Realizing Operational Efficiency

2. Realizing Operational Efficiency In partnership with Queen’s School of Business Dr. Elspeth Murray Associate Professor & Managing Director, Queen’s Centre for Business Venturing Queen’s School of Business

3. Why Are You Here? “Many more individuals of each species are born than can possibly survive. Consequently, there is a frequently recurring struggle for existence, and it follows that any being, if it varies however slightly in any manner profitable to itself under the complex conditions of life, will have abetter chance of surviving, and thus be naturally selected.” Charles Darwin, The Origin of the Species EM-506

4. The Simple Message? Change before you have to!

5. Agenda • Great Organizations – Long term success • Your Radar Screen: Key Trends • Know when & what to change…. • Your Edge: Critical Implications • ….and in what ways

6. What Was Darwin Really Saying? Visionary leaders Establishdirection Raise thebar Ability toinvent thefuture Innovativeapproaches Create newrules Outwit thecompetition Defined & forward looking strategy Expect changes Adjust along the way Ability tomake ithappen Dynamicculture Pride, passion Energy PR-103

7. The Executive "Balancing Act" Create and build for the future Manage today's business efficiently and effectively EM-507

8. If you don't know what to do with many of the papers piled on your desk, stick a dozen colleagues initials on them and pass them along. When in doubt, route. ~ Malcolm S. Forbes ~

9. Forward Thinkers: Their Radar Screen • Increasing expectations from all stakeholder groups • Post-911 fallout • Post-corporate scandal fallout • Technological shifts • Demographic shifts • Globalization PR-604

10. Your “Radar Screen”: Stakeholder Expectations • Shareholders – push for quarterly returns, ‘what have you done for me lately’ • Employees – ‘what’s in it for me?’ • Customers – better, faster, cheaper customized, high quality • Partners – easy to do business with • Suppliers – want ‘your’ attention, lock you in

11. Category Health Products Personal Care Sports Food Office Computers Apparel Example Gatorade Protein-based Shampoo Mountain Bike Chocolate Milk White-out Liquid E-mail, Desktop Publishing Sports Bra Important Innovations by Customers

12. Study Scientific Instruments Process Machinery Tractor Shovels Plastics First Device Used in Field Developed and Built By: Product Product User Manufacturers 77% 23% 67% 33% 6% 94% 0% 100% How Often Do Users Innovate? Source: E.v. Hippel, The Sources of Innovation, Oxford University Press, 1988

13. Innovation Patterns Documented Example: Scientific Instruments 77% of Innovations Developed by Users First firm Bringing Product to Markets 5 – 7 Year Transfer Lag

14. Implications of Customer Loyalty 100% 77% • Of those who rated: • A very satisfied rating, 77% would definitely recommend • A satisfied rating, 21% would definitely recommend • Neither satisfied nor dissatisfied rating, 1% would • definitely recommend • A dissatisfied or very dissatisfied rating, 0% would • definitely recommend 21% 1% 0% 0% VeryDissatisfied NeitherSatisfiednor Dissatisfied VerySatisfied Satisfied Dissatisfied

15. High Employee Satisfaction Equals Customer Satisfaction -> Loyalty 5.0 4.01 Customer Satisfaction Rating 3.80 3.67 Low 2.5 - 3.0 Average 3.0 - 3.5 Leaders 3.5 - 4.5 Employee Satisfaction Range PR-300

16. Drivers of Employee Satisfaction • Ability to satisfy customer needs • Possesses the appropriate skills and knowledge • Ability to influence the workplace PR-461

17. Employee/Customer Satisfaction Drives Profitability - Two Ways Employee Satisfaction Outstanding Service Satisfied Customers Job Involvement Customer Loyalty Ideas Productivity ContinuousImprovement Profitability

18. Your “Radar Screen”: Post-911 Fallout • More hassles at the border – the future of JIT in jeopardy? • More regulation of transportation industry – cost pressures, H/R pressures • Greater scrutiny of transported goods – more delays, Homeland Security, “where is your stuff” • “North American” standards and compliance – increased costs of coordination

19. Your “Radar Screen”: Post-corporate scandal fallout • Corporate governance – tough to find directors, more ‘fingers in’ the business • SOX compliance – bureaucracy & controls abound taking ‘eyes’ off the business • Environmental liability

20. Your “Radar Screen”: Technological Shifts • RF id (item) • Nanotechnology • Electronic Paper/Digital Ink • On-Demand Software

21. Your “Radar Screen”: Demographic & Social Shifts • Aging workforce • 25% of business owners retiring in next 5 years • Work-life balance concerns

