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BehaviorInculcating productive workforce behaviors is of utmost significance in Business Transformation, successful Strategy Execution, and Performance Improvement.  However, making people embrace productive behaviors involves a concerted effort across the organization.

The realization of Transformation, Strategy, and Performance improvement goals can become a reality by developing a thorough understanding of the 4 components of Organizational Behavior.  These components act as powerful levers in shaping the desired behaviors in the workforce:

  1. Organizational Structure
  2. Roles and Responsibilities
  3. Individual Talent
  4. Organizational Enablers

These Organizational Design levers work effectively when combined and aligned.  Let’s discuss the first 2 levers in detail now.

Organizational Structure

Organizational Structure represents the management reporting lines that create the organization’s spans of control, layers, and number of resources.  Organizational Structure is a foundational driver to Organizational Design, which also has a strong positive bearing on promoting the behaviors critical to improve the overall performance of the enterprise.  This is owing to the power that a position exerts on the subordinates based on factors that are important for individuals—e.g., work, compensation, and career ladder.

The Organizational Structure indicates an enterprise’s priorities.  An organization is typically structured in accordance with its top most priority.  For instance, functional organizational structure is adopted by enterprises having functional excellence as a priority.  In present-day’s competitive markets, most organizations have to deal with several priorities at a given time, which could be conflicting.  However, this does not mean adding new structures on top of existing ones, thereby increasing unnecessary complexity.  Creating overly complex structures to manage multiple priorities results in red tape and delayed decisions.  All roles are interdependent, necessitating cooperation.  This means taking care of the needs of others—instead of just watching over personal priorities—and encouraging individual behaviors that boost the efficiency of groups to achieve collective objectives.

Roles & Responsibilities

Roles and responsibilities deal with tasks allocated to each position and individual.  Organizational Design depends heavily on redefining clearer and compelling roles and responsibilities—to avoid any duplication of efforts or creating adversaries among team members.  In a collaborative culture where cooperation is the mainstay of an organization, individuals should not only be aware of what is required of them, but also appreciate the responsibilities of their team members, the authorities their roles exercise, the skills required, and the metrics to measure success.

A methodical way to outline roles and responsibilities effectively—while minimizing complexity—that encourages cooperation and empowerment is through the “Role Chartering” technique.  The technique requires distinctly identifying all roles on the basis of 6 key factors:

  • Describing shared and individual accountabilities
  • Outlining indicators to track success
  • Specifying who has the right to decide what
  • Indicating the capabilities critical for roles
  • Assigning the leadership traits valuable for the roles
  • Charting the abilities required for accomplishing personal and team goals.

Interested in learning more about these components to Organizational Behavior?  You can download an editable PowerPoint on Organizational Behaviors here on the Flevy documents marketplace.

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4 Organizational Design (OD) Elements Essential to Inculcate the Desired Behaviors Across the Organization

automobile-car-interior-control-counter-110990Business dashboards are important tools to measure key performance indicators and data pertaining to an organization or certain procedure.  Just as a vehicle dashboard is powerful performance management tool in summarizing a performance of a multitude of processes, a business dashboard summarizes the performance or impact of a host of functions, teams, and activities; and assists in strategic planning and decision making.

Business dashboards simplify sharing and analysis of large data, and help users visualize complex performance data in simple yet visually aesthetic manner.  Dashboards aid in simplifying complex processes into smaller more manageable information pieces for the organizational leadership to focus on everyday operations.  They keep everyone on the same wavelength and prioritize display of facts based on their importance and potential impact.  The information on a well-designed dashboard is clear, presentable to enhance meaning, readily accessible, and dynamic.  A carefully-planned dashboard allows the leadership to identify and answer business challenges in real-time, develop plan of action based on insights, and inculcate innovation.

Proficient and capable dashboard designers and firms have taken the art of visualization of valuable indicators and insights through dashboards to the next level.  They have devised specific guiding principles, dos and don’ts, and time-tested development routines to accomplish this.  These guiding principles comprise 10 best practices, which can be segregated into 3 major implementation categories:

  1. Planning

  • Analyze your audience
  • Contemplate display options
  • Prompt application loading time
  1. Design

  • Exploit eye-scanning patterns
  • Restrict number of views & colors
  • Let viewers filter data
  • Ensure proper formatting 
  1. Refinement

  • Use Tooltips to reinforce story
  • Eliminate redundancy  
  • Review the dashboard carefully

Let’s discuss the first 5 best practices for now.

