Disruptive technologies are helping companies automate work. Robotic Process Automation and Artificial Intelligence are taking up jobs which were in the past earmarked only for smart humans. Driver-less cars, automated check-in kiosks at airports, and autopilots steering the aircrafts are just few instances of how automation is transforming our world.
However, automation presents unique challenges that organizations need to identify and mitigate appropriately. These include costs associated with job losses; confidentiality of data; quality and safety risks stemming from automated processes; and regulatory implications.
Other critical factors to consider before investing in automation are adoption, pace of development of automation, and readiness of organizational leadership in redefining processes and roles to support automation.
The key question is how automation will impact our work in future. Should we anticipate benefits — e.g., efficiency gains and quality of life improvements — or dread further disruption of established business and job cuts?
Research by McKinsey suggests that Robotic Process Automation will impact 4 workplace areas the most:
- Workplace Activities
- (Re)definition of Work
- High-wage Jobs
- Creativity and Meaning
Now, let’s discuss the first two key areas in further detail.
Research findings (based on the US labor market data) reveal that the future does not likely hold complete automation of individual jobs, but rather automation of certain activities within specific occupations. The assumption that only routine, codifiable activities can be easily automated — and those that necessitate implicit knowledge will be unaffected — is misleading. Automation has already reached (or surpassed) the median level of human performance in some cases.
Capital or hardware-intensive industries — under stringent regulatory control — are slow and expensive to automate and need more time to reap return on investments. Whereas, the sectors where automation is mostly software based (e.g., financial services) may create value at a far lower cost and within rather shorter span of time.
(Re)definition of Work
The current level of automation can potentially transform a number of occupations to a certain level, but it requires redefinition of job roles and activities. Research reveals that only about 5% of occupations can be completely automated with the current level of technology.
In spite of this, automation can boost human productivity even in the highest paid occupations by taking care of repetitive daily tasks — e.g., analyzing paperwork, reports, data and evaluating applications based on criteria — and freeing up time for people to focus more on high value work that involves human emotions and creativity.
For instance, Automation and Machine Learning can automate diagnosis of common ailments, thereby enabling the doctors to concentrate more on acute or complicated problems. Likewise, lawyers can employ data mining tools to sift through piles of documentation to isolate the most relevant cases for their review.
Interested in learning more about the other key areas most impacted by Robotic Process Automation? You can download an editable PowerPoint on Impact of Robotic Process Automation here on the Flevy documents marketplace.
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Digital-savvy startups are disrupting markets and threatening conventional businesses. They are doing this by utilizing technology to offer new products and services and providing tailored yet uncomplicated experiences for their customers.
Likewise, large traditionally-run firms will have to keep evolving their Customer Experience approaches to secure additional avenues of revenue and to stay competitive. To accomplish this, they will need to develop capabilities to effectively utilize insights on customer preferences and design offerings as per the customers’ preferences.
Many organizations, today, are undertaking Digital Transformation programs to improve their Customer Experiences. However, a majority of these Digital Transformation initiatives fall short of securing their maximum value potential due to focusing only on improving specific touchpoints instead of confronting the entire customer journeys—spanning across several departments and channels.
To make their Customer Experience sustainable and to become Customer-centric Organizations need to clearly transform their ways of doing business, operations, and employee behaviors. It is critical to improve these fundamental support processes before embarking on initiating any Customer Experience optimization initiatives.
Customer Experience optimization facilitates in gaining more satisfied/paying customers, additional value, and better retention rates. Research reveals that the companies that have higher Customer Satisfaction levels can achieve four times growth in value compare to those that rank lower in Customer Satisfaction.
Customer Experience (CX) Approach to Value Creation
The following pragmatic 5-phase approach to Customer Experience Management and Value Creation is of great benefit to organizations aspiring to enrich their Customer Experience, achieve clear-cut differentiation, and capture the most potential value:
- Understand What Customers Value
- Simplify and Streamline Offerings
- Link Customer Value to Operational Drivers
- Focus on Most Important Customer Journeys
- Adopt Continuous Improvement (CI) Thinking
Let’s now delve deeper into the first 3 phases of the approach.
