strategic planning and organization clarity

www.myCNI.com.my www.OOBEY.com

STRATEGIC PLANNING AND ORGANIZATION CLARITY Case Study, Concepts and Debatable Ideas

Kenny OngCNI Holdings Berhad


Intro: CNI

1. 20 years old2. Core Business: MLM3. Others: Contract Manufacturing,

Export/Trading, eCommerce4. Malaysia, Singapore, Brunei, Indonesia, India,

China, Hong Kong, Philippines, Italy, Taiwan, Oman, United States, Vietnam

5. Staff force: ± 5006. Distributors: 200,0007. Products: Consumer Goods and Services


"The digital watch didn't come from established watch companies, the calculator

didn't come from slide rule or adding machine companies, video games didn't come from board-game manufacturers Parker Bros or Mattel, the ballpoint pen didn't come from

fountain pen manufacturers, and Google didn't come from the Yellow Pages"

Bob Seidensticker, Futurehype


What’s wrong with Strategic Planning Today?

Long-term Plans

Objectives

Strategies

Enablers

Resources

Also known as L.O.S.E.R.


What’s wrong with Strategic Planning Today?

1. Biggest Threats often come from OUTSIDE your normal industry

2. Planning from the base of an ‘Existing’ organization vs. zero-based

3. Traditional Analysis (e.g. SWOT) based only on known or existing assumptions or knowledge

4. Spending too much time in market research and analysis

5. Defining the company from a Product/Service perspective vs. Category vs. JTBD (e.g. Coca-cola)

6. Wrong Benchmark – already successful vs. what made them successful

7. New strategy, same people


Today’s Agenda


Summary: Today’s presentation

1. Business Model Clarity

2. Strategy Clarity

3. Execution Clarity


What is the Business Model?

USP

Market Discipline

Profit Model


Business Model: USP

Unique Selling Proposition (USP)

=

Targeted Customer

=

Core Buying Purpose/ Customer Value Proposition/ Job To Be Done (JBTD)


Business Model: USP

“The Product is Not the Product”

• What is the customer really buying?

• What is the “Core Buying Purpose”?

• What is the “Job To Be Done”?


Business Model: USP

Obstacles to JBTD:

1. Insufficient WEALTH

2. Insufficient ACCESS

3. Insufficient SKILL

4. Insufficient TIME



USP

Market Discipline

Profit Model


Business Model: Profit Model

Revenue

CostMargin


Business Model: Profit Model

Revenue

CostMargin

Revenue

CostMargin

Profit Model Examples:1. Gillette Shaver2. iPod and iTunes3. IBM and Lenovo4. GM and GM Finance5. Google and Ad Revenue6. McD and Drive-thru revenue, 7. Subsidizing Hire Purchase Loan vs.

reduce price to protect brand 8. Oracle Project Financing over 4 years

covering even non-Oracle components9. SaaS PAYU e.g. Siebel/Salesforce


Who Killed Disney™?

Revenue

CostMargin

Revenue

CostMargin

Profit Model vs. Competition:1. DVD vs. video games and online

movies2. car sales vs. car leasing3. newspaper vs. online news4. client server systems vs. SaaS

Bussinessweek, February 19 2009, “Hollywood Is Worried as DVD Sales Slow”

your greatest competitor for

market share is often a different

profit model



USP

Market Discipline

Profit Model


Intro: Market Discipline

• Mamak stall


Intro: Market Discipline

"They are the most innovative"

"Constantly renewing and creative"

"Always on the leading edge"

"A great deal!"

Excellent/attractive price

Minimal acquisition cost and hassle

Lowest overall cost of ownership

"A no-hassles firm"

Convenience and speed

Reliable product and service

"Exactly what I need"

Customized products

Personalized communications

"They're very responsive"

Preferential service and flexibility

Recommends what I need

"I'm very loyal to them"

Helps us to be a success

Product Leadership

OperationalExcellence

CustomerIntimacy


Operational Excellence(low cost producer)

Ref: The Discipline of Market Leaders, Michael Treacy & Fred Wiersema; 1995

Product Leadership(best product)

Customer Intimacy(best total solution)

Strategy: Value Disciplines


http://www.mycni.com.my/

http://www.oobey.com/






Strategy: Disciplines

HP well-balanced portfolio, mass customization

Acer super lean cost structure, aggressive pricing

Apple powerful products, premium

pricing, limited range

Still Doing well in 2009


Business Model vs. Competition

USP

Market Discipline

Profit Model

Competitor Anchoring vs. Business Model:

1. Air Asia vs. Busses & Trains2. Tata Nano vs. Motorbikes3. iPod vs. Sony BMG4. Kindle (Amazon) vs. iPhone (Apple)5. Google vs. Newspaper (Ads) vs.