Analyze your audience

A careful analysis and understanding of the business dashboard’s intended audience is the first important principle to consider before commencing the development of such a dashboard.  For instance, a busy salesperson in need of quickly going through indicators, whereas senior management needing a deep-down review of quarterly sales results.  This gives the developers a thorough idea of what the audience wants from a dashboard, what data they will visualize utilizing this, and let them know the audience’s technical capabilities in terms of data analysis, theme, issue, and business understanding.

Contemplate display options

The second principle to follow in designing a business dashboard is to research your users’ device and display preferences beforehand.  Building a dashboard with desktop display options in mind when your audience prefers to use phones to view it could be a disaster.  The designers should set the size of the dashboard properly—allowing the users to view it on a range of devices, by building in automatic sizing option for the dashboard to adopt to the dimensions of the browser window.

Prompt application loading time

Your audience and viewers are busy people who hate long waits.  Therefore a stunningly designed dashboard would not get the right traction if it takes too much time to load.  The dashboard author should facilitate prompt dashboard loading by deciding which filters to add in the dashboard and which ones to exclude.  For instance, although filtering is useful in restricting the amount of data analyzed, it effects query performance.  Some filters are quite slower than others as they load all of the data for a dimension instead of just what you want to keep.  Knowing the Order of Operations is also beneficial in reducing the load times.

Exploit eye-scanning patterns

The dashboard authors should have a deep sense of the main purpose of the dashboard in mind when develop such a tool.  They need to be aware of individuals’ eye tracking patterns—typically when most people look at a screen or content, they start scanning the upper left hand corner of the screen first by intuition—and make the best use of the screen space to display the most important content at the right place.

Restrict number of views & colors

The designers often get over enthusiastic during their application designs and try to stuff the dashboard with multiple relevant views.  This is detrimental for the bigger picture.  They must include not more than 2 to 3 views per dashboard and create more dashboards in case the scope creeps beyond the 2-3 views range.  It is also crucial to ensure the content to be clearly visible to the viewer and to use colors correctly to facilitate analysis instead of cramming too many colors in the visuals, which creates a graphical overload for the viewers, slacken analysis (or may even prevent users to analyze data), and even blur the graphics.

Let viewers filter data

Allowing users to filter the data is another best practice to keep in mind while designing business dashboards.  This added interactivity encourages data assessment and permits the users to have their most important view act as a filter for the other views in the dashboard.  This helps in conducting side-by-side analysis, promotes involvement, and retains users’ interest.

Interested in learning more about the other best practices to aid in designing a robust business dashboard and knowing the most common mistakes to avoid in this process?  You can download an editable PowerPoint on Business Dashboard Design here on the Flevy documents marketplace.

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Value Chain1The Value Chain concept, first described by Dr. Michael Porter in 1985, is a series of actions that a firm—in a specific industry—accomplishes to produce a valuable product or service for the market.  The value chain notion visualizes the process view of an organization, perceiving a manufacturing or service organization as a system comprised of subsystems of inputs, transformation processes, and outputs.

Another way to define the Value Chain principle is, “transforming business inputs into outputs, thereby creating a value much better than the original cost of producing those outputs.”  These inputs, processes, and outputs entail acquiring and utilizing resources—finances, workforce, materials, equipment, buildings, and land.

An industry Value Chain includes the suppliers that provide the inputs, creation of products by a firm, distribution value chains, till the products reach the customers.  The way Value Chain activities are planned and executed determines the costs and profits.

Value chains consist of set of activities that products must undergo to add value to them.  These activities can be classified into 2 groups:

  • Primary Activities
  • Secondary Activities

Primary activities in Porter’s Value Chain are associated with the production, sale, upkeep, and support of a product or service offering, including:

  • Inbound Logistics
  • Operations
  • Outbound Logistics
  • Marketing and Sales
  • Service

 The secondary activities and processes in Porter’s Value Chain support the primary activities.  For instance:

  • Procurement
  • Human resource management
  • Technological development
  • Infrastructure

Value Chain Analysis Benefits

The analysis of a Value Chain offers a number of benefits, including:

  • Identification of bottlenecks and making rapid improvements
  • Opportunities to fine-tune based on transforming marketplace and competition
  • Bringing out the real needs of an organization
  • Cost reduction
  • Competitive differentiation
  • Increased profitability and business success
  • Increased efficiency
  • Decreased waste
  • Delivery of high-quality products at lower costs
  • Retailers can monitor each action throughout the entire process from product creation to storage and distribution to customers.

