October 22, 2008 Leadership Challenges and a Management Perspective in Achieving Market Dominance Professor Michael D. Oliff Director, Enterprise 2020 University of Texas, Dallas Michael.Oliff@UTDallas.edu 1 Background… Dominance or Death? Dominance… “The ability to sustain influence …in your chosen markets” Michael.Oliff@Utdallas.edu All Rights Reserved 2 Based on a proven success… At the leading International Business School in the World The 1st Generation… 1989 - 1993 IMD Lausanne, Switzerland 3 Enterprise Transformation – what is it…? “Significant changes in the strategy, structure and human systems of the Corporation… “…the rapid redeployment/reallocation of resources… … purposed to create significant, sustained customer value” Michael.Oliff@UTDallas.edu, All Rights Reserved 4 State of the North American Pulp & Paper Industry – An Update & Outlook – Unstable Times – Problems or Opportunities? -- Q2 2006 Data– The quality of pending investment decisions, basic economic and demand factors and the industry’s motivation to pursue innovative structural change via enterprise transformation will drive industry performance in the mid-to long-term 5 Dominance or Death?? 6 What do You Believe…? Popular Business Press Strategy, Structure and Human Systems Manufacturing Improvement Programs (Execution) Continuous Improvement BPR Customers, Leadership Employees and Innovation Forces Academic Strategy Research & Resources 7 A Framework and 3 Principles… Enterprise & Individual Transformation Strategy Purpose Structure Systems Customer Value Focus Distinctive Competency Employee Discipline Value Michael.Oliff@UTDallas.edu All Rights Reserved 8 The 1st Generation… …IMD, 1989 - 1993 …90% of the original 2000 Board Members have sustained Dominance in their chosen markets 9 10 Increasing Turbulence …Impacting You The Customer/Consumer Experience Wellness, Security, Infotainment Anything, Anytime, Anywhere Corporate Insourcing/Outsourcing Firms build and market Distinctive Competencies Human Capital Development Gen Y, Trust, Employee Engagement 11 1. Customer Value Vision (or Burning Platform) 2. Strategic Intent 3. Communication Campaign 4. Complex Program Management 5. Competency Build 6. Stretch Culture Program 7. Key Performance Indicator (KPI) System All Rights Reserved, M D Oliff, 1996 12 eTMM-Leadership: Dimensions, Definitions Dimensions/DEFINITIONS* 1 CUSTOMER VALUE VISION – The relentless, overriding focus on and preoccupation with the firm’s customers (and their customers), their business growth and value creation. 2 STRATEGIC INTENT – Corporate resource allocation and reallocation (competency bundling and unbundling) driven by a balanced view of external forces and internal resources. The focus on sustainable and differentiable development versus transient imperatives or initiatives alone. COMMUNICATION PROGRAM – A corporate campaign that formally and informally creates awareness, 3 understanding and commitment to customer value vision, strategic intent and individual roles. COMPLEX PROGRAM MANAGEMENT - Formal, comprehensive planning, management and 4 execution of customer value vision, competency builds, culture development and KPI implementation. 5 STRETCH CULTURE PROGRAM – An environment where individuals and teams routinely and voluntarily set stretch goals and consistently achieve them. 6 DISTINCTIVE COMPETENCY DEVELOPMENT - Corporate wide abilities that customers value and competitors fear. Built on capabilities, processes, people, technology and assets. 7 KPI PROGRAM – Key Performance Indicators are today’s predictors of tomorrow’s performance. *All rights reserved: Dr. Michael D. Oliff 13 eTMM-Leadership Dimensions : Future Importance Part 2 Please rank each of the 7 eTMM-Leadership Dimensions (your view of there future importance) on the scale of 1 to 5. Where 5 is the most Important and 1 is the least Important. DIMENSIONS 1 2 3 4 5 CUSTOMER VALUE VISION 1 2 3 4 5 STRATEGIC INTENT 1 2 3 4 5 COMMUNICATION PROGRAM 12345 COMPLEX PROGRAM MANAGEMENT 12345 STRETCH CULTURE PROGRAM 12345 DISTINCTIVE COMPETENCY DEVELOPMENT 1 2 3 4 5 KPI PROGRAM 14 eTMM-Leadership Dimensions : Current Performance Part 3 Customer Value Vision Given this scale, where would you place your firm on the Customer Value Vision Dimension? 