Company E, a leading international simulation company producing software and hardware for military and civil applications wants to change the way they manage their business. They want to be ‘more flexible’ and ‘responsive to customer needs’ and believe a correct approach in this direction will help them gain advantage over their competitors in the exiting niche market they operate in. The brief of Case E states that they believe they could achieve these goals by developing strategies within its organization.
In this paper we will focus on what tools Company E could adopt in order develop strategies in order to achieve their aims, i.e. become more flexible and responsive to customer needs.
Company E should begin by choosing which managing tools to use to scan its external and internal environments, help make the correct decisions and implement the strategies.
After considering a number of appropriate tools available, we selected four tools which we think will be important for Company E in this context. Benchmarking, SWOT Analysis, Balanced Scorecard and considering Organisational Development are the main tools and practices we would encourage Company E to use in order to gain competitive edge in their market niche.
SWOT Analysis is a very effective way of identifying ones Strengths and Weaknesses, and of examining the Opportunities and Threats a business faces. Carrying out an analysis using the SWOT framework helps to focus the activities into areas where the company is strong and where the greatest opportunities for it lie1.
For example, Company E could identify some of the following as their strengths, weaknesses in their internal environment and map out the opportunities and threats they face in the external environment (See Diagram D1).
Strengths might be specialist marketing expertise, new innovative products or service, location of the business, quality processes and procedures or any other aspect of the business that adds value to the product or service. Alternatively a weakness could be lack of marketing expertise, undifferentiated products and service (i.e. in relation to your competitors), location of your business, poor quality goods or services and damaged reputation2.
Opportunities and threats are external factors. For example An opportunity could be a developing market such as the Internet, mergers, joint ventures or strategic alliances, moving into new market segments that offer improved profits, a new international market and a a market vacated by an ineffective competitor. Whereas a threat could be a new competitor in your home market, price wars with competitors, a competitor has a new, innovative product or service, competitors have superior access to channels of distribution, taxation is introduced on your product or service.
Benchmarking is the common name given to a variety of techniques which involve comparisons between two examples of the same process so as to provide opportunities for learning. It can be used to compare ways different companies deal with the product development processes; either within a narrow range of similar sets of manufacturing activities, or against a specific firm that competes in a similar market segment (See Diagram D2).
In this tool firms choose patterns of hypothetical or actual ‘best practice’ and then measure up their performance. Benchmarking must occur in a structured framework3 and can be constructed along several dimensions of performance – customer service, flexibility, productivity, quality, etc. – and comparisons can be made with similar firms (in terms of size, sector and product/markets) or with different ones but which are noted for world class performance along a key dimension. The underlying principle is one of auditing the strengths and weaknesses of the firm and identifying the directions for future development of competitive advantage4.
To become more flexible and responsive to consumer needs company E should implement Best Practice Benchmarking. BPB comes in various forms, but essentially involves:
* Establishing what makes the difference, in their customers’ eyes, between an ordinary supplier and an excellent supplier
* Setting standards in each of those things, according to the best practice they can find
* Finding out how the best companies meet those challenging standards
* Applying both other people’s experience and their own ideas to meet the new standards – and ideally to exceed them.
The Balanced Scorecard (BSc) tool
The balanced scorecard is a management system (not only a measurement system) that enables organizations to clarify their vision and strategy and translate them into action5.It provides feedback around both the internal business processes and external outcomes in order to continuously improve strategic performance and results6.
The BSc lays down four processes (translating the vision, communicating and linking, business planning and feedback) could be used separately or in combination to link long term strategic objectives with short term actions7.
And in relation to the problem Company E faces, the best would be to focus on the first process, i.e. translating vision. BSc’s helps the managers to translate vision into terms that have meaning to the people who will realize it into action. Diagram D5 illustrates different perspectives of translating the vision process. The answers to these questions will help Company E identify their visions and spell out easily understandable ways to achieve them.
Understanding the tools in application
These tools should be used to assess Company E’s current circumstances and identify how to proceed in attaining greater competitiveness. However any form of assessment is always based on certain principles should have known areas of focus or of cost/oversight. In understanding these better we can then make decisions on their implementation that takes all criteria into account.
SWOT analysis is a thorough tool covering most internal (strengths/weaknesses) and external (opportunities/threats) factors that may affect the company and can therefore provide a clear view of directions the company could take. In addition may provide a big advantage over competitors, as this tool takes competitors into account. As an overview it will only focus on the critical issues that affect a certain company in a certain environment. Thus smaller, less important issues are not focused on.
However in a SWOT analysis topics covered in a case study are usually quite broad, and perhaps not concise enough it is also difficult to complete if it is carried out by an insider from the company. Therefore might be costly keeping staff on the payroll whilst carrying the study out or if errors in assessment are compounded by errors when applied in practise.
A SWOT analysis should be used for strategic overview of the company position and where best areas to improve flexibility and receptiveness. Focusing on critical factors it doesn’t provide depth for detailed consideration so really highlights directions of further study and better awareness. An external consultant would objectively conduct a study though without collaborating closely with internal groups there’s risk of missing information and misanalysis. Internal project management would control cost and direction.
Balanced Scorecard (BSc) assessments can be conducted with different directions of focus and by quantifying the