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Lunchtime Webinar Series: Aligning Breakthrough Objectives with Operating Models

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Operational Strategy Overview

• Saturate

• Incubate

• Illuminate

Mental Modelling

Growth Strategy Matrix

The Innovation Portfolio

The S-Curve

• Establish Vision

• Develop 3-5 Year

Breakthrough

Objectives

Ambidextrous Paradox

Strategy Maps

Balanced Scorecard

X-Matrix

• Annual Objectives

• Deploy Objectives

VS Assessment

Focal Area Assessment

Prioritization Matrix

X-Matrix

• Deploy Objectives

• Implement Objectives

• Metrics

• Monthly Review

• Annual Review

VS Mapping

Lean

Six Sigma

Rapid Innovation Teams

WIG Teams

A3 Reporting

• Process Improvement

Management

• KPI’s

• Rapid Problem

Solving

Management Boards

Improvement Dialogs

Leadership Std Work

PPSR

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The 7 Step Strategy Planning Process

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Vision and KPIs

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Balanced Scorecard

• Typically 3 to 6 KPIs per Topic Area • 12 to 24 Metrics • Not all are strategic

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Y=f(Xs) approach: • Profits = f(revenues, costs) • Revenues = f(innovative products, right prices,

effective promotion, distribution channels…)

The Pareto approach:

• 80% of costs are Raw Materials and Energy • 80% of promotion budget is spent on TV ads

Know your Operating Model.

How To Choose Your Strategic KPIs?

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Suppliers Inputs Process Outputs Customers

Customers Share holders Employees

Delivered products and services Achieved annual objectives Achieved breakthrough objectives

Customers Share holders Senior Leaders

Jobs to be done Business Environment Growth Plan Strategic Due Diligence Operating Model

Operational Strategy as SIPOC

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One of the first decisions leadership has to make is which “Standard Model” they feel is best to create differentiation and profitability. There are three basic models to select from:

1. Operational Excellence 2. Product Leadership 3. Customer Intimacy

Selecting an Operating Model

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Operational Excellence Model: An unprecedented combination of Quality,

Delivery and Cost. Examples: Wal-Mart, Federal Express

Product Leadership Model: Focus on invention.

Example: Apple

Customer Intimacy: To give the customer more than they expect.

Example: Ritz-Carlton

Standard Operating Models

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Not choosing one model can create:

Lack of employee alignment

Wasted resources

Silo based competition

Unnecessary complexity

The Cost of Not Choosing

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Selecting an Operating Model

Comparative view of the Three Operating Models

Product View Convenience View Service View Price View Core Business View

Operational Excellence

Products are simple and standardized

Easy to find and choose

Predictable and reliable service

The lowest prices for their services

and products.

Capital spend tends to be focused on improved asset

utilization.

Product Leadership

Products are superior, sought

after.

Extra efforts to obtain

Stuff helps to understand the

special features of products

Customers are expected to pay for

leading edge products.

Capital spent on new products and

swift commercialization.

.

Customer Intimacy

Wide variety of offerings

Choice from many options

The customer expects to be

treated as a partner

Sometimes the price doesn't

matter because the customer gets

exactly what they want

Capital spent on finding perfect solutions to the

customer

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Current Situation: BaltiColors is a small but rapidly growing industrial paints company operating in the Baltic states of Europe Vision: “To become a major player (among top 5 by revenue) on European market of industrial paints” Current Challenge: To Define the breakthrough objectives for next 7 years, taking into account their selected Operating Model

Industrial Paints Case Study: BaltiColors, Inc.*

*This example has been created for illustration purposes only! Any resemblance to real products or companies is purely accidental!

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Financial Perspective: • Increase revenue by 100% in 7 years • Increase the number of active clients to >100

Customer Perspective: • Improve OTIF (on-time in full) delivery to >98%

Internal Processes • Increase Overall Equipment Efficiency to >80% • Keep the number of SKUs at <300

Infrastructure • 30% of employees at YB level, 10% at GB level, 2% at BB

level

BaltiColors – Operational Excellence Approach to Breakthrough Objectives

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Financial Perspective: • Increase revenue by 100% in 7 years • Increase sales of New Products to >40% by revenue

Customer Perspective: • Increase Customer rating on “Innovative and Superior

Products” to > 8.5 on a 1-10 Scale

Internal Processes • Reduce Time To Market to < 120 days • Increase Rolled Throughput Yield for new products to

>98%

Infrastructure • Increase involvement of employees on NPD projects to

>30%

BaltiColors – Product Leadership Approach to Breakthrough Objectives

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Financial Perspective: • Increase revenue by 100% in 7 years • Increase growth of sales to existing customers to >25% by

annual revenue

Customer Perspective: • Increase Customer rating on “BaltiColors are our Partners”

to > 8.5 on a 1-10 Scale

Internal Processes • Increase percentage of fulfilled customer requests to >70% • Reduce lead time <48 hours to >80% of orders

Infrastructure • Increase interactions of employees with customers to >30%

BaltiColors – Customer Intimacy Approach to Breakthrough Objectives

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In order to choose one of the Operating Models, BaltiColors might look at:

Current areas of expertize and budget: Building NPD capacities for product leadership

might take time Customer intimacy requires regional presence

Industry trends: Commoditization makes product leadership and

Customer intimacy difficult Operational Excellence works poorly against

disruptive innovation

Choosing your Own Operating Model

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How to Link to the X-Matrix

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Questions?