5 Exceeding Customer Expectations and creating value With customers drives enterprise initiatives, actions and behaviors 4 Exceeding Customer Expectations and creating value priorities in place but with limited span of influence 3 Quality, customer service and customer satisfaction priorities are formally evidenced but not consistently 2 Quality, customer service and customer satisfaction priorities are evidenced in general 1 Little or no Customer Value focus is evident in communications, actions or behaviors 15 Importance vs. Performance – Paper Products Future Importance Current Performance 5 4.5 4 3.5 3 2.5 2 1.5 1 0.5 0 Customer Value Vision Stretegic Intent Communication Program Complex Program Management Stretch Culture Program Distinctive Competency Development KPI Program 16 Unprecedented Price Increases Average Unit Price % Change vs Prior Year Core Consumer Products Category Eggs 2001 Recession 5.6% Milk 4.9% Natural Cheese 3.6% Flour 2.5% Baby Formula 7.1% Juice 3.2% Pasta 3.2% Bread 4.6% Gastrointestinal Tablets 4.7% Shampoo Today 3.2% 33.1% 18.3% » Right products, not pricing 11.3% » Right packages » Private label 10.8% 10.2% 9.4% 9.4% 6.6% 4.3% 3.5% Alan Beach, 7-Eleven, 08 17 Ability to Afford Staples A high proportion of consumers can no longer afford the branded staple items they need. % of Consumers Who Are Having Difficulty Buying the Staples they need by income. 56% <$35K 7-Eleven’s $47,500 $35$54.9K $55$99.9K $100K+ 60% Of U.S. Households Earn Under $55K per Year 44% 24% 16% Sources: IRI Economic Trend Database™, IRI AttitudeLink™ Survey of 1,000 Consumers, May 2008, U.S. Census Bureau 18 Consumer Pressure Lower Spending Power Falling Wealth, Income and Credit Housing values declining Tighter credit (banks freezing home equity lines, tightening mortgage qualifications, raising credit card rates) Flat income Unemployment increasing Weak dollar = less buying power Average US Consumer Getting Squeezed Rising Living and Household Expenses Rising Costs Personal debt servicing (mortgage, credit cards Home energy (oil, electricity) Transportation (gasoline, oil, tires) Food costs Education Alan Beach, 7-Eleven, 08 19 Paper products drivers China, Korea, India… supply and demand U.S. Government…level playing field? Energy… cost and availability Labor… quality and availability Technology… cost and competitiveness 20 Synchronization Strategic Transformation in a Perfect Storm. TRUCO External Challenges Transforming Strategies real time synchronicity Page Page 21 21 © Copyright © Copyright 2008 Truco 2008 Enterprises, Truco Enterprises, LP LP Rising Cost of Goods Page 22 = Greatest Increases © Copyright 2008 Truco Enterprises, LP National Partnerships in Retail Page 23 © Copyright 2007 Arbor Private Investment Company LLC Retail Environment - A Perfect Storm Retailers, manufacturers and consumers are in the midst of a “perfect storm” of underlying forces that are transforming the economy and mandating new go-to-market strategies. Pa ck ag ing Commodities Industry Intense margin pressure Increased value selection Declining consumer ts s loyalty Co l e s e Di Page 24 Consumer New Strategies for a Transforming Economy Ga s& Changing what they buy, where they shop and how they eat En er gy Stagnant Income dC o Fo ts s o Co sts Source: IRI 6.25.08 © Copyright 2007 Arbor Private Investment Company LLC United Supermarkets 25 NEWS RELEASE April 16, 2007 Verizon to Take Lead Role in ‘Enterprise 2020’ Business/Education Partnership at The University of Texas at Dallas New Program to Bring Together Leading Business Thinkers and Educators to Create and Enhance Corporate and Customer Value Through Transformation NEW YORK -- Verizon Communications (NYSE:VZ) announced Monday (April 16) that it has become the first Board Company Member of The University of Texas at Dallas School of Management’s innovative new global business and education consortium, Enterprise 2020. Markets change quickly, making it increasingly important for companies to identify and develop distinctive competencies that are applicable across all industry segments as well as corporatewide functions. The Enterprise 2020 program, a partnership between the university and industry leaders, is designed to develop new approaches to creating and enhancing corporate and customer value through transformation. 