu Krishnamurthy          “The Strategy Process”

• Giddings & Lewis/Machine Tool/Vasu Krishnamurthy        • Henry Mintzberg, James Brian Quinn, “The Strategy Process:
                                                            Concepts, Contexts, Cases”
• Osh Kosh B’ Gosh?SP/Retail/Mike Weiss

• XYZ MCS/Consulting/Vasu Krishnamurthy

• Save & Prosper/Banking/KIT database




                                                         13
Core Competency Analysis
Core Competency Analysis Summary

Core Competency Analysis provides a practical and systematic process to identify a company’s core competencies and assess
key competitive advantages.

Examples of Core Competency Models:



COMPETENCIES MODEL - FRAMEWORK

Strategic/         Technology        Product                  Mfg/Joint                              Sales/             Customer            Other
Financial Planning Development       Development              Venture             Marketing          Distribution       Refill Support      Customer Service


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                                                              Core Competence (CC) - A competence which delivers a sustainable competitive advantage in

                                    •Fast, affordable, fun,
                                                               current markets, provides access to a wide variety of markets, and makes a significant                      p
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                                                               contribution to the perceived customer benefits of the end product.
                                        family dining
                                          experience
                                                                          Critical Strategic Capabilities (SC) - The capabilities in which a company is a
                                                                           leader. These capabilities are the source of competitive advantage.
                           •   Marketing and brand mgmt.
                           •
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                               Training
                               Franchise mgmt.                                        Critical Enabling Capabilities (EC) - The capabilities in which a company is        s
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                           •   Product innovation                                      competitively equivalent to other market leaders. These capabilities are
                                                                                       often the source of a barrier to entry.                                            p
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                           • BigMac recipe
                           • High quality, low price product                                       Primary Capabilities (PC) - Minimum functional and technical
                             sourcing                                                               requirements necessary to participate.
                           • Efficient operation                                                                                                                             t
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                           • Menu selection
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                                                                                                                                                                     14
Core Competency Analysis
When To Apply

Employ Core Competency analysis to evaluate a company’s capabilities in each function of the value chain with a hierarchical
model which identifies capabilities and the degree to which they provide competitive advantage and can be leveraged. Please
note that there is a risk of defining too narrowly the market in which the client competes, thus focusing on the wrong
competency requirements or a subset of the competencies required to effectively compete. It is key that those projects and
programs that aim at developing core competencies should not be open to re-prioritization at a later stage.


Approach

Adhere to the following guidelines when analyzing core competencies and developing a Competencies Model - Framework:

• Interview company senior management and business line management as well as competitor management

• Define company’s business system and activities performed within each function - Based on the total range of
  capabilities identified, ask the questions:
       • Which ones do we have to be “good at”?
       • Which ones do we have to be “market/world leading at”?

• Determine whether each activity is a primary capability, a critical enabling capability, a critical strategic capability, or a
  core competence, based on the degree to which the activity provides competitive advantage and can be leveraged

• Note that while all the identified capabilities will be critical to achieve the vision and strategy, the questions will help
  distinguish core from non-core by invoking management attention and reflection in a systematic and structured manner




                                                                    15
Core Competency Analysis
Citations - Client and Industry Experience            Source List

• Galileo/Travel/ Spencer Lin & Vasu Krishnamurthy    • David A. Aaker, “Developing Business Strategies”, 5th Edition

• Giddings & Lewis/Machine Tool/Vasu Krishnamurthy    • Robert M. Grant, “Contemporary Strategy Analysis”, 3rd
                                                        Edition
• MetLife/Insurance/KIT database
                                                      • Michael Gould, Andrew Campbell, Marcus Alexander,
• XYZ MCS/Consulting/Vasu Krishnamurthy                 “Corporate-Level Strategy: Creating Value in the
                                                         Multibusiness Company”
• Save & Prosper/Banking/KIT database
                                                      • Henry Mintzberg, Bruce Ahlstrand, Joseph Lampel, “Strategy
                                                        Safari: A Guided Tour Through the Wilds of Strategic
                                                        Management”

                                                      • Henry Mintzberg, James Brian Quinn, Sumantra Ghoshal,
                                                        “The Strategy Process”

                                                      • Henry Mintzberg, James Brian Quinn, “The Strategy Process:
                                                        Concepts, Contexts, Cases




                                                     16
Customer Segmentation Methodology
Customer Segmentation Methodology Summary


   High level work flow for a customer segmentation

            Establish                                                                   Build Closed Loop
                                          Data                   Model
          Segmentation                                                                    Performance
                                       Assessment              Construction
           Objectives                                                                          Tool



   What are the objectives    What data is needed to    Define the variables of    Establish a way to
   of the segmentation?       meet the objectives?      the model with             capture the key data
   Better ROI, redistribute                             accessible data?           needed to segment
                              How much of that data
   spending, change sales                                                          customer base.
                              can be obtained           Develop an analytical
   efforts?                   internally? externally?   tool that utilizes the     Utilize the data on an
                                                        variables to determine a   ongoing basis to
                              What data is essential
                                                        customer ranking or        improve performance
                              to the segmentation?
                                                        grouping (ie most ideal    and continually reward
                              What data can be a        partner to most            the better performing
                              focus for further         inefficient partner).      customers.
                              improvement in the
                                                        Refocus internal efforts
                              future?
                                                        based on segmentation
                                                        outcome.




                                                         17
Customer Segmentation

Customer Segmentation Summary

Customer segmentation is a division of a market into distinct groups of buyers who might require separate products and/or
marketing mixes.




                                       THE CONVERTER MARKET CAN BE SEGMENTED USING TWO
                                       VARIABLES: ECONOMIC RISK AND FABRIC INNOVATION
                                                               High
                                                                      • Hold inventory                        • Specialty products
                                                                      • Credit problem                        • Narrow customer base
                                                                      • Basic fabrics


                                       Economic Risk
                                       • Inventory position                                                   Niche Strategy (specialized
                                       • Credit status                                                        product to narrow customer
                                                                      “Opportunistic” Strategy                base)
                                       • Product mix
                                       • Customer base                • Sell to manufacturers before fabric   • Sell to manufacturers before fabric
                                                                        purchase                                purchase
                                                                      • Established credit                    • Established credit
                                                                      • Broad customer base                   • Focused customer base
                                                                      • Basic fabrics                         • Novel fabrics (“fashion forward”)

                                                                                                              Differentiation Strategy
                                                                                                              (specialized product to broad
                                                                      Low-Cost Strategy                       customer base)
                                                              Low

                                                                      Low                                                                   High
                                                                                             Fabric Innovation
                                                                                             • Percent novelties
                                                                                             • Order size
                                                                                             • Number of collections




                                                                                          18
Customer Segmentation
When To Apply
Applicable when it is useful to better identify marketing opportunities, to develop the right offering for each target market, or to
be able to reach the target market in the most efficient manner possible.
Approach

                              STEP                              DATA REQUIRED                      SOURCE(S)
               1. Identify segmentation variables       • Results from focus groups,        • Focus groups, interviews,
                  and segment the market                  interviews, and surveys             surveys
                   a) Survey Stage: Conduct             • Customer characteristics:         • Company data
                      interviews/focus groups with        demographics, statistics, etc.
                      consumers to gain insight into
                      motivations, attitudes, and
                      behavior
                   b) Analysis Stage: Apply factor
                      analysis to data to remove
                      highly correlated variables;
                      apply cluster analysis to
                      create a number of maximally
                      different segments
               2. Form segments by looking at
                  consumer characteristics as well as
                  consumer responses
                   a) Geographic Segmentation
                   b) Demographic Segmentation
                   c) Psychographic Segmentation
                   d) Behavioral Segmentation
                                                                      19
Customer Segmentation
Citations - Client and Industry Experience            Source List

• Galileo/Travel/ Spencer Lin & Vasu Krishnamurthy    •   Paul Elkin, “Mastering Business Planning and Strategy:
                                                          The Power and Application of Strategic Thinking”
• General Mills/CIP/Johan Sauer                       •   Robert M. Grant, “Contemporary Strategy Analysis”
• Giddings & Lewis/Machine Tool/Vasu Krishnamurthy    •   Henry Mintzberg, James Brian Quinn, Sumantra Ghoshal,
                                                          “The Strategy Process”
• The Littlewoods Organization/Retail/KIT database

• XYZ MCS/Consulting/Vasu Krishnamurthy




                                                     20
The Experience Curve

Experience Curve Summary

The Experience Curve forecasts future trends in cost/labor and determines the relative cost position of various competitors. The
tool quantifies cost savings, theoretically achieved through experience gained in conducting a process.



                          EXPERIENCE CURVE FOR WIDGETS - PROJECTIONS


                                     Unit Cost
                                        ($)
                                                  1974
                                                                Slope 20%
                                      50

                                                  1975
                                      40
                                                         1976
                                                                                   1978
                                      30                        1977


                                                                                                    1980
                                                                                   1979
                                                                                                       1981

                                      20                                                                         1982
                                                                                                                        1983

                                                                                                                               1984




                                      10
                                           200                  400         600        800   1000             2000             4000

                                                                  Unit Volume (Thousands)




                                                                                  21
Experience Curve
When to Apply

The Growth Share Matrix may be overly simplistic, market share does not always correlate with profitability and not all
businesses have the same asset intensity. Conclusions are sensitive to business and market definitions; where lines are drawn.
Practitioners must be creative, careful and consistent with market data.

Approach

Creating the Experience Curve requires yearly accumulated production volume for the entire indicative and individual
competitors, and the unit cost for the entire industry and competitors (use price data if cost data is not available.) Data can be
secured from government agencies, trade associations, and from internal company data.

Step 1        Plot accumulated volume for different years against unit cost on a log/log scale (unit cost should be deflated by
              using a general index such as the GNP deflator, or specific indices for the various pars of cost such as materials
              and labor.)
Step 2        Add a standard regression line to the graph.

