Session 4

Strategic Intent and

Performance Management
 Integral Values
 As organizations cultivate the ability to change constantly how can the corporate2 ship
be kept stable?
 Through core values, which act as stabilizers when the sea of change become
turbulent.
 Royal Dutch/Shell’s study of long lasting firms - All had a strong sense of identity
 James Collins and Jerry Porras study - “Built to Last”.
 Most respected high performing companies with another successful company in the same industry.
 Johnson and Johnson with Bristol-Myers Squibb
 Merck with Pfizer
 GE with Westing house
 Sony with Kenwood
 Procter and Gamble with Colgate
 Hewlett-Packard with Texas Instruments
 All the companies for at least 50 years in business
 Integral Values
Contd…. 3

 Focus of the research was not why the companies survived - but why the
higher-performing company did better than its counterpart.

 Conclusion? - Leading firms had stronger and more enduring core values,
The values didn’t appear just on a plague in the entrance hall but were what
the organizations managed by.
Sony - To be a pioneer, not following others but doing what seems
impossible
Motorola - Continuous self-renewal
Wal-Mart - Swimming upstream, against conventional wisdom.
 Enhancing Core Values
4

 A Relativistic strategy must reflect and reinforce core values, not try to change them
 Specific manifestations of the core values can and should be changed, but not the
core values themselves.
 There is no such thing as corporate values - only the shared values of the individuals
whom the corporation comprises
 Core values cannot be denied but transformed.
Johnson & Johnson
Core value: The firm’s first responsibility is to all those who use its products.
 1982 - Seven people in Chicago area took analgesic Tylenol and died within
minutes. Somebody tempered and laced them with cyanide
 J&J immediately recalled every Tylenol capsule in US. Mounted an aggressive
campaign to alert public.
 The estimated cost was $ 100 million
 Enhancing Core Values
Contd... 5

 Organizational values feed into strategy development through the process of sharing,
understanding and committing.
Tata
 Late 1970s - Created a division
 Management declared values to new workforce-Not just maintaining high quality but
providing work places where every individual would be treated with dignity and
respect. No matter how serious the differences of opinion, they should be resolved
by non violent, open and honest discussion.
 General Manager - Upbraided an employee - CEO
 1980s worker union - disrupted collective bargaining.
 The values had stabilized Tata through the storm
 Guided by The Light - Vision
6
 Corporate vision provides the point of reference on the horizon, a bacon of light.
 Components of vision
 specify Aspiration, a unique long-term achievement that the organization is striving for.
 offer Inspiration, which acts as a super magnet, pulling the organization onward and upward
through change.
 Invite Perspiration, suggesting how the people in the organization can bring that achievement
closer everyday.
 Normally the focus is on the statement rather than on the vision.
 The core values have to act as a foundation to every vision.

Komatsu - Small is Beautiful

 Japanese manufacture of earth-moving equipment
 Main competitor was Caterpillar
 Vision - “Encircle Caterpillar”
 Vision Statement
7
A strategic vision is a road map showing the route a company intends to take in
developing and strengthening its business. It paints a picture of a company’s
destination and provides a rationale for going there.
Characteristics of an effectively worded vision statement:
Graphic

Directional

Focused

Flexible

Feasible

Desirable

Easy to communicate
 Vision Statement
8
Common shortcomings in Company Vision Statements
1.Incomplete

2.Vague

3.Bland

4.Not distinctive
5.Too reliant on some superlatives
6.Too generic
7.Too broad
One example: GE: We will become number one or two in every markets we
serve, and revolutionize this company to have the speed and agility of a small
enterprise.
 Pragmatic Routes to a Shared Vision 9

 TELLING: The CEO creates a vision and advises organization

to follow it
 SELLING: The CEO believes in a vision and encourages the
organization to follow it.
 TESTING: The CEO has some ideas about a vision and gets
the organization’s reaction.
 CONSULTING: To put together a vision, the CEO gets creative
input from the organization.
 CO-CREATING: Together, the CEO and the rest of the
organization create a shared vision.
 Vision and Mission Statement 10

 Strategic vision: “Where we are going and why”

 Mission statement: “Who we are, what we do, and why
we are here”
A company’s mission is defined by the buyer needs it seeks
to satisfy, the customer groups and market segments it is
endeavoring to serve, and the resources and technologies
that it is deploying in trying to please its customers.
 Why Organizational Mission? 11

