Why Strategy Matters

• Borrowing heavily from Kaplan’s Balanced Scorecard and Strategy Mapping.• I have taken everyone’s feedback from the meeting on 10/29 and

attempted to place it into a comprehensive strategy map.• A Harvard Business School study shows that between 70-90% of

businesses attempting a new strategy fail.• The Balanced Scorecard (BSC) approach nets results in 2-3 years.• It emphasizes consistent alignment and focus.• Five principles have to be embraced:

– Translate strategy to operational terms.– Align the organization to the strategy.– Make strategy everyone’s everyday job.– Make strategy a continual process.– Mobilize change through executive leadership.

Introducing Strategy Maps

Customer PerspectiveTo achieve our vision, how should we

appear to our customers? What is that “customer delight” combination of

product, service, pricing, etc.?

Internal PerspectiveTo satisfy our customers, what

operational processes must we excel at?What do we need to be better at than

any of our competitors in order tocreate “customer delight”?

Learning andGrowth Perspective

How will we sustain our abilityto change and improve? How do webuild a learning, growing company?

May appear to be foundational features orgrounding principles.

Financial PerspectiveTo financially sustain our mission,

what must we focus on?

Foundation / Multi-Disciplinary

Bot

tom

-Up

Pro

cess

Learning & Growth Perspective

Learning & Growth Perspective

• Orienting Question: How will we sustain our ability to change and improve? How do we build a learning, growing company?

• Divide into 3 areas: human, information & organizational capital.

Human Capital Information Capital Organizational Capital

• Skills• Training• Knowledge

• Systems• Databases• Networks

• Culture• Leadership• Alignment• Teamwork

Internal Perspective

Internal Perspective

• Orienting Question: To satisfy our customers, what operational processes must we excel at? What do we need to be better at than any of our competitors in order to create “customer delight”?

•Lower cost of ownership.•JIT delivery.•High quality supply.•New ideas from suppliers.•Supplier partnerships.•Outsource mature non-strategic products & services.

Develop SupplierRelations

•Lower cost of production.•Continuous improvement.•Process cycle time.•Fixed asset utilization.•Working capital efficiency.

Produce Product

•Lower cost to serve.•Responsive delivery time.•Enhance quality.

Distribute toCustomers

•Financial risk (high creditrating).•Operating risk.•Technological risk.

Manage Risk

Customer Perspective

Customer Perspective

• Orienting Question: To achieve our vision, how should we appear to our customers? What is that “customer delight”combination of product, service, pricing, etc.?

• Answer is some combination of the following:

Price BrandQuality AvailabilitySelection /

BreadthFunctionality Service Partnership

Product / Service Attributes Relationship Image

Financial Perspective

Financial Perspective

• Orienting Question: To financially sustain our mission, what must we focus on?

Long-Term Shareholder Value

Productivity Strategy Growth Strategy Operating Income Strategy

ImproveCost

Structure

IncreaseFixed AssetUtilization

StreamlineO/H

ExpandExistingProduct

Lines

PenetrateNew

MarketSegments

Pursue“Lost”

Business

Pulling Together Strategy w/ Implementation … The Balanced Score Card (BSC)

Keep in mind that these processes & themes (what I previously called Core Obstacles) can be changed and

added based on your feedback from earlier slides.

The Time Realities of BSC

1 2 3 4 5

Time (years)

ShareholderValue

($)

OperationsManagement

Processes

CustomerManagement

Processes

InnovationProcesses

Long-Term Shareholder Value

OperationalEffectiveness

Customer Management

ProductInnovation

Start w/ Key Definitions - Themes

Customer PerspectiveTo achieve our vision, how should we

appear to our customers? What is that “customer delight” combination of

product, service, pricing, etc.?

Internal PerspectiveTo satisfy our customers, what

operational processes must we excel at?What do we need to be better at than

any of our competitors in order tocreate “customer delight”?

Learning andGrowth Perspective

How will we sustain our abilityto change and improve? How do webuild a learning, growing company?