Yahoo (Search) vs. Microsoft (Software)

6. McD vs. Toys ‘R’ Us

Shift your Business Model,

and your Competitor will

change


Operational Excellence

• Competitive price

• Error free, reliable

• Fast (on demand)

• Simple

• Responsive

• Consistent information for all

• Transactional

• 'Once and Done'





• Simple

• Responsive


• Transactional

• 'Once and Done'

Customer Intimacy

• Management by Fact

• Easy to do business with

• Have it your way (customization)

• Market segments of one

• Proactive, flexible

• Relationship and consultative selling

• Cross selling

Customer Intimacy







• Cross selling

Product Leadership

• New, state of the art products or services

• Risk takers

• Meet volatile customer needs

• Fast concept-to- counter

• Never satisfied - obsolete own and competitors' products

• Learning organization

Product Leadership


• Risk takers










The McPlaybook*

Make it easy to eat• 50% drive-thru• Meals held in one

hand

Make it easy to prepare• High Turnover• Tasks simple to learn

& repeat

Make it quick• “Fast Food”• Tests new products

for Cooking Times

Make what customers want• Prowls market for new

products• Monitored field tests

*Adapted from: Businessweek , Februrary 5th 2007









Strategy: Disciplines


Business Model

1. change one, effect

three USP

Market Discipline

Profit Model

2. change one, change

model



1. Business Model Clarity Done

2. Strategy Clarity



2. Strategy Clarity

‘Hope’ is not a strategy


What is Strategic Planning?

Strategic

Planning

Variables:

Research

Growth

Risks

Stakeholders

Constraints

SWOT

Misc.

Output:

Plans

Priorities

KPIs


Before we start…

Which comes first?

1. Strategies -> KPI?

2. KPI -> Strategies?


Before we start…

Which comes first?



•already know our priorities, aware of all strategy options available

•creating something UNIQUE, INNOVATIVE and DISRUPTIVE e.g. Air Asia

•conducting a business Turnaround e.g. MAS


Before we start…

Which comes first?



•want to find out possible strategies,

•determine our priorities first thru selection of important KPIs;

•growing through ‘normal’ business, not a Turnaround.


Business Situation vs. Focus

Upturn Flat Downturn

Fight Complacency

Sharpen Edge

Keep Momentum

Conquer

‘Change’ mgmt

Reduce Fat

Continuity

Everyone Happy

Innovation

Acquire

Profits

Build momentum

Sales

Cash Flow

Talent Mgmt

Innovation/R&D

Early wins

Slow Down HR Costs

Top Talent focus

Sales, Sales, Sales

Increase attrition



Business Situations vs. Focus


Fight Complacency

Sharpen Edge

Keep Momentum

Conquer

‘Change’ mgmt

Reduce Fat

Continuity

Everyone Happy

Innovation

Acquire

Profits

Build momentum

Sales

Cash Flow

Talent Mgmt

Stack R&D

Early wins

Slow Down HR Costs

Top Talent focus

Stack Sales

Increase attrition

Many times, you need a different CEO/Leader/Management Team

for each business situation



What is your Goal?

1. Cost Reduction

2. Growth

3. Both?


Growth Strategy

1.Base Retention

2.Share Gain

3.Positioning4.Adjacent Market

5.New Business

GROWTH

“Double-Digit Growth”, Michael Treacy



How Markets determine Growth Strategies (1)

• Growth Rate

Growth Rate

Strategy Why?

Fast 1. Market Positioning

2. Share Gain

3. Base Retention

•Maintain market share in strategic segments•Prepare for market decline•Competitors focus too much on getting new customers

Flat 1. Base Retention

2. Share Gain (Acquisitions)

•Lose customers slower than competitors•Create scale economics, squeeze costs



• Churn RateChurn Rate

Strategy Why?

