value and stakeholders 9-16[1]dspace.mit.edu/.../0/valueandstakeholders9_16.pdf · balance needs of...

1 - D. Nightingale - © 2002 Massachusetts Institute of Technology

Value and Enterprise Stakeholders

Prof. Deborah NightingaleSeptember 16, 2002

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Learning Objectives

Value creation frameworkEnterprise stakeholdersStakeholder value metrics

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Creating Value

Value Value PropositionProposition

Find Stakeholder

Value

Develop and Agree to the

Approach

Execute on the

Promise

Dynamic and

Iterative

Value Value IdentificationIdentification

Value Value DeliveryDelivery

* Source: Murman et al., Lean Enterprise Value, Palgrave 2002

“How various stakeholders find particular worth, utility, benefit, or reward in exchange for their respective contributions to the enterprise.”*

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Find stakeholder value

Identifying Value

Identify stakeholdersWhat part of the program or process adds value for each stakeholder?

Determine each stakeholder value

What kinds of exchanges are required to provide this value?

Establish stakeholder expectations and contributions

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Creating a Value Proposition

Develop and agree to the approach

Align stakeholders around the program value streamStructure the enterprise value stream

Each stakeholder will contribute their efforts or resources to the value stream in those ways from which they can derive value

Establish clear communication of balanced expectations with all stakeholders

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Deliver Value to All Stakeholders

Add value at each step along the value steam in accordance with the value propositionExecute the value stream using lean principlesGather information and data to continue to improve enterprise processes

Execute on the promise

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Value Creation is Dynamic and Iterative

Real world is not staticChanges in stakeholder valuesChanges in who are the stakeholders

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A Value Creation Framework

Value Identification

Value Proposition

Value Delivery

Value Phases

Program

Corporate Government

National International

EnterprisesMost lean principles and practices have been focused here

Opportunities

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Corporate Leadership

Employees

Multi-Program

Enterprise

Business Unit

Customers/End Users

Shareholders

UnionsSociety

Partners

Suppliers

Enterprise Stakeholders

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Customer View

Value as we define it is delivered in a timely fashion, even in anticipation of our needsOur satisfaction appears to be the focus of all our supplier’s activitiesWe are invited to get involved early in the design processOur supplier understands our need for low life-cycle cost and superb quality

OUTCOMES:More customersGreater market share

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Workforce ViewI am proud to be an employee and feel my skills are valued as a resource for the companyI enjoy coming to work everyday and understand how my work adds value for customersContinuous and cross-functional training helps empower me to make decisions and create a leaner enterprise I can get the necessary information for decision making when I need it and how I need itI am rewarded both as an individual and as a team member for my contributions OUTCOMES:

Better worker retentionFewer sick/absent daysMore innovationGreater productivity

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Senior Leadership ViewBalance needs of all stakeholders and encourage value creation throughout the enterpriseCreate a shared vision of the enterprise with value defined for all stakeholdersEstablish a process-based enterprise using integrated teams that are aligned with customer value streamsStrategic goals and enterprise metrics are created and understood by all levels of the organizationOrganizational learning is encouraged and best-practice/lessons learned information disseminated

OUTCOMES:Long-term corporate leadershipBetter executive compensation

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Union ViewFeel like full strategic partners in the enterpriseUnderstand market forces can cause “tough” decisions, but want to be in on the decisions in shaping the futurePositive contributor to the enterprise by enabling work, NOT by withholding laborFeel a sense of pride in the work they help do and the products they help provideWork for long-run success of the enterprise, not simply short-term job quotas

OUTCOMES:Better salaries for employeesLong-term job stabilityFewer union conflictsHR duties shared with union

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Corporate / Stockholder ViewDelighted with increased profitability from enhanced operating margins and salesUnderstand that the delivery of value to the customer is the core business objectiveEnterprise integration enables globalization and market growthFinancial community values the increased operating efficiencies and the company shares these financial gains with the other stakeholdersResources freed up in the lean transformation are tasked with innovating and creating growth opportunities