26 Enterprise Transformation… Enterprise CHOSEN InfoCom Enterprise Cyber-Security MARKETS Consumers Wellness Entertainment Security Education & Information Enterprise DISTINCTIVE Health Care COMPETENCIES MDOliff,Enterprise 2020 27 Ed Cantwell President & CEO 22 May 2008 Customer Value … Ubiquity Always On Always Synchronized Always With You 29 Eco-system Guarantee Provision Wide Area Network Platform Design Distinctive Competencies Coverage Signal Strength Capacity Wireless Local Area Network 30 Customer Value 31 Dominance… the key requirements… “Significant changes in the strategy, structure and human systems of the Corporation… …Enterprise and Individual Transformation Michael.Oliff@UTDallas.edu All Rights Reserved 32 3 Keys to Dominance Creating Value With Customers Building Distinctive Competencies Developing Stretch Cultures MD Oliff, all rights reserved, 2008 33 A Framework and 3 Principles… Enterprise & Individual Transformation Strategy Purpose Customer Value Focus Structure Systems Distinctive Competency Employee Discipline Value Michael.Oliff@UTDallas.edu All Rights Reserved 34 The First Principle… in Creating Value … is a Focus on Expectations ** How Do You “Manage…” Your Customers’ Expectations? ** What Do You Do To Anticipate, Influence And Exceed Your Customers’ Expectations? Michael.Oliff@UTDallas.edu All Rights Reserved 35 Future Expectations FutureCustomer Consumer Expectations Low carb, low calorie, low sugar content Health benefits Wider product selection and choice 36 Consumer Expectations 24-hr availability Low cost Unlimited selection Convenience 37 Customer Activity Cycles Pre-Purchase GIVE BONUS PROMOTION, DEALS Post-Purchase REACHNG YOUR GOAL TOUR OF FITNESS CENTER Purchase TRIAL PERIOD 38 Customer Activity Cycles Pre-Purchase SET ANOTHER GOAL GIVE BONUS PROMOTION, DEALS REACHNG YOUR GOAL Post-Purchase TOUR OF FITNESS CENTER GET INFORMATION Purchase SET GOAL GOAL IS REACHED CONTRACT STARTS/PAYMENT TRIAL PERIOD PERSONAL TRAINER 39 The Third Principle… in Creating Value Developing Value Propositions What Bundle Of Value And Benefits Do You Create With Your Customer? Michael.Oliff@UTDallas.edu All Rights Reserved 40 What Is Your Value Proposition? An Offer… “The Customer Cannot Refuse” “The Compelling Consumer Experience” Michael.Oliff@UTDallas.edu All Rights Reserved 41 August 4, 2008 42 Value Benefit Bundles Customer Consumer Business VBB VBB VBB Identifying the VBB ? ? ? Estimating Potential ? ? ? Measuring Delivery ? ? ? Assuring Capture ? ? ? Source: Team Generated August 4, 2008 43 Value Benefits Bundle: Consumer Consumer VBB Loyalty program: More meaningful and Identifying the VBB personalized communications • Promotions: Sales, coupons, special offers • Rewards: Increased options, store credit rewards • Improve consumer shopping experience rankings Estimating Potential to match best in class • Increase customer delight ratings by 10% • Increase reward redemption rate by 20% Measuring Delivery • Customer surveys; monitor promotion conversion • KPI’s to monitor consumer shopping experience Continual review of KPIs associated with the Assuring Capture consumer activity cycle to ensure consumer delight Adjust service offerings as needed. Source: Team Generated What Is Your Value Proposition? A central challenge has become… How do you measure the customer value you help create… … and assure proportionate capture? Michael.Oliff@UTDallas.edu All Rights Reserved 44 What Is Your Value Proposition? Which Customers… Can You NOT Afford To Serve? Your Customer Choice… Michael.Oliff@UTDallas.edu