 Focus Human Effort in a Common Direction

 Organization Not Pursuing Conflicting Purposes

 Establishes Broad Areas of Job Responsibilities

 Basis for Development of Organization Objectives

 Mission Statements
12

 Arvind Mills “To achieve global dominance in select business built

around our core competencies through continuous product and technical
innovations and customer orientation with a focus on cost-effectiveness.”
 Godrej Soaps “We shall operate in existing and new businesses
which profitably capitalize on the Godrej brand and our corporate image
of reliability and integrity. Our objective is to delight our customers, both
in India and abroad. We shall achieve this objective through continuous
improvement in quality, cost as well as customer service.”
 Wipro “Be among the 10 most admired Indian corporations. Corporation
And by 2000, have international operations/exports contribute more than
50% of corporation profit after tax.”
Key Components of a Mission Statement
13

Specifies basic product or service

Identifies primary market to be served

Specifies principal technology for production or delivery

Reflects company’s concern for survival

Reflects company’s philosophy

Identifies company’s self-concept

Reflects company’s concern for public image

Formulating a Mission: Indispensable Components
14

Indicates basic product or service

AMAX’s principal products are molybdenum, coal, iron ore,
copper, lead, zinc, petroleum and natural gas, potash, phosphates,
nicke, tungsten, silver, gold, and magnesium.

Specifies primary market

To anticipate and meet market needs of farmers, ranchers, and
rural communities within North America. (CENEX)

Indicates principal technology

Control Data is the business of applying microelectronics and
computer technology in two general areas: computer-related
hardware and computing enhancing services, which include
computation, information, education, and finance.
Formulating a Mission: Economic Goals
15

 Reflect firm’s intention to secure survival through growth

and profitability
A firm unable to survive is incapable of satisfying any of
its stakeholders
 Profitability is the clearest indication of a firm’s ability to
satisfy principal claims of employees and stockholders
 Growth is tied to firm’s survival and profitability

The company will conduct its operation prudently, and

will provide the profits and growth which will assure
Hoover’s ultimate success.
Formulating a Mission: Company Philosophy
16

Reflects basic beliefs, values, aspirations, and

philosophical priorities to which strategic decision
makers are committed

We believe human development to be the worthiest of the goals

of civilization and independence to be the superior condition
for nurturing growth in the capabilities of people. (Sun
Company)
Formulating a Mission: Public Image 17

Reflects public’s expectations which makes

achievement of firm’s goals more likely
We are sensitive to our image with our customers and the business
community. Commitments to customers are considered sacred, and
we are upset with ourselves when we do not meet our commitments.
We strive to demonstrate to the business world on a continuing basis
that we are credible in describing the state of the corporation, and
that we are well organized and in complete control of all things that
determine the numbers. (Intel Corporation)
 Formulating a Mission: Self-Concept
18

 Characteristics
 Based on management’s perception of how others will
respond to company
 Directs behavior of people employed by company
 Determined partly by response of others to company
 Incorporated in mission statements communicated to
people inside and outside company

Hoover Universal is a diversified, multi-industry corporation

with strong manufacturing capabilities, entrepreneurial
policies, and individual business unit autonomy.
 Organizational Objectives
19

Target(s) towards,
Directing Its Efforts
Importance

• Guide in Decision Making

• Guide For Increasing
• Organization Efficiency
• Guide For Performance Appraisal
Types

 Short Run
 Long Run
Hierarchy
Types of Long-Term Objectives
20

Profitability Employee Development

Productivity Employee Relations

Technological
Competitive Position
Leadership

Public Responsibility
 The Balanced Scorecard Provides a Framework to
Translate a Strategy into Operational Terms
21
Financial

as s
es

es
Me tive
“To succeed

ur

tiv
In ts
financially, how

jec

e
itia
should we

rg
Ob

Ta
appear to our
shareholders?”

Customer Internal Business Process

as s
as s
es

rg e s
Vision

Me tive

es
es
Me tive

e
“To achieve our vision, “To satisfy our

ur

ur
Ini ts

Ini ts
t iv
t iv
how shareholders

jec
je c and

t ia
t ia
rg
should we and customers,

Ob
Ob

Ta

Ta
appear to our Strategy what business process
customers?” must
we excel at?”