Understand What Customers Value
Ascertaining the key drivers of Customer Satisfaction is the foremost step in improving Customer Experience. A flawed approach—that many companies still employ—at the onset of a Customer Experience optimization initiative is to reduce costs associated with internal processes and exploring customer pain points. This doesn’t assist in maximizing Value Creation.
Customer-centric organizations, on the other hand, devote their time in developing a clear understanding of what really matters to their customers. This helps in deciding where to focus, rationalizing their processes, and creating new experiences for the customers to generate additional value.
Great Customer Experience necessitates much more than just satisfactory interactions. Customer Satisfaction should be mapped along the entire customer journey—spanning multiple functions and channels—as customers use various channels to communicate with companies before making a transaction.
Simplify and Streamline Offerings
Alongside rationalizing the processes, it is equally important to carry out a detailed analysis of the brands, offerings, and price structures is essential to tap value from Customer Experience. After all, even the most pleasing Customer Experience cannot offset an unpredictable or exorbitantly expensive product.
Once these fundamentals are in order, organizations should investigate which interactions and Customer Journeys carry the most significance in a Customer Experience; evaluate how the organization is rated in each journey; identify and focus on the operations that need to be overhauled to improve the overall Customer Experience.
Link Customer Value to Operational Drivers
Technology and customer input provides the stimulus to streamline offerings and Customer Experience. However, the real value comes from linking the Customer Experience to core operational processes. Seeing journeys from the customer perspective aids in focusing on what they need and linking internal processes, structures, and KPIs to customer facilitation.
This necessitates deeper insights on elements that are of most value to the customer across a journey, pinpointing drivers of business costs and revenues, and—most importantly—inculcating the right mindsets across the organization. This detailed evaluation of customer journeys facilitates in determining operational improvements that bear the most positive effect on Customer Experience.
Interested in learning more about the other phases of the approach to managing Customer Experience? You can download an editable PowerPoint on the Customer Experience (CX) Approach to Create Value here on the Flevy documents marketplace.
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Organizations need to persistently improve the way they do business to stay ahead of the curve. New ideas trigger organizational improvement and build the foundation of a Learning Organization.
Scholars have defined a Learning Organization in many different ways. Some suggest it as an organization skilled at creating, acquiring, and transferring knowledge, and at modifying its behavior to reflect new knowledge and insights. Marlene Fiol and Marjorie A. Lyles describe organizational learning as “the process of improving actions through better knowledge and understanding.” Barbara Levitt and James G. March define organizations as “Learning Organizations when they encode inferences from history into routines that guide behavior. Chris Argyris categorizes organizational learning as “a process of detecting and correcting error.” According to Peter Senge, “a Learning Organization is a group of people working together collectively to enhance their capacities to create results they care about.”
Being a Learning Organization offers several advantages. A perpetual influx of insights and new experience keeps the organization dynamic and ready for transformation; assists in better management of investments, improves efficiency; and helps in developing cost leadership and differentiation strategies. Learning Organizations tend to be more innovative by encouraging people to learn, develop, and by generating a more innovative environment. Shared learning builds the corporate image of the organization and increases the pace of change within the organization. Learning Organizations provide their people the ability to think insightfully about complex problems, take coordinated action, improve decision making, and instill a sense of community in them.
Despite efforts to improve continuously and creating new knowledge, organizations cannot simply become Learning Organizations. They employ various approaches but what they actually need is to become proficient in translating new knowledge into new ways of doing things, and actively managing the learning process so that it gets ingrained into the organizational culture.
Becoming a Learning Organization necessitates mastering 5 key activities. These 5 activities form the building blocks of a Learning Organization and should be integrated into the organizational core to transform your company into a Learning Organization.
- Systematic Problem Solving
- Learning from Experience
- Learning from Others
- Knowledge Transfer
Applying these practices to some degree or in isolated cases isn’t enough. To ensure continued success, these practices should be complemented by distinct mindsets, support systems, and processes.
