management strategy - ukzn extended learning (pty) ltd

2017/03/15

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Management Strategy

Dr Abdulla Kader

iI

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7Ps are the substance of the firm’s Value Proposition

Philosophy

Products Positioning

Purpose

People Partners

Processes

7Ps Framework Business Model

As humans we operate on two levels the one being the landscape of Consciousness and the landscape of Action…

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Why do we exist?

Who do we serve?

What value do we deliver to our stakeholders?

How do we do it?

Why should do they want us to survive and grow?

Whose interests are most important?

Why would society be worse off without us?

What could our future contribution be?

What must we do to increase our value?

What is our ambition?

What beliefs guide us? (Consider the following issues.)

Strategy The process (concepts, models, theories) we use? Our business model? Who we involve in creating strategy? Sharing information? How we define “success”? How we decide what’s best? Our performance measures? How we make trade-offs or sacrifices? The way we implement our strategy?

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What is Business Excellence

We do not get the same answers for the two questions you ask business leaders:

What does excellence mean to you?

Do you think you’ve achieved it?

Their definition evolves as they learn and as circumstances change

Business Excellence is:

A journey, not a destination

An enduring pursuit and require enduring approach

Lifelong pursuit for most who attain it

Requires on going balance between strategy and execution

What is Business Excellence

Strategy Execution

Business Excellence

Requires getting there while overcoming an unending number of surprises

More difficult to achieve than Strategy and impossible without Strategy

Choose promises to make to Stakeholders

Roadmap for delivering those promises

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Business Excellence Model

Strong Weak

Str

ate

gy

We

ak

S

tr

on

g

Growth Wave

Fire-Fighting

III

I

Balanced & Predictable

Profit Wave

IV

II

Execution

Blue Ocean Strategy

How to create

uncontested market space

and make the competition irrelevant

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Two worlds …

Two worlds …

Red Ocean Strategy Blue Ocean Strategy

Compete in existing market

space.

Create uncontested market

space.

Beat the competition. Make the competition

irrelevant.

Exploit existing demand. Create and capture new

demand.

Make the value-cost trade-off. Break the value-cost trade-off.

Align the whole system of a

strategic firm's activities with

its choice of differentiation or

low cost.

Align the whole system of a

firm's activities in pursuit of

differentiation and low cost.

VALUE INNOVATION

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The rising Imperative of Creating Blue Oceans

• supply exceeds demand

• globalization

• accelerated commoditization of products and services

• increasing price wars

• shrinking profit margins

• brands are becoming more similar

select based on price

• ...

BOS Logic: The Core Principles

Reconstruct Market

Boundaries

… overcome believes.

Reach beyond

existing Demand

… go for uncontested space.

Get the strategic

sequence right

… value [innovation] first.

VIVI

COST

VALUE

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BOS Logic: Reconstruct market boundaries

IndustryFocuses on rivals within its

industry

Strategic GroupFocuses on competitive position

within strategic group

Buyer GroupFocuses on better serving the

buyer group

Scope of Product and

Service Offerings

Focuses on maximizing the value

of product and service offerings

within the bounds of its industry

Functional-emotional

Orientation of an

Industry

Focuses on improving price-

performance with the functional-

emotional orientation of this

industry

Time/TrendsFocuses on adapting to external

trends as they occur

Looks across alternative

industries

Looks across strategic groups

within its industry

Redefines the buyer group of the

industry

Looks across to complementary

product and service offerings that

go beyond the bounds of its

industry

Rethinks the functional-emotional

orientation of its industry

Participation in shaping external

trends over time

Boundaries of

Competition

Head-to-Head

CompetitionCreating

New Market Space

BOS Logic: Get the Strategic Sequence right

Buyer utility

Is there exceptional buyer

utility in your business idea?

Adoption

What are the adoption hurdles in

actualizing your business idea?

Are you addressing them up

front?

Price

Is your price easily accessible to

the mass of buyers?

Cost

Can you attain your cost target to

profit at your strategic price?

A commercially viable Blue Ocean Strategy

YES

YES

YES

YES

No Rethink

No Rethink

No Rethink

No Rethink

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Enterprise Performance Management

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Management Excellence: The Next Competitive Edge

Time

Competitive

Advantage

OPERATIONAL EXCELLENCE

MANAGEMENT EXCELLENCE

Cost – Lean and Mean

Quality – Six Sigma, TQM

Speed – Real-time, JIT

Smart – Deep Insight

Agile – Decisive Action

Aligned – Across the Enterprise

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19© 1999 The Balanced Scorecard Collaborative and Robert S. Kaplan. All rights reserved.

