The 5 levels of change

We face opportunities and challenges everyday. Taking advantage of the opportunities or managing the challenges involves change and maybe moving workers out of their comfort zone. Each challenge or opportunity requires different management and change level. The following is a spectrum of change levels that will cover almost every challenge faced in business.

Level 1: Improve efficiency

2014-12-19 20.51.12Improve efficiency by determining if workers are putting the right effort at the right place. Take a look at the current work practices and if the workers are doing what they are suppose to do.
Worker competence and willingness to work are two major factors at this level. Superstars in box 1 are those who are competent and willing to work. They are go-getters who you only need to describe the job for them and they will execute it flawlessly. Workers in box 2 are good workers who are willing to work, but not competent enough to execute a faultless job. Training and development are the solution to increase the workers’ efficiency in this box. Competent and experienced workers in box 3 are unwilling to do their jobs for different reasons. Motivation may help improve the efficiency in box 3 but the workers are choosing not to work for different reasons. Workers in box three knows the rules and regulations, knows the lube holes, shortcuts and exceptions. Troublemakers are usually found in this box and the leader or manager should be careful with them. Workers in box 4 are either new workers or older workers who’ve been moved to a new job without proper training. Their unwillingness to work may be affected by their incompetence or the neglect they feel after they have been assigned to their new role. The leader should either replace workers in the box or train and motivate them to do their jobs.

Level 2: High performance.

Importance vs UrgencyExecuting the right business process. Focus on the important and not urgent part of the business before they become important and urgent. Important and urgent businesses are usually executed in a firefighting mood which lead to mistakes or substandard jobs. Organize work by using the right procedures and setting priorities with key performance indicators and milestones. Pareto Principle states that 80 percent of all the things being done are executed by 20 percent of the right effort by the right people. Assign the right workers with the right resources to high yielding part of the business.

Level 3: Improve, eliminate and copy.

Cut or improve some of the steps from the best process recognized for the business. In level 2 we selected to automate processes to conduct the organizational business, but we need to improve or trim some of the redundant steps that take up time and recourses with little or no positive effect. Redesign the business process by eliminating the unnecessary steps, improve vital steps and imbed best practices in the process. Revisit the business process with fresh and unbiased eyes. Some of the steps in the process were put to inflate somebody’s ego. Other steps were useful for many years, but became absolute now. Some activities and regulations are practiced in the organization for no apparent reason. When asked, the workers will say “we always do it this way, but we are not sure why!” Simple questions can reveal a lot of wrong practice. The same simple questions can be directed to top management and floor workers.

2014-12-17 08.53.29Organization’s do not work soon. Competitors with similar products are produced by similar processes or even better. The organization should explore how others are executing their businesses and find ways and means to adapt them in the organization. Change will always have resistance from workers living in their comfort zone. Not Invented Here (NIH) is one of the hurdles that workers used to stop or even sabotage processes or practices they did not develop internally in the organization. Workers ego and selfishness will find faults and difficulties in the new best practices they did not develop. Resistance can be handled by explaining or demonstrating the benefits of the new best practice and how it may help the workers in their daily work.

Level 4: Think out of the box.

Brainstorm new idea nobody thought could be possible or feasible. The new ideas may have a slim chance to succeed, but experimenting with these ideas after careful thought may yield great results. The new ideas may lead to other possibilities worth further exploring. Integration between different tools or technologies can result in different possibilities and products. New ideas are always welcome, but implementing them will face Great resistance. Change management is a major factor in getting the new ideas go through the comfort zone.

Level 5: Breakthrough.

Complete shift in the thinking paradigm. In this level the business owner was exploring new territories that never been explored before. The breakthrough might be in changing the future direction by more than 90 degrees. Intel dropped the memory chip business and pursued the processor business. Steve Job reduced the Apple products from 12 to only fore after his legendary return to Apple.

 

Bargaining Power of Customers (Porter’s 5 Forces)

Five Forces - CustomerAn evaluation of how it’s simple to drive costs down for the customers. The customer can influence the price and terms of purchase and may request better service and product quality. The customer power is magnified when the market has many sellers and fewer customers. The switching cost from one seller to another is another factor in the buyer’s bargaining power. The buyers switch to another seller if the products are similar and there is no significant cost to switch. The washing machine detergents are almost similar and do the same cleaning. Dental care products are almost the same with different flavors. Online search engines are another example of service similarities. Users may switch because of a delay of a fraction of a second during the search. The customer will buy another toothpaste because of the new flavor of the month. In undifferentiated market, the brand loyalty between the buyer and seller could be the only reason why a consumer sticks with one seller over the other.