Low 1. Share Gain (Acquisitions)

2. Adjacent Markets

•Buying customer base is cheaper than own efforts•New products, old customers strategy

High 1. Base Retention

2. Share Gain

3. Adjacent Market

•Lose customers slower than competitors•Customers are always open to the best value and offer•Desperate to gain revenue





Fast Growth,

Low Churn

1.Market Positioning

2.Share Gain (M&A)

3.Base Retention

4.Adjacent Markets (M&A)

•Example: XYZ Sector



Downturn Strategy


Side Notes on Cost Reduction Strategy

Cost Reduction

Business Model

•USP

•Profit Model

•Market Discipline

Operational

•Finance and HR

•Supply Chain

•R&D

•Sales & Marketing

5% - 30%

30% - 80%


Business Situation vs. Sales


Fight Complacency

Sharpen Edge

Keep Momentum

Conquer

‘Change’ mgmt

Reduce Fat

Continuity

Everyone Happy

Innovation

Acquire

Profits

Build momentum

Sales

Cash Flow

Talent Mgmt

Innovation/R&D

Early wins

Slow Down HR Costs

Top Talent focus

Sales, Sales, Sales

Increase attrition


1. Optimize customers’ current assets

2. Offset customers’ costs 3. Focus market share 4. CEO and Sr. Mgmt in the field 5. Sell up the buyer chain 6. Motivate troops 7. Add extra services 8. Control troop emotions9. Specialized vs. general teams,

i.e. sell support services, sell equipment, existing customers etc. (e.g. Xerox)


Marketing Clarity:

Goods Return Policy“I don’t care if they return a

Goodyear tire. If they said they paid $200, pay them $200.”

Nordstrom does not sell tires


Marketing Clarity: CNI

“CNI is more than business.

We strongly believe that every individual has the opportunity to

attain a better living through CNI.”


Marketing Clarity: Segment & Target

Who?

Experience Swing Former

Opposition


Branding Clarity: Segment & Target

• Who are you attracted to?


Branding Clarity: Basics & Differentiators

Segments

Targets

Targets

Basics

Differentiators

Experience = Branding


Swing Loyalty

Swing Customers are “loyal” because:

• Individual Relationships• Convenience (at that point in

time)• Tied-up• Product Uniqueness• Promotions• No better alternative• Downlines• No known alternative• Psychologically lazy

Swing = Best alternative at the current

moment until I find another alternative


“Swing” Marketing

• Increase switching costs

• Mega packages• Community• Reward programs

(Points)• Membership

Subscription• Email communication

• Newsletters• Personalized alerts• Survey• Suggestion Box• Switching Techniques

(e.g. Balance Transfer of credit cards)


R&D Clarity: The “Old” Days

InventR&D

BuildManufacturing

MarketMarketing

SellSales


R&D Clarity: The “New” Days

Invent

Build

Market

Sell

R&D

Manufacturing

Marketing

Sales


R&D Clarity: Marketing 101

Product

Promotion

Pricing

Place

4Ps


R&D Clarity: Marketing & R&D

Product

Promotion

Pricing

Place

4Ps

Features

Brand

Target

Logistics


R&D Clarity: Marketing & R&D

FeaturesBrand

Target

Logistics

Price

Promotion

Place

Product

IKEA Apple Nestle Asus


R&D Clarity: RD&D

• Garnier• Digi

Design Point 1: Designed to SELL

Design Point 2: Before-After R&D


R&D Clarity: RD&D

• CNI Waterlife




R&D Clarity: RD&D

• Research, Development & DESIGN

1.Features

2.Benefits

3.Differentiation


R&D Clarity: RD&D

• Research, Development & DESIGN

1.Function

2.Aesthetics

3.Logistics




Innovation Clarity

Product/ Service

Process Business Model

Break-through

Sub-stantial

Incre-mental



1. Business Model Clarity Done

2. Strategy Clarity


Done



Accountability, Benchmarking, BSC, KPIs and other evils


“…in the past 18 months, we have heard that profit is more important than revenue,

quality is more important that profit, people are more important than profit,

customers are more important than our people, big customers are more important than small customers, and that growth is the key to our success. No wonder our

performance is inconsistent"CEO, Anonymous


Wrong KPIs

“What is the moral of the story?”


