Strategic Supply Chain Planning is the “Pegasus of Strategy.” It can soar, but it also needs to keep its feet on the ground.
Companies with a global supply chain now need to introduce its strategic left hand to its operational right hand. To make planning more valuable, its strategic supply chain planning needs to combine strategic planning with its tactical supply chain planning. The importance of aligning strategic direction to the supply chain has become of utmost importance.
Senior Managers formulate strategies to maximize shareholder value. Supply chain planners run optimization models to minimize costs. If scenario planning is combined with supply chain planning, the best of both worlds is achieved. The company can expect to achieve a long-term competitive advantage.
Strategic Supply Chain Planning provides the framework in selecting projects that best support the organization’s supply chain objectives and strategies. It plays an essential role within the Planning Spectrum.
The Planning Spectrum
Within the Planning Continuum are 3 decision-making models of importance to the business.
The range of Strategic Planning approaches across the Planning Spectrum depends on the fundamental changes it is focused on. Strategic Planning, Strategic Supply Chain Planning, and Tactical Supply Chain Planning differ in terms of scope of decision making, decision horizon, flexibility to act, and possible tools to use.
Let us take a look at Strategic Planning. In Strategic Planning, its scope of decision making covers the entire nature of the business. This means that the planning scope covers the reevaluation of the business model.
When undertaking Strategic Planning, there are several tools that can be used. Organizations may use the Framework Analysis or lower-level analysis that may entail the use of spreadsheets. Dynamics tools and other simulation tools may also be used.
If we look at the Strategic Supply Chain Planning, its scope of decision making is more focused or directed. This is undertaken to determine whether there is a need to open or close plants and distribution centers. It is used to determine whether there is a need to modify capacity, change product offerings even the decision to manufacture in-house or to outsource it. Strategic Supply Chain Planning is more directed towards a specific area.
Once Strategic Supply Chain Planning has been undertaken, it is appropriate to follow this up with Tactical Supply Chain Planning. It is at this point wherein organizations now have to plan out and determine which plant should produce what product over the coming months depending on the demand forecast.
When undertaking the Planning Spectrum, it is best to understand the scope of decision making of each planning approach for organizations to achieve the best results.
Other Organizational-based Tools
The 3 Planning approaches have demonstrated effective use of organization-based tools to maximize results and impact. One is the use of Optimization Models for Strategic Supply Chain Planning. The Optimization Model has been known to have been applied effectively by corporations such as Baxter International, Inc., Pet Inc., and GM.
Baxter International, Inc. has been successful in using SAILS or Strategic Analysis of Integrated Logistics Systems. It has been used to evaluate consolidated approaches. Pet Inc was able to used SAILS to assess supply chain synergies from 2 potential acquisitions.
The use of the Optimization Model in Strategic Supply Chain Planning and Tactical Supply Chain Planning differs both in design and use. Hence, it is essential for organizations to have a good understanding of the Planning Spectrum to effectively integrate to use the Optimization Model.
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Execution has become the new watchword in Boardrooms. As organizations fail to effectively implement strategies, the importance of execution has risen to the forefront. Essentially, the first step in resolving these dysfunctions is to understand how the inherent traits of an organization influence and even determine each individual’s behavior. Organizations must also understand how collective behavior affects company performance.
The idiosyncratic characteristics of an organization can be codified using the DNA. When the DNA of an organization is purely configured, unhealthy symptoms and counterproductive behaviors are demonstrated.
Understanding the DNA and the Organizational DNA Framework
DNA has been used as a family metaphor to codify the idiosyncratic characteristics of a company.
The Organizational DNA Framework examines all aspects of company architecture, resources, and relationships. It ensures that managers focus their efforts on reinforcing what works in the organization and modifying what does not. It helps companies identify and expose hidden strengths and entrenched weaknesses.
In identifying unhealthy symptoms and unproductive behavior, the Org DNA Profiler is used as a tool. It allows management to gain insight into what is and is not working deep inside a highly complex organization.