CAVEATS:
• Cost figures must be defined in the same manner by all sources of data. If company cost-accounting data is used, it may
  need to be adjusted for overhead allocations and other costs not considered to be part of the activity, process, or product
  under study. If price data is used pricing behavior of participants needs to be considered
• Innovation within any functional area (e.g., product, process, distribution) can render the current experience curve useless as
  a strategy tool. Therefore, it is important to understand the environmental and customer trends in order not to rely too heavily
  on this analysis
• The experience curve is only an analytical concept, and there is no guarantee that costs will actually decrease according to it.
  The company must actively manage costs down


                                                                  22
Experience Curve
Citations - Client and Industry Experience    Source List
                                              • David A. Aaker, “Developing Business Strategies”, 5th Edition

                                              • The Boston Consulting Group, “Perspectives on Strategy”

                                              • Robert M. Grant, “Contemporary Strategy Analysis”, 3rd
                                                Edition

                                              • Henry Mintzberg, Bruce Ahlstrand, Joseph Lampel, “Strategy
                                                Safari: A Guided Tour Through the Wilds of Strategic
                                                Management




                                             23
Financial Modeling
Financial Modeling Summary
The financial model will allow us to test management assumptions and understand how different actions may affect performance
on some key competitive dimensions.


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                                                             24
Financial Modeling
When To Apply

Financial Modeling is effective in analyzing how a company’s performance, in core areas of business, will be affected by
pursuing different courses of action. This tool facilitates an understanding of various cause-effect and provides a model by
which to test various "what if" statements.

Approach

Follow these steps to successfully create a Financial Model

Step 1       Gather information on key drivers ie.
             • From the cash flow analysis performed as part of the SVA
             • Data and insight from Voice of the Customer is another source of insight

Step 2       Map the relationships and identify factors which reinforce one another vs. those that have a negative relationship
             (e.g. increase in price may have a negative effect on demand)

Step 3       Build the financial model based on the cause-effect relationships identified

Step 4       Gather data from industry analysis or internal corporate data

Step 5       Test the quality of the model by doing manual calculations on some "what if”

Step 6       Perform "what if" to assess the completeness of the model




                                                                25
Financial Modeling

Citations - Client and Industry Experience            Source List

• Flemings Fund Management Ltd (FFML)/Banking/KIT     •   Robert M. Grant, “Contemporary Strategy Analysis”,
  database                                                3rd Edition

• Galileo/Travel/ Spencer Lin & Vasu Krishnamurthy

• Osh Kosh B’ Gosh?SP/Retail/Mike Weiss

• XYZ MCS/Consulting/Vasu Krishnamurthy

• United Airlines/Travel/Vasu Krishnamurthy




                                                     26
The Fit vs. Attractiveness Model


Fit vs. Attractiveness Model Summary

The Fit vs. Attractiveness Model optimizes strategy by developing a sense of the realistic state of the market and company
affairs. The Model compares product fit with a market to product fit with a company’s objectives.




                                                          CATEGORY EVALUATION - SPECIALTY/SPIN-OFF                                                    EXAMPLE


                                                          •   Baked Goods              • Stationery                       • Decorative Accessories
                                                          •   Bulbs                                                       • Indoor Plants
                                                          •   Cheese
                                                          •   Fruit
                                                          •   Kitchenware
                                                          •   Meat/Seafood
                                                          •   Nursery Stock
                                              High
                                                          •   Snacks/Candy




                                                          • Nuts                       • Gourmet Food                     • Bed/Bath
                                                          • Seeds                                                         • Pool/Patio/Gardening
                                                          • Trees/Shrubs
                             Category
                             Fit With         Medium
                             Company




                                                          • Crafts                     •   Camping Equipment              •   Athletic Equipment
                                                          • Personal Care/Grooming     •   Children’s Apparel             •   Fishing Equipment
                                                          • Specialty Apparel          •   Drug/Vitamins/Health Food      •   Hunting Equipment
                                              Low                                      •   Hardware/Tools                 •   Sporting Good Apparel
                                                                                       •   Hosiery/Lingerie
                                                                                       •   Women’s Apparel
                                                                                       •   Men’s Apparel
                                                                                       •   Women’s Large Size Apparel




                                                                              Low                         Medium                               High



                                   Categories included in existing or planned                   Category Attractiveness
                                   specialty books


                                   Recommended additional specialty book
                                   venture




                                                                                                      27
Fit vs. Attractiveness Model

When to Apply
The Fit Vs. Attractiveness Model is used to analyze a new product or service offering’s fit within a company, in comparison to the
overall attractiveness of the product or offering. This particular model requires judgements which are subjective in nature; one
should be aware that this model may oversimplify the market situation.




Approach
Step 1       Identify product, category or market overall attractiveness as being low, medium, or high. Plot along x-axis.
Step 2       Identify product category, or market fit with company objectives as being low, medium, or high. Plot along y-axis.
Step 3       Evaluate newly created matrix; aim to reveal products, categories, or markets that fall under high overall
             attractiveness and high fit with company objectives.




                                                                28
Fit vs. Attractiveness Model
Citations - Client and Industry Experience            Source List

• Galileo/Travel/ Spencer Lin & Vasu Krishnamurthy        • Paul Elkin, “Mastering Business Planning and Strategy:
                                                            The Power and Application of Strategic Thinking”
• XYZ MCS/Consulting/Vasu Krishnamurthy
                                                          • Henry Mintzberg, James Brian Quinn, Sumantra Ghoshal,
                                                            “The Strategy Process”




                                                     29
Five Forces Analysis

Five Forces Analysis Summary

The Five Forces Analysis evaluates the attractiveness of an industry.


                        DRIVERS OF MARKET ATTRACTIVENESS
                                                               POTENTIAL ENTRANTS
                                                               Entry barriers are high if there are:
                                                               • Economies of scale
                                                               • Product differentiation
                                                               • Capital requirements
                                                               • Limited access to distribution
                                                                 channels
                                                               • Restrictive government policies
                                                               • Potential retaliatory reaction of
                                                                 incumbents

                          SUPPLIERS                                                                      BUYERS
                          Bargaining power of suppliers is                                               Bargaining power of customers is
                            greater if:                                                                    greater if:
                          • The supply industry is                                                       • The customer group is
                                                                INDUSTRY COMPETITORS                       concentrated or buys in large
                            dominated by a few companies        Rivalry is intense if:
                            or is more concentrated than                                                   volume
                                                                • Competitors are numerous or            • Products purchased are
                            the buying industry                   roughly equal in power or size
                          • The supply product is                                                          undifferentiated
                                                                • Industry growth is slow                • Products purchased represent a
                            differentiated or there are high    • There are high fixed costs or the
                            switching costs                                                                significant portion of the
                                                                  product is perishable                    customer's cost
                          • There are few substitutes           • The product lacks differentiation
                          • The buying industry is not an                                                • Customers earn low profits,
                                                                  or switching costs                       creating incentive to lower
                            important customer of the           • Capacity is augmented in large
                            supply industry                                                                purchasing costs
                                                                  increments                             • The product purchased is
                          • The supply industry poses a         • Exit barriers are high
                            credible threat of forward                                                     unimportant to the quality of the
                                                                • Rivals are diverse in strategies,        customer's product
                            integration                           origins, and "personalities"           • Switching costs are low
                                                                                                         • Customer group poses a
                                                                                                           credible threat of backward
                                                                                                           integration

                                                               SUBSTITUTES
                                                               Threat of substitutes is high if:
                                                               • There is an abundance of products or
                                                                 services that serve the same function
                                                               • The price-performance tradeoff of
                                                                 substitutes is attractive




                                                                                30
Five Forces Analysis

When To Apply

Use the Five Force analysis to evaluate a market’s structure and the trends affecting a market’s profitability. Please note that
the structural conditions alone do not provide a quantification of total future market profitability or the viability of a company.
Therefore, it is important to integrate company specific insights and confirm that the model accurately reflects what is
happening in the market.



Approach

Five Forces analysis utilizes a four step approach and is applied as a starting point for understanding a market’s attractiveness:

Step 1:       Collect data

Step 2:       Evaluate strength of key forces, including: (What about technology?)
              • Buyers
              • Suppliers
              • Substitutes
              • Competitors
              • Potential entrants

Step 3:       Qualitatively assign a high, medium or low score to each key force

Step 4:       Assess the overall effect of the forces on industry attractiveness and strategic implications




                                                                  31
Five Forces Analysis
Citations - Client and Industry Experience                      Source List
• Aerospace & Electronics Alliance/Multi-Industry/KIT database • David P Baron, “The Nonmarket Strategy System”, Sloan
                                                                 Management Review, Fall 1995
• Galileo/Travel/ Spencer Lin & Vasu Krishnamurthy
                                                               • Liam Fahey, Robert M. Randall, “The Portable MBA in
• Iberdrola and Johnson & Johnson/TC-Utilities/KIT database      Strategy”

• la Caixa/FM-Banking/KIT database                              • Robert M. Grant, “Contemporary Strategy Analysis”, 3rd
                                                                  Edition
• Levi Straus, Merk and Motorola/Multi-Industry/KIT database

• XYZ MCS/Consulting/Vasu Krishnamurthy




                                                               32
GANTT Chart
GANTT Chart

A GANTT chart gives the expected timeline for the engagement based on the client’s needs and our experience and expertise.




                                                               Scheduled    Mar                            Apr
                             ID            Name
                                                                 Finish    3/14        3/21   3/28   4/4   4/11   4/18   4/25

                             1    Mobilization                 3/26/93

                             2      XYZ Mobilization           3/26/93

                             3    SCM Mobilization             4/23/93

                                    Design customer
                             4      service process            4/12/93

                                      Map communication
                             5                                 3/30/93

                                      Model economic
                             6                                 4/1/93
                                      decisions
                                      Identify cost
                             7        drivers                  4/5/93
                                      Identify value
                             8                                 4/7/93
                                      drivers
                                      Specify CS
                             9                                 4/8/93
                                      activities
                                      Specify CS information
                             10       needs                    4/9/93

                                      Specify CS
                             11                                4/12/93
                                      resource
                                  Prepare training
                             12   materials                    4/19/93




                                                                                  33
GANTT Chart
When To Apply

When it is necessary to Illustrate for the client a rough timeline for the proposed engagement.