KPIs and Behavior

Before: “Handle Time” Per Call• Motivated Call Centre staff to transfer callers,

getting rid of complainers, making them someone else’s problem

• Callers at 45% chance of being transferred• 7,000 customers each week suffered transfers 7

times or more


KPIs and Behavior

After: “Minutes Per Resolution” of a problem

• Resolution in ONE CALL become the core goal• Reduced probability of call transfers from 45% to

18%


Why BSC?

• Reason 1: Balanced

• Reason 2: Cause-and-Effect



Financial

“To satisfy our stakeholders, what Financial objectives must we accomplish?”

Internal Process

“To satisfy our customers, in which internal business processes must we excel?"

Customer

“Who are our target customers?

What is our value proposition?”

Learning & Growth

“What capabilities and tools do our employees require to help them execute our strategy?

Cause and Effect


Revenue Growth

Base Retention

Share Gain Positioning Adjacent Market

New Business


Product Leadership

Customer Intimacy

Competencies Information Systems

Motivation, empowerment,

alignment

Financial

Learning & Growth

Internal Process

Customers

Investment Strategy

Productivity Market Value

Linking BSC to Strategy


Financial

Learning & Growth

Internal Process

Customers / Distributors

Revenue Growth

ProductivityMarket Value

Department Operations

Supplier & Alliances

External Involvement

Target Markets

Products/ Services

Channel Strategies

Human Resources

Technology

Information & IntelligenceSystems &

Processes

Cause and Effect: An Example


Example: Selection of KPIs for BSC

•Customer satisfactionCustomer loyaltyMarket shareCustomer complaintsComplaints resolved on first contactReturn ratesResponse time per customer requestPrice relative to competitionTotal cost to customerAverage duration of customer relationshipCustomers lostCustomer retentionCustomer acquisition ratesPercentage of revenue form new customersNumber of customersAnnual sales per turnover

•Win rate (sales closed/sales contact)•Customer visits to the companyHours spent with customersMarketing cost as a percentage of salesNumber of ads placedNumber of proposals madeBrand recognitionResponse rateNumber of trade shows attendedSales volumeShare of target customer spendingSales per channelAverage customer sizeCustomers per employeeCustomer service expense per customerCustomer profitabilityFrequency (number of sales transactions)


Financial

Learning & Growth

Internal Process

Customers / Distributors

Example: 1st Level BSC & KPIs

Profit after Tax. Revenue. Cash-to-cash cycle. Operating cash flow

Average Revenue Per User (ARPU), Customer Complaints. Customer Acquisition Rate. Product Availability. Product Quality & Service. Renewal Annual Subscription. No. of Active Members. No. Retail Points.

Customer Database Availability. Accuracy of Forecast Planning. Continuous Improvement. Response Time to Customer Needs. Perfect Order Fulfillment. Inventory Turnover. Number of Effective Loyalty Programs. On Time Delivery. Number of Effective A&P

% of staff evaluated on Core Competency Framework. % of staff with Career Development Plans. No. of training hours completed per staff. % of staff with access to strategic information. Q12 Index. % staff evaluated on Culture alignment


Sample: Other 1st Level KPIs across industries…

Financial Services Retail Telecommunications

•Maximize ARPU•Minimize Churn•Mutichannel customer service

•Understand customer behavior related to customer conversion, acquisition, and retention•Single view of customer•Multichannel customer experience•Personalized customer experience

•Anticipate and prevent churn despite compensation•Increase number of products per customer•Turn call center information opportunity to up-sell and cross-sell•Increase customer satisfaction and loyalty

Hospitality Travel & Leisure Manufacturing

•Personalized customer experience•Maximize share of wallet•Player/customer loyalty•Multichannel customer service

•Increase customer loyalty and preference•Maximize customer revenue•Improve service quality and efficiency•Capture and close sales opportunities

•Single view of customers across supply chain•Zero-error order capture•Streamline opportunity to cash processes•Leverage investment in ERP and backoffice systems


Lagging and Leading KPIs

Lagging

Leading

Historical, Outcome, Results, 1st Level, Usually Financial or tangible, Quarterly and Annually

Current, Indicators, Drivers, 2nd Level onwards, usually non-financial or intangible, Weekly, Monthly and Quarterly


Developing ‘Driver’ KPIs

Customer Retention % Lagging, 1st Level

Customer Satisfaction Index

Leading, 2nd Level

On time delivery

Time to market for new products

TNA %

Defect levels, warranty claims

Leading, 3rd Level onwards


What is the Objective?