May appear to be foundational features orgrounding principles.

Financial PerspectiveTo financially sustain our mission,

what must we focus on?

Low

-Total C

ost Position in M

arket

Product Innovation &

Meaningful L

ine Extension

Re-E

nergized & R

e-Organized Sales T

eam

Resource A

llocation –P

lacement &

Justification

Bringing the Processes & Themes Together

The BSC Methodology & Template

Strategy Map Balanced Scorecard Action PlanProcess:Theme: Objectives Measurement Target Initiative Budget

Learning &GrowthPerspective

InternalPerspective

CustomerPerspective

FinancialPerspective

Total Budget $XXXX

INTENTIONALLY BLANK

Undefined for N

ow

Low Total-Cost Position in Market

Strategy Map Balanced Scorecard Action PlanProcess: Operations ManagementTheme: Low Total-Cost Market Position Objectives Measurement Target Initiative Budget

Learning &Growth Perspective

InternalPerspective

CustomerPerspective

FinancialPerspective

Total Budget $XXXX

HumanCapital

Logistics/Supply Chain/

Purchasing

InformationCapitalRFQ forSourced Products

Continue & ExpandChina Sourcing Evaluation

CT Product

Lowest TotalCost Supplier

Improve Cost Structure • Profitability• Reduced Cost

• Defend mature P/Ns.• Attract & retain morecustomers.• Challenge perceptionthat we will notcompete on cost.

• Identify & qualifyoff shore vendors.• Define actual vs.perceived costadvantage.• Reduce cost of keynew product.

• Develop the necessaryskills in purchasing.• Design the supportsystem to makesourcing moreefficient.• Establish standardsfor what we should bepursuing as sourcedproducts.

• Savings due to Sourcing• O/H Absorption

• W/L by customer & P/N• Industry Growth Rate vs.Growth Rate (byaccount)

• P/N analysis of savings• CT Product Re-Quote

• Lead Time for Quotes• Awareness of Expectationsfor Sourced Products• Go/No-Go – PurchasingCapability w/ These Needs

• >15%• O/H Abs. Var.

•0 losses@ retail.• Key accountgrowth (% theyproject vs. Ourgoal)• RealisticGrowth Goal

• What % justifiesmoving P/N?• What % savings on CT tobroaden its sales?• 1 week for standard products.• 2 weeks forcustom products.• ____ our costto purchasesourced product.• Purchasingmanager capableof handling this.

• W/L Analysis• P1 – Customer Delight•Budget Process

• China Sourcing – SP• China Sourcing – TW• China Sourcing – Top 5• Co-Extrusion• Q1 2008 Sales Meeting

• Design RFQ Process• Expectations for Sourced& New Product Launches.• Personnel ReviewProcess

Product Innovation & Meaningful Line Extension

Strategy Map Balanced Scorecard Action PlanProcess: Innovation ProcessesTheme: Product Innovation & Line Ext. Objectives Measurement Target Initiative Budget

Learning &GrowthPerspective

InternalPerspective

CustomerPerspective

FinancialPerspective

Total Budget $XXXX

HumanCapitalProduct

Design &Development

HumanCapital

Training onInnovation

InformationCapital

JustificationFor NewProducts

Supplier Capabilities

Market Operating Risks

AppropriateSelection

• Renewed ExistingProduct for Contractor• ER Product• SP Redesign• TW Gen II• OPP TW

Growth Strategy • Revenue Growth• Improved ROI

• New Products• Obvious functionalitydifferences.• Ability to leverageagainst other companiesin our segment.

• In-House DevelopmentCapability.• Penetrate New MarketSegments

• Develop andcommunicatephilosophy w/ procedures and expectations on newproduct development.

• YOY Expectation• ROI Expectation

• ROR or $ revenue onexisting NPD launches.• # of Functional ∆s vs.competitive products.• Numerical goal onbay space or P/N’s gained.

• Staff Addition(s)• New Market QuarterlyReport

• Additional Staff• Do We Invest in NPDTraining Program?