The customer may switch to another product if the customer is well-deducted about the product and have price sensitivity. The availability of the product substitute makes the seller weaker relative to the customer bargaining power. Supermarket shelves in most countries are stacked with different bands of a similar product that the consumer can conveniently choose from according to the brand name, price tag, or attractive packaging.

Regional small farmers, selling most of their farm products to a large supermarket chain have little influence on the terms of the sale. The farmer may opt not to sell to the supermarket at the price they set, but then the farmer has to endure the additional transportation cost to sell his products to another market.

Threat of New Entrants (Porter’s 5 Forces)

Five Forces - Entrants

Lucrative markets attract new entrants unless the existing organisations have a strong barrier to entry. If it is easy to make and sell what the organisation is selling then every other organisation would love to jump in and produce the same product and market it to the consumer. The organisation should have barriers to its share of the market to stop the new entrants from taking a slice out of it.

One of the best barriers is the economy of scale. Economy of scale is achieved when more products or services are obtained with the same fixed cost. A good example would be the neighbourhood bakery. The fixed cost for the bakery is the skilled bakers, the oven, and the store rent. The bakery would be losing money if they produce and sell a few items every day, but the bakery will have excellent economy of scale if the bakers work all of the time and the oven is always full of white dough turning to golden cakes and bread. The fixed cost will be distributed over multiple products and the production cost of each unit will be low. New entrant has to achieve this production and selling scale to be profitable otherwise they will not be able to enter and compete with the existing organisation.

Another example of the economy of scale is the Microsoft Excel. Competitors of Excel have to be widely distributed and adopted to be able to compete. The cost of switching to Excel to another spreadsheet software has to be very low, or maybe free to attract new users. Google offered Google Spreadsheets free online and offline for all users and it is making a good gain in the spreadsheet market share. Brand name can be a useful entry barrier when new organisation try to muscle in its way into the market. In the case of spreadsheet market, both Microsoft and Google are excellent brands and will have a fair chance to compete.

Product differentiation and location are strong entry barriers. Using the bakery example above would be a good illustration for these entry barriers. The bakery should have a good location and access to the costumers to make it more attractive for the customers. New competing bakery will have difficulty attacking the costumers if store is located in the back of a shopping mall or in a remote area. The customer will not go to the new bakery unless it has products the other bakery does not offer. The new bakery can specialize in birthday, wedding, and special occasion cakes which will make the costumer reach for it for that special social event.

The pharmaceutical industry illustrates three major entry barriers. Initial capital investment, government policy, and technology propriety (patent). The pharmaceutical industry invents heavily in research and development to generate a promising medicine that they can patent and sell in the market for many years in the future. The pharmaceutical life cycle from an idea to introduction to the market is averaging around 8 years. The FDA takes at least one year to approve the drug and only three out of twenty drugs turn out profitable. The patent may prevent other pharmaceutical organizations from copying the formula, but the customer will find generic products, which have the same effect, in the market within one year after launching the drug in the market.

Read also The Suppliers Bargaining PowerBargaining Power of Customers

What is Business Continuity Plan

Business continuity plan is otherwise known as disaster recovery plan or a business resumption plan. Business continuity plan is made while the business is running successfully. Crises can be natural (Hurricane, tsunami, earth quick, etc.) or man-made like political unrest, fire, labor strike. The end result of the plan is identification of the risks and the required actions, personnel.

Business ContinuityBusiness continuity plan is needed to support the organisational survival. It estimates that 25% of the businesses, especially small ones, do not service most of the crises that affect their operations because they are not ready. Business continuity plan not only ensure the organisation’s survival but also minimise the crises impact on the business. Employees and customer will be more loyal to the organisation and its brand knowing that the organisation will always deliver its products or services during difficulties and crises.