Learning and Growth

es
as s

es
Me tive
“To achieve our vision,

ur

Ini ts
t iv
how will

jec

e
t ia
rg
we sustain our

Ob

Ta
ability to
change and improve?”
 Perspectives in BSC
22

Financial
ROCE

Customer Customer
Loyalty

On-time
Delivery

Internal Business
Process Process Process
Quality Cycle Time

Learning and Growth

Employee
Skills
 23

Perspective Generic Measures

Financial Return on investment and economic

value-added

Customer Satisfaction, retention, market, and

account share

Internal Quality, response time, cost and new

product introductions

Learning and Growth Employee satisfaction and information

system availability
The Customer Perspective—Core Measures
24

Market
Share

Customer Customer Customer

Acquisition Profitability Retention

Customer
Satisfaction
The Internal Scorecard and Linkages—Kenyon Stores
Financial Profitable 25
Growth
Increase
Productivity
Penetration

Customer
Brand Product Attributes Customer
• Fashion and Relationships
• Brand Design • Shopping
Image • Quality and Fit Experiences
• Availability
• Prince Benefit

Internal
Fashion Leadership Memorable Shopping
Brand Experience
• First to Market
Management •Mystery Shopper
• Revenue from new
• Market Share Categories Merchandise
(target Availability
Sourcing Leadership
• Stock-out %
categories) • Quality Returns (selected items)
• Brand • Vendor Performance • Inventory Turnover
Recognition
• New Accounts
The Learning and Growth Measurement Framework
26

Core Measurements
Results

Employee Employee
Retention Productivity

Employee
Satisfaction

Enablers
Staff Technology Climate for
Competencies Infrastructure Action
 The Metro Bank Strategy 27

The Revenue Growth Strategy The Productivity Strategy

“Improve stability by broadening “Improve operating efficiency
the sources of revenue from by shifting customers to more
current customers.” cost-effective channels of
distribution.”
 The Metro Bank Strategy
Financial
Perspective Improve 28

Returns
Broaden Improve Operating
Revenue Mix Efficiency

Customer Increase Customer

Increase Customer
Perspective Satisfaction Through
Confidence in Our
Financial Advice Superior Execution

Internal
Perspective
Understand Develop Cross-Sell Shift to Provide
Customer New the Product Appropriate Minimize Rapid
segments Products Line Channel Problems Response

Learning and Increase

Growth Employee
Perspective Productivity

Develop Access to Align

Strategic Strategic Personal
Skills Information Goals
System Dynamics Modelling for
Flexible Strategy Game-card
The Conceptual Research Framework
Adopted for the Study 30
System Dynamics Modeling in the Context
of Bharat Telecom 31

 To
develop a system dynamic based PMS for
Bharat Telecom

 Assess the most likely impact of recommended

strategic interventions on firm’s performance
Step I: Problem Definition, Variables and Scope 32

 The system dynamics methodology is used to

capture the impact of investment in infrastructure
and providing value added services on the firm’s
performance in the future.

 Only those key variables that have an influence on

the system’s behavior have been used here.
Key Variables for Bharat Telecom
33
 Step II: Formulation of Dynamic Hypothesis
34

“The dynamic hypothesis is a preliminary sketch of the main interaction and

feedback loops that could explain observed and anticipated behavior”
Dynamic hypotheses formulated are
H1: The investment in data architecture creates the future performance of
telecom service provider.
H2: The integration of subscribers’ view point lead to future performance of
telecom service provider.
Interpretive CLD has been developed for both enterprise, and subscribers’
factors through group discussion with company experts
CLD that brand image index, customer satisfaction index and competition
level in terms of number of operators affect the number of subscribers
 Step III: Formulation of Model 35

For development of system dynamics based model, STELLA 10.0.2

software package has been used
Stock and flow diagram has been developed
The values of parameters have been collected from case company and
some insights from practitioners
Assumptions drawn while developing the model are as follows
The licensing fee and revenue sharing have been paid from gross
revenue on yearly basis.
The cost components of telecom operator have been kept constant.
As the competition increases (in terms of number of operators), the
subscribers of case company will reduce.
 Step IV Model Testing 36

Itis imperative to conduct different tests for building

confidence in SD models

Testing of model structure done through

Structure-verification Test

Dimensional-consistency Test

Boundary Adequacy Test

Retrospective Testing
 Step V Simulation and Analysis
37

The main purpose of the model is to visualize the impact of data

architecture investment, other investments and issues
The base year has been taken as 2010 and simulation has been run
for the next 10 years
The stocks chosen for analyzing the policy parameters
Gross revenue
Number of subscribers
Customer satisfaction index
Subscriber factor
Brand image index
Dynamics of Lagging Performance Indicators for
Bharat Telecom 38
 The Graph Highlights
39

Exponential growth in subscribers’ numbers due to an increase in

brand image index and customer satisfaction index
By setting a positive brand image of operator and providing quality
services
There is a positive word of mouth from the existing subscribers that
influence more potential subscribers
Brand image index and customer satisfaction index are showing goal
seeking behavior and moving towards a goal of 10-point
Gross revenue is showing dramatic growth, which is prompting more
investments in data architecture
Thank You