The Org DNA Profiler, as an Assessment tool, was used to fix problems by identifying and isolating them. Launched in 2003, the Org DNA Profiler measures an organization’s relative strength in 4 Building Blocks on the basis of individual employees’ responses to 19 questions.
What Type of Organization Do You Have?
When diagnosing and overcoming organizational impediments, there is also a need to identify the type of organization that you have. There are 7 broad types of organizations; each organization fitting a certain type.
There is a Resilient Organization. A Resilient Organization can adapt quickly to external market shifts. It can remain steadfastly focused on and aligned with a coherent business strategy. Resilient Organizations can anticipate changes routinely and addresses them proactively. They can attract motivated team players and offers a stimulating work environment, resources, and authority to solve tough problems.
However, there is also a disadvantage when it comes to Resilient Organizations. Resilient Organizations have the tendency to be overly adapted toward one direction or the other.
Another type of organization is the Just-in-Time Organization. The JIT Organization demonstrated an ability to turn on a dime when necessary, without losing sight of the big picture. They can manage to hold on to good people and performs well financially. A Just-in-Time Organization is a stimulating and challenging place to work.
While this may be a good place to work, it can also have its disadvantages. A Just-in-Time Organization is not proactive in preparing for impending changes. In fact, it has not made a leap from good to great. As such, it tends to miss opportunities by inches rather than miles. It celebrates successes that are marginal rather than unequivocal.
The third type of organization is the Military Organization. This type of organization succeeds through sheer force of will of top executives. However, it has a shallow and short-lived middle management bench.
There are 4 other types of organizations. There can be the Passive-Aggressive Organization, the Fits-and-Starts Organization, the Outgrown Organization, and the Overmanaged Organization.
The Passive-Aggressive Organization is considered the most prevalent of all types of organizations. The Outgrown and Overmanaged Organizations, on the other hand, are those that are often considered unhealthy.
The intricacies and defining characteristics of the 7 types of organizations are effective in creating specific interventions to enhance performance and execution. Knowing and understanding the types of organizations can better assist organizations in the analysis of their DNA and guide them in undertaking Business Transformation or Strategy Development.
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Survival of a business in this digital age largely depends on its ability to timely embrace Digital Transformation. Digital Transformation entails using Digital Technologies to streamline business processes, culture, and customer experiences.
In order to compete today—and in future—and to enable Digital Transformation, organizations should work towards fostering a culture of continuous learning, since Digital Transformation depends on learning and innovation. The organizations that holistically embrace this culture are called “Next-Generation Learning Organizations.”
The next generation of Learning Organizations capitalize on the following key variables; Humans, Machines, Timescales, and Scope. These organizations incorporate technology in enabling dynamic learning. Creating Next-Generation Learning Organizations demands reorganizing the entire enterprise to accomplish the following key functions to win in future:
- Learning on Multiple Timescales
- Man and Machine Integration
- Expanding the Ecosystem
- Continuous Learning
Learning on Multiple Timescales
Next-Generation Learning Organizations make the best use of their time. They appreciate the objectives that can be realized in the short term and those that take long term to accomplish. Learning quickly and in the short term is what many organizations are already doing, e.g., by using Artificial Intelligence, algorithms, or dynamic pricing. Other learning variables that effect an organization gradually are also critical, e.g., changing social attitudes.
Man and Machine Integration
Rather than having people to design and control processes, Next-generation Learning Organizations employ intelligent machines that learn and adjust accordingly. The role of people in such organizations keeps evolving to supplement intelligent machines.
Expanding the Ecosystem
The Next-generation Learning Organizations incorporate economic activities beyond their boundaries. These organizations act like platform businesses that facilitate exchanges between consumers and producers by harnessing and creating large networks of users and resources available on demand. These ecosystems are a valuable source for enhanced learning opportunities, rapid experimentation, access to larger data pools, and a wide network of suppliers.
