The Next Step to Raising the Bar Business Agility

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The Next Step to Raising the BarBusiness
Agility

• Dr. Dan L. Shunk
• Professor and Chair of SNI, ASU
• Director, Tech MBA, ASU
• CMEA Workshop
• Winnipeg, Canada March 2009

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Key Messages

• Globally competitive times require BUSINESS
  AGILITY
• Competitive Advantage comes from COST and
  DIFFERENTIATION
• To achieve success requires new metrics
• All this driven by STRATEGIC VALUE STREAMS
• With a Game Plan
• Agile Value Streams
• Agile Leadership
• Agile Innovation
• Agile Finance
• Agile Execution
• With an Agile Infrastructure

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Most Important Factors Impacting Growth
NYSE Euronext CEO Report 2009
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Most Important Factors Impacting Profitability
NYSE Euronext CEO Report 2009
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Todays Business Challenges

• According to a recent international study, the
  top three business challenges facing US
  companies today are
• Financial pressure to cut costs, 54
• Competitive threats, 43
• Rapid growth, 39

AND
Study was commissioned by AchieveGlobal and
conducted by Bersin Associates during the first
quarter of 2008.
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Success Requires Business Agility

• To thrive in a constantly changing business
  environment!

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Business Agility Foundation
Business Agility
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Business Agility

• How to measure agility
• Innovation sales from new or modified products
• Time to market lean operations / value streams
• Profitable growth focused cost management
• What is the foundation of agility in your
  enterprise?
• MTTRCCD
• Mean Time to Respond to a Changing Customer Demand

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Business Agility Foundation
Business Agility
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Core Business Processes
Traditional Manufacturing Focus
Support Business Processes
Business Mission Strategy
Corporate Governance
Value Collaboration
Value Collaboration
Market
Research
Develop
Acquire
Build
Fulfill
Brand
Sell
Support
Customers
Suppliers SRM Supply Network Dev.
CRM Supply Network Dev.
Source
Make
Deliver
Return
Information Management
Technology Development
Human Resource Management
Finance Accounting
Quality Business Excellence
Safety, Health Environment
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Core Business Processes
Todays Agile Value Stream Focus
Support Business Processes
Business Mission Strategy
Corporate Governance
Value Collaboration
Value Collaboration
Customers
Suppliers SRM Supply Network Dev.
Market
Research
Develop
Acquire
Build
Fulfill
Brand
Sell
Support
CRM Supply Network Dev.
Information Management
Technology Development
Human Resource Management
Finance Accounting
Quality Business Excellence
Safety, Health Environment
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With A Fundamental Premise
Customer .....
Success
Strategic Issue What will raise the bar? What
will differentiate you from your competition in
the 21st Century?
Customer Satisfaction
(a 1990s view in every company I visit)
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How Companies Compete in the Future
Source Supply Chain vs. Supply Chain, The Hype
vs. the Reality J. Rice, Jr. and R. Hopper,
Supply Chain Management Review, Sept / Oct,
2001, pp. 46 54.

• Formal SN vs. SN
• Strategic set of Supply network companies
  competing
• Channel Master (Big Kahuna)
• Most powerful company determines competition
• Informal SN vs. SN
• Group of supply network companies compete
• Single Company via Design
• Competing on supply network design
• Single Company via Cost / Service
• Competing on supply network cost and or service
  capabilities

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We All Know the Principles of Lean

• Value
• What does my customer want?
• What will make my customer successful?
• What is my customer willing to pay for?
• Value streams Is all work that I do providing
  value to the customer?
• Pull Do I do work only when its needed?
• Flow Does work flow continuously through the
  value chain?
• Perfection How good is the work I perform?

James Womack and Daniel Jones, Lean Thinking,
Free Press, 2003.
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With a Value Stream Focus

• A Simple Hoosier View of Value
• What is the Customer Willing to Pay For?

Known for three events!
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Traditional Organizational View vs. Value Stream
View
Traditional View
DESIGN MAT'L S FAB ASS'Y
LOGISTICS
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Manufacturing Value Stream System
One size does not fit all
Manufacturing looks different than health care
however, each have Value Strategic Processes to
address
12 Value Streams from a Manufacturer that we are
working with
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Construction Value Stream System
One size does not fit all
Construction looks different than manufacturing
however, each have Value Strategic Processes to
address
7 Value Streams from a Construction Company that
we are working with
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Health Care Value Stream System
One size does not fit all
Health Care looks different than manufacturing
however, each have Value Strategic Processes to
address
12 Value Streams from another health provider
that we are currently working with
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The Process

• Supporting the AND

Should Be
To-Be Roadmap
VALUE GAP
VSAT
As-Is
Value Priority
Projects
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Agile Value StreamsAchieving Flexibility
Efficiency Effectiveness

• Lean and Six Sigma are complementary!