Value Chain Analysis (VCA) Approach

Businesses seeking competitive advantage often turn to Value Chain models to identify opportunities for cost savings and differentiation in the production cycle.  The Value Chain Analysis (VCA) process encompasses the following 3 steps:

  • Activity Analysis
  • Value Analysis
  • Evaluation and Planning

Activity Analysis

The first step in Value Chain Analysis necessitates identification of activities that are essential to undertake in order to deliver product or service offerings.  Key activities in this stage include:

  • Listing the critical processes necessary to serve the customers—e.g., marketing, sales, order taking, distribution, and support—visually on a flowchart for better understanding.
    • This should be done by involving the entire team to gather a rich response and to have their support on the decisions made afterwards.
  • Listing the other important non-client facing processes—e.g., hiring individuals with skills critical for the organization, motivating and developing them, or choosing and utilizing technology to gain competitive advantage.
  • This stage also entails gathering customers’ input on the organization’s product or service offerings and ways to continuously improve.

Value Analysis

The second phase of the Value Chain Analysis necessitates identifying tasks required under each primary activity that create maximum value.  This phase is characterized by:

  • Ascertaining the key actions for each specific activity identified during the first phase.
  • Thinking through the “value factors”— elements admired by the customers about the way each activity is executed.
    • For example, for the order taking process, customers value quick response to their call, courteous behavior, correct order entry, prompt response to queries, and quick resolution of their issues.
  • Citing the value factors next to each activity on the flowchart.
  • Jotting down the key actions to be done or changes to be made to under each Value Factor.

Interested in learning more about the other phases of the Value Chain Analysis Approach?  You can download an editable PowerPoint on Strategy Classics: Porter’s Value Chain here on the Flevy documents marketplace.

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Warehouse 3As the last decisive step in customer service, a warehouse ensures cost effective distribution.  Latest technological innovation has turned warehousing into a competitive advantage.  It offers untapped potential for improvement. However, warehousing is a hugely neglected part of global supply chains.  There is inconsistency in picking, packing and shipping orders, storing receipts, and managing inventory and logistics operations.

These and the following roadblocks in the way of smooth warehousing operations and Lean Management exist in every traditional warehouse:

  • Lack of focus on acquiring technology to facilitate in improving efficiency and quality.
  • Inability to utilize a structured approach to ascertain the reasons for poor performance.
  • Lack of a big picture viewpoint pertaining to processes, costs, or external supply chain partnerships.
  • Absence of a continuous improvement culture to achieve warehouse operations excellence.
  • Lack of communication, organization, and proper training of resources.

These shortcomings call for implementing Lean Warehousing methodology to unlock improvement opportunities and savings in operational, efficiency, and maintenance related costs.  First initiated by Toyota, the Lean Warehousing approach has a deep emphasis on eliminating 3 basic limitations: waste, variability, and inflexibility. The Lean Warehousing methodology focuses on the following 3 improvement areas:

  1. Cost Reduction
  2. Customer Quality
  3. Service Levels

Cost Reduction

The Lean Warehousing methodology concentrates on increasing productivity and reducing operating costs.  This is achieved by:

  • Cutting undue walking and searching
  • Preventing needless replenishment, reworks, waiting times, and double handling
  • Upgrading demand and capacity planning and manpower allocation

Customer Quality

A Lean Warehouse seeks to take the customer quality to the next level by avoiding:

  • Order deviations
  • Picking errors
  • Damaged goods

Service Levels

Improving service levels is at the center of a Lean Warehousing methodology, which involves:

  • Reducing lead times
  • Enhancing on-shelf availability

Lean Warehousing Transformation

Lean Warehousing Transformation entails streamlining operations to identify waste, know how to increase service levels, implement standardization and innovative ideas, and learn to evaluate and manage performance.  Such transformation becomes a reality in an experiential learning environment and by developing organizational capabilities in 3 critical areas:

  1. Operating System
  2. Management Infrastructure
  3. Mindset and Behaviors

Operating System

The organizational capability to configure and optimize all company physical assets and resources to create value and minimize losses.  The focus areas under operating systems include eradicating variability, encouraging flexibility, and promoting end-to-end design.

Management Infrastructure                                                                   

The organizational capability to strengthen formal structures, processes, and systems necessary to manage the operating system to achieve business goals.  The focus areas under Management Infrastructure are performance management, organizational design, capability building, and functional support process.

Mindset and Behaviors

The organizational capability to manage the way people think, feel, and act in the workplace individually as well as collectively.  The target areas to focus on here include a compelling purpose, collaborative execution, up-to-date skills, drive to improve, and committed leadership.

Model Warehouse Implementation

Lean Warehousing Transformation necessitates developing a “Model Warehouse,” which presents facilities for supply chain people to practically experience state-of-the-art warehouse operations in a modern warehouse and shop-floor environment.  The Model Warehouse incorporates newest technology and systems, and offers real-life conditions for building capabilities—i.e., optimization of storage, pick and pack, and dispatch processes.  Newest technologies—e.g., Smart Glasses and HoloLenses—available at the facility help improve the performance of pickers significantly and execute multi-order picking efficiently.