Expert in risk management with experienced employees in the organisations uncover the potential risks sounding the organisation’s operations. Each risk is classified according to its severity and likelihood. The risk is later treated according to its ranking. Organisation appetite toward the risk will decide to either avoid, control, accept or transfer the risk. The risk treatment is intended to find the principal actions, personnel and services needed to manage the incident and the recovery process after the incident. Continue reading …

Let Them Feel Proud

We like to hold down to our ideas and tell everybody that we are right when they are wrong. But we can let others be right, even if it is not true just to make them happy and we have a piece of mind.

heart_made_of_words_16158 (1)When I was ten years old I use to trim my hair ate the nearby barber. But when I go to another barber to cut my hair he would ask me the usual question “Who cut your hair last time?” I would name the barber shop and he would quickly point out how badly that barber cut my hair and missed a spot without cutting. I usually smile or at lease agree with him just simply because he holds my head at that moment with scissors moving fast!! Sometimes the barber asks the same question while, but I answer immediately, “It was you cut my hair last time, but why?” The barber will be silent until he finish cutting my hair. I might feel smart with my answer, but the barber usually punishes me by not spraying me with his usual cheap cologne.

I am in Singapore now and I have to take a different taxi every morning from the hotel to National University of Singapore (NUS). I have a map to show the taxi driver to take me to the right building in NUS campus. Every taxi driver would look at the map and then take me through a different route to the same building and when we arrive there he will say something like “if I followed your map we would be late and …”. The directions on the map were prepared by the NUS staff and I am sure that they selected the best route to the building. I could argue with the taxi driver that he was wrong and yesterday’s driver said the same but I usually agree with driver and just pay the money and wish him a good day.

Arguing with the barber, taxi driver, or co-workers over obvious things may make you feel better but will consume your time without gaining any value over the argument. You might be right and they are wrong, you might have the supporting evidence, but agreeing with them will make them feel proud. Always agreeing with the others when no risk is involved, you will get what you want and they will feel proud.

Another Good Initiative

ImageNew initiatives are important at work to improve the existing work processes or initiate new process. Initiatives can be new products or another sub-product. Organizations usually encourage employees to present new initiatives frequently. Some organizations evaluate their engineers or experts by the number of initiatives they produce every year. I was discussing this issue with a consultant once, and he complained that some organizations evaluate the engineers’ yearly bonus on number of new “money-saving” projects. These organization end up with multiple projects by the end of the year waiting for execution.

The problem with “opportunity” initiatives or “money-saving” initiatives is in their evaluation. Many initiatives promise to solve the organizational problems, save $$$, or introduce found breaking products that will make the organization the best in its market segment. Very few initiatives produce %90 of promised result. Most of the initiatives stray in a side track or end up as an embarrassing memory. Initiatives should be supported with a strong change management  plan and good management support or it will be one of the arrows in the attached figure!

The Purpose of the Business

The purpose of the business is to maximize shareholder value, but the stakeholder may be enriched in the same process. The media is evaluating the organization according to its hiring and firing policy and practices. The organization may be firing employees because of a strategic and profitable decision but the media will report this decision negatively. The organization may be hiring without good business sense but the media will positively talk about the organization even if the hiring is adding unnecessary cost to the bottom line. Drucker (2004) state that the purpose of business is to create and keep a customer. The customer will create the jobs and will demand products from the organizations. The customer demand will increase the organizational productivity which will enrich the shareholder then the stakeholder.
Rasmussen and Den Uyl (2009) state, the purpose of the business is to maximize the owners value by selling goods or services. Business leaders focus on their strategy’s direction, momentum, and balance to achieve the business goals. Setting and implementing good strategy will maximize the shareholder value and enrich the stakeholder. Walker and Shenkir (2008) state, the leader should examine the effect of the strategy on the organization’s objectives after he or she develop the strategy.

References:
Drucker, P. (2004). The daily drucker: 366 days of insight and motivation for getting the right things done. New York: Harper Business.
Rasmussen, D. B., & Den Uyl, D. J. (2009). Making room for business ethics: Rights as metanorms for market and moral values. Journal of Private Enterprise, 24(2), 1-19. doi: http://www.apee.org/journal-private-enterprise.html
Walker, P. L., & Shenkir, W. G. (2008). Implementing Enterprise Risk Management. Journal of Accountancy, 205(3), 31-31.