Approach


 •Determine the approximate duration for each task.
 •Understand the prospective client's time constraints.
 •Using a project management software tool such as Microsoft Project, determine the specific timeline for the project
 •Work either forward from an anticipated start date to determine the approximate time of completion, or backward from a
  client's "must-complete-by" date to determine the necessary duration of tasks, or both




                                                                34
GANTT Chart
Citations - Client and Industry Experience                     Source List

• Chrysler/Automotive/Vasu Krishnamurthy                       • Henry Mintzberg, James Brian Quinn, Sumantra
                                                                 Ghoshal, “The Strategy Process”
• E.B.Eddy - Forestry & Wood Products Division/Agriculture,
  Forestry & Fisheries/KIT database

• Giddings & Lewis/Machine Tool/Vasu Krishnamurthy

• RBMG/Mortgage Banking/Vasu Krishnamurthy

• United Airlines/Travel/Vasu Krishnamurthy




                                                              35
Gap Analysis
Gap Analysis Summary

An analysis ranking critical success factors against a company’s ability to attain them and their criticality to succeeding with a
particular product or service.



                                                                                                                            Ensure
                                             EXAMPLE:                                                                      software                   Negotiate contracts with
                                                                 Call center adaptation                    Source         quality and  Software        software vendors and
                                                                       (e.g. 7x24)                   software/agreement    security vendor contacts    distribution channels



                                                          High

                                                                                                                          Appropriate
                                                     Payment method                   Evaluate                              Internet                          Develop product
                                                                                        Atlas                              interface                          offering mix and
                                                                                      software                                                              marketing expertise
                                                                                                                                                            (e.g. non-traditional
                                                                                 High Priority                              Core Challenge                    distribution; CD-
                                                                                                                 Modify software as                                 ROM)
                                                                                                                      needed
                                                                                      Market and
                                                                                       feasibility
                                                  Technical support
                                        CRITICALITY                                   assessments                            Obtain strong patents
                                            TO
                                         PRODUCT                                        Financial
                                          SUCCESS Dongle capability                    projections
                                                        and                           (marketing)
                                                   manufacturing
                                                       source

                                                                                   Quick Hit                                Lowest Priority




                                                           Low                                                                                              High

                                                                                          DIFFICULTY FOR COMPANY TO ATTAIN
                                          Source: PW analysis,   Source CD-ROM and
                                          industry interviews     disks manufacturers




                                                                                                     36
Gap Analysis
When To Apply

When you must understand which critical success factors present the greatest challenge in order to focus efforts.



Approach

Is this the correct text???????????

                           STEP                        DATA REQUIRED                          SOURCE(S)
                1. Determine the trademark     • An understanding of the client’s     • Interviews with senior
                   axes for the matrix           current positioning, vis-a-vis         management
                                                 competitors
                2. Determine the                                                      • Analyst reports
                   company’s existing          • Understanding of strategic options
                                                                                      • Industry experts
                   strategy against the          available
                   industry                                                           • Interviews with competitors
                3. Generate alternative                                               • Trade publications
                   strategic options for the
                   company and plot them
                   on the matrix




                                                                  37
Gap Analysis
Citations - Client and Industry Experience            Source List
• Flemings Fund Management Ltd (FFML)/Banking/KIT     • David A. Aaker, “Developing Business Strategies”, 5th Edition
  database
                                                      • Robert M. Grant, “Contemporary Strategy Analysis” 3rd
• Galileo/Travel/ Spencer Lin & Vasu Krishnamurthy      Edition

• General Motors/Automotive/KIT database              • Michael Gould, Andrew Campbell, Marcus Alexander,
                                                        “Corporate-Level Strategy: Creating Value in the
• Philips/Multi-Industry/KIT database                    Multibusiness Company”

• XYZ MCS/Consulting/Vasu Krishnamurthy




                                                     38
  Growth Share Matrix
  Growth Share Matrix Summary
  The Growth Share Matrix is examines a company’s portfolio of businesses, depicting the company’s cash flow position by plotting
  each business’ relative market share against industry growth. This tool assists companies in determining which business units
  should be a focal point for growth strategies. Two examples of Growth Share Matrices appear below:

    Each circle represents Circle size represents                            Data needed for each business unit:
    a different business   proportional sales                                  1. Sales
                                                                               2. Market growth
                                                                               3. Sales of largest competitor
                                                                                    (or market share data)


         40%
                                                                                          PPO


         30%
                                                                                                                                         30%


         20%
                                                               PPO Nat’l
                                                                Account          Local Group
                                                                                 Cost Plus and
                                                                                                           HMO
                                                                                                                                                                                                ?
                                                PPO Outstate                         ASO
         10%                                                               Direct
                                                                            Pay                                                                            STARS
                                                                           CompMedicare                        Life         Market                                         QUESTION MARKS
                                                                                                                            Growth
Market                                                                                                                       Rate
          0%
Growth
                                                                                                           Dental
 Rate                                                                                                      Stand-                                                            NO
         -10%     Traditional/                                                                             Alone            Expected
                                                                                                                                                                            MAN’S
                                                                Nation                                                      Growth if
                    Comp                                                                                                    Available;                                      LAND
                     Local                                        al                                       Nation           Otherwise
                                                                                                                             3-Year
                    Group                                       Accou                                        al
         -20%                                                                                                               Historical
                                                                                                                                                    CASH COWS                                DOGS
                   Outstate      Traditional                    nt Par                                     Accou             Growth
                                                                                                                                         0%
                                                                                                                              Rates
                                  / Comp                                                                     nt
                                                                                                                                               4x          2x          1.5x             1x     .5x .25x
                                   Local                                                                   Control
         -30%                                                                                                                                                   Company’s Sales or Share
                                   Group                                                                                                                        Largest Competitors Sales or Share
                                   Metro
         -40%

            5.0       4.0        3.0      2.0      1.5           1.0           0.7         0.5       0.3              0.2

                                                                                                     39
Growth Share Matrix

When To Apply

This tool aims to eliminate management distraction in small unprofitable business and guides management to access the
appropriate resource levels needed for allocation to promising new businesses/core businesses. Although a useful tool, it has
been criticized as being overly simplistic. Market share does not always correlate with profitability and not all businesses have
the same asset intensity. Conclusions are sensitive to business and market definitions; where lines are drawn. When using
this tool, practitioners should be creative, careful and consistent with market data.


Approach
Creating the Growth Share Matrix requires sales data, market growth information and market share data. This information can
be found in the following sources: company data/financial statements, trade publications, interviews with senior management and
industry expert/analyst opinions. The following steps will assist in creating a Growth Share Matrix:

Step 1        Plot relative market share on x-axis

Step 2        Plot market growth rate on y-axis

              • Use expected growth if available, otherwise use 3 year historical growth rates

Step 3        Each circle (plot) should represent a different business

              • The size of the circle should be proportionate to sales




                                                                 40
Growth Share Matrix
Citations - Client and Industry Experience            Source List

• Galileo/Travel/ Spencer Lin & Vasu Krishnamurthy    • David A. Aaker, “Developing Business Strategies”, 5th Edition

                                                      • Robert M. Grant, “Contemporary Strategy Analysis”, 3rd
• XYZ MCS/Consulting/Vasu Krishnamurthy
                                                        Edition

                                                      • John Micklethwait & Adrian Wooldridge, “The Witch Doctors:
                                                        Making Sense of the Management Gurus”




                                                     41
Growth Share Matrix Supplement

It is useful to accompany the Growth/Share Matrix with a Growth/Growth Matrix, which shows those businesses that are gaining
share and those that are losing share. This matrix will often suggest additional analyses, examining the strategy of those
businesses losing share.


                             30%                                                      Data needed for each business unit:
                                                                                      1. Sales
                                                                                      2. Market Growth
                                     Losing                                           3. Sales of largest competitor
                                     Market                                              (or market share data)
                                     Share


                         Market
                                                    Holding
                         Growth                     Market                                             Each circle
                          Rate                       Share                                             represents a different
                                                                                                       business


                                                                     Gaining                           Circle size
                                                                     Market                            represents
                                                                      Share                            proportional sales



                             0%               Business Growth Rate             30%
      Use 3-year
   historical growth
  rates (use 5-year if
   business is highly
        cyclical)



                                                               42
Industry Value Chain Analysis
Industry Value Chain Analysis Summary

The Value Chain Analysis can operate on two levels: as a strategic tool to facilitate an understanding of where the key strengths
and weaknesses lie within an organization and as a more operational tool to look at supply chain management issues.

Limitations include: difficult to estimate where value is created (or destroyed) without more detailed analysis, e.g. ABM,
relatively static model, should not be applied in nonmanufacturing or non process oriented companies




                                                                43
Industry Value Chain Analysis
When To Apply

Understand opportunities for adding value by improving the various elements of the value chain



Approach

The value chain analysis is at its' simplest a high level diagnostic to see where the organization needs to improve or maintain
value creation.

Step 1        Identify the key primary and support activities
Step 2        Identify value added at each stage
Step 3        Assess the contribution of each stage to the organization's competitive advantage
Step 4        Identify the key cost drivers
Step 5        Assess potential for increasing value and decreasing costs




                                                                44
Industry Value Chain Analysis
Citations - Client and Industry Experience            Source List

• Galileo/Travel/ Spencer Lin & Vasu Krishnamurthy    • Paul Elkin, “Mastering Business Planning and Strategy: The
                                                        Power and Application of Strategic Thinking”

                                                      • Liam Fahey, Robert M. Randall, “The Portable MBA in
                                                        Strategy”

                                                      • Robert Grant, “Contemporary Strategy Analysis”

                                                      • Henry Mintzberg, James Brian Quinn, Sumantra Ghoshal,
                                                        “The Strategy Process”

                                                      • Henry Mintzberg, Bruce Ahlstrand, Joseph Lampel,
                                                        “Strategic Safari: A Guided Tour Through the Wilds of
                                                         Strategic Management”




                                                     45
Issue Tree/Issue Map
Issue Tree/Issue Map Summary

An Issue Tree/Issue Map typically begins with a broad question and defines the sequence of key issues (phrased as yes
or no choices) that will support a specific answer. A practitioner would use issue maps to frame options, usually later
in the project.
A more detailed example is included as a supplement. However, a basic representation can be found below.