‘Do-or-Die’ KPIs for CNI• Revenue• ARPU

• Sponsoring• Retention

• Commission Plan (BDP)• Product• Corporate Image






Strategy: Disciplines, Priorities, and KPIs






• Simple

• Responsive


• Transactional

• 'Once and Done'





• Simple

• Responsive


• Transactional

• 'Once and Done'

Customer Intimacy







• Cross selling

Customer Intimacy







• Cross selling

Product Leadership


• Risk takers





Product Leadership


• Risk takers





Strategy: Disciplines, Priorities, and KPIs


• Operational Excellence• Move know-how from top performing

units to others• Benchmark against best in class• Ensure operations training for all

employees• Use disciplines like TQM for continuous

learning to reduce costs and improve quality




• Customer Intimacy• Capture knowledge about customers• Understand customer needs• Empower front line employees• Ensure that everyone knows the

customer• Make company knowledge available to

customers


• Product Leadership• Reduce time to market• Commercialize new products fast• Ensure that ideas flow• Reuse what other parts of the company

have already learned• Ensure there are multiple sources of

funding



Sample KPIs for Each Discipline


• Price• Selection• Convenience• Zero Defects• Growth


• Price• Selection• Convenience• Zero Defects• Growth

Customer Intimacy

• Customer Knowledge

• Solutions Offered• Penetration• Customer Data• Customer-success

focus

Customer Intimacy

• Customer Knowledge

• Solutions Offered• Penetration• Customer Data• Customer-success

focus

Product Leadership

• Marketing• Functionality• # of Successes• # of Failures• Learn from key

users• Interdisciplinary

teams• Pipeline

Product Leadership

• Marketing• Functionality• # of Successes• # of Failures• Learn from key

users• Interdisciplinary

teams• Pipeline


Execution: 4-Wheels Alignment

Culture

Business

ModelStrategic Planning

StructurePerson

Leadership

Resources



• Focus point• Alignment• Quality• Innovation & Differentiation• Risk taking• Performance Management• Corporate obsession• Decision making

Culture



• Org Structure• Job Design• C&B• Policies & procedures• Decision making• Job fit• Management Systems• BSC and KPIs• Decentralized & Empower

Structure



• Role modeling• Vision/Mission/Philosophy• Leadership Style• Delegation & Empowerment• C&B, Promotions• Sense of Urgency• Speak regularly about Performance

Leadership



• Recognition• Recruitment• Training• Profit sharing• Values• Motivation• Self Efficacy• Awareness• Useful Competencies• Career aspirations• Attribution (control)

Person


E3 – Department BSC

Financial Perspective

Goals Measures Targets CAPEX OPEX

Quality

Innovation

On Time Delivery

Budgeting


Resource Alignment

Enablers• Technology• Equipment• Materials• Human• Intellectual

Property• Partners• Property

Resources

Funding • CAPEX• OPEX




Customer Intimacy

Customer Intimacy

Product Leadership

Product Leadership

Organization, jobs,skills

Management systems

Information and systems

Culture, values,norms

Each Discipline Requires Different Priorities & Resources



•Central authority, low level of empowerment•High skills at the core of the organization

•Disciplined Teamwork•Process, product- driven•Conformance, 'one size fits all' mindset

• Integrated, low cost transaction systems•The system is the process

•Command and control•Quality management


•Central authority, low level of empowerment•High skills at the core of the organization

•Disciplined Teamwork•Process, product- driven•Conformance, 'one size fits all' mindset

• Integrated, low cost transaction systems•The system is the process

•Command and control•Quality management

Organization, jobs, skills

Management systems






Management systems



Product Leadership

•Ad hoc, organic and cellular•High skills abound in loose-knit structures

•Concept, future-driven•Experimentation and 'out of the box' mindset

•Person-to-person communications systems•Technologies enabling cooperation

•Rewarding individuals' innovative capacity•Risk and exposure management•Product Life Cycle profitability