Next-generation Learning Organizations make learning part and parcel of every function and process in their enterprise. They adapt their vision and strategies based on the changing external environments, competition, and market; and extend learning to everything they do.
With the constantly-evolving technology landscape, organizations will require different capabilities and structures to sustain in future. A majority of the organizations today are able to operate only in steady business settings. Transforming these organizations into the Next-Generation Learning Organizations—that are able to effectively traverse the volatile economic environment, competitive landscapes, and unpredictable future—necessitates them to implement these 5 pillars of learning:
- Digital Transformation
- Human Cognition Improvement
- Man and Machine Relationship
- Expanded Ecosystems
- Management Innovation
1. Digital Transformation
Traditional organizations—that are dependent on structures and human involvement in decision making—use technology to simply execute a predesigned process repeatedly or to gain incremental improvements in their existing processes. The Next-generation Learning Organizations (NLOs), in contrast, are governed by their aspiration to continuously seek knowledge by leveraging technology. NLOs implement automation and autonomous decision-making across their businesses to learn at faster timescales. They design autonomous systems by integrating multiple technologies and learning loops.
2. Human Cognition Improvement
NLOs understand AI’s edge at quickly analyzing correlations in complex data sets and are aware of the inadequacies that AI and machines have in terms of reasoning abilities. They focus on the unique strengths of human cognition and assign people roles that add value—e.g., understanding causal relationships, drawing causal inference, counterfactual thinking, and creativity. Design is the center of attention of these organizations and they utilize human imagination and creativity to generate new ideas and produce novel products.
3. Man and Machine Relationship
Next-generation Learning Organizations (NLOs) make the best use of humans and machines combined. They utilize machines to recognize patterns in complex data and deploy people to decipher causal relationships and spark innovative thinking. NLOs make humans and machines cooperate in innovative ways, and constantly revisit the deployment of resources, people, and technology on tasks based on their viability.
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Most organizations are unhealthy. Only organizations that are recognized to be Resilient, Just-in-Time, and Military can be described and relatively free from dysfunction. Yet, only 27% of the responses gathered from the Org DNA Profiler showed a healthy profile.
The Org DNA Profiler is a short online self-assessment tool launched on December 9, 2003. It was used to measure an organization’s relative strength in 4 key areas, on the basis of individual employees’ responses to 19 questions. From a total of 4,007 completed assessments collected, there were 6 Organizational Behavioral issues that were prompted. These issues can still be turned around by undertaking the appropriate step.
The 6 Key Issues on Organizational Behavior
Organizational Behavioral Issues are observations on the prevalence of dysfunctions among business organizations.
- Most organizations are unhealthy. More than 60% of the organizations are either Passive-Aggressive, Fits-and-Starts, Outgrown, or Overmanaged.
- Organizational DNA changes as companies grow. Small companies report more Resilient and Just-in-Time behaviors. They become more centralized and demonstrate Military traits as they grow. Once annual revenues cross the $101B threshold, decentralization occurs. However, often this is undertaken badly.
- Attitude determines attitude. There are sharp differences between senior management and lower-level personnel. A disconnect exists between the organizations that senior executives believe they have established and the organizations they are actually running.
- Non-executives feel micromanaged. Junior managers feel a lack of maneuvering room compared to senior managers who view their self-professed involvement in operating decisions as good.
- Decision rights are unclear. More than 50% of the respondents believe that the accountability for decisions and actions in their organizations was vague.
- Execution is the exception, not the rule. Less than 50% of the respondents agreed that important strategic and operational decisions are quickly translated into action in their organizations.
It is expected that all organizations have behavioral issues. However, unlike humans and other organisms, organizations can change their DNA by adjusting and adapting their building blocks and resolve these issues. There are just processes that organizations must take into consideration to effectively address these behavioral issues and turn them around for the benefit and advantages of the organization.