                                                        Issue Map
                                                      (Yes/No Tree)

                                                                        Yes


                                                ?
                                                                        No




                                                             46
Issue Tree/Issue Map
When To Apply

This tool is most effective when considering discrete or well-defined alternatives and is extremely practical for communication
related issues. A practitioner should be recognize that an Issue Tree/Issue Map requires strong knowledge of problem or issue,
client and industry. It can be frustrating to push decision branches to yes/no questions and difficult (time consuming) to create
MECE options.

Approach

An Issue Tree/Issue Map ensures logical integrity of the problem solving framework and reduces potential for oversights or
missed opportunities. Follow these 5 steps to successfully create an Issue Tree/Issue Map:

Step 1        Identify the key issues

Step 2        Define the starting points (i.e. what factors drive these issues?)

Step 3        Identify all possible outcomes

Step 4        Develop the logic flow connections among these options

Step 5        Start over




                                                                 47
Issue Tree/Issue Map
Citations - Client and Industry Experience            Source List
• BCBSF/ /Chuck Stern                                 • Strategic Change MBA Training

• Galileo/Travel/ Spencer Lin & Vasu Krishnamurthy

• United Airlines/Travel/Vasu Krishnamurthy




                                                     48
    Issue Tree/Issue Map Supplement
    Note that this issue map for evaluating an SBU’s strategy sets up six analyses in order.


                                                                                                                                               Action
                                                        Yes Carry on as
                           Yes                              presently
                              Is client prepared
                            2 to wait for this?
Will likely movements            Analysis                    Go to A
                                                        No
in prices and demand
allow Client to achieve                                      Improve sales and
reasonable profitability                                    marketing effective-
if it carries on as              A                      Yes   ness by selecting
presently?                                                  target segments and
                              Can client achieve             refocusing efforts
1   Analysis               No reasonable
                              profitability by better                              Yes
                              sales and marketing                                         Define and implement
                                                           Can client                     profit improvement
                            3 efforts?                  No                                                              Define and implement
                                                           achieve                        programs                Yes
                                 Analysis                  reasonable                                                   reinvestment program
                                                           profitability by
                                                           reducing its                  Would major                                    Yes Dress up
                                                                                   No                                Is client worth
                                                           costs?                        investment provide
                                                         4                               client with reasonable      more to others         for sale
                                                             Analysis                                             No than to its
                                                                                         profitability?
                                                                                     5                               parents?              Develop
                                                                                           Analysis                 6
                                                                                                                        Analysis        No harvest
                                                                                                                                           strategy




                                                                              49
     Issue Tree/Issue Map Supplement
        EXAMPLE          This study was to assist management at a diversified parent co. develop a “vision” for the future of its “heritage”
                         business - a paperboard subsidiary. While returns had been attractive in this subsidiary, management was
                         questioning whether further investment was advisable.
                                                                                                                            Yes 11
                                                                                                                                “Change the
                                                                                                     No 9                       game”               Answers to Each
                                                                               No 8                      Can Client
                                     5                No 6                        Will capacity          Name “change           12                Find another basis for
                                 No Can Client           Will modernization       expansion be           the game” (i.e.,    No “Niche/milk”      competing, i.e., value not
                No 2                 Name                be forced on Client      required to            compete on                               cost
                   Would further     economically        Name as a “ticket        economically           something
                                                                                                         other than             13                 Find the market segments
                   integration       “leapfrog”          to play the game”?       develop the cost
                                                                                                         cost?)                 “Build strength    that are not cost-sensitive
                   economically      competition                                  leadership
                                                                                                     Yes                        through
                   develop a         in production                                position?
                                                                                                                                capacity”         Modernize all plants as
                   sustainable       technology?
1                  low-cost                                                                                                                       quickly as possible
                                                                                                     No                    14
Over the next      position?                                                       7
                                                                                                                           “The modernized
12-18 months,                              Yes                                     Will current                                                   Expand capacity to a point
                                                                               Yes state-of-the-art                        Client Name”
can Client                                                                                                                                        that maximizes profit
economically                                                                       technology be        10             Yes 15
become the low-                                       Yes                          replaced, putting    Can Client                                Minimize any current
                                                                                                                           “Aggressive
cost producer                                                                      Client Name at a Yes Name                                      modernization; participate
                                                                                                                           leadership in
through                                                                            disadvantage         economically                              in S3 development; lead
                                                                                                                           technology”
optimization of                                                                    with a modern        develop and                               introduction
the current                                                                        plant?                                  16
                                                                                                        lead the
plant?                                                                                                                     “Leadership            Minimize current
                                     4                                                                  introduction of No
                                                                                                                           exploitation”          modernization; be aware
                                     Are external                                                       this S3
                                                                                                        technology                                and flexible to convert
                                 Yes factors likely                                                                                               when appropriate
                                     to foreclose                                                                          17
                                     on this cost                                                                          “Build strength
                                                         No                                                                                       Integrate backward and
                        No           position?                                                                             through
                                                                                                                                                  forward to an extreme
                                                                                                                           integration”
                                      3                                                                                         18                Make cost management/
                                      Is this                                                                                   “The excellent    productivity a “way of life”
               Yes                    position          Yes                                                                     manufacturing
                                      sustainable?                                                                              company”

                                                                                   50
Key Performance Indicators - KPI
Key Performance Indicators Summary

Although there are many approaches to performance management and various types of KPIs: Strategic KPIs, Financial KPIs,
Organizational KPIs and City KPIs, this particular example focuses on Strategic KPIs (SKPIs).

Founded on the concept of a Balanced Scorecard, the Strategic KPI management technique highlights those factors that are
critical to maintaining the strategic direction of a business. The Balanced Scorecard is a measurement framework which
focuses on the four primary perspectives of corporate performance. Each perspective focuses on a particular question
fundamental to the future prosperity of the overall business.




                                                   The Balanced Scorecard



                                     FINAL PERSPECTIVE                CUSTOMER PERSPECTIVE
                                      …how do we look                   …how do our customers
                                      to our owners?                    see us?




                                  BUSINESS DEVELOPMENT                INTERNAL PERSPECTIVE
                                  PERSPECTIVE
                                                                      …what must we excel at?
                                  …how can we further develop?




                                                                 51
Key Performance Indicators - KPI
Key Performance Indicators Summary - continued...

The Balanced Scorecard drives performance throughout the organization. There is a direct line of integration between the
Vision of the organization and the Strategy that is being pursued. It also provides the top level “scoring” mechanism to ensure
each aspect of the business is on-track. The link between objectives, SKPIs, targets and initiatives is illustrated below.
                                                 The Balanced Scorecard Approach

              THE VISION                                                            FINANCIAL PERSPECTIVE
          “to achieve sustainable                                      OBJECTIVES      SKPI     TARGETS       INITIATIVES
                                                                       AAA             AAA      AAA           AAA
          outstanding results                                          BBB             BBB      BBB           BBB
          through a continuous                                         CCC             CCC      CCC           CCC
          focus on brand values                                        DDD             DDD      DDD           DDD
          and customer service”

                                                                            BUSINESS DEVELOPMENT PERSPECTIVE
                                                                       OBJECTIVES      SKPI      TARGETS      INITIATIVES
                                          THE VISION                   AAA             AAA       AAA          AAA
                                                                       BBB             BBB       BBB          BBB
                                    • deliver customer                 CCC             CCC       CCC          CCC
                                      satisfaction                     DDD             DDD       DDD          DDD


                                    • continuous improvement
                                                                                    CUSTOMER PERSPECTIVE
                                    • develop quality people           OBJECTIVES       SKPI     TARGETS      INITIATIVES
                                                                       AAA              AAA      AAA          AAA
                                    • meet shareholder                 BBB              BBB      BBB          BBB
                                                                       CCC              CCC      CCC          CCC
                                      expectations                     DDD              DDD      DDD          DDD


                                                                                    INTERNAL PERSPECTIVE
                                                                       OBJECTIVES       SKPI     TARGETS      INITIATIVES
                                                                       AAA              AAA      AAA          AAA
                                                                       BBB              BBB      BBB          BBB
                                                                       CCC              CCC      CCC          CCC
                                                                       DDD              DDD      DDD          DDD


                                                                52
Key Performance Indicators
When To Apply

Use the Strategic KPI approach to determine what factors will be the foundation for ensuring a culture of continuous
performance improvement and preparing the overall business for both the boom and recessionary periods which typify the
economic cycles in which corporations operate. It is particularly effective to visualize the direct correlation between an
organization’s vision and the strategy which is being pursued to satisfy that vision.

Approach


   Step 1       Assign each of the organization’s Business Objectives to the appropriate Strategic KPI; these SKPIs will
                represent measurement tools used to track progress. Examples regarding the Financial Perspective are
                as follows:

                Profitability               Net profit Margin (%)
                                            Return on Total Funds (%)

                Shareholder Income          Dividend Level ($)
                                            Dividend Cover (times)

                Growth                      Sales Trend (year on year growth)

                Stability                   Gearing (Debt: Equity) Ratio
                                            Interest Cover (times)

   Step 2       Set and clearly communicate a stretching yet achievable target level of performance to each SKPI

   Step 3       Identify, implement and continually review specific initiatives which will enable the organization to achieve
                the aforementioned targets



                                                                53
Key Performance Indicators
Citations - Client and Industry Experience                   Source List

• DuPont/Chemicals/Vasu Krishnamurthy                        • Paul Elkin, “Mastering Business Planning and Strategy: The
                                                               Power and Application of Strategic Thinking”
• Ericsson/Technology/KIT database
                                                             • Robert M. Grant, “Contemporary Strategy Analysis”, 3rd
                                                               Edition
• Flemings Fund Management Ltd (FFML)/Banking/KIT
  database

• International Paper Company/Multi-Industry/KIT database

• SAP/CIP/KIT database

• Sega of America/Technology/KIT database

• Valco/Chemicals/Vasu Krishnamurthy




                                                            54
Market Profitability
Market Profitability Modeling Summary

Measures current and predicts future market profitability by company profit margins.