Product Leadership

•Ad hoc, organic and cellular•High skills abound in loose-knit structures

•Concept, future-driven•Experimentation and 'out of the box' mindset

•Person-to-person communications systems•Technologies enabling cooperation

•Rewarding individuals' innovative capacity•Risk and exposure management•Product Life Cycle profitability




Management systems



Customer Intimacy

•Empowerment close to point of customer contact•High skills in the field and front-line

•Customer-driven•Variation and 'have it your way' mindset

•Strong customer databases, linking internal and external information

•Strong analytical tools

•Customer equity measures like life time value•Satisfaction and share management•Focus on ‘Share of Wallet’

Customer Intimacy

•Empowerment close to point of customer contact•High skills in the field and front-line

•Customer-driven•Variation and 'have it your way' mindset

•Strong customer databases, linking internal and external information

•Strong analytical tools

•Customer equity measures like life time value•Satisfaction and share management•Focus on ‘Share of Wallet’



Budgeting in a Downturn

1. StratEx

2. CoREx


What’s In Between Planning and Execution?

Succession Planning (Business Continuity)

Talent Management

Differentiation

Performance Management System

Budgeting + Planning

KPIs

BSC

Business Model



What’s In Between Planning and Execution?

Succession Planning (Business Continuity)

Talent Management

Differentiation

Performance Management System

Budgeting + Planning

KPIs

BSC

Business Model

a.k.a. Business Plan Implementation

a.k.a. Talent Management



Performance Execution Clarity

A Excellent

B Good

C Average

D Poor

E Useless




A Excellent

B Good

C Average Good

D Poor

E Useless




A Excellent Excellent

B Good Very Good

C Average Good

D Poor Not Good

E Useless Commit Suicide




A Excellent Consistently achieved 4 for 3 quarters

B Very Good Higher than planned results

C Good Achieved Planned Results

D Not Good Did not fully meet planned results

E Commit Suicide

Unacceptable performance



Performance and Pay Clarity

• Pay for Service

• Pay for Job

• Pay for Performance

• Pay for Competency




• Increment

• Bonus

• Promotion




< 0.7 ≥0.7 - ≤0.9

>0.9 - <1.1

≥1.1 - ≤1.3

> 1.3

5 9 8 7 6 5

4 8 7 6 5 4

3 7 6 5% 4 3

2 6 5 4 3 2

1 5 4 3 2 1




< 0.7 ≥0.7 - ≤0.9

>0.9 - <1.1

≥1.1 - ≤1.3

> 1.3

5 20 15 12 8 5

4 18 12 9 5 3

3 9 7 5% 4 3

2 1 1 1 0 0

1 0 0 0 0 0



End Notes

Tying it all up


Review processes

1. Result Planning schedule inc. BSC, Budget

2. Quarterly Performance Appraisals

3. Sales performance reviews

4. Non-sales performance reviews

5. Annual Appraisals

6. Specialized KPI committees

7. CAR, PAR, SCAR KPI improvements

8. Internal Audit & MSD – process problems

9. HRM & TND – people problems


Problems, problems and more problems…


Problems, problems and more problems…

1. No serious budget to tackle key risks

2. Too much optimism or pessimism

3. Investment ≠ Portfolio Management

4. Top down vs. Bottom up

5. Good to have vs. Need to have

6. Line Manager not thinking like Investors

7. Too focused on KPI and BSC

8. Budget allocation seen as ‘popularity’ vote

9. Public Listing -> pressure for short-term budgets and results vs. long-term innovation


Alignment: 4-Wheels Model

Culture

Business

ModelStrategic Planning

StructurePerson

Leadership

Resources


Way back in 2004…

• Thomas Cup, Indonesia


In 2007…

CNI ‘Beemax’ Factory Visit, China

1. Top Leaders

2. Product Development

3. Media

Thank You.

soft copy of slides: www.totallyunrelatedrandomanddebatable.

blogspot.com

strategic planning and organization clarity

Business

business model clarity

different profit model

product leadership new

discipline of market

speed reliable product

targeted customer

volatile customer

strategy clarity