The Need to Unlearn, Learn, and Relearn
It is advisable for an organization to continue to analyze its organization as it grows into and occasionally out of dysfunction. This can be done by using a 4-step evolutionary process.
Step 1: $0 – $500 Million. The first step or Step 1 generally demonstrates characteristics depicting Resilient or Just-in-Time profiles.
Organizations at this level are effective at executing and adapting to changes in the environment. They are generally younger small companies that are attuned to and aligned with the vision and strategy of the founders. They are known to be able to adapt more nimbly to market shifts.
Step 2: $500 Million – $1 Billion. The second step is an evolutionary phase where organizations are starting to experience the adverse effect of growth in terms of size. This is basically the stage where Military profile has reached its peak in revenue segment. These are the organizations that are bureaucratic, slow, and overly politicized. At this point, expanding middle management starts to second guess and interfere in lower-level decision making.
Step 3 is where organizations are becoming too large and step 4 is returning back to a Resilient profile. The 4-step evolutionary process reflects the stages of development of organizations as they start from being small to being large and complex. It is a reflection of the issues they are encountering at each step of development that they are in. Knowing where they are at this point will enable an organization to better undertake their Strategy Development in a most effective approach.
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Identifying what the market wants is a critical issue for most executives. Likewise, the decision on how much to charge for a product is also crucial for planners. This is where Market Research comes to rescue.
One of the Marketing Research methods that researchers most commonly employ is the Conjoint (Trade-off) Analysis. Conjoint Analysis helps in identifying product features that consumers prefer, discerning the impact of price changes on demand, and estimating the probability of product acceptance in the market.
In contrast to directly inquiring from the respondents about the most important feature in a product, Conjoint Analysis makes the survey participants assess product profiles. These product profiles comprise various linked—or conjoined—product features, therefore the analysis is termed “Conjoint Analysis.” Conjoint Analysis simulates real-world buying situations where the researchers statistically determine the product attributes—that carry the most impact and are attractive to the participants—by substituting the features and recording the participants’ responses.
The Conjoint Analysis Approach
The Conjoint Analysis is useful in creating market models to estimate market share, revenue, or profitability. The Conjoint Analysis is widely used in marketing, product management, and operations research. The Conjoint Analysis approach entails the following key steps:
- Determine the Study Type
- Identify Relevant Features
- Establish Values for Each Feature
- Design Questionnaire
- Collect Data
- Analyze Data
1. Determine the Study Type
The first step of the Conjoint Analysis involves ascertaining and selecting from a number of different types of Conjoint Analysis methods available. This should be determined based on the individual requirements of the organization.
2. Identify Relevant Features
The next step of the Conjoint Analysis entails categorizing the key features or relevant attributes of a product. For instance, setting the main product attributes in terms of size, appearance, price.
3. Establish Values for Each Feature
After selecting the key features of the product, the next step in Conjoint Analysis is to choose some values for each of the itemized features that have to be enumerated. A combination of features in different forms should be chosen to present to the participants. The presentation could be written notes describing the products or in the form of pictorial descriptions.
4. Design Questionnaire
The basic forms of Conjoint Analysis—practiced in the past—encompassed a set of product features (4 to 5) used to create profiles, displayed to the respondents on individual cards for ranking. These days, different design techniques and automated tools are used to reduce the number of profiles while maintaining enough data availability for analysis. The questionnaire length depends on the number of features to be evaluated and the Conjoint Analysis type employed.
5. Collect Data
A statistically viable sample size and accuracy should be considered while planning a Conjoint Analysis survey. It is up to the senior management to decide how they want to gather the responses—by taking the responses from each individual and analyzing them individually, collecting all the responses into a single utility function, or dividing the respondents into segments and recording their preferences.
6. Analyze Data
Various econometric and statistical methods are utilized to analyze the data gathered through the Conjoint exercise. This includes linear programming techniques for earlier Conjoint types, linear regression to rate Full-Profile Tasks, and Maximum Likelihood Estimation (MLE) for Choice-based Conjoint.