                                     TOTAL MARGINS OF HMOs CONTROLLED BY
                                     NETWORK MANAGERS


                                              Margins
                                             ($ Billions)
                                                $3



                                                $2



                                                $1



                                                $0
                                                            1995           2005




                                                                   55
Market Profitability
When To Apply

When you would like to forecast industry profitability.



Approach


                             STEP                         DATA REQUIRED            SOURCE(S)
                   1. Collect margin data in    • Competitor margin data   • Company financial
                      dollars for industry                                   statements
                      competitors for the
                                                                           • Moody’s company data
                      current year and
                                                                             Bloomberg
                      aggregate
                                                                           • Industry Associations/
                                                                             Publications
                   2. Predict the same
                      margins for a
                      determined future year
                      and aggregate


                   3. Graph current and
                      future aggregate
                      margins




                                                                 56
Market Profitability
Citations - Client and Industry Experience    Source List

• Braun/CIP/KIT database                      • David A. Aaker, “Developing Business Strategies”, 5th Edition

• XYZ MCS/Consulting/Vasu Krishnamurthy       • Robert M. Grant, “Contemporary Strategy Analysis”, 3rd
                                                Edition




                                             57
Portfolio Analysis/Product Portfolio Analysis
Portfolio Analysis/Product Portfolio Analysis Summary

This analysis illustrates product performance and suggests product strategies; for example: high competitive position coupled
with high market attractiveness suggests investing to grow at the maximum digestible rate.




                                                                                                      Invest
                                                                    DSU                                           Operating Profit    Bubble
                                   STRONG                                                     Network
                                                                                             Management
                                                                                                                   > $500,000
                                                      Traditional Services
                                                                                                                   $10 M in FY 1994
                                                      STD Mux                                                      Budgeted Revenue
                                                                                             Fiber
                                                                             Data
                     COMPETITIVE            Leased Line                      Encryption                            < - $500,000
                                   MEDIUM                                                            Remote/Bra
                      POSITION              Modems      High                                         nch Access
                                                        Speed                    T1 Access
                                                        Dial
                                                        Modems
                                                  Low
                                                  Speed                                               Routers
                                                  Dial                         T1 Mux
                                    WEAK          Modems

                                            Disinvest                                                   Hubs
                                                LOW                       MEDIUM                     HIGH
                                                        MARKET ATTRACTIVENESS




                                                                                  58
Portfolio Analysis/Product Portfolio Analysis
When To Apply

Best utilized to consider the relative strengths of a company’s array of products and determine appropriate strategies for each.




Approach

When presenting portfolio analysis/product portfolio analysis findings, use the following guidelines:

• Use available internal and external sources to collect data on indicators of market attractiveness and competitive position
  such as market share, % revenue growth, and revenue in absolute dollars for each of the company’s product lines
• For each product:

       • graph growth rate vs. relative market share

       • scale the data points to reflect product revenue in absolute dollars

• Divide each axis into three sections - low, medium, and high - to form nine subdivisions on the graph




                                                                 59
Portfolio Analysis/Product Portfolio Analysis
Citations - Client and Industry Experience           Source List
• Allstate Insurance Company/Banking/KIT database    • David A. Aaker, “Developing Business Strategies”, 5th Edition

• Vanguard/Banking/KIT database                      • The Boston Consulting Group, “Perspectives on Strategy”




                                                    60
Real Options/Strategic Options
Real Options/Strategic Options Summary

Produces positioning maps to assess various strategic options.
Traditionally, the financial tool most widely relied on to estimate the value of strategy, discounted cash flow (DCF) valuation,
assumes that management will follow a predetermined strategic plan, regardless of how events unfold or what new information
is obtained. Ideally, executives would like to address flexibility and uncertainty in their strategies when assuring them. Option
pricing is a tool which enables executives to do just that, improving decision making about the sequence and timing of a
portfolio of strategic investments.
Option space is a way to visualize the various options for an executive; it gives them a way to “draw” a strategy in terms that
are neither wholly strategic nor wholly financial but some of both.

                                                                                       Option Space Divided into Regions
                             EXISTING STRATEGY                                              “The Tomato Garden”
         General
        Merchandise                                                                                       Value-to-cost
                                   Discount
                                   Stores
                                                                              0.0                             1.0
                                              General
                                               Store                  lower Region 6: Never. Rotten     Region 1: Now. Ripe
                                                                                       tomatoes, Invest            tomatoes, Invest
                               Client
       WHERE TO
       COMPETE                                                                       Region 5: Probably                    Region 2: Maybe
                                                                                       never. Late                           now. Imperfect
                                                                                       blossoms and                          but edible
                                                                        Volatility


                                              Specialty                                small green                           tomatoes
                                               Stores                                  tomatoes

         Specialty
        Merchandise
                      Cost     HOW TO COMPETE Non-Cost
                                                                                                         Less    Inedible, but
                                                                                              promising green    very promising
                                                                                                     tomatoes     tomatoes
                                                                      higher             Region 4: Maybe later   Region 3: Probably later




                                                                 61
Real Options/Strategic Options
When To Apply

When you wish to identify various strategic options (positioning), which outline where and how to compete.



Approach



                             STEP                        DATA REQUIRED                          SOURCE(S)
                  1. Determine the trademark     • An understanding of the client’s     • Interviews with senior
                     axes for the matrix           current positioning, vis-a-vis         management
                                                   competitors
                  2. Determine the                                                      • Analyst reports
                     company’s existing          • Understanding of strategic options
                                                                                        • Industry experts
                     strategy against the          available
                     industry                                                           • Interviews with competitors
                  3. Generate alternative                                               • Trade publications
                     strategic options for the
                     company and plot them
                     on the matrix




                                                                   62
Real Options/Strategic Options
Citations - Client and Industry Experience              Source List
                                                        •    Robert M. Grant, “Contemporary Strategy Analysis”
• GTE CyberTrust/Banking/KIT database
                                                        •     Timothy Luehrman, “Investment Opportunities as Real
• Kellogg Company/Food & Beverage/KIT database
                                                              Options:Getting Started on the Numbers”, HBR, July
                                                              1998
• Robeco Bank SA/Banking/KIT database
                                                        •     Timothy Luehrman, “Strategy as a Portfolio of Real
• Star System Inc. - E-Commerce Workshop/Banking/KIT
                                                              Options”, HBR, September 1998
  database




                                                       63
Scale Curve
Scale Curve Summary

The Scale Curve identifies the benefits derived from economies of scale.




                             SUPPORT LABOR SCALE EFFECT - CONVENTIONAL FIGHTER AIRCRAFT                                                  EXAMPLE
                                                   10.0



                                                    5.0
                                                                                 Client Plane base hours
                                                                       1A
                                     Ratio of                    1A     1A
                                  Support Labor
                                  Hours to Touch    1.0
                                   Labor Hours                                 1A
                                                                                               1A          1A
                                                                                     1A 1A 1A
                                                    0.5                                        1A
                                                                                                                                        1A
                                                                                                                                  SLOPE = 67%




                                                    0.1
                                                          1               2                3            4      5      6   7   8    9   10
                                                                       Total Annual Program Touch Labor Hours (000)

                                                                                                  Key
                                                                                                              Client A
                                                                                                             1A
                                                                                                              Competitor C
                                                                                                             1A B
                                                                                                              Client
                                                                                                             1A
                                                                                                              Competitor B




                                                                                           64
Scale Curve
When To Apply

When it is necessary to determine if there is a benefit to derived from economies of scale.



Approach


 •Gather cost information of producing a service or a product at various volumes
 •Display information in scale curve for relevant products or functions




                                                                 65
Scale Curve
Citations - Client and Industry Experience    Source List

• BCBSF/ /Chuck Stern                         • Robert Grant, “Contemporary Strategy Analysis”




                                             66
Scenario Envisioning

Scenario Envisioning Summary

The Scenario Envisioning concept is an inductive, “top-down” approach to developing future industry/market scenarios. The
approach hypothesizes future scenarios independent of the past and present upfront and then links them to past and current
trends. The scenarios are then used in simulating business outcomes such as consumer preferences, business systems and
competitive actions, which in turn are used to identify value added opportunities and future strategies.
PricewaterhouseCoopers’ Scenario Envisioning has been developed to assist companies in mapping the possible future of an
industry in transition. Decision makers are using Scenario Envisioning to rethink how the driving forces of their industry might
combine in surprising ways. In these new models of the future, they test current strategy, develop and explore other options.
Executives practice operating and understanding their business in states that current rivals don’t expect, making decisions today
that will enhance their organization’s chances of succeeding tomorrow.
Most managers expect Scenario Envisioning to begin with prefabricated world visions of economic and geopolitical trends. In
contrast, Scenario Envisioning develops customized pictures of a company’s future markets that are distinctly different from the
present and yet quite possible. Hence, managers experience what it would be like to operate in new markets and serve
customers with new needs.




                                                                67
Scenario Envisioning
When to Apply
Scenario Envisioning is a powerful approach for companies in industries that are experiencing rapid discontinuous change –
where the future cannot be extrapolated from the past and present. Scenario Envisioning fulfills the key needs for formulating
strategy in a rapid discontinuous change environment.

The central conflict in economics ….is the battle between past and future, the war between the existing configuration of
industries and the industries that will soon replace them,” observed the Wall Street Journal recently. A few years ago, planners
labeled such industry transformation “discontinuity,” or a break in established trends. A more descriptive word is “convergence,”
one type of discontinuity that creates a new set of customer values and products when two or more industries or technologies
collide. This phenomenon has already redefined many markets and is even transforming whole industries. Executives today
tasked with formulating strategic plans face the uncertain future of these converging industries.

Scenario Envisioning can be employed, but not limited to the following situations:

• Organization leaders who seek to understand the emerging future and its implications for making immediate decisions.