Let’s now discuss the first 3 building blocks in detail.
1. Systematic Problem Solving
Systematic problem solving is based on scientific methods for diagnosing problems, e.g., the Plan, Do, Check, Act (PDCA) cycle or “hypothesis-generating, hypothesis-testing.” The technique employs fact-based management, relying on concrete data instead of assumptions for making decisions and utilizes statistical tools—such as Pareto charts, histograms, correlation, and cause and effect diagrams—to consolidate data and draw conclusions.
For a real Learning Organization, people need to become more disciplined, pay more attention to detail, assess underlying causes, and analyze data before reaching decisions.
Experimentation involves systematic exploration and testing of new knowledge. Experimentation has 2 fundamental configurations; both forms transfer knowledge and yield new insights, capabilities, tools, techniques, and processes:
- Ongoing programs
- Demonstration Projects
Ongoing programs entails a chain of small experiments aimed at yielding incremental gains in knowledge. These programs maintain a steady flow of new ideas by sending workforce on sabbaticals at different places to learn new work practices and tools from industry and academia, and applying that knowledge to their daily routines. Such programs foster risk taking and a feeling of “benefits of experimentation far outweigh the costs.”
Demonstration projects are one of a kind, large-scale initiatives that include holistic system-wide transformation targeted at a single site. These projects are executed with a goal of developing new organizational capabilities using a “clean slate” approach.
Self-managing, multi-departmental teams; high level of employee autonomy; considerable “learning by doing;” course corrections; implicit policy guidelines, precedents, and decision rules are the key characteristics of demonstration projects.
3. Learning from Experience
Learning Organizations gain valuable knowledge from their past experiences, by doing an exhaustive and systematic appraisal of past successes and failures. However, not too many managers pay attention to past experiences or reflect on those, eventually losing valuable insights. To inculcate a culture of learning, lessons learned should be recorded and made readily accessible to all employees.
A handful of companies have laid out processes for their managers to contemplate on their past actions and incorporate those in their learning. At the core of this approach lies the belief that distinguishes productive failure from unproductive success. Productive failure delivers knowledge and understanding whereas unproductive success goes unnoticed where nobody knows what went well and why. Learning from experience approach isn’t that expensive—case studies and project reviews can be compiled with little cost.
Interested in learning more about the building blocks of a Learning Organization? You can download an editable PowerPoint on Learning Organization: 5 Building Blocks here on the Flevy documents marketplace.
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Corporate Social Responsibility (CSR) is an organization’s commitment to produce an overall positive impact on society. CSR encompasses sustainability, social and economic impact, and business ethics. It makes a company socially accountable of its operations, stakeholders, and the public. Businesses undertake CSR programs to benefit society while boosting their own brands.
CSR affects every aspect of business operations and functions. Encouraging equal opportunities; partnering with organizations practicing ethical business methods; putting part of earnings back into environment, health, and safety initiatives; and taking care of communities and charity are all examples of CSR initiatives.
Communities, customers, employees, and media consider CSR vital and gauge companies based on these initiatives. Executives of leading companies consider CSR as an opportunity to deal with critical issues innovatively, reinforce their organizations, and serve the society simultaneously.
The Need for CSR Implementation
Organizations need to come up with a robust approach to unlock potential benefits and value from CSR for them and for the society. The organizations practicing Corporate Social Responsibility do that with one of the following 4 objectives in mind:
- Philanthropy: These initiatives (e.g. corporate donations) make the companies and society feel good, but produce low value for the business—questionable repute building benefits to companies, but offer much to society.
- Propaganda: These CSR initiatives are predominantly geared towards promoting a company’s standing, but offer little real value for the society. This form of CSR is more of advertisement and becomes risky if there are any gaps between the firm’s commitments and actions.
- Pet Projects: Some companies engage in CSR initiatives that support the personal interests of senior executives. These initiatives are much touted about, but are actually of little value to the business or community.
- Smart Partnering: These initiatives concentrate on common themes between the business and the community. Organizations, in this case, create innovative solutions by drawing synergies from partnerships to tackle major issues concerning all stakeholders.