Types of Conjoint Analysis
There are a number of Conjoint Analysis types available for the marketing researchers to choose from, including:
- Two-Attribute Tradeoff Analysis
- Full-Profile Conjoint Analysis
- Adaptive Conjoint Analysis
- Choice-Based Conjoint Analysis
- Self-Explicated Conjoint Analysis
- Max-Diff Conjoint Analysis
- Hierarchical Bayes Analysis (HB)
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Organizations can change over the years. Change may happen because that is what the customers expect or it is because the organization gets to have even the most coveted skills. Despite the changes, there are those that stay the same—the organization’s brand, its unique culture, and its shared lexicon. These are the underlying organizational and cultural design factors that define an organization’s personality. Metaphorically, these are called Organizational DNA. The Organizational DNA can indicate whether the organization is strong or weak in executing strategy.
Today, execution has come to a fore as organizations fail to effectively implement strategies. Organizations now realize that it must first resolve this dysfunction by understanding how the inherent traits of an organization influence and even determine each individual’s behavior. The idiosyncratic characteristics of an organization can be codified using the DNA. When the DNA of an organization is purely configured, unhealthy symptoms and counterproductive behaviors are demonstrated. High performing organizations have shown that there are precepts that they closely follow to ensure that their Organizational DNA is in order.
The 10 Principles of Organizational DNA
The 10 Principles of Organizational DNA are the precepts upon which high-performance companies are built on.
Let us take a look at 5 of the 10 Principles of Organizational DNA.
- Organizations always identify with 1 of 7 behavioral patterns regardless of industry and geography. Enterprise-wide behavior can either be passive-aggressive, overmanaged, outgrown, fits-and-starts, just-in-time, military-precision, or resilient. The complication here is that companies can face and conquer even the most pernicious performance problems by changing personalities. When this happens, it is crucial that the company must be ready for any problems that may arise as a result of the change in personality type. The inability to address these problems may be detrimental to the organization. Changing personality is not easy. It must be well-studied and strategically planned.
- Companies contain a mix of personalities. Business units fall under different archetypes, particularly in major acquisitions. At this stage, it is possible that a resilient organization may have a division that matches the fits-and-starts profile, characterized by smart entrepreneurial talent. However, despite that, it may lack the collective discipline necessary.
- There is a strong connection between personality type and strategy execution. In the survey conducted, 48% of the respondents fit a profile that is distinguished by weak execution. Passive-aggressive organizations may have people who pay lip service to results but they may consistently undermine some necessary efforts.
- Strong execution can be sustained. Organizations with a strong execution archetype cannot afford to be complacent. Leaders must continually seek feedback from the market, encourage and act on criticism from customers and frontline employees, and take action to address minor issues. These must be done before any problem gets bigger.
- The combination of building blocks determines the organization’s aptitude for execution. Organization DNA is made up of 4 building blocks. These are decision rights and norms, motivation and commitments, information and mindsets, and structure and networks. Complications may come in when companies decide to improve execution. At this point, building blocks must be considered and these must be considered as a whole and not individually.
The other 5 core principles of Organizational DNA are essentially necessary. Even the company with the most desirable profile, the resilient organization, must continually stay at the top of the game. Hence, it is essential that organizations must adopt the most appropriate behavioral pattern and personality to be able to build high-performance organizations. Strategy Development must be able to integrate into the organization’s Business Transformation the 10 core principles of Organizational DNA.
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A commonly quoted statistic is that 80% to 95% of the cost of a product is determined by its design and is therefore set before the item enters manufacturing. This assumption suggests that the dominant focus of Cost Management should be during Product Development and not during Manufacturing.
However, contrary to a widely held assumption, companies can integrate a variety of Cost Management techniques not only in the design phase but throughout the product life cycle. This is to ensure that there is a substantial reduction in costs. In fact, companies achieving Operational Excellence and competing aggressively on cost might consider the adoption of some form of an Integrated Cost Management Program that spans the entire product life cycle.