• Management beginning corporate repositioning, strategic visioning, or re-invention initiatives

• Managers of such functions as mergers and acquisitions, research and development, marketing and sales who need to test
  the consequences of current and potential decisions in different competitive futures

• Staff units needing to depict, assess and communicate the implications of the alternative futures facing their organizations as
  part of the planning cycle

• Corporate development managers who want to monitor emerging technologies and potential competitive conditions

• Product and service marketers who track the rapid evolution of customer needs

• Senior executives who integrate and coordinate mergers and acquisitions, joint ventures and strategic alliances and who need
  a clear vision of the outcomes and benefits of these ventures.
                                                                68
Scenario Envisioning
Approach
Through PricewaterhouseCoopers’ work with companies in evolving industries, a ten-step approach has been developed that
previews innovative and nontraditional industry and market capabilities.

Innovative hypothesis about the future, based on extensive expert industry knowledge and research are formulated for study
and review. The scenario team converts these theories of logical futures - ones that diverge from the past and present trends -
into a set of distinctly different scenarios.

Develop Future Industry Scenarios
Step 1       Define the broad future industry and market context within which the scenarios will be developed. For example, the
             banking industry, the broader context may be financial services or even personal information services.

Step 2       Identify the paramount forces that will shape this industry and market context. For example, what consumer,
             regulatory, social, legal and technological changes can or could exert the most powerful influence on your industry?
             How do these interact on a global basis? Which of these is the most uncertain?

Step 3       Identify the boundary parameters - the full range of uncertainty - of the paramount forces. For example, if regulation
             is one of the paramount forces, could the industry be intensively regulated or completely deregulated?

Step 4       Develop logical but innovative hypotheses that explain how the most powerful and uncertain forces could interact.
             For example, will a major segment of the banking industry evolve into an on-line personal with building industry,
             fostered by deregulation and increasing consumer technological capability?

Step 5       Create a set of scenarios that show how a few key unpredictable forces with the highest impact could interact.
             Using a matrix model, the interaction of two or more unpredictable conditions results in a number of distinct
             possibilities. The goal is to cover a comprehensive spectrum of market conditions.




                                                               69
Scenario Envisioning
Approach cont.

Step 6      Test the credibility of the scenarios by assessing the viability of enabling events required to make them happen.
            For example, as today’s youngsters quickly adapt to interactive games, will the market for this type of entertainment
            continue to grow as they mature?

Step 7      Plot the evolutionary paths of the scenarios. For example, the delivery of broadband TV to the home by fiber optics
            cable may not occur for many years. In the meantime, a variety of “compromise” technologies such as direct
            broadcast satellite TV, ISDN phone lines, and ultra-fast modems, may flourish.

Key business outcomes of the scenarios such as value chains and competitive dynamics are simulated. By viewing the potential
evolutionary paths of markets , decision makers can anticipate what moves will put a company into the most advantageous
position.

Assess Economic Potential and Define Strategy Options

Step 8       Simulate business outcomes and such as new value chains and new competitor dynamics created by the
             evolutionary paths of the scenarios. This will identify which segments of your industry may have increased profit
             potential and which types of market participants are likely to reap the benefits.

Step 9       Assess your company’s capabilities and compare them to capabilities needed to compete in the various
             scenarios. Identify the company’s capability gaps and develop potential solutions to overcome them.

Step 10      Develop, prioritize, and select a portfolio of optimal strategic options to compete successfully in each of the
             scenarios, and compare them with the present direction. This will allow the company to rehearse its potential
             future.




                                                               70
Scenario Envisioning
Citations - Client and Industry Experience                     Source List
• Hollywood Studio/Entertainment                               • Saul J. Berman and Steve Redwood, “Developing Strategy
            At a major Hollywood Studio, XYZ was                 in Changing Markets: A Case Study in Scenario Envisioning”
            employed to lead studio executives through
            the Scenario Envisioning ten step approach.        • Strategic Change: Scenario Envisioning Approach to Strategy
            Please refer to Sample Deliverables.                 Development

• Galileo/Travel/Spencer Lin & Vasu Krishnamurthy
             At Galileo, XYZ used the Scenario
             Envisioning tool to develop potential
             diversification strategies.
             Deliverables are available for review.

• Tetra-pack/?/E-Business/Susan?




                                                          71
 Scenario Envisioning Supplement
                                                                                        Ideal Strategy
                                                                                        Development


                      HIGH
                                                                                          Scenario
                                                                                          Envisioning

                                                              Dynamic Industry
Industry Driver                                                     Rapid
    Impact
                                                                Discontinuous
• New entrants
• New/substitute                                 Transforming      Change
  products                                        Industry
• New markets
• M&A activity                                     Steady
• Shifting business                              Evolutionary                             Traditional
  models and                                       Change                                 Strategy
  economics                                                                               Development
                               Static Industry
                              Slow Incremental
                                  Change
                                                                                          Budgetary
                      LOW                                                                 Planning
                             LOW           Environment Driver Impact             HIGH

                                                 • Technology
                                                 • Regulation
                                                 • Consumer Disposition
                                                          72
Scenario Envisioning Supplement
High- Level Approach

                                     Develop Future Industry Scenarios

             Step 1:    Define future industry/market context
             Step 2:    Identify paramount forces that will shape this context
             Step 3:    Identify boundary parameters of the paramount forces
             Step 4:    Create a set of scenarios within these boundary parameters
             Step 5:    Test credibility of scenarios by assessing viability of enabling events
             Step 6:    Modify and select scenarios for further analyses based on Step 5



                             Simulate Business Outcomes and Develop Strategy


             Step 7:    Simulate business outcomes such as consumer preferences,
                        business systems and competitive actions
             Step 8:    Assess client’s capabilities in context of scenarios and business
                        outcomes
             Step 9:    Identify client’s capability gaps and develop potential solutions
             Step 10:   Develop portfolio of optimal strategies

                                                     73
Sensitivity Analysis
Sensitivity Analysis Summary

Sensitivity analysis assesses the effects on profits and cash flow when changes are made in key variables. The reliability of a
sensitivity analysis is only as good as the reliability of the estimated key variables for each case. Ensure that the variables
changed in each case are the variables with the most impact on the end result (revenues, profit, etc.)




                                 Annual Project Cash Flow
                                       $ 000
                                     4,000



                                     2,000



                                        0
                                         1996   1997   1998   1999   2000   2001   2002   2003   2004    2005   2006   2007   2008

                                    -2,000



                                    -4,000                                                              High
                                                                                                        Base
                                    -6,000                                                              Low

                                    -8,000




                                                                               74
Sensitivity Analysis
When To Apply

Sensitivity analysis should be used to determine the range of profit/loss and cash flow possibilities for a potential project by
changing key revenue and cost variables.




Approach

 When creating a sensitivity analysis model, there are three key steps.

 Step 1:       Create a pro forma base case for the project in question

 Step 2:       Determine range of low to high numbers for each of the established variables

 Step 3:       Replace base case numbers with low and, then high case numbers separately to determine the overall
               outcome range




                                                                 75
Sensitivity Analysis
Citations - Client and Industry Experience                Source List

• Braun/Multi-Industry/KIT database                       • David Matheson and Jim Matheson, “The Smart Organization:
                                                            Creating Value through Strategic R&D”
• Compaq/Technology/Vasu Krishnamurthy

• Motorola/Technology/Vasu Krishnamurthy

• National Brands Limited/Food & Beverage/KIT database

• Top European Brewery/Food & Beverage/KIT database




                                                         76
The 7-S Framework
Seven S Tool Summary

The 7-S framework provides a means to analyze the building blocks of an organization that ultimately serves to support its
strategy. The bottom level of the pyramid represents the more tangible components of the company which provide the foundation
for achieving the company’s goals.

                                                                    A coherent statement of actions aimed at gaining
                                                    Strategy        a sustainable advantage over competition



                                                                              Key factors needed by the company to
                                                Critical Success              effectively implement the strategy
                                                Factors (CSFs)

                                                                                          Capabilities possessed by the organization as a whole as
                                              Capabilities/Skills                         distinct from those of individuals; some companies
                                                                                          perform extraordinary feats with ordinary people



                          Processes/        Staff        Culture/Style        Structure
                           Systems


                 The process and   The people in the     The way managers         The organization
                 procedures        organization          collectively behave      chart and
                 through which     considered in terms   with respect to use      accompanying
                 things get done   of corporate          of time, attention       baggage that
                 from day-to-day   demographics, not     and symbolic actions     show who reports
                 and the systems   individual                                     to whom and how
                 that facilitate   personalities                                  tasks are divided
                 them                                                             up and integrated

                                                                    77
The 7-S Framework
Seven S Tool Summary
When performing a 7-S assessment, a practitioner must address several key questions along each of the model’s dimensions.
Organizational strengths and weaknesses must be identified and the gap between the organizational requirements must be
determined.


                                                                                              •   What is current strategy?
                                                                                              •   What is future strategy
                                                                                              •   How well is it communicated?
                                                                              Strategy        •   Does it vary by region?




                                                                Critical Success Factors                   • What must be done well to achieve strategy?
                                                                         (CSFs)                            • How well are these currently being done?


                                                                                                                        •   What skills are needed to support CSFs?
                                                                     Capabilities/Skills                                •   Do these capabilities currently exist?
                                                                                                                        •   What are the current core capabilities?
                                                                                                                        •   Are they supporting CSFs and Strategy?


                                             Processes/            Staff           Culture/ Style        Structure
                                              Systems




      • What are the best practices across       • Do people have the            • How does the culture impact       • Does structure make sense?
        regions?                                   right skills?                   effectiveness and change          • What are the best practices?
      • How effective are systems and            • Is the level of staffing        readiness?                        • Do the administrative functions
        processes at supporting customer           appropriate?                  • How well do performance             adequately support customer and region
        and strategic goals?                                                       measures support goals?             needs?
                                                                                                                     • Can this be done more effectively?