Among these objectives, Smart Partnering offers maximum opportunities for shared value creation and finding solutions to crucial business and social challenges. Whereas for the society, smart partnering helps create more employment opportunities, improve livelihoods, and enhance the quality of life.
Guiding Principles for CSR Initiative Selection
An effective way for the companies to maximize benefits of their CSR efforts is to map the current initiatives; identify the objectives, benefits, and resources responsible for realizing value from those initiatives; and define the projects valuable for addressing key strategic challenges.
Pet projects, philanthropy, or propaganda are easy to plan and execute. However, the real issue is to implement CSR opportunities that bring value for the business as well as society (smart partnering). This goal can be achieved by applying these 3 guiding principles:
- Focus on the right segments
Real opportunities lie in the segments where the business collaborates with and influences the society the most. These segments help the business interpret mutual dependencies and uncover maximum mutual benefit.
- Recognize challenges and benefits
After finalizing the opportunity segments, it is imperative to appreciate the potential for mutual benefit. The key is to find the right balance between the business and community and recognize the challenges that both sides face.
- Find the right partners
Collaboration with right partners—who benefit from business endeavors and capabilities of each other—creates a win–win situation for both sides and motivates them to achieve mutual value. Sustainable collaboration demands long-term alliances and deeper insights on the strengths of each other.
These principles are helpful in selecting appropriate CSR opportunities, identifying societal and business needs to be addressed, and the required resources and capabilities.
The Case for CSR Benefits
The goal of unlocking mutual benefits—associated with CSR (specifically Smart Partnering)—is critical for long-term success of the program. As required by any other strategic initiative, the mutual value creation objective needs to be carefully assessed based on the true value-creation potential, prioritized, designed, staffed, and audited.
The next step is to outline the list of potential benefits for the business and community. A well-defined business case and a compelling story immensely helps involve and gain commitment from the senior leadership, investors, and employees.
Interested in learning more about how to tap CSR opportunities effectively? You can download an editable PowerPoint on Corporate Social Responsibility (CSR) Opportunities here on the Flevy documents marketplace.
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Takeovers can turnaround companies in a short period of time, but there is a significant degree of risk to be anticipated and mitigated prior to undertaking such transactions. Lack of careful deliberation of the potential risks, insufficient planning, weak execution, and lack of focus on Post-merger Integration are the major reasons why many Merger & Acquisition deals fail to achieve their desired goals.
The course of an M&A transaction has to be set at an early stage, way before the actual deal closure. The period prior to the deal approval by the regulatory authorities and while due diligence is being done is most critical, and should be utilized by the leadership to clearly define the goals of integration, the potential risks, and a layout for the execution of the actual integration process. It is the right time to perform a structured evaluation of 3 core pre-merger considerations associated with such deals, i.e.:
- Strategic Objectives
- Organization & Culture
- Takeover Approach
Understanding these PMI Pre-merger considerations helps the stakeholders ascertain the unique challenges and constraints related to M&A transactions and make informed decisions. These considerations assist in developing a systematic approach to undertaking a Post-merger Integration (PMI) — which is devoid of any “gut decisions,” and ensures realization of synergies and value. These considerations set the direction and pace of the post-merger integration process.
Now, let’s discuss the 3 core considerations in detail.
Organizations undertake Mergers and Acquisitions as a way to accelerate their growth rather than growing organically. The foremost core consideration associated with an M&A transaction is the strategic objectives that the organizational leadership wants to achieve out of it.
M&A deals take place to fulfill one or more of these 5 strategic objectives:
- Reinforcement of a segment
- Extension in new geographies
- Expansion of product range
- Acquisition of new capabilities
- Venturing into a new domain
The PMI approach needs to be tailored in accordance with the desired strategic objectives of the deal.
Organization & Culture
The senior management should be mindful of the significance of organizational and cultural differences in the two organizations that often become barriers to M&A deals. Small companies, typically, have an entrepreneurial outlook and culture where there aren’t any formal structure and the owner controls (and relays) all the information and decision making. Whereas, large corporations typically have formal structures and well-defined procedures.