22. Your “Radar Screen”: Globalization • Outsourcing & offshoring – not just goods but services also • Key trends driving these views: • Declining shipping costs & abundant and cheap bandwidth China and India emerging as economic forces

23. The Operations Challenge Performance Are competitors getting better? Faster? We are getting better! Time Competition - Ruthless and Dynamic PR-048

24. So What Can You Do? • Good news and bad news – depends on your perspective….. • Every industry is impacted, in different but significant ways • To lead and manage effectively in the face of all this change, operations professionals need to be very good at: • Setting strategy – recognizing the need to change, creating a plan • Fostering innovative & creative thinking • Engaging employees • Leading and managing the changes that result

25. Your Radar Screen: Tracking Leading Indicators Strategic Health Strong Weak Monitor performance Execute well Avoid complacency Operating performance may mask deteriorating strategic health Re-formulate strategy Strong Operational Health Avoid long-term pain for short-term gain Operational program: Improve margins, costs, productivity Turnaround required: Improve operating performance Re-position the business Weak

26. Streamlined Strategic Planning Process StrategicIssue Analysis Strategic PlanDevelopmentWorkshop InformalPre-Work Size-UpWorkshop • Environment • Macro • Industry • Competition • Corporate • Capabilities • Business • Positioning • Critical successfactors • Vision/mission • Objectives • Strategies • Initializing actionplans • Who • What • When • How much • Implementationissues Benchmark Discussions Study Groups ‘Radar Screen’ Review Implement and Review Task Forces Management Reviews Customer Surveys 4-6 weeks 2-3 days 2-4 weeks 2-3 days PR-029

27. Engagement: Link to Business Results • Best Employer research has identified a strong and consistent link between engagement and various performance measures. An analysis of the 2003 study results comparing the 50 organizations that were identified as the 50 Best (“Best”) to the 78 organizations that did not make the top 50 list (“Rest”) indicated the following: * Information is based on total shareholder returns for publicly traded organizations over a five-year period (annualized over five years: 1997 to 2002).

28. People • Senior Leadership • Manager • Co-workers Work / Values • Intrinsic Motivation • Resources • Corporate Citizenship Engagement Opportunities Total Rewards • Career Opportunities • Development Opportunities • Pay • Benefits • Recognition Procedures • People Practices • Performance Review Quality of Life • Work / Life Balance • Physical Work Environment Engagement: 15 Related Drivers • Hewitt’s Engagement Model TM

29. The Importance of Innovation “… the only sustainable competitive advantage is to innovate consistently …” … remember Digital Equipment Corporation? … remember when gold was the precious consumer metal? EM-369

30. Different Levels of Innovation High Incremental “Tinkering at the Edges” Degree of Difficulty Quantum “New Box(es)” Breakthrough “Outside the Box” Low EM-733

31. Fostering Innovation • Intrinsically motivated people • Objectives around innovation NOT just invention • Stay ‘close’ to customers • Opportunities for diversity of perspective • A disciplined process to evaluate and fund new initiatives with potential and ‘weed out’ the rest • Time for people who do the work, to “think” creatively

32. “Strategies take on value only as committed people infuse them with energy” Philip Selznick EM-357

33. Managing Change: It’s Not What You Do, It’s How You Do It • Family Vacations • We all know what makes for a smooth journey on the drive across Canada: create the winning conditions • Physics • It’s all about momentum and overcoming inertia -> GUIDANCE, SPEED & CRITICAL MASS • Heterogeneity • The workforce is diverse, and typically operates under the ’20:70:10’ principle when it comes to change

34. Winning Conditions for Change • Guidance – share the itinerary • Establish the need, create shared understanding of the entire journey, make a plan • Speed – overcoming inertia • Create urgency, focus on a ‘critical few’, enable rapid decision making, deploy initiatives in parallel • Critical mass – gaining momentum • Provide leadership, operationalize ’20-70-10’, deal with the ‘arsonists & saboteurs’ Find the ‘Tipping Point’

35. Long Term Success Visionary leaders Establishdirection Raise thebar Ability toinvent thefuture Innovativeapproaches Create newrules Outwit thecompetition Defined & forward looking strategy Expect changes Adjust along the way Ability tomake ithappen Dynamicculture Pride, passion Energy PR-103

36. Staying Ahead – Reading List • The Economist • MIT’s Technology Review • The Tipping Point (Gladwell) • Fast Forward: Organizational Change in 100 Days (Murray & Richardson) • Built to Last (Collins & Porras) • Good to Great (Collins)

37. Thank You!

38. © 2004 Microsoft Corporation. All rights reserved. This presentation is for informational purposes only. Microsoft makes no warranties, express or implied, in this summary.