An organization must have a good understanding of Integrated Cost Management and the 5 Cost Management Strategies that they can use to reduce costs but still attain the desired level of functionality and quality at the target costs.
The 5 Cost Management Strategies
The 5 Cost Management Strategies play a crucial role in the company’s integrated approach to Cost Management.
The 5 Cost Management Strategies can be applied throughout the product life cycle with one technique used during the product design and the rest during manufacturing.
- Target Costing. This is a technique applied during the design stage. Target Costing is best used when the manufacturing phase of the life cycle of a product is short.
- Product-specific Kaizen Costing. This is a technique applied during the early stages of the manufacturing phase. It enables the rapid redesign of a new product to correct for any cost overruns. The primary rule in Product-specific Kaizen Costing is that the product’s functionality and quality have to remain constant.
- General Kaizen Costing. The third Cost Management Strategy, this technique is applied during the manufacturing phase. It focuses on the way a product is manufactured with the assumption that the product’s design is already set. This technique is effective when addressing manufacturing processes that are used across several product generations.
- Functional Group Management. This is the technique that is applied in the production process. Functional Group Management consists of breaking the production process into autonomous groups and treating each group as a profit instead of a cost center. The switch to profit as opposed to cost allows groups to increase the throughput of production processes even if changes result in higher costs. It enables the change in mindset that functional group management induces.
- Product Costing. The 5th Cost Management Strategy, this is the technique that coordinates the efforts of the other four techniques. It does coordination work by providing the other four techniques with important, up-to-date information.
Target Costing vis-a-vis Kaizen Costing
Kaizen Costing as known as continuous improvement costing. It is a method of reducing managing costs. Kaizen Costing has a similarity with Target Costing but it also has its differences. (Note: Kaizen is the Japanese term for Continuous Improvement and often tied to the philosophy of Lean Management.)
Both Kaizen Costing and Target Costing can achieve results with lower resources. This is basically their similarity. On the other hand, the differences lie in their usage and involvement.
Target Costing is used on the design stage and requires the involvement only of designers. On the other hand, Kaizen Costing is used during the manufacturing stage and requires high involvement of employees. The general idea of Kaizen Costing is to determine target costs, design products, and process to not exceed those costs.
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COVID-19 has taken the world by a storm. Financial markets, manufacturing, services, and tourism have been hit hard. In fact, it has also changed the way we work, communicate, interact, and shop more than any other disruption in the decade.
As a result, there have been key changes in Consumer Behavior. There is a growing reluctance to visit crowded places, the increasing shift of work from the office to home, and the higher propensity for digital adoption and Digital Transformation. The changes are inevitable. For businesses to stay relevant, businesses have to adjust to the new norms.
We are now entering the Low Touch Economy, a new normal where there are behavioral shifts and entirely different rules and policies.
A Glimpse of the Low Touch Economy
A new economy will be shaped as a result of new habits and regulations. There will be reduced close-contact interaction, tighter travel, and hygiene restriction.
The global economy will transition into a Low Touch Economy as an aftermath of the COVID-19 2020 crisis. A Low Touch Economy will be characterized by entirely different rules and policies, habits, and behaviors. New rules and policies will be passed that will limit the number of people gathering, restrict travels, hygiene requirements, and strict adherence to practices that will ensure the protection of vulnerable groups.
In the work organization, there will be more people working from home and there will be a greater need for access to e-commerce and logistics. With the Low Touch Economy, traditional business and lifestyle norms will be greatly challenged and behavioral shifts occurring.
The 10 Trends in Consumer Behavior
While COVID-19 has made a great dent in the global economy, it has also triggered a shift in human behavior. There are 10 trends in Consumer Behavior driven by COVID-19 that are becoming more and more prevalent.
Let us take a look at the first 4 Trends in Consumer Behavior.