A takeover of a small firm by a large entity is bound to stir criticism and disagreement. M&A process often faces long delays between the offer, deal signing, and closing — due to antitrust reviews or management’s indecisiveness — triggering suspicion among people. This should be mitigated during the PMI process by orienting the people of the small firm with the new culture and giving them time to transition effectively.
For M&A deals to be effective, leadership needs to carefully evaluate the behavioral elements of the organizational culture and contemplate the overriding principles guiding a company.
Integrating the operations of two companies proves to be a much more difficult task in practice than it seems theoretically. Organizations have the option of selecting the takeover approach most suitable for them from the following 4 methodologies — based on their organizational structures, people, management, processes, and culture:
- Direct Hit
- Deferred Decisions
- Quick and Unsympathetic Disposal
Interesting in learning more about the takeover approach and the pre-merger considerations in detail? You can download an editable PowerPoint on Post-merger Integration: Pre-merger Considerations here on the Flevy documents marketplace.
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Stiff market competition, expansion into new territories, product portfolio extension, and gaining new capabilities are the prime reasons why more and more organizations are seriously looking into the prospects of—and carrying out—Mergers and Acquisitions. However, only a few M&As achieve their desired revenue objectives.
Revenue Synergies are a decisive factor in closing such deals. However, identifying precisely where these Revenue Synergies lie and then capturing them isn’t as easy as it sounds.
A McKinsey study comprising of 200 M&A executives from 10 different sectors revealed that all the respective organizations of the respondents remained short of achieving their Revenue Synergy targets (~23% short of the target on average). Securing Revenue Synergies is a long-term game. The companies that succeed in securing Revenue Synergies achieve the target in or around 5 years.
Leaders aspiring to achieve Revenue Synergies should first clarify the objectives from and the schedule of the revenue synergies, lay out the organizational priorities and go-to-market strategies, remove obstacles from realizing value, and gain across the board readiness and commitment for the initiative. Organizations that are most successful in securing revenue synergies pay close attention to these 7 guiding principles during the Post-merger Integration process:
- Source of Synergies
- Leadership Ownership
- Customer Insight-driven Opportunities
- Salesperson Driven Strategy
- Ambitious Targets and Incentives
- Sufficient Support
- Performance Management
These 7 guiding principles to capturing Revenue Synergies are critical for effective integration of two firms after a merger and unlocking potential benefits from the deal. Let’s discuss the first 3 principles in detail now.
1. Source of Synergies
The inability of the leadership of the acquiring company to spot major sources of revenue that integration brings in results in losing significant pools of opportunity and failure of M&As. Realizing Revenue Synergies demands a thorough methodology to ascertain and qualify revenue prospects along markets and channels, Go-to-Market Strategies, and developing commercial capabilities. This entails:
- Evaluating customers and markets, selling offerings of the combined firms utilizing existing and additional channels, and adequately training and rewarding the sales teams.
- Coming up with innovative new products and bundles utilizing combined R&D capabilities.
- Sharing best practices and commercial capabilities that mergers offer.
2. Leadership Ownership
Organizations that accomplish their Revenue Synergy objectives guarantee that their top management and employees commit themselves fully to the initiative from the onset. They identify potential value pockets from the integration, examine the assumptions about securing value, and get them endorsed by the senior management and front-line staff. The potential Revenue Strategies are regularly evaluated by inter-departmental experts.
3. Customer Insight-driven Opportunities
Accurate estimation of Revenue Synergies demands top-level estimates—assumptions on market share gain, revenue enhancement, or improved penetration—alongside comprehensive bottom-up customer insights, and evaluation of customer relationships. Other important elements to consider include analyzing the offerings being offered to customers, discerning other potential products and services required by the customers, and assessing the ability of the sales team and brands in terms of the potential they offer to the clients.
Interested in learning more about the other guiding principles of securing PMI revenue synergies? You can download an editable PowerPoint on Post-merger Integration (PMI): Securing Revenue Synergies here on the Flevy documents marketplace.