Such a setting allows people to observe and analyze the performance of an exemplary warehouse and implement this knowledge at their own premises.  Leading organizations organize a week-long rigorous knowledge sharing workshop—in an experiential learning environment of a Model Warehouse—for their people to have a hands-on experience to learn Lean Warehousing, actual picking, packing, root cause analysis, and performance management.  The participants of the Model Warehouse Knowledge Sharing Workshop are excellent candidates for “change agents” to implement Lean Transformation.

Interested in learning more about Lean Warehousing, Model Warehouse Implementation, and Lean Warehousing Transformation?  You can download an editable PowerPoint on Lean Warehousing Transformation here on the Flevy documents marketplace.

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Digital 2Gordon Moore, Intel co-founder, observed that the number of transistors in a dense integrated circuit doubles about every two years.  He projected that this rate of growth would continue for at least another decade.

His observation, termed the “Moore’s Law,” has correctly predicted the pace of innovation for several decades and guided strategic planning and research and development in the semiconductor industry.  Moore’s law is based on observation and projection of historical trends.

In 2015, Gordon Moore foresaw that the rate of progress would reach saturation.  In fact, semiconductor advancement has declined industry-wide since 2010, much lower than the pace predicted by Moore’s law.  The doubling time and semi-conductor performance has changed, but it has not impacted the nature of the law much.

Although many people predict the demise of Moore’s law, exponential growth in computing power persists with the emergence of innovative technologies.  Moore’s law is only part of the equation for effective Digital Transformation—there are other contributing factors including the role of leadership.

First Law of Digital Transformation

George Westerman—a senior lecturer at the MIT Sloan School of Management—proposes a new law, which states that, “Technology changes quickly, but organizations change much more slowly.”  The law known as the “First Law of Digital Transformation” or “George’s Law” is a pretty straightforward observation, but is often ignored by the senior leadership.  This is why Digital Transformation is considered more of a leadership—than technical—issue.

Just announcing an organization-wide Transformation program does not change the enterprise.  According to George’s Law, successful Digital Transformation hinges on the abilities of senior leadership to effectively manage the so many contrasting mindsets of its workforce, identify and take care of the idiosyncrasies associated with these mindsets, interpret their desires, and focus attention on encouraging people to change.

Above all, the leadership should focus on converting Digital Transformation from a project to a critical capability.  This can be done by shifting emphasis from making a limited investment to establishing a sustainable culture of Digital Innovation Factory that concentrates on 3 core elements:

  1. Provide People with a Clear and Compelling Vision
  2. Invest in Upgrading or Replacing Legacy Technology Infrastructure
  3. Change the Way the Organization Collaborates

Let’s now discuss the first 2 elements of the First Law of Digital Transformation.

Provide People with a Clear and Compelling Vision

Without a clear and compelling transformative vision, organizations cannot gather people to support the change agenda.  People can be either change resisters, bystanders, or change enablers.  However, most people typically tend to like maintaining the status quo, ignore change, or choose to openly or covertly engage in a battle against it.

For the employees to embrace change, leadership needs to make them understand what’s in it for them during the transition and the future organizational state.  This necessitates the leaders to develop and share a compelling vision to help the people understand the rationale for change, make people visualize the positive outcomes they can achieve through Transformation, and what they can do to enable change.  A compelling vision even urges the people to recommend methods to turn the vision into reality.

Invest in Upgrading or Replacing Legacy Technology Infrastructure

Problems and shortcomings in the legacy platforms is an important area to focus on during Digital Transformation.  The legacy technology infrastructure, outdated systems, unorganized processes, and messy data are the main reasons for organizational lethargy.  These issues hinder the availability of a unified view of the customer, implementing data analytics, and add to significant costs in the way of executing Digital Transformation.

Successful Digital Innovation necessitates the organizations to invest in streamlining the legacy systems and setting up new technology platforms that are able to enable digital and link the legacy systems.  Fixing legacy platforms engenders leaner and faster business processes and helps in maintaining a steady momentum of Innovation.

Interested in learning more about the First Law of Digital Transformation?  You can download an editable PowerPoint on First Law of Digital Transformation here on the Flevy documents marketplace.

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competition-Ice HockeyMichael Eugene Porter—a Professor at the Institute for Strategy and Competitiveness, Harvard Business School—is widely acclaimed for his unmatched prowess in competitive strategy, strategic planning, global economic development, and the application of competitive principles and strategic approaches.  Renowned as the father of modern day strategy, Dr. Porter is an author of 18 books and a number of articles.