The

BALANCEDSCORECARD


What Is a Balanced Scorecard?

A Measurement

System?

A Management

System?

A Management

Philosophy?

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Translating Vision and Strategy: Four Perspectives

Vision and

Strategy

Objectives Measures Targets Initiatives

FINANCIAL

“To succeed

financially,

how should we

appear to our

shareholders?”


LEARNING AND GROWTH

“To achieve our

vision, how

will we sustain

our ability to

change and

improve?”


CUSTOMER

“To achieve our

vision, how

should we

appear to our

customers?”


INTERNAL BUSINESS PROCESS

“To satisfy our

shareholders

and customers,

what business

processes must

we excel at?”


.

The Balanced Scorecard Focuses on Factors that Create Long-Term Value

• Traditional financial reports look backward

– Reflect only the past: spending incurred and revenues earned

– Do not measure creation or destruction of future economic value

• The Balanced Scorecard identifies the factors that create long-term economic

value in an organization, for example:

– Customer Focus: satisfy, retain and acquire customers in targeted segments

– Business Processes: deliver the value proposition to targeted customers

• innovative products and services

• high-quality, flexible, and responsive operating processes

• excellent post-sales support

– Organizational Learning & Growth:

• develop skilled, motivated employees;

• provide access to strategic information

• align individuals and teams to business unit objectivesProcesses

Customers

People

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The Four Perspectives Apply to Mission Driven As Well As Profit Driven Organizations

• What must we do to satisfy our financial

contributors?

• What are our fiscal obligations?

• Who is our customer?

• What do our customers expect from

us?

• What internal processes must we excel

at to satisfy our fiscal obligations, our

customers and the requirements of our

mission?

• How must our people learn and develop

skills to respond to these and future

challenges?

Profit Driven Mission Driven

• What must we do to satisfy our

shareholders?

• What do our customers expect from

us?

• What internal processes must we

excel at to satisfy our shareholder and

customer?

• How must our people learn and

develop skills to respond to these and

future challenges?

Financial Perspective

Customer Perspective

Internal Perspective

Learning & Growth

Perspective

Answering these questions is the first step to develop a Balanced

Scorecard


The Balanced Scorecard Framework Is Readily Adapted to Non-Profit and Government Organizations

The Mission, rather than the financial / shareholder objectives,

drives the organization’s strategy

"If we succeed, how

will we look to our

financial donors?”

“To achieve our vision, how must our people learn,

communicate, and worktogether?”

The Mission

“To satisfy our customers, financial donors and mission,

what business processesmust we excel at?"

”To achieve our vision,

how must we look to

our customers?”

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Customer Perspective

Financial Accountability Perspective

Internal Process Perspective

Learning and Growth

Perspective

Reduce

Crime

Increase

Perception

of Safety

Availability of

Safe,

Convenient

Transportation

Maintain

Competitive

Tax Rates

Improve

Service

Quality

Promote

Economic

Opportunity

Strengthen

Neighborhoods

Enhance

Knowledge

Management

Capabilities

Close

Skills Gap

Achieve

Positive

Employee

Climate

Streamline

Customer

Interactions

Improve

Productivity

Increase

Positive

Contacts

Secure

Funding/

Service

Partners

Expand

Non-City

Funding

Maximize

Benefit/Cost

Grow Tax

Base

Maintain

AAA

Rating

Promote

Community

Based

Problem

Solving

Coporate-level Linkage Model

Increase

Infrastructure

Capacity

Promote

Business

Mix

Scorecard Design & Rollout

BALANCED

SCORECARD

S T R A T E G Y

Mobilize change

through executive

leadership

Change people,

make strategy

everyone’s

everyday job

Align the

organization

to create

synergies

Translate the

strategy to

operational

terms

Integrate

improvement

programmes

with scorecard

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Financial

Customer

Internal Processes

Learning & Growth

Improve

Returns

Decrease

Cost per

Liter sold

Diversify Customer

profile -Change

Customer profile

Increase Customer

Satisfaction Through

Superior Execution

Increase

Employee

Productivity

Develop product,

industry and basic

business skillsIncrease staff

satisfaction

Align

Personal

Goals

Top

Management

Visits

Increase

Delivery

capacity

Develop New

Customers

More Personal

Contact Minimise

ProblemsProvide News

Updates

Increase

Satisfied

Customers

Broaden product

mix Increase sales

Increase Market

Share

Increase

discount

per liter

Increase opera-

ting capacity

STRATEGY MAP

PERFORMANCE MANAGEMENT: ALIGNMENT

Performance management takes place

at three different levels:

- Organisational Level

- Departmental Level

- Individual Level

The cascading process is used to

align the organisation’s objectives

with the individual performance

requirements.