                                                                                   78
The 7-S Framework
When To Apply

When it is necessary to evaluate the building blocks of an organization that serve to support its mission and allow it to execute
its strategies. Information for this analysis is difficult to obtain in some areas without extensively interviewing company
personnel. The model as a simple description of the status quo; it should move the analysis forward to identify areas in which
the organizational building blocks are not supporting the strategy.

Approach


                               STEP                        DATA REQUIRED                       SOURCE(S)
                    1. Document                    • Mission Statement                 • Company documents
                       mission/shared vision
                                                   • Business plans                    • Interviews with key
                                                                                         executives and staff
                                                   • Annual strategic plans
                    2. Document strategy
                                                   • Organization charts
                    3. Evaluate key skills and     • Training manuals
                       capabilities
                                                   • Position descriptions
                                                   • Budgeting process documentation
                    4. Evaluate support levers,
                       decision                    • Performance measures
                       processes/systems, staff,
                       culture/style and
                       structure




                                                                      79
7- S Framework
Citations - Client and Industry Experience          Source List

• DuPont/Chemicals/Vasu Krishnamurthy               • Paul Elkin, “Mastering Business Planning and Strategy: The
                                                      Power and Application of Strategic Thinking”
• MCS Market Strategy/FIP/Steve Malloy
                                                    • Liam Fahey, Robert M. Randall, “The Portable MBA in
• Rover/Automotive & Transportation/KIT database      Strategy”

• United Airlines/Travel/Vasu Krishnamurthy         • Henry Mintzberg, Bruce Ahlstrand, Joseph Lampel, “Strategy
                                                      Safari: A Guided Tour Through the Wilds of Strategic
                                                      Management”




                                                   80
Stakeholder Analysis
Stakeholder Analysis Summary

This tool reveals stakeholder expectations, identifies potential conflicting objectives, and allows management to make
conscious choices on which stakeholders to prioritize, and how to deal effectively with those that are not prioritized.




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                                                                       ..
                                                                       ..
                                                                       ..
                                                                       ..




                                    C
                                    u
                                    s
                                    t
                                    o
                                    mr
                                     s
                                     e




                                                               81
Stakeholder Analysis
When To Apply

Stakeholder analysis is used to understand the objectives and interests of various stakeholders in order to identify potential
conflicts of interest. While some conflicts are not readily resolvable, discussing them will raise awareness of their existence.




Approach

  Adhere to the following criteria when performing an analysis of stakeholder interests:

  • Identify potential stakeholders at the client organization

  • Identify potential objectives through discussions with management, key owners, union representatives, etc.

  • Support the objectives by available secondary information (e.g., union purpose statements)

  • Identify potential areas of conflict and discuss with management potential actions to resolve the conflicts




                                                                 82
Stakeholder Analysis
Citations - Client and Industry Experience               Source List

• All State/Insurance/Julia Stamberger                   • Paul Elkin, “Mastering Business Planning and Strategy: The
                                                           Power and Application of Strategic Thinking”
• Crown Life Insurance Company/Insurance/KIT database
                                                         • Liam Fahey, Robert M. Randall, “The Portable MBA in
• Dana/Automotive/Mike Weiss                               Strategy”

• Frito Lay/CIP/Mike Weiss                               • Michael Gould, Andrew Campbell, Marcus Alexander,
                                                           “Corporate-Level Strategy: Creating Value in the
• la Caixa/Banking/KIT database                             Multibusiness Company”

• Pillsbury/CIP/Julia Stamberger                         • Henry Mintzberg, Bruce Ahlstrand, Joseph Lampel, “Strategy
                                                           Safari: A Guided Tour Through the Wilds of Strategic
• Shell Italia/Energy (Petroleum)/KIT database             Management




                                                        83
SWOT Analysis

SWOT Analysis Summary


SWOT Ana;ysis is a framework used to identify the Strengths, Weaknesses, Opportunities, and Threats an organization is
facing. SWOT provides a high-level understanding of the internal challenges and direction of a company, and the external
environment’s developing forces. SWOT can be simultaneously simple and powerful, providing an overall assessment of a
business.



                                                               Strengths                                                         Weaknesses

                                    • Entertainment industry expertise and thought leadership
                                                                                                         • Not enough consultants with industry expertise and
                                            –EMC 2000
                                                                                                           functional experience to meet demand
                                            –Technology Forecast
                                            –ETC
                                                                                                         • Minimum media client experience
                                            –Publications
                                                                                                         • Internal competition for industry vs. functional resources
                                    • Functional experience
                                           –Financial systems
                                                                                                         • Limited visibility in the “business issues” market on the
                                           –Strategy development
                                                                                                           CEO and COO level
                                    • Large, existing client base in entertainment
                                                                                                         • Inconsistent client management and consulting skills
                                    • Concentrated focus through EMC practice, marketing and PR
                                                                                                         • Limited ability to respond quickly
                                      efforts
                                                                                                         • No software package to leverage
                                    • Broad range of consulting services

                                    • International network of partners and consultants

                                    • Strong vendor relationships (e.g., Oracle, SAP) to leverage

                                    • High visibility with CFOs gained through financial systems
                                      projects




                                                     Opportunities to Increase Revenue                                            Threats

                                    • Leverage existing client relationships                               • Competition aggressively targeting EMC industry
                                                                                                             clients
                                    • New areas of business
                                          –Content management                                              • Building of resources slower than market growth
                                          –Digital asset management
                                          –Internet applications                                           • Limited ability to quickly recruit and effectively
                                                                                                             deploy qualified consultants with deep industry
                                    • Increased demand for current services                                  experience
                                            –Cost reduction
                                            –Change management                                             • Potential conflicts of interest as client list grows
                                            –revenue enhancement
                                            –new business opportunities                                    • Shrinking client base due to industry
                                            –infrastructure development                                      consolidation

                                    • Growth through acquisition or alliance

                                    • Increased consultancy needs due to regulatory changes




                                                                                                    84
SWOT Analysis
When to Apply

SWOT is tool, used to identify market opportunities facing a company, competitor issues, and key success factors to leverage. It
can be effective in combining various issues identified through other forms of analysis.

Approach
SWOT Analysis involves a 4 step approach, requiring input from both internal and external sources, including, interviews with
senior and business line management, as well as, expert opinions from industry analysts and trade publications.


Step 1       Interview company management

Step 2       Perform competitive analysis

Step 3       List strengths and weaknesses of company

Step 4       Determine opportunities and threats the company faces




                                                                85
SWOT Analysis

Citations - Client and Industry Experience                   Source List
• Galileo/Travel/Spencer Lin & Vasu Krishnamurthy            • Paul Elkin, “Mastering Business Planning and Strategy: The
                                                               Power and Application of Strategic Thinking”
• Philips/Multi-Industry/KIT database
                                                             • Liam Fahey, Robert M. Randall, “The Portable MBA in
• XYZ MCS/Consulting/Vasu Krishnamurthy                        Strategy”

• XYZ Specialty Chemicals Point of View/Energy Practice &    • Robert M. Grant, “Contemporary Strategy Analysis”, 3rd
  Strategic Change/KIT database                                Edition

• Ralston Purina Company/CIP/KIT database                    • Henry Mintzberg, Bruce Ahlstrand, Joseph Lampel, “Strategy
                                                               Safari: A Guided Tour Through the Wilds of Strategic
• US Postal Service/Multi-Industry/KIT database                Management




                                                            86
Value Based Management
Value Based Management Summary

VBM advocates the use of strong management processes in tandem with value-based performance metrics to make strategic
decisions for a company. Value-based performance metrics for making better decisions. Value-based management is an
integrative process designed to improve strategic and operational decision making throughout an organization by focusing on
the key drivers of corporate value. VBM can be a key component in improving organizational effectiveness, because it provides
an unambiguous and precise performance metric, namely value, upon which to build an organization.
Previously, some management theories have not been based upon the bottom-line impact on the business. For example, in
total quality management (TQM), the lack of value-oriented performance targets and measures contributed to failure.



                                 EXAMPLE
                                                   FRAMEWORK FOR SBU ANALYSIS
                                             20

                                                       Value Creation
                                             15

                                       Return
                                        on    10
                                       Equity

                                              5
                                                               Value Destruction

                                              0

                                                   0     5        10       15      20
                                                             Cost of Equity




                                                                        87
Value Based Management
When To Apply

To evaluate whether a company’s financial results have created or destroyed shareholder value. Can be applied in business
unit analysis or to the organization as a whole.


Approach


 •Properly allocate overhead to business area, and calculate profitability*
 •Determine measure of business risk and required returns through extensive external analysis of similar public companies
 •Allocating equity or assets among the business units
 •Determine cost of equity and return on equity


 *For Business Unit Analysis




                                                                       88
Value Based Management
Appendix




                                     Business Valuation

                                       Calculate NOPLAT and invested capital
               1. Analyze              Calculate value drivers
                  historical           Develop an integrated historical perspective
                  performance          Analyze financial health
                                       Understand strategic position
                                       Develop performance scenarios
               2. Forecast             Forecast individual line items
                  performance          Check overall forecast for reasonableness

                                       Develop target market value weights
               3. Estimate cost of  Estimate cost of non-equity financing
                  capital           Estimate cost of equity financing

                                       Select appropriate technique
               4. Estimate             Select forecast horizon
                  continuing           Estimate the parameters
                  value                Discount continuing value to present

               5. Calculate and        Calculate and test results
                  interpret            Interpret results within decision context
                  results




                                                       89
Value Based Management
Citations - Client and Industry Experience    Source List

• Amoco/Energy (Petroleum)/KIT database       • Copeland, Kaller and Murrin, “Valuation: Measuring and
                                                Managing the Value of Companies
• Compaq/Technology/Vasu Krishnamurthy
                                              • Robert M. Grant, “Contemporary Strategy Analysis”, 3rd
• Delta/Transportation/Dave Morgan              Edition

                                              • Michael Gould, Andrew Campbell, Marcus Alexander,
• Motorola/Technology/Vasu Krishnamurthy
                                                “Corporate-Level Strategy: Creating Value in the
                                                 Multibusiness Company”
• Union Pacific/Transportation/Dave Morgan




                                             90
Value Chain Analysis

Value Chain Analysis Summary

The Value Chain Analysis is functional on two levels: as a strategic tool to facilitate an understanding of where the key
strengths and weaknesses lie within an organization and as a more operational tool to evaluate supply chain management
issues.