His scholarly writings on management and competitiveness are ranked as the most influential pieces of work till date.  Dr. Michael Porter is widely known for his Porter’s Five Forces framework, which is a useful tool to evaluate the competitiveness of an organization with respect to its rivals.  Competition is part and parcel of every industry, and for the existence of an enterprise it is important to know its rivals and how their product / service offerings and marketing strategies affect the market.  It is a common foundational framework used in Strategy Development.

The Five Forces framework emphasizes on 5 critical elements that determine the attractiveness of a business against its rivals in the industry:

  1. Threat of New Entrants
  2. Supplier Power
  3. Buyer Power
  4. Threat of Substitution
  5. Competitive Rivalry

Threat of New Entrants

This element examines the simplicity or complexity of an industry for the competitors to jump in.  High-return industries are more appealing to new entrants.  A market with easy access for new entrants poses greater risk—of market share diminishing—for established businesses.  New entrants in an industry are able to dent the profitability of established players unless the incumbents retaliate strongly and make the entry of new firms challenging.

A serious threat to entry also relies on the existing barriers in the industry.  If the market entry barriers are high and there is an expected sharp response from the entrenched competitors, the newcomers will think twice before entering the market.  Another important factor for new entrants is the requirement for large capital for branding, advertising and creating product demand, which limits their entry in a niche market.  Aspiring market entrants should thoroughly analyze and understand all the critical barriers to entry before entering an industry—such as economies of scale, product differentiation, capital investment, access to distribution channels, and government policies and regulations.

There 6 prevalent types of barriers to entry:

  1. Economics of scale
  2. Product differentiation
  3. Capital requirements
  4. Cost disadvantages (independent of size)
  5. Access to distribution channels
  6. Government / regulatory policy

Supplier Power

Suppliers are a powerful force that influences the competitiveness of an industry.  They create immense pressure on market players by slashing the quality of goods and by increasing prices, thereby squeezing the margins of manufacturers.  For instance, by jacking up the price of soft drink concentrate, suppliers erode profitability of bottling companies.  The bottlers, in turn, don’t have much leverage to raise their own prices because of intense competition from fruit drinks, powdered mixes, and other beverages.

The power of a supplier group amplifies if it’s dominated by a few firm, has differentiated and unique products; and has built up switching costs that buyers face when changing suppliers, for making investments in specialized equipment, or in learning how to operate a supplier’s equipment.  The supplier group also thrives when there isn’t much competition for sale to the industry, or when the industry is not its major customer, as this saves the supplier from selling at a bargain and investing in R&D and lobbying for the industry.

Buyer Power

Buyer or customer groups also impact the competitiveness of an industry landscape by exercising their power to bring the prices down, insist on higher quality, or demand more service.  A buyer group is powerful if it buys in large volumes in an industry characterized by heavy fixed costs and buys undifferentiated or standard products.  Buyers have the ability to put one supplier against another and find alternative suppliers.

The power of a buyer group increases if it’s a low profit business—providing it the reason to be price sensitive and insist on lower purchasing costs—, if the industry’s product is insignificant to the quality of the buyers’ products or services, or if the product that suppliers provide does not save much for the buyer.  Buyers can also use the threat of self-manufacturing as a bargaining lever against the suppliers.

Threat of Substitution

Substitute product or service offerings restrict the capacity of an industry by placing an upper limit on prices it can charge.  The industry’s earnings and profits will continue to suffer lest it can enhance the quality of products or create differentiation through, for instance, aggressive marketing.

If substitute products offer more competitive price-performance trade-off, then the industry’s profitability gets limited or goes down.  For instance, the erosion of profits for the sugar industry due to substitution of sugar with commercialized high-fructose corn syrup.

Internal Rivalry

Internal Rivalry, existing at the center of Porter’s Five Forces framework, represents the competition between existing players often leads to rivals using manipulative tactics like price competition, new product launch, and advertising wars.  Companies can use strategic shifts to improve their competitive position—e.g., raising buyers’ switching costs, increasing differentiation, and focusing on low fixed costs areas.

Interested in learning more about the other critical elements of the Porter’s Five Forces and their role in in determining the state of competition and profit potential of an industry?  You can download an editable PowerPoint on Porter’s Five Forces here on the Flevy documents marketplace.

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mind - guy

Technology, Internet, growth, and globalization have metamorphosed the way we work, play, and live.  They have even changed the fundamental laws of economics.  We are living in an economy that is quite different from the old manufacturing-based economy of the 1980s.  Fewer people are now employed in the manufacturing sector, who are anxious about the prospects of being replaced by machines soon.