Six Sigma says Once we can identify value
added processes lets absolutely minimize the
variability and get them in control
Lean says Dont do a process that does not
add Value!
Six Sigma
Lean
Dont waste your efforts employing six sigma
principles and Six Sigma Black Belt time on
something that does NOT add value!
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Mitigating the Bull Whip Effect
Source Dr. Hau Lee, Mgmt. Science, 1997.
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Key Message

• Establish One Common Continuous Improvement Base
  Line

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Business Agility Foundation
Business Agility
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Agile Leadership Managers vs. Leaders

• Managers
• Focus on things
• Do things right
• Plan
• Organize
• Direct
• Control
• Follows the rules

• Leaders
• Focus on people
• Do the right things
• Inspire
• Influence
• Motivate
• Build
• Shape entities

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What Leaders Do ...

• Recruits, doesnt just hire
• Breathes vision into people
• Models positive behavior
• Challenges, provokes
• Is intellectually stimulating
• Doesnt interfere, has courage to let it happen
• Discovers talents
• Builds the habitat for creativity
• Instills ownership

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Business Agility Foundation
Business Agility
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In Parallel Agile Finance

• Somehow we must free the cash to allow the growth
  that will come.
• Lean a good start.
• Non-strategic expense reduction another good
  start.

Our target is 30 ?t for Strategic Value Streams
Our target is 20 ?c For Non-Strategic Cost
Categories
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Agile Finance Releasing Cash for Growth
Step 2 Fund innovation for new / modified
products
Step 3 Maximize business valuation over time
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Lowering Non-core Costs Establishes Funds for
Sustainable Profitable Growth
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Agile Finance Means
Every dollar spent needlessly is a dollar removed
from your bottom line profit
Short term cost reduction provides
greater financial rewards than time spent in
generating sales
10 reduction of non-core costs means typically
an extra 2 profit
Business Agility
Medium / Long Term Innovation and LEAN
initiatives are critical
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Business Agility Foundation
Business Agility
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Agile, Disruptive Innovation
Performance
Time
Christensen (1997)
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Disruptive Innovation
Performance
Absorbable Performance
Time
Christensen (1997)
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Disruptive Innovation
Performance
Absorbable Performance
Time
Christensen (1997)
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Business Agility Foundation
Business Agility
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Last, NOT LEAST, Agile Execution a
systematic way of exploring reality and acting on
it

• Most efforts at cultural change fail because
  they are not linked to improving business outcome.

• 7 Essential Behaviors of Leaders
• Know your people and your business
• Insist on realism
• Set clear goals and priorities
• Follow through
• Reward the doers
• Expand peoples capabilities
• Know yourself (it takes emotional fortitude)
• Strategic Plans A Tool A good strategy process
  is one of the best devices to teach people about
  execution. It makes the mind better at detecting
  change.

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The Strategic Magic Number
Goal Strategy Program
Task
With this strategic planning structure.
1120
410
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Number of Goals
0
12
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Goals Achieved With Excellence
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Execution Challenge
W.I.G.s Wildly Important Goals
Tasks / Activities
Execution
Execution
_______________ _______________ _______________
What is the most important goal of the business
unit?
Source Franklin Covey friends
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Ritz-Carlton Example
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100 Guest Retention
80
?
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Recent Results

• Strategic

• Tactical

• Trucking Industry
• 8 vehicles/day to 42 vehicles/day in 18 months
• 2 stage execution process
• FTE count no change
• 425 improvement
• Cost, waste, and cycle time savings ?? 50
• Home Construction Industry
• 110 day construction build time reduced to 70
  days ??40

• Health Care (Hospital)
• 500,000 annual savings in nonstrategic supplier
  related cost reductions
• Manufacturer of construction materials
• 648,000 annual reduction in customer facing
  Merchant Card Services

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Failure to be Agile
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Business Agility Foundation
Business Agility
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In Summary

• Globally competitive times require BUSINESS
  AGILITY
• Competitive Advantage comes from COST and
  DIFFERENTIATION
• To achieve success requires new metrics
• All this driven by STRATEGIC VALUE STREAMS
• With a Game Plan
• Agile Value Streams
• Agile Leadership
• Agile Innovation
• Agile Finance
• Agile Execution
• With an Agile Infrastructure

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Recommended Readings

• Lean Thinking, Womack and Jones, 2003
• The Toyota Way, Liker, 2004
• Bull Whip, Dr. Hau Lee, Management Science,
  1997.
• Mass Customization, Joe Pine, 1997.
• Clockspeed, Charles Fine, 1997.
• Lean Enterprise Self Assessment Tool, MIT, 2001.
• CIO Magazine, Nov. 15, 2002, Hersheys
  Bittersweet
• Gartner Group, Nov. 12, 2002, Knowledge
  Management
• Supply Chain Management Review
• Next Generation Manufacturing Project, TEAM,
  1997.
• Second Toyota Paradox, MIT Sloan Management
  Review, Spring 1995.