This ensures that every individual and

business unit has a direct impact on

the success of the organisation.

Alignment matrix Dept scorecard

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BSC helps organisations become performance driven by:

1. Providing a visual representation of their strategy through strategy maps

2. Cascading high-level scorecards down to customized scorecards in business units, shared services and corporate staff units

3. Communicating scorecards to all employees

4. Making strategy a continual process by providing a new reporting and feedback framework

LINK BETWEEN BSC AND STRATEGY

Lin

e o

f Sig

ht

Lin

e o

f Sig

ht

ESTABLISHING LINE OF SIGHTBoard & Shareholder

Vision/Mandates

Strategic Direction

Themes

Strengths/

Weaknesses

Opportunities

Threats

Corporate Scorecard

Performance

Management

Strategy Map

Cause & Effect Relationships

Strategic Objectives

Training, mentoring, coaching

Development plans

Career management

Individual Scorecards – KPA’s & KPI’s

Role profiles & Initiatives

ProjectsDepartmental

Scorecards & Maps

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LINE OF SIGHT

STRATEGIC OBJECTIVES

strategic plan

Objective(KPAs) KPIs

Business plansbudget

Dept KPAs and KPIs projects

INDIVIDUAL KPAS AND KPIS

influencedby key

challenges

influencedby key

challenges

Vision

Director/EXCO mandates

Director/EXCOmandates



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CORPORATE GOVERNANCE

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Chapter 10: Corporate Governance and SustainabilityHOUGH | THOMPSON | STRICKLAND | GAMBLE

10.2.1 Governance Framework -

“Apply or Explain”

King III follows an “apply or explain”approach. Where entities have applied the Code and best-practice recommendation in the Report, a positive statement to this effect should be made to stakeholders. In situations where the boards of directors (the “board”) or those charged with governance decide not to apply a specific principle and/or recommendation, this should be explained fully to the entity’s stakeholders.


10.2.2 Integrated Reporting

King II had a chapter dedicated to integrated sustainability reporting. The concept of reporting on economic, social and environment performance (the so-called “triple bottom line”) is thus not new. However, there is growing global and local attention to sustainability issues. King III requires the statutory financial information and sustainability information to be integrated in the “integrated report”.

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10.2.3 Combined Assurance

Management, internal assurance providers such as internal audit and external assurance providers (such as external audit) are role-players in providing assurance to the board over risks in an enterprise. King III tasks the audit committee with the responsibility of monitoring the appropriateness of the company’s combined assurance model and ensuring that significant risks facing the company are adequately addressed.


10.3 New Concepts Introduced in

King III

• IT Governance

• Shareholders Approval of Remuneration

Policies

• Directors’ Performance Evaluation

• Business Rescue

• Alternative Dispute Resolution (ADR)

• Fundamental and Affected Transactions

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APPROACH TO ETHICAL LEADERSHIP

WE EXPECT OF OURSELVES….

TO DO THE RIGHT THING

ALL THE TIME

EVEN IF NO ONE IS

WATCHING

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Ethical leadership – The key

to understanding King III

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Introductory remarks – Ethics and King III

Principle 1.1 – Ethical leadership by board

Principle 1.2 – Board and company as responsible

corporate citizen

Principles 1.3 – Board and effective ethics

management

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Ethics vocabulary

• Ethics

– Values-based conduct

– Discretionary decisions grounded in values

• Values

– Standards/norms for good, right and fair conduct

– Examples: respect, integrity, responsibility, accountability, fairness

• Compliance

– Rule-based conduct (following laws, regulations, rules)

– Ethics codified

• Ethical dilemma

– Values clash

• Ethical reasoning

– Using values-based reasoning to solve ethical dilemmas

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Making an ethical decision

An “Ethics Quick Test”

1. Is it legal?

2. Do my organisation’s Code of Ethics/Conduct and

other policies allow it?

3. Do my professional standards allow it?

4. What would my ethical role model do?

5. How would it look on the front page of tomorrow’s

newspaper?

6. How does it make me feel?

7. Would I be comfortable sharing my decision with my

closest family?