The “New Economy” is a term economists started using in the 1990s to describe new, high-tech, high-growth industries that have been the driving force of economic growth since that period.  The new economy is also heralded as the Digital Economy, the Knowledge Economy, the Data Economy, or the eCommerce Economy.  Top technology enterprises—including Google, Facebook and Apple—have outpaced traditional firms around the globe by taking advantage of the new economy.

Leadership Development in this age of Digital Economy is a key challenge for most organizations.  More and more organizations, today, are revisiting what they are about and the meaning of leadership for them.  It’s not about one person or even those residing at the top anymore.

MIT Sloan Management Review conducted a study of 4,000 executives from 120 geographies around the world to understand what defines a great leader in this changing world.  The study revealed striking results with most executives believed that their leaders lacked the mindset needed to produce the strategic changes essential for leading in the Digital Economy.  Enterprise-level transformation is what majority of leaders feared to embark on.

Mindsets are established set of attitudes held by someone that shape how a person interprets and responds to experiences.  A mindset arises out of a person’s view of the world or philosophy of life.  To know about the Digital Economy leadership mindsets (i.e. leadership mindsets critical to survive in this new economy), the MIT Sloan Management Review’s global study identifies 4 critical mindsets—based on in-depth interviews from executives worldwide and detailed analysis of data:

  1. The Producer
  2. The Investor
  3. The Connector
  4. The Explorer

Let’s define these first 2 leadership mindsets.

The Producer

Leaders with a producer mindset evaluate each of their customer touch points painstakingly.  These leaders exhibit a passion for producing customer value.  Producers concentrate on analytics, digital know-how, implementation, results, and customer satisfaction.  They focus on analytics to fast-track creativity.  The resulting innovation helps them tackle shifting customer preferences and enhance customer experiences.  The Producers strive to create all the customer journeys enjoyable.

The Investor

The leaders with an investor mindset make people appreciate the higher purpose they serve by their work.  They constantly struggle to instill motivation and teamwork among their teams in order to achieve their overall organizational goals.  The leaders with an investor mindset are concerned about the communities that surround them.  They look after the well-being and constant advancement of their employees, and devote their efforts to improve value for their customers.

Fostering these types of mindsets is critical to building the right Organizational Culture for an organization to be successful in the Digital Economy.

Interested in learning more about the leadership mindsets required to win in the new economy?  You can download an editable PowerPoint on Leadership Mindsets Critical to Succeed in the Digital Economy here on the Flevy documents marketplace.

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This image has an empty alt attribute; its file name is Performance-analytics-1024x678.jpgTechnological innovation and intensifying competition are forcing leaders to rethink how they use Key Performance Indicators (KPIs) to manage and direct organizations.  Digitization has reinforced the importance of Key Performance Indicators not only in enhancing employee performance but driving the overall organizational productivity.

The role of KPIs is becoming more dynamic.  KPIs are getting demonstrably flexible, smarter, and valuable in achieving strategic advantage.  Leading technology-driven organizations—including Amazon, Airbnb, and Uber—rely on metrics considerably and utilize KPIs to steer their strategy and evaluate success.  They perceive KPIs quite differently than traditional-focused organizations, and employ them as an input for automation, and to guide, regulate, and improve their machine learning tools.

To make the most out of these dynamic and strategic KPIs of this Digital Age, leaders need to be more insightful and knowledgeable.  They should be able to thoroughly determine which KPIs to analyze, how to measure them, and how to effectively improve them.  Understanding the value of selected KPIs and their optimization is key to aligning strategies; making the right decision to invest in data, analytics, and automation capabilities; and create a link between people and machines.

KPI Virtuous Cycle

The relationships and dependencies that clarify, educate, and enhance KPI investment are demonstrated by “KPI Virtuous Cycle.”  By digitally linking KPIs, data, and decision-making into virtuous cycles, companies can align their immediate situational requirements with long-term strategic planning.  The KPI Virtuous Cycle has 3 key components, and it demands active cross-functional collaboration:

  1. Data Governance
  2. KPIs
  3. Decision Rights

The way these 3 components impact—and support each other—keeps changing.  Organizations aspiring to become digital-savvy should embrace, value, and relentlessly invest in the KPI Virtuous Cycle.

Data Governance

The first component of the KPI Virtuous Cycle is about employing authority and control (planning, monitoring, and enforcement) through a set of practices and processes to manage organizational data assets.  Leading digital organizations consider data as a strategic resource, a valuable tool for measurement and accountability, and a mechanism to facilitate meeting strategic KPIs.  Data Governance frameworks are guided by strategic KPIs.  Organizations should know what data sets would be ideal to predict and rank—for instance, customers’ lifetime value and their propensity to leave—to prioritize preemptive and preventive action.  Data and Analytics serve as a component of Data Governance.