All Rights Reserved 45 A Framework and 3 Principles… Enterprise & Individual Transformation Strategy Purpose Focus Structure Systems Customer Value Distinctive Competency Employee Value Discipline Michael.Oliff@UTDallas.edu All Rights Reserved 46 Dominance or Death? Definition: A Distinctive Competency is a corporate-wide ability that Competitors Fear and Customers Value ... MD Oliff, all rights reserved, 2008 47 Dominance or Death? Building Distinctive Competencies The CONTINUUM Over 60 percent of firms are aware of . . . The Competency Continuum The Phoenix Performance Group All Rights Reserved Michael.Oliff@utdallas.edu Michael D. Oliff Strategic Intent Future Trends Future Customer & Expectations Discontinuities Current Competencies Future Distinctive All Rights Reserved MDOliff 2008 Competencies 49 Strategic Intent •Increased Buyer Incentives •Master Planned Communities •Cost Efficiency •Custom Look and Feel •Flexible Financing •Innovation Future Customer Expectations Future Trends Current Competencies •Warranty Management •Construction Management •Customer Value Development •Technology Management •Brand Management •Resource Management •Supply Chain Management Future Targeted Competencies 50 Source: Group Development Strategic Intent Model Future Customer Expectations Future discontinuities and trends •Decreasing Family Sizes (U.S.) •Change in Consumer Spending •Globalization •Hygiene Consciousness •Longer Life Expectancy •Spin-off of Neenah Paper Current Competencies Targeted future competencies Group #9 •Convenient Bulk Packaging •Comfortable/Reliable Products •Low Cost •Customer Service •Convenience/Availability •Variety •Brand Management •Product Innovations •Supply Chain Management •HR Management •Marketing •Cost Management •Global Brand Management •Customer Value Focus •Global Cost Management •Portfolio Management •Product Innovation 51 Future Target Market Analysis As of 2010 Resort Housing 5% First-Time Home Buyers 25% Active Adult Living 40% Established Home Buyers 30% 52 The Competency Continuum Distinctive Core Corporate Contracted Sales/Service Management M&A / Growth Management Brand/Market Development Financial Management & Margin Development HR Management Partnership & Alliance Management Product Innovation Operational Processes Knowledge Management Installation & Network Support Services 53 Dominance… key requirements… “The rapid allocation, …reallocation of resources” Michael.Oliff@UTDallas.edu All Rights Reserved 54 … Focus on Distinctive Competencies Nokia Product Innovation Global Brand Management Rapid Response Connecting People… Michael.Oliff@UTdallas.edu All Rights Reserved 55 Determining Distinctive Competencies… Wal-Mart Logistics Management Brand & Merchandising Management Customer Value Development Delivering Customer Value… Michael.Oliff@UTDallas.edu, All Rights Reserved 56 Verizon Distinctive Competency…? Health Care Ecosystem Enablement Care Delivery Support Care Management Support Care Coverage Support 57 Verizon Distinctive Competency… Health Care Ecosystems Enablement Care Coverage Support Care Management Support Care Delivery Support Service Integration Customer Experience Development Product Development Multiple Platform Management Consumer Experience Development 58 … Focus on Distinctive Competencies Bahlsen Demand Chain Management European Brand Management Product Innovation Omnipresence and consumer delight… Michael.Oliff@UTdallas.edu All Rights Reserved 59 Constructing Distinctive Competencies THE BASIC COMPONENTS OF COMPETENCIES Competencies Capabilities Processes Behaviors Resources Capabilities Processes Behaviors Resources Processes Behaviors Resources Source: Michael D. Oliff, The Phoenix Group S.A., 1993 The Phoenix Performance Group All Rights Reserved Michael D. Oliff 60 Dominance or Death? Constructing Distinctive Competencies A Consumer Products Competency Map Competency Customer Care Capabilities Trade Service End Customer Partnering Excellence Delight Processes Space & Electronic Data Trade Service Expectation Delight & Loyalty Management Interchange Marketing Innovation Management Measures Sub-Processes Category Space Promo Management Management Management Resources Customer Customer Database “Partners” Source: Michael D. Oliff, The Phoenix Group S.A., 1995 The Phoenix Performance Group All Rights Reserved Michael D. Oliff 61 Sales and Marketing Development - Competency Map Sales & Marketing Development Cross Functional Sales Force Increase International Brand Awareness Brand Breadth Develop International Marketing Strategy Consumer Interviews Competency Leverage MultiNational Customers 3rd Party Marketing Organization Capabilities Increase Customer Interaction Sales Force Automation Sales Force Automation 62 Source: Team 6 Analysis Processes Resources APEX Distinctive Competencies – The Core Capabilities Create & Develop Products & Processes I Manage European Concepts Bahlsen Market Intimacy Brand Portfolio Strategy BR Grow and Build Profitable Brands Set Strategic Direction CV DC Manage the Best Customer Value Strategy Strategic management Of Infrastructure And Technology Manage Effectively Customer Partnering Demand forecasting Integrated Demand Planning Manage Merchandising Manage Van Selling Produce & Deliver to Demand Alliance and Partnering Management Michael.Oliff@UTDallas.edu, All Rights Reserved 63 A Framework and 3 Principles… Enterprise & Individual Transformation Strategy Purpose Focus Structure Systems Customer Value Distinctive Competency Employee Value Discipline Michael.Oliff@UTDallas.edu All Rights Reserved 64 • The prevailing business culture is broken • The focus should be on the future, not the past • The best culture promotes a higher purpose Dan Sanders, CEO, United Supermarkets 65 BUILDING A STRETCH CULTURE “A culture wherein Teams and individuals voluntarily set ‘Stretch’ targets and meet them routinely and consistently ” ‘Stretch’ Target – is defined as a target being ‘the best of the best’, better than internal expectations and better than external competitive benchmarks. 66 Building A Stretch Culture Discipline: • Clear and concise best practices • Transparent expectations • Culture of fairness and high ethics starting from executive management & all the way down Support: • Professional autonomy / proper delegation of responsibility by management • Professional development and guidance • Clear career advancement routes • Perceived fairness Trust: • Performance based rewards with consistency • Mentor / fast track programs Current State: Current average stretch culture ratings = 0.7 on a scale of 4 Diagnostic: Current impediments to growing the business 67 Trust and Engagement Survey Rate on a scale of -2 to +2 (-2=Strongly Disagree, -1=Disagree, +1=Agree, +2=Strongly Agree About My Manager Fosters a culture of integrity throughout the department Focuses on solutions rather than blame when things go Gives me enough freedom to do my job and allows me Addresses issues honestly and directly Clarifies why decisions are made & how they affect me Discusses my professional ambitions & aspirations Gives recognition & expresses appreciation appropriately Makes my priorities clear with well-defined expectations Shows concern for me as an individual Creates a climate which encourages excellence. -2 -2 -2 -2 -2 -2 -2 -2 -2 -2 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 +1 +1 +1 +1 +1 +1 +1 +1 +1 +1 +2 +2 +2 +2 +2 +2 +2 +2 +2 +2 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A About My Workplace People here are honest and treat each other with respect -2 I can see how my performance affects organizational goals-2 We have a competitive compensation system -2 I am part of a team and we can depend on each other. -2 My work is challenging. -2 My capabilities are fully utilized at work. -2 At the end of day, I feel good about my accomplishments -2 I would recommend this company to my closest friends -2 Little in this organization prevents me from performing -2 at optimum levels every day. -1 -1 -1 -1 -1 -1 -1 -1 -1 +1 +1 +1 +1 +1 +1 +1 +1 +1 +2 +2 +2 +2 +2 +2 +2 +2 +2 N/A N/A N/A