Is Balanced Scorecard easy to do?

custom_life_balance_13780Balanced Scorecard (BSC) is a management tool to measure the organizational implementation of the vision and strategy against the business and operating Key Performance Indicators (Carpenter & Sanders, 2009). BSC transform the strategy into tangible and intangible performance measures that make the strategy a dynamic process (Carpenter & Sanders, 2009). BSC is an innovative method to dissect and direct the strategy into four principles. The principles or categories that each strategy should have are finance, external relations, internal business process, and learning and growth. The vision and strategy can be mapped through the BSC information to give a clear representation of the strategy to the stakeholders and shareholders.

Some organizations think that BSC is a complete waste of resources and takes time to set up the required measures (Linna & Seal, 2009). The measure maybe is outdated and need change within a few months. Success in the internal processes or human resources is sometimes not rewarded (Linna & Seal, 2009); however, the rewards are usually linked to the financial measures only. BSC may be a good performance dashboard if the tangible measures are updated frequently, however BSC will not be dynamic enough when most of the measures are intangible and cannot be updated frequently.

References:

Carpenter, M. A., & Sanders, W. G. (2009). Strategic management. Upper Saddle River, NJ: Pearson Prentice Hall.

Linna, Y., & Seal, W. (2009). The balanced scorecard. Financial Management (14719185), 27-28.

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Competitive Advantage

Market imperfections can be in the form of monopoly, externalities or public goods, but sometimes defined as anything that interferes with trade (DeGennaro, 2005). The organizational competitive advantage can be achieved by adapting to the external trends and events and adapt to the changes in capabilities and resources. The organizations can make the competitive advantages by formulating and implementing strategies that help adapting and taking advantage of these changes (Ogrean, Herciu, & Belascu, 2009). Organizations can definitely take advantage of the market monopoly and keep up its position until another competitor force its market penetration. Externalities can be used as a competitive advantage when the organization anticipates and plan for the positive externalities. Over fishing in a place would increase the demand when the fish supplied to the market is less than the demand. The organizations can take care of this externality by anticipating the decrease in the supply and importing enough supply of fish for the consumer in the local market.

Rolls-Royce found out that its automobile business was not competitive and its jet engine market was booming. Rolls-Royce sold its automobile business and concentrated on leasing jet engines to the airline companies (Carpenter & Sanders, 2009). The leasing strategy made Rolls-Royce take larger share of the jet engine business (Carpenter & Sanders, 2009). Xerox had good innovations coming from its research center in Palo Alto, which could have been good competitive advantages. Innovations like personal computers, bit-mapped, desktop, icons, and the use of mouse and menus (Carpenter & Sanders, 2009; Rothkopf, 2000). Xerox did not use these competitive innovations and lost a good chance to be a leader in these markets (Carpenter & Sanders, 2009; Rothkopf, 2000).

References:

Carpenter, M. A., & Sanders, W. G. (2009). Strategic management. Upper Saddle River, NJ: Pearson Prentice Hall.

DeGennaro, R. (2005). Market Imperfections. Journal of Financial Transformation, 14(2005), 107-117.

Ogrean, C., Herciu, M., & Belascu, L. (2009). Searching for sustainable competitive advantage– From tangibles to intangibles. Journal of US-China Public Administration, 6(4), 1-9.

Rothkopf, M. H. (2000). Under the Mike-R-Scope: What happened at Xerox PARC? Interfaces, 30(6), 91-94.

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CSF and KPI

Acronyms are everywhere these days and they can mean different things to different people. In the business lingo, CSF means Critical Success Factor. These factors are what will make or break the organization. The organization should focus on a limited number of CSFs, typically between 3-8, that affect the services efficiency, or product quality. The success in the CSF will differentiate the organization from it’s competitors. For a hairstylist, the the design and beauty of it’s styles would be it’s CSF. For a baker, the freshness and taste of the it’s backed products will be a CSF. Successful surgeries with few (or no) complications is a good CSF for a medical surgeon. The CSF needs a Key Performance Indicators (KPI) to measure them. The old saying “What gets measured, gets done!” is so true in this situations. The critical success factors have key performance indicators which the organization should carefully monitor. The key Indicators should be measurable but not all of them can be measured easily. Customer satisfaction is a good KPI but very difficult to measure. However, number of units produces can be calculated easily.

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