Strategic KPIs

Strategic KPIs shape and govern enterprise Data Governance models.  These KPIs include financial, customer, supplier, channel, and partner performance parameters.  For instance, Data Governance initiatives in customer-centric organizations are prioritized to facilitate in realizing customer-focused KPIs—e.g., Net Promoter Score (NPS) and Customer Lifetime Value (CLV).  Enterprise Data Governance frameworks are strongly influenced and informed by strategic KPIs.

Decision Rights

Decision Rights ascertain the decision-making authority required to drive the business and strategic alignment.  Making decisions in such a way that it boosts organizational performance involves identifying the individuals explicitly involved in making decisions, charting an outline on how decisions will be made, reinforcing with appropriate processes and tools, and defining various decision rights scenarios to facilitate in automation.  It is, however, quite tricky to determine and assign decision rights when an enterprise is aspiring to empower its people and making machines function better.

Imperatives for Creating Dynamic and Strategic KPIs

For the KPIs to be strategically defined and become truly dynamic, the leadership needs to provide the required support by getting thorough data sets compiled and meaningful analytics performed.  At the same time, there is a need to:

  • Decide whether the decision rights needs to be assigned to individuals (rather than machines or vice versa.
  • Enhance the capabilities of people and machines.
  • Apply decision rights to generate data to identify and gauge productivity.
  • Identify the delays and bottlenecks between KPIs, data, and decisions.
  • Verify the diligence in the way KPIs, data, and decisions are mapped and monitored.

Interested in learning more about the components of KPI Virtuous Cycle, its applications, and Strategic KPIs?  You can download an editable PowerPoint on Strategic Key Performance Indicators (KPIs) here on the Flevy documents marketplace.

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Level-YardstickCreating a culture that measures productivity objectively is a sensitive matter.  Key Performance Indicators (KPIs) are being employed extensively by organizations across the globe to monitor and track performance.  KPIs provide valuable metadata to improve top-down and bottom-up vertical efficiency.

Analytics-driven firms are aware that KPIs are much more than a tool to evaluate performance.  Utilizing KPIs, they gather valuable insights, create enterprise-wide accountability, and develop a goal-oriented culture.

However, most executives typically fall short of utilizing KPIs to their full potential.  They have to realize that the effectiveness of KPIs depends on two distinct yet important elements: KPI transparency for the entire workforce—making the core metrics available across the board at all levels—and alignment of KPIs—determining the KPIs most relevant to the people and organizational purpose, and taking action based on the results of performance monitoring.  Leading organizations share KPIs with all stakeholders and use algorithms to gauge the contribution of KPIs to critical functions, e.g., Marketing and Customer Experience.

To create an objective-driven culture, the senior leadership should work on developing capabilities to outline key performance and putting in place accurate metrics to measure it.  The selection and prioritization of most relevant indicators is something that the leadership needs to carefully think about.

When defining KPIs, there are 5 KPI focus areas.  Each focus area is unique and critical, but collectively they have a profound impact on each other and on the organizations that are aiming to undergo Digital Transformation.  Leading Data and Analytics-driven organizations devise KPIs that cover all 5 of these focus areas:

  1. Enterprise KPIs
  2. Customer KPIs
  3. Workplace Analytics
  4. Partner and Supplier KPIs
  5. Quantified-self KPIs

Let’s discuss the first 3 focus areas in detail, for now.

Enterprise KPIs

The Enterprise KPIs benchmark the effectiveness of core functions of an organization.  These indicators are important to determine the accountability of the leadership and workforce, and are vital for strategic as well as routine decision-making and investment.  Examples of these indicators include Risk-Adjusted Return On Capital (RAROC) and Net Promoter Score (NPS).

Customer KPIs

The Customer KPIs facilitate in measuring the knowledge and impact of all leads, prospects, and customers. These metrics are used to calculate the actual and likely financial contributions of business prospects and clients.  The Customer KPIs assist in analyzing and ranking the relationships that organizations aspire to develop with the customers and better understanding each segment and sales funnel the customers belong.  Customer lifetime value is an example of these indicators.

Workplace Analytics

The Workplace Analytics pertain to quantifying the efficiency and commitment level of organizational people.  These analytics are used to isolate leadership tools and methodologies helpful in enhancing customer focus, and capture and quantify process outcomes and outputs feeding organizational KPIs.  These metrics are valuable in measuring collaboration across the organization, gauging the proficiency of managers in motivating their teams, and highlighting the elements that demoralize people.

