Accelerating Cost TransformationAccelerating Cost TransformationRitz Carlton, Mega Kuningan – February 3, 2010

Commonization of industry

Brighter 2010

2010: Challenges and Opportunities

� ASEAN-China Free Trade Agreement

� Higher customer bargaining power

– Flatten world, More supply

� Rising costs but limited pricing power due to � Rising costs but limited pricing power due to

globalization and intensifying competition

� Volatile energy prices

� Reduced access to liquidity and expensive financing

� Threat of global recession

� Weak investor confidence

The Battle

Case: Airlines

What Can or Should We Do?What Can or Should We Do?

Translating Pressure into Competitive Advantage

Cost Transformation vs Future Growth

� Organizations tend to cut cost all over for short

term without considering longer term growth

� Tyranny of “or”

� Impact:

– You survive,… for now. But, to bounce back?

Our Perspective on COST

� Cost is everywhere

� Cost tends to increase along with business

complexity

� Good news is you can manage the complexity

� Area with cost reduction opportunity is not always

obvious!

Cost-cutting measures will not only keep a business

running efficiently in a downturn, but also position

the company to take advantage of the market when it

eventually snaps back.

Our Perspective on COST

� Obvious Cost

� You are certain

� eg: Defects and Errors

� Suspected CostSuspect

Obvious

� Doubtful

� Can we eliminate it?

� eg: transportation, discount?

� Hidden Cost

� You do not aware

� Biggest portion of managing cost.

Hidden

Suspect

-ed

Approach to Cost Transformation

STRUC-

TURAL

High

PROCESS

LOW

HANGING

FRUIT

Complexity

Length of Time

Low

HighLow

PROCESS

CHANGE

Myths of Six Sigma

Myth #1: Runs well only in large companies

Myth #2: Only for manufacturing

Myth #3: You have to be a statistician to use itMyth #3: You have to be a statistician to use it

Myth #4: It’s a big training investment with a long

payback period.

Myth #5: You have to be good in Karate

Lean and Six Sigma

� Lean provides tools for quickly and significantly slashing

cycle time and waste in any process

� Six Sigma provides tools and organizational guidelines that

establish a foundation for sustained, data-based

improvements in strategically important, customer-critical improvements in strategically important, customer-critical

targets.

� LSS has grown beyond these problem-solving roots, it is a

deployment guidelines that give companies the means to

establish and maintain…

strategy-to-execution links.

Examples of LSS Projects/Subjects

CLAIM PROCESS

PRODUCTIVITY

SERVICE QUALITYCUSTOMER SATISFACTION

OPERATION CONTROL

PERFORMANCE MEASUREMENT

PROCESSING COST

SERVICE QUALITY

DELIVERY PERFORMANCE

DEFECT REDUCTION

ENERGY COST

EFFICIENT PROCESS

PROCESS SPEED

HUMAN RESOURCES

OPERATION CONTROL

SERVICE LEVEL AGREEMENT

Questions Are

• Are those projects will help you increase added value to

shareholders and stakeholders?

• Do we have infrastructure, process, and people to • Do we have infrastructure, process, and people to

identify and execute those initiatives?

• Do we have the skill-set and know-how to effectively

solve the issues?

Okay, Let’s Agree on What We Need

• Strategic Alignment and Integration between process

improvement, cost transformation, and strategy

– Selected and prioritized portfolio of initiatives (projects)

– Calibrated vision and business objectives, top down

• Proven Change Infrastructure (change management, • Proven Change Infrastructure (change management,

people, monitoring process)

– Skilled change agents with technical know how and people skills

– Power of Mass

• Disciplined Execution of initiatives/projects with

comprehensive skill set and methodology

– Robust factual-approach methodology

– Wave by wave by wave

Okay, Let’s Agree on What We Need

• Strategic alignment and integration between process

improvement, cost transformation, and strategy

– Selected and prioritized portfolio of initiatives (projects)

– Calibrated vision and business objectives, top down

• Proven Change Infrastructure (change management,

Commitment

Strategy

• Proven Change Infrastructure (change management,

people, monitoring process)

– Skilled change agents with technical know how and people skills

– Power of Mass

• Diciplined Execution of initiatives/projects

– Robust factual-approach methodology

– Wave by wave by wave

CalibrateVision

Method

Discipline

Infrastructure

Okay, Let’s Agree on What We Need

• Strategic alignment and integration between process

improvement, cost transformation, and strategy

– Selected and prioritized portfolio of initiatives (projects)

– Calibrated vision and business objectives, top down

• Proven Change Infrastructure (change management, LEAN SIX SIGMA• Proven Change Infrastructure (change management,

people, monitoring process)

– Skilled change agents with technical know how and people skills

– Power of Mass

• Diciplined Execution of initiatives/projects

– Robust factual-approach methodology

– Wave by wave by wave

LEAN SIX SIGMA

A rose by any other name would smell as sweet!But, it is not recommended to use: cost cutting

Prioritizing ProjectsYou can download the software for free:

http://www.SSCXinternational.com/projectselection.html

Instruction and explanations

are available on the website.

Project

Queue

Project

Queue

Long-List of Potential CI Projects

Black BeltBlack Belt

Executive and

Leadership

Structure of Training Programs

Green BeltGreen Belt

AwarenesssAwarenesss

Leadership and Change

Technical Side and Execution

Awareness and Understanding

Define

Measure

Analyze

Improve

Control

Sustain!

DMAIC Problem Solving Roadmap

Define Measure Analyze Improve Control

Well defined Well defined

problem is problem

half-solved.

DMAIC Problem Solving Roadmap

Define Measure Analyze Improve Control

Understand Understand

issues by knowing

where they stand.

DMAIC Problem Solving Roadmap

Define Measure Analyze Improve Control

Y = f(x), analyze, Y = f(x), analyze,

identify, and

prioritize xs.

DMAIC Problem Solving Roadmap

Define Measure Analyze Improve Control

Execute CHANGE, Execute CHANGE, ensure they are

statistically significant.

DMAIC Problem Solving Roadmap

Define Measure Analyze Improve Control

Sustain Sustain

improvement,

never let it slip.

Integrating Change ManagementIntegrating Change Management

More on Change Management

Clear and

Shared Vision

Aligned

Infrastructure

Enduring

Capability

Quick Wins

and Stories

“Change is

not a Priority”

Clear and

Shared Vision

Compelling

Reason

Enduring

Capability

Quick Wins

and Stories

Slow , Bumpy

Change

Compelling

Reason

Aligned

Infrastructure

Enduring

Capability

Quick Wins

and Stories

Confusion,

Unmotivated

Shared Vision Reason Capability and Stories Change

Clear and

Shared Vision

Compelling

Reason

Aligned

Infrastructure

Quick Wins

and StoriesFrustration

Clear and

Shared Vision

Compelling

Reason

Aligned

Infrastructure

Enduring

Capability

Losing

Enthusiasm

Clear and

Shared Vision

Compelling

Reason

Aligned

Infrastructure

Enduring

Capability

Quick Wins

and Stories

Succesful

CHANGE

Menara Rajawali 11th Floor

Mega Kuningan

Jakarta 12950

T +62 21 576 2727

F +62 21 576 2736

www.SSCXinternational.com