• Defined.• Defined.

• Defined.• Min. of 3.• Defined.

• 1 NPD Staff• Metric for NewMarkets Defined& Developed

• 1 NPD Staff• 1 NPD TrainingProgram for XEmployees

• NPD – Add Staff orOutsource?• Develop NM Report

• NPD – Add Staff orOutsource?• Identify NPD Training

Re-Energized & Re-Organized Sales Team

Strategy Map Balanced Scorecard Action PlanProcess: Customer ManagementTheme: Re-Energized & Organized Sls Objectives Measurement Target Initiative Budget

Learning & Growth Perspective

InternalPerspective

CustomerPerspective

FinancialPerspective

Total Budget $XXXXHumanCapitalSeniorRetailSales

HumanCapital

Sales TeamManagement

HumanCapital

Key LargeAccount

Management

HumanCapital

Paint & Mid-Level Retail

HumanCapital

Expand Ears @Retail Mtgs

InformationCapital

CRM / SalesMgmt Software

Re-Organized Team

Re-Energized Team

Quality & CostPerception

Relationship /Service

Growth Strategy &Operating Income

• Revenue Growth• Profitability

• New Awareness ofour Attitude & Ability• Heightened Presence• Add in-house NPD• Expand P/N’s• Build Relationships

• Consistent PerformanceStandards & Expectations• Accountability Systems(Budget & CRM)• Emphasis on Organization

• YOY Expectation• GM or O/H Abs.

• TBD• Calls / Day• NP Placed @ Customer• P/N Growth by Cust.• Account Touch Metrics

• Grading System for Field Sales Staff tiedTo Annual Review• # of NP Placed• % P/N & Gross SalesGrowth• Calls / Day• # of Sales Meetings

• Training in Key AccountManagement.• Added Staff @ Sr. Lvl.• Added CRM System• # of Key RetailerMeetings

• Defined.• Defined.

• Defined.• Defined.• Defined.• Defined.• Defined.

• System designed& implemented byJanuary.• Defined• Defined• Defined• 2 / Year (Q1, 4)

• 1 Session/yr.• 1 EC Sls Mgr.• By XXX.• Min. 2 @ each.

•Sales TeamExpectations Program

• CRM Project•Sales TeamMeeting•Sales TeamExpectations Program

• Large AccountTraining Program• EC Sales Manager• CRM Project•Sales TeamExpectations Program

Resource Allocation –Placement & Justification

Strategy Map Balanced Scorecard Action PlanProcess: Operations ManagementTheme: Resource Allocation Objectives Measurement Target Initiative Budget

Learning &GrowthPerspective

InternalPerspective

CustomerPerspective

FinancialPerspective

Total Budget $XXXXOrganizational

CapitalQuarterlyStrategy

Presentations

OrganizationalCapital

Transparency onFinancial

Performance

OrganizationalCapital

CompensationTied to

Performance

OrganizationalCapitalRefine

Annual ReviewProcess

Accountability

Relationship /Service

Streamline O/H

• New Standards forJob-Specific Accountability• Tied to Compensation

• Higher QualityFace Time with FocusedStaff.• Attitude, Aptitude &Follow-Through

• Profitability

• Communicate ClearExpectations & Goals.• Transparency (onperformance &on “my” Performance.

• GM or O/H Abs.• % O/H Savings.

• Calls / Day• NP Placed @ Customer• P/N Growth by Cust.• Account Touch Metrics

• Performance Review

• Defined ExpectationsBy Job Category (top-down).• Quarterly PresentationAs to Job Performance

• Defined.• Defined.

• Defined.• Defined.• Defined.• Defined..

• System designed& implemented byJanuary.)

• System designed& implemented byJanuary.• 4 PresentationsOn Financial Performance

•Sales TeamExpectations Program

• CRM Project• Performance Review•Sales TeamExpectations Program

• Performance Review•Sales TeamExpectations Program• Quarterly CompanyUpdate Presentation