Trend 1: Mental Health
As a result of COVID-19, there is an increasing state of anxiousness, loneliness, and depression. People have started feeling isolated, experiencing lower productivity, and even loss of a job. Relationships have also been affected and the cost of healthcare increased.
Trend 2: Hygienic Concerns
The second trend is geared more on limiting COVID-19 exposure on the job. It is the ability to respond to varying levels of disease transmission through prevention and control measures.
As a result of this trend, there has been increased caution when interacting with people and products. In fact, establishments, offices, and even individuals are increasingly demanding for formal proof of hygiene and current health status.
Trend 3: Travel
Travel and Tourism is the trend that has the biggest impact as an industry. There are now extended travel restrictions, even within one’s country.
We can expect local tourism to flourish and there will be longer extensive holidays with quarantine taken into consideration.
Trend 4: Working from Home
Trend 4 is a COVID-19 preventive measure that used to be an office perk. There is now a need to optimize remote work home setups, which are beyond typical office jobs. As a result of this trend, individuals and families will start figuring out news ways to balance work-life needs within the confines of home.
With more people working from home, we can expect a reduction in office space and infrastructure. At the home front, there will be the presence of special equipment, machines, and advanced video/audio setups to accommodate the change in lifestyle.
There are 6 other trends on Consumer Behavior that have propped up as a result of the COVID-19 pandemic. With these trends, there are response mechanisms we can expect from organizations, families, and even individuals.
What to Expect
With the changes that the COVID-19 pandemic has brought, we can expect organizations to come up with response mechanisms that will address concerns arising from these trends. Relative to mental health, risk-stratified crisis counseling needs to be initiated as additional support to employees. In fact, it is essential that organizations provide comprehensive benefits for their employees that will center on mental health.
For each trend, a corresponding response mechanism must be put in place if we are intent on ensuring the well-being of our employees and the continuity and stability of our organization.
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The uncertain times, coupled with the COVID-19 pandemic, have spur leaders to reflect on what kind of organization, culture, and operating model they need to put in place. This is to avoid returning to previous patterns of behavior and instead, be able to embrace the next normal.
In this rapidly changing environment, people in organizations need to respond with urgency, without senior executives and traditional governance slowing things down. Waiting to decide, or even waiting for approval, is the worst thing to happen. Today, some level of coordination across teams and activities is crucial for the organization’s response to be effective.
Getting Ready for Business Resilience
Business Resilience is a management approach that integrates many disciplines into a single set of integrated processes. It is an enterprise-wide term that encompasses Crisis Management and Business Continuity.
Business Resilience enables organizations to face a wide range of risks—risks that can cause long-term harm, from a financial penalty to reputational damage. This is further emphasized with the global economy greatly affected by COVID-19, a pandemic that has overturned business and rattled the entire global business environment.
Addressing the COVID-19 pandemic
Leaders across industries cannot treat the Coronavirus pandemic like any other event. COVID-19 is unlike any other event. No single executive has the answer. In this rapidly changing environment, organizations need to respond with urgency. There are several initiatives that can be undertaken and integrated in Strategy Development. One of these initiatives is to build Team Resilience through the creation of a Network of Teams.
A Network of Teams is a cohesive and adaptable network of teams that are united by a common purpose. It is empowered to operate outside of the current hierarchy and bureaucratic structures of the organization.
The 4-phase Approach to Creating a Network of Teams
The Network of Teams needs to be created in phases for it to be effectively cohesive and adaptable.
Phase 1: Central Team with Response Teams. Phase 1 begins with a Central Team launching a few primary response teams very quickly. There are several key considerations that must be underscored in Phase 1.
Organizations must create teams that will tackle current strategic priorities and key challenges facing the organization. The model that is to be built must be flexible and capable of shifting when mistakes happen. The network must be created to learn, using the information to update actions and strategies. It must spur experimentation, innovation, and learning which is done simultaneously among many teams. There must be spontaneous learning in the face of challenges and opportunities at the individual, team, and network-wide levels.