OUTCOMES:Higher ROILong term growth

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Supplier / Partner ViewFully integrated in design, development, and production of the productProductions schedules are aligned and open to all in the value chainSupplier is assisted by his customer to achieve Lean and is appraised of potential business opportunitiesDelivers products just in time to point of useOpenly share ideas on product and process improvement that will benefit the entire enterpriseEquitable sharing of profits throughout the enterprise

OUTCOMES:Greater salesLess overhead and stockReduced demand amplification

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Societal View

Pleased to have this organization in their communityThe organization provides jobs and participates in the improvement of the communityThe environment is considered important to the organization The local society is willing to provide infrastructure support to sustain the organizationPartnership between organization and society makes the community a desirable place to live

OUTCOMES:Long term partnershipImproves local economyIncreased local societal well-being

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LeanEnterprise

SatisfiedStakeholders

Strategicoutcomes

Lean Enterprise Value For All Stakeholders Delivers Results

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Stakeholder Values/Contributions

Corporation Sustainability of Growth in Growth in Expansion into Innovation in the Enterprise Market Share Profits New Markets Products

Shareholders Share Price in Growth in Financial Management of Information on Goodwill of the Market Profits Ratios Corporation Corporate Affairs Corporation

Employees Sustainability of Share in Job Sec- Quality of Work Information Good the Enterprise Profits urity Environment Sharing Management

Customers Responsiveness Quality in Value in Innovation in Quality in Overall On-Time to Concerns Products Products Products Service/Support Deliveries

Suppliers Sustainability of Growth in Fair Pri- On-Time Accts. Early Design Information the Enterprise Market Share cing Receivable Involvement Sharing

Society/Commu- Expansion in Em- Job Security Tax Pay- Quality of Work Externalities Corporate nity/Government ployment Opport. ments Environment Citizenship

STAKE HOLDERS' INTERESTS IN AN ENTERPRISE

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Stakeholder Values/Contributions

Corporation Capital/ Direction Legal Management Inter-Functional Facilities and Strategy Entity Expertise Integration

Shareholders Financial Fore- Capital Feedbackcasting/Analysis on Value

Employees Labour/Service/ Ideas/ CorporateExpertise Innovations Culture

Customers Money Drive and Feedback Design Competition Specifications

Suppliers Products (Parts/ Design Ideas/ Brand Recogni-Raw Materials) Input Innovat. tion

Society/Commu- Manpower Quality of Services Policiesnity/Government Life

STAKE HOLDERS' CONTRIBUTIONS TO AN ENTERPRISE

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Customer Value

CUSTOMER**SATISFACTION

Product /ServiceQuality

Relationshipwith

Corporation

Cost ofOwnership

CycleTime

Function to RequirementsReliabilityAvailability Product Performance

DefectsFailure Rate, MTBF

ResponsivenessEarly InvolvementQuality of SupportOpen CommunicationsTrustRisk SharingBenefit SharingViability of Enterprise

Product Development CostAcquisition CostOperating CostSupport CostRetirement CostRetention of Resale Value

Order Lead TimeProduct Development TimeMaintenance/Repair/Overhaul TimeOn-Time DeliveryJust in Time Capability

** Includes Acquisition Community, End User, and System Beneficiary

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Shareholder ValueEarnings/ShareFinancial RatiosCorporate Profit ReturnShare PriceBond Interest Rate

Corporate DebtCorporate Equity RiskBond RatingShare Rating

Barriers to EntryMarket Share MarketCompetitors PositionSubstitutesBranding

R&D Investment Growth SHAREHOLDERNew Product Successes Potential SATISFACTION

Track RecordVision Expression ExecutiveRespect (internal and external) LeadershipPerception of Ability to Perform

Information AvailabilityGoodwill External Reputation RelationsRegulatory Compliance

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Supplier Value

Training/Assistance with Process ImprovementMarket Information Supplier Certification RelationshipDemand Information Early Involvement (design, development, production) withDesign Information Information Sharing CorporationProduction Information Technology SharingProduct/Process Improvement Viability of Enterprise

Long Term RelationshipCorporation's Market Reputation SUPPLIER

SATISFACTION

Fair PricingRisk SharingEquitable Benefit Sharing FinancialOn-Time Accounts ReceivableGrowth in Market Share

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Employee Value

SalaryBenefits Compensation

Individual BonusTeam

Skills are valuedLost Time Incident Rate Safety

Environment/OSHA WorkErgonomics Environment

Employee Empowerment Good Management RelationsTimely CommunicationsTwo-way Communications"Cool" place to work

EMPLOYEEJob Security SATISFACTIONTraining CareerPotential for Career AdvancementEmployability

Community Relations External Company Reputation/Personal Pride FactorsQuality of Life

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Societal Value

Corporate Tax on ProfitsProperty TaxIncome Tax of Employees Tax Revenue FinancialLocal Sales Tax Charitable Contributions

SuppliersSupporting Commerce Secondary and Tertiary Industry Economic

Job Potential Attractiveness SOCIETALJob Security of Industry SATISFACTION

Reduction of Emissions Voluntary EffortsWaste Reduction Environmentally Friendly Practices Corporate

Quality of Work Environment CitizenshipAdherence to Regulations

Universities Affiliated Professional Societies OrganizationsIndustry Associations

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Union Value

Headcount ProtectionPosition Protection Job Security

CompensationBenefitsSafety EmploymentJob ClassificationsSeniority Rights

Sharing in Decision MakingContribution to Long-term Corporate Success UNIONInstill Sense of Pride in Workforce Influence SATISFACTIONStrike Threat CapabilityEncourage Involvement in InnovationUnion Teaming with Corporate Leadership

Political Action

Committees

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Corporate ValueRevenueExpenses Profits

Growth in profitsOther financial ratios FinancialCash flow

Stock rating Ability to raise capitalBond rating

Market ShareBarriers to EntryCompetition Market PositionSubstitutesBranding

New Product Development Growth Potential SustainabilityNew Market Development

Continuous Improvement

Knowledge Management

Contribution to InnovationProductivityTurnoverCost (Salaries & Benefits) Employees CORPORATESafety SATISFACTIONSick/Absent daysLoyalty

Customer satisfactionLoyalty CustomersSalesTimely Accounts Receivable

High Quality StakeholderLow Cost SuppliersTimely Delivery

Fewer Conflicts Unions

Infrastructure Support SocietyLong Term Partnership

Political/Public

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High

CurrentPerformance

LowLow High

Relative Importance

Stakeholder: ____________

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High

CurrentPerformance

LowLow High

Relative Importance

Stakeholder: CustomerMajor Factors Contributing to Customer Value:

•Product/Service Quality•Relationship with Corporation

•Cost of Ownership•Cycle Time

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High

CurrentPerformance

LowLow High

Relative Importance

Cost Of Ownership

Product /ServiceQuality

Relationship with Corp.

Cycle Time

Stakeholder: CustomerMajor Factors Contributing to Customer Value:

•Product/Service Quality•Relationship with Corporation

•Cost of Ownership•Cycle Time

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High

CurrentPerformance

LowLow High

Relative Importance

Stakeholder: ShareholderMajor Factors Contributing to Shareholder Value:

•Return •Risk•Market Position

•Growth Potential•Executive Leadership•External Relations

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High

CurrentPerformance

LowLow High

Relative Importance

External Relations

Risk

Executive Leadership

Market Position

Stakeholder: ShareholderMajor Factors Contributing to Shareholder Value:

•Return •Risk•Market Position

•Growth Potential•Executive Leadership•External Relations

Return

Growth Potential

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High

CurrentPerformance

LowLow High

Relative Importance

Stakeholder: SupplierMajor Factors Contributing to Supplier Value:

•Relationship with Corporation•Financial

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High

CurrentPerformance

LowLow High

Relative Importance

Relationship with Corp.

Financial

Stakeholder: SupplierMajor Factors Contributing to Supplier Value:

•Relationship with Corporation•Financial

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High

CurrentPerformance

LowLow High

Relative Importance

Stakeholder: UnionMajor Factors Contributing to Union Value:

•Employment•Power

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High

CurrentPerformance

LowLow High

Relative Importance

Employment

Power

Stakeholder: UnionMajor Factors Contributing to Union Value:

•Employment•Power