N/A N/A N/A N/ N/A N/A Enterprise 2020 and Performisys 68 Trust/Engagement - Manager Average for all statem ents More than 15 Years (17) 0.82 11 - 15 years (16) 0.85 5 - 10 years (9) 0.47 Fewer than 5 years (23) -2.00 0.86 -1.50 -1.00 -0.50 0.00 0.50 1.00 1.50 2.00 Total Res pondents : 66 69 Source: Management Survey – Team 6 APEX About My Workplace A v e r a g e o f A ll R e s p o n d e n ts M y w o rk is c ha lle ng ing . I c le a rly s e e ho w m y p e rfo rm a nc e a ffe c ts the o rg a niza tio n''s a b ility to m e e t its g o a ls . A t the e nd o f the d a y, I fe e l g o o d a b o ut w ha t I ha ve a c c o m p lis he d . I a m p a rt o f a te a m a nd w e c a n d e p e nd o n e a c h o the r. I w o uld re c o m m e nd a jo b w ith this c o m p a ny to m y c lo s e s t frie nd s . P e o p le he re a re ho ne s t, fo rthrig ht a nd tre a t e a c h o the r w ith re s p e c t. W e ha ve a c o m p a ra b le c o m p e ns a tio n s ys te m c o ns id e ring o the r c o m p a nie s a nd o rg a niza tio ns . M y c a p a b ilitie s a re fully utilize d . N o thing in this o rg a niza tio n p re ve nts m e fro m p e rfo rm ing a t o p tim um le ve ls e ve ry d a y. T o ta l R e s p o nd en ts : 66 -2 -1 .5 -1 -0 .5 70 Source: Management Survey – Team 6 0 0 .5 1 1 .5 2 APEX Culture Grid- Before 2001 •Vague •Training not driven on Customer Delight Rituals & Routines Information Policy •Only top mgmt. knew direction Stories •Outright growth •Product and geography focus Structure & Decision Making Process Measures •Pure sales goal •Customer not Incl. in surveying Delight Values & Culture Power & Control Roles Career Assumption •Middle mgrs. not accountable for their team •Individual Recognition & reward •At mgmt., level only 71 Culture Grid- Before 2001; After 2001 •Vague •Training not driven on Customer Delight •Structured comm. of corp. goals Rituals & Routines •Consistent, Transparent Information Policy Stories •Outright growth •Product and geography focus •Profit and customer value focused •Across all levels Structure & Decision Making Process Values & Culture Roles Career Assumption •Only top mgmt. knew direction •Bank of America Spirit training •Middle mgrs. not accountable for their team •Risk mgmt. at all levels •Individual Recognition & reward •Team building •Pure sales goal •Process KPI’s •Team rewards— •Customer not •Relationship Building •At mgmt., level only performance based Incl. in surveying•Rapid feedback •Employee empowered •Spirit Points Delight •Shareholder value 72 added Measures Power & Control 2020 Distinctive Competencies Customer Value Development Brand Value Development Strategic Intent & Resource Allocation Partner Value Development Employee Value Development All rights reserved Prof. M. D. Oliff Michael.Oliff@utdallas.edu 73 2020 Distinctive Competencies/ Capabilities Offer Innovation And Development Demand Generation Brand Value Development Customer Value Development Strategic Intent & Resource Allocation Demand Chain Optimization Partner Value Development Employee Value Communications & Connectivity Complex Program Mgt. Development Key Value Driver Management & Feedback All rights reserved Prof. M. D. Oliff Michael.Oliff@utdallas.edu 74 Dominance… “The ability to sustain influence …in your chosen markets” Michael.Oliff@Utdallas.edu All Rights Reserved 75 1. Customer Value Vision (or Burning Platform) 2. Strategic Intent 3. Communication Campaign 4. Complex Program Management 5. Competency Build 6. Stretch Culture Program 7. Key Performance Indicator (KPI) System All Rights Reserved, M D Oliff, 1996 76 Dominance or Death? 77 Dominance… The need to transform the enterprise By leveraging DC’s…resource re-allocation By doubling human capital…stretch culture By creating ever increasing value with customers…the mandate of every operation and individual and The need to transform yourself… By aligning individual purpose with corporate strategy By … relentless individual focus By …consistent personal discipline Both require you to focus on Potential… not only Performance… 78 79