8. Does it pass the Golden Rule test?

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Ethics in all human activities

Personal

relationsEducation

Politics

Organisations

Science

Religion

Professions — Law,

medicine, accountancy, etc

ETHICS

Sport

Animals and natural

environment

Art

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Ethics in all aspects of

business

• Business ethics – The application of

ethical values to organisational

behaviour

– Boardroom strategies and control

– HR, IT, technical

– Product development

– Sales and marketing

– Accounting practices

– Relationships with agents, suppliers and

customers (stakeholder relations)

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King III – “Stakeholder triple

context approach” to corporate

governance

QUESTION 1

To whom is the board

responsible?

QUESTION 2

For what is the board

responsible?

All stakeholders

Stakeholder (vs shareholder)

model of corporate governance

Triple context performance

and reporting

•Economic

•Social

•Natural environment

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Relationship ethics/governance

in King III

• “Ethics of governance”

– Ethics is the reason for

corporate governance and

the King reports

– Every aspect of corporate

governance is grounded

in ethical values

• Board responsibilities

• Risk management

• Internal audit

• Sustainability

• “Governance of ethics”

– A company’s ethics

performance needs to

be actively governed and

managed

– By means of a ethics

programme




corporate citizen


management

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• Principle 1.1:

– “The board should provide

effective leadership based on an

ethical foundation.”

Ethical leadership

• “Ethics of governance”

– Corporate governance requires that the

company is run ethically through effective

ethical leadership

• Strategic direction – Board sets tone at the top

• Control – Board delegates operational aspects of

ethics management

• “License to operate”

– Company earns approval from all its

stakeholders

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Ethical leadership

• Ethical leaders

– Set the tone at the top

– Make ethics explicit

– Legitimise ethics discourse

– Are ethical role models

– Encourage ethical conduct in others

– Hold others accountable for the ethics of

their conduct

“Ethics of governance” — Ethical

values (“RAFT”)

1. Responsibility

– Board responsibility for company’s assets

2. Accountability

– Board able to justify its decisions

3. Fairness

– Board considers interests of all stakeholders

fairly

4. Transparency

– Board discloses information in manner that

allows for meaningful analysis of the company’s

actions

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“Ethics of governance” — Ethical

duties of directors/leaders

1. Conscience

– Intellectual honesty; avoids conflict of interest;

independence of mind

2. Care

– Devotes serious attention to affairs of company;

acquires all relevant information needed for effective

control and direction

3. Competence

– Has knowledge and skills; develops competence

4. Commitment

– Diligent in performing duties

5. Courage

– Courage to take risks associated with directing a

successful sustainable enterprise and to act with

integrity



Principle 1.2 – Board and company as

responsible corporate citizen


management

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• Principle 1.2:

– “The board should ensure that

the company is and is seen to be

a responsible corporate

citizen.”

Responsible corporate citizenship

• Company as collective citizen, analogous to

natural person

• Discharges duties in manner sensitive to

triple context

– Economic

– Social

– Natural environment

• In South Africa it means that company builds

trust by respecting rights

– Universally recognised human rights

– Constitutional rights

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corporate citizen


management

• Principle 1.3

– “The board should ensure that the

company’s ethics is managed

effectively.”

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57

“Governance of ethics” —

The ethical challenges

• Proactive: Building

– Trust

– Reputation

• Defensive: Preventing

– Fraud, corruption, theft

– Cartels, insider trading

– Conflicts of interest

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2.2 Develop ethical

standards

(code and policies)

2.1 Assess

ethics

risks and

opportu-

nities

1. Build

ethical

culture

2.3 Integrate

ethical

standards

(ethics code)

2.4 Monitor, report

and disclose

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Ethics in organisations

― A statement

• “Ethics is not an optional add-on to

‘normal’ business, nor it is a ‘soft’ issue.

All business strategies and operations

have an ethical dimension that we cannot

escape — as we cannot escape our own

shadow. Ethics holds enormous risks for

companies, but ― more importantly ―creates reputational and competitive

opportunities.”

Internal Audit’s journey

Corporate Governance Framework

STRATEGY

COMBINED ASSURANCE

STRUCTURE

RISK

MANAGEMENT

INTERNAL

CONTROLS

PERFORMANCE

MEASUREMENT

OPERATIONS

FINANCIALENVIRON-

MENTAL

SOCIAL &

ETHICAL

AUTHORITIESPOLICY

ACCOUNTABILITYINTEGRATED REPORT

CONDUCT

ETHICSCORPORATE

CULTURE

COMPLIANCE

REQUIREMENTS

PEOPLE PROCESSSYSTEMS

PURPOSE GOALSVALUES

REGULATORY

LEGAL

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Strategic Insightdevelopment through scenarios

development

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