                                                              91
Value Chain Analysis

When To Apply

Employ Value Chain analysis as a high level diagnostic used to determine where an organization needs to improve or maintain
value creation. It is most effective when applied to manufacturing or process oriented companies and is not a substitute for
more detailed analysis such as AMB or the Relatively Static Model.




Approach

Listed below are key features to consider when creating a Value Chain Analysis model:

• Separate the company’s business into primary and support activities and list the primary activities performed in
  each component

• Identify the critical success factors for each component and evaluate the company’s strengths/weaknesses for
  each
• Identify the key cost drivers

• Assess potential for increasing value and decreasing costs




                                                                92
Value Chain Analysis
Citations - Client and Industry Experience               Source List
• Amoco/Energy (Petroleum)/KIT database                  • David A. Aaker, “Developing Business Strategies”, 5th Edition

• Crown Life Insurance Company/Insurance/KIT database    • David P Baron, “The Nonmarket Strategy System”,
                                                           Sloan Management Review, Fall 1995
• Galileo/Travel/Spencer Lin & Vasu Krishnamurthy
                                                         • Liam Fahey, Robert M. Randall, “The Portable MBA in
• MetLife/Insurance/KIT database                           Strategy”

• Rhone Poulenc/Chemicals/KIT database                   • Robert M. Grant, “Contemporary Strategy Analysis”, 3rd
                                                           Edition
• Save & Prosper/Banking/KIT database
                                                         • Henry Mintzberg, Bruce Ahlstrand, Joseph Lampel, “Strategy
• The New Zealand Refining Company Ltd(NZRC)/Energy        Safari: A Guided Tour Through the Wilds of Strategic
  (Petroleum)/KIT database                                 Management




                                                        93
Value Tree
Value Tree Summary

This tool is useful to develop a comprehensive list of potential value creation drivers




                          Benefit type   First-order drivers   Second-order drivers             Third-order drivers (Examples of)
                          Increase       Increase              Increase sales opportunities     Increase call volume
                          revenue        volumes                                                Decrease number of abandoned calls

                                                               Increase close ratio             Improve training for sales rep selling techniques

                                                               Increase items per close         Increase sales rep product and
                                                                                                 customer knowledge
                                                               Increase customer retention      Increase customer satisfaction “follow up”
                                                                                                communication

                                                                                                Sell longer-term packages/contracts
                                         Increase              Increase base price
                                         prices                Reduce discounting               Reduce number or frequency of promotions

                                         Improve               Up-sell current customers        Increase out-bound selling to existing
                                         mix                                                    customers
                                                               Acquire upscale customers        Increase targeted

                          Reduce         Improve               Eliminate non-value-added work   Re-design business processes
                          expense        efficiency                                             Automate activities through use of IT
                                                               Reduce other factor costs        Reduce reliance on overtime
                                         Avoid                 Eliminate cost drivers
                                         costs                 Improve process quality yields   Reduce order processing errors




                                                                                           94
Value Tree
When To Apply

When it is necessary to develop a comprehensive list of potential value creation drivers



Approach


 • Begin with a standard value tree consisting of benefit type, first-order drivers, and second-order drivers


 • Determine "third-order drivers," i.e., those specific activities which constitute the second-order drivers, based on one's
  industry knowledge and any company-specific information


 • Use the available information and insights from other tools (e.g. Dupont Analysis, Enterprise Diagnostic, and Lean Producer
  Chart) to determine which benefit drivers might be the specific areas of company concern


 • “Run the numbers” to model potential profit improvement




                                                                  95
Value Tree
Citations - Client and Industry Experience    Source List

• Compaq/Technology/Vasu Krishnamurthy        • Strategic Change MBA Training




                                             96
 Voice of the Customer
 Voice of the Customer Summary

 The Voice of the Customer is a framework for understanding what are critical factors from the customers' point of view and how
 well the corporation performs compared to its competitors.

  Process              Order winning              Crucial            Given                                          Performance                                                           Strengths                    Weaknesses


                                                                                        Undamaged del. (G)
                                                                                                                                                            7.9                         Overall, strong on delivery    Varied performance in 1996
                                                                                                                                                             8
                                                                                                                                                                                        performance                    Not flexible due to campaign
                                              Urgency delivery    Undamaged                                                                      7.4                                                                   structure
 Deliver
                       Timed delivery                                                          Flexibility (C)
                                                                                                                                                                    8.1                 Good on urgent delivery
                       (JIT)                                      delivery                                                                                7.8
                                                                                                                                                                                                                       Start-up problems with NN
                                                                                        Urgency delivery (C)                                                                            Consignment stocks are well    Some problems with
                                              Flexibility                                                                       6.7
                                                                                                                                                                                                                       labeling

 Goods
                                                                                                                                                7.3                                     received                       Some problems with
                       Delivery                                                         Delivery reliable.(OW)
                                                                                                                                                       7.7
                                                                                                                                                                                                                       wrapping
                       reliability/security                                             Timed delivery (OW))
                                                                                                                                                    7.5
                                                                                                                                              7.2

                                                                                                              5         6             7                         8               9
                                                                                                                                XXX
                                                                                                                                Competitor




                                                                                                                                          6.9                                           Strong technical competence    Reactive, not proactive
                                                                                          Complaints handle.(G)
                                                                                                                                                          7.6
                                                                                                                                                                                        Speed of response - reactive   Do not bring technical staff to

 Provide
                                                                                                                                                                7.8
                       Speed of response      Technical           Availability                  Availability (G)
                                                                                                                                                                7.8                     Joint R&D with few selected    meetings/not structured
                                                                                                                                                                                        companies                      Technical issues not always
                                              knowledge           Complaints                Knowl. of cust. (C)
                                                                                                                                           7
                                                                                                                                                          7.6
                                                                                                                                                                                                                       dealt with by technical staff
                                                                                                                                                                                        Some positive signs towards
Technical              Solution orientated                                                                                                                                8.3
                                                                                           Technical know. (C)                                                                          closer co-operation
                                              Process knowledge   handling                                                                             7.5
                                                                                                                                                                          8.3

                                                                                          Solution orient.(OW)


 Support
                                                                                                                                                          7.7
                       Proactive                                                                                                                                        8.1
                                                                                          Speed of resp. (OW)
                                                                                                                                                          7.6

                                                                                                                  5         6             7                         8               9
                                                                                                                                  XXX
                                                                                                                                  Competitor




                                                                                             Freq. of visits (G)                                             7.8                        Very good with selected        Attitude to pricing is
                                                                                                                                                              7.9
                                                                                           Continuity of rep(G)                                           7.6                           clients                        short-term
                                                                  Easy to get hold of                                                 6.8
                                                                                                                                                                8.1                     Very good when "going gets     Lack of initiative/

  Relation
                       Openness, sharing      Understanding                               Technical comp. (G)                                               7.9
                                                                                                                                                                                        tough"                         not spontaneous
                                                                                           Easy to get hold (G)                                         7.6
                       information            clients business    Tech. competence                                                                   7.4
                                                                                                                                                     7.4
                                                                                                                                                                                                                       Not open about market
                                                                                              Relationship (C)                                                                                                         information and strategy
Management
                                                                                                                                                       7.5
                                                                  Continuity of             Underst. client (C)                                      7.4                                                               Too dependent on one key
                       Honesty, integrity,    Ability to listen                                                                                     7.3
                                                                                                                                                       7.5                                                             person
                                                                                             Ability to listen(C)                                          7.8
                       trust                                      representatives         Honesty/integr. (OW)                                                8                                                        Unclear about strategic
                                                                                                                                                           7.8
                                                                                                                                                                                                                       direction
                                                                                                                  5         6             7                         8               9                                  No unity of approach
                                                                  Frequency of visits                                             XXX                                                                                  Confusing account handling
                                                                                                                                  Competitors




                                                                             97
Voice of the Customer
When To Apply
The Voice of the Customer is used to determine which analysis will yield the relative importance of each value driver to the
customers. By associating each value driver with business processes and capabilities, one can use the result to make strategic
choices on where to focus and how "good" the corporation should aspire to be on the criteria. A practitioner should note that
this technique does have a few limitations/points of concerns:

 • Voice of the Customer survey provides an assessment of what customers currently believe to be the case, not future
   needs, requirements, etc. It is therefore important to include non-customers and a discussion with management about
   what might become the requirements of the future

 • It might be a good idea to have a selection of managers and employees answer the same questions. Often, you will
   find a gap between what is internally perceived to be important and what the customers says. In itself a disturbing and
   revealing fact that should raise some interesting discussions.

Approach
Step 1        Preparation
              • Look through existing corporate material on customer surveys
              • Perform a focus group workshop to raise the various dimensions that might concern customers (intern and with a
                selection of customers)

Step 2        Develop the questionnaire and test it. Make sure to have customers focus:
              • Criteria: order winning, crucial, given

              • Comparison: Better than competitors, equal, competitors better
              • Ranking: on a scale from 1 to 5

Step 3        Perform the survey. NOTE: Make sure to include the voice of non-customers

Step 4        Assemble the results according the the VoC presentation outline.

                                                                98
Voice of the Customer
Citations - Client and Industry Experience    Source List

• Baxter/Pharmaceuticals/KIT database         • Jon Anton, Debra Perkins, “Listening to the Voice of
                                                the Customer: 16 Steps to a Successful Customer
• Coach Leather/Retail/KIT database             Satisfaction Management Program”

• Hormel/CIP/Johan Sauer                      • William Barnard, Thomas F. Wallace, The Innovative
                                                Edge: Creating Strategic Breakthroughs Using the
• Polaroid/CIP/KIT database                     Voice of the Customer”

                                              • Price Waterhouse, “Better Change”

                                              • Voices into Choices : Acting on the Voice of the

                                                  Customer




                                             99

								
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