Team leaders must be creative problem solvers with critical thinking skills, resilient, and battle-tested. Having teams that can respond to the dynamic demands of the external environment is one of the strengths of the network approach.
Phase 2: Hub and Spoke Model. The Hub and Spoke Model emerges when additional teams are launched to address rapidly evolving priorities and new challenges.
After the initial set of teams are created, leaders must shift toward ensuring that multidirectional communication takes place. There should be steady coordination with the central team hub in a daily stand-up meeting. Central Hub must make sure that support teams are using first-order problem-solving principles.
Leaders must take the role of catalyst and coach. The primary goal is to empower teams and support them at the same time, without micromanaging.
The next phase is Phase 3: Hub and Spoke with Subteams and Phase 4: the Network of Teams. The Hub and Spoke Model evolves into a Network of Teams when peripheral teams start connecting and collaborating directly with another.
With the Network of Teams, all self-organizations are turbocharged ready to face any disruptions the business has to encounter.
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There is a general belief among organizations that a large percentage of a product’s costs are locked in by design. It is assumed that little can be done once the design is set. This assumption has influenced cost management programs across diverse products’ life cycles. As a result, the focus during the design phase is Cost Reduction and Cost Containment during the manufacturing phase.
Yet, organizations that operated in a highly competitive market and demanded aggressive cost management showed that costs can be aggressively managed throughout the product life cycle. Various cost management strategies or techniques may be used to increase the program’s overall effectiveness. One of them is the Integrated Cost Management.
A Purview on Integrated Cost Management
Integrated Cost Management is every organization’s prescription for lower cost and higher profits. It is the 21st business approach to achieving Cost Management efficiency.
Integration is necessary for Strategy Development as it can promote the achievement of the company’s profit objectives. In fact, there are major benefits to Integrated Cost Management. One of which is lowering of overall costs throughout the product life cycle.
Integrated Cost Management can facilitate a steady decrease in costs all the way to discontinuance. In fact, it can result in an annual cost reduction of about 17% during manufacturing, savings that exceed 30$%, and a designed-in cost of below 70%.
Achieving this requires an understanding of the Integrated Cost Management Approach.
The Integrated Cost Management Approach
The Integrated Cost Management Approach focuses on the integration of cost management techniques which can lead to higher levels of cost reduction and superior overall performance.
The Integrated Cost Management Approach takes into consideration 5 Cost Management Strategies.
- Target Costing. This is the technique used or applied during the design stage. It is a feed-forward mechanism that enables the retooling of the design of new products to reduce costs while maintaining the desired level of product functionality and quality.
- Product-Specific Kaizen Costing. This is a technique that enables the rapid redesign of a new product during the early stages of manufacturing to correct any cost overruns. (Note: Kaizen is the general term for Continuous Improvement and often associated with Lean Management.)
- General Kaizen Costing. General Kaizen Costing is a technique that focuses on the way a product is manufactured with the assumption that the product’s design is already set. It is generally effective in addressing manufacturing processes that are used across several product generations.
- Functional Group Management. This is a technique that is used to break down the production process into autonomous groups and treat each as a profit center.
- Product Costing. Product Costing is a technique that coordinates the efforts of the other four (4) techniques by providing important, up-to-date information.
The 5 Cost Management Strategies enable organizations to better manage costs throughout the product life cycle, with just one (1) technique taking place during the product design and the rest during manufacturing.
The Key Takeaways
The application of the 5 Cost Management strategies has its key takeaways. These can be used as a guidepost in its application and a model of general concepts that organizations may consider.
One key takeaway is significant savings can still be achieved with short life cycle products and aggressive cost management focused on product design. Taking to note this key takeaway, we have to consider that as the length of the manufacturing phase of the product’s life cycle increases, the opportunity for cost reduction increases. Further, there is a need to explore the value of integrating multiple cost management during manufacturing.
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