Interested in learning more about the 5 KPI areas of focus?  You can download an editable PowerPoint on Key Performance Indicators (KPIs): 5 Areas of Focus here on the Flevy documents marketplace.

Are you a Management Consultant?

You can download this and hundreds of other consulting frameworks and consulting training guides from the FlevyPro library.

Security Door LockIn the age of rapid technological progress, where Digital Transformation has become pervasive, business applications are getting increasingly complex and interconnected.  The advancement in technology has also helped attackers get more aggressive and inflict more damage to IT systems and applications.  Application security tools and techniques are evolving too, yet most organizations still fall prey to vulnerabilities.  Cybersecurity has become a bigger threat than ever before.

The current application security methodologies mainly count on detecting weaknesses and correcting them.  Most organizations, primarily, rely on utilizing penetration testing or automated tools, at the most.  They ignore to concentrate on establishing strong defenses against threats, merely do patch work, and leave the weaknesses unguarded.  A small fraction implement threat modeling, security architecture, secure coding techniques, and security testing—but even they are typically unsure of how these approaches link with their strategic business objectives.

A few weaknesses constitute majority of break-ins–e.g., SQL injections and buffer overflows.  Major security threats and application vulnerabilities include compromised credentials, failure to patch promptly, SQL injections, and cross-site scripting.  A large number of security threats can be neutralized just by taking care of security hygiene.

Secure Software Development

State-of-the-art technology and best practices available today offer effective yet economical methods to prevent security breaches and threats.  These tools and practices work well without affecting the pace of delivery or straining the users unnecessarily.

Secure software development not only warrants analyzing the technology but also looking at the entire organization that creates the software—people, processes, tools, and culture.  Secure software development culture inspires security by promoting and improving communication, collaboration, and competition on security topics and rapidly evolving the competence to create available, survivable, defensible, secure, and resilient software.

Rugged Software and a Culture of Security

Rugged software, or Rugged DevOps, promotes developing secure and resilient software by embedding this practice into the culture of an organization.  A Rugged culture of security is more than just secure—secure is a state of affairs at a specific time whereas Rugged means staying ahead of threats over time.  The rugged code aligns with the organizational objectives and can cope with any challenges.  Rugged enterprises constantly tweak their code and their internal organization—including governance, architecture, infrastructure, and operations—to stay ahead of attacks.  All applications developed by “Rugged” organizations are well-secured against threats, are able to self-evaluate and distinguish ongoing attacks, report security statuses, and take action aptly.

Rugged software is a consequence of the efforts to rationalize and fortify security.  This is achieved by communicating the lessons learnt from experimentation, setting up stringent lines of defense, and adopting and sharing rigid safety procedures across the board.  Adopting Rugged software development practices across the enterprise help execute more applications promptly, improve security, and achieve cost savings across the software development life-cycle.  Rugged software development is cost efficient because of fewer labor and time requisites during the requirements, design, execution, testing, iteration, and training phases of the development life-cycle.

The following 10 guiding principles apply to all organizations aiming to develop a Rugged culture of security:

  1. Perpetual Attacks Anticipation
  2. Staying Informed
  3. Security Hygiene
  4. Continuous Improvement
  5. Zero-defect Approach
  6. Reusable Tools
  7. One Team
  8. Comprehensive Testing
  9. Threat Modeling
  10. Peer Reviews

Let’s discuss the first 5 principles for now.

Perpetual Attacks Anticipation

A Rugged software development organization anticipates nonstop vulnerabilities and attacks—deliberate or accidental.

Staying Informed

Rugged organizations appreciate staying informed about security issues and potential threats, seek recommendations from security specialists, and identify and update security policies and rules.

Security Hygiene

Rugged organizations take good care of their security hygiene by limiting the sharing of user accounts, carefully guarding the passwords and sensitive personal information.  They employ secure software practices.

Continuous Improvement

Continuous Improvement is the management principle foundational to Lean Management that should be embraced by all areas of an organization.  In case sensitive information is left lying on somebody’s desk at night, Rugged organizations ensure that this does not recur in future and gather feedback from the people who happen to notice it.

Zero-defect Approach

Rugged organizations leave no room to tolerate any known weaknesses.  An issue is resolved as soon as it is detected.

Interested in learning more about the guiding principles to develop a Rugged culture of security?  You can download an editable PowerPoint on the Culture of Security here on the Flevy documents marketplace.

Are you a Management Consultant?

You can download this and hundreds of other consulting frameworks and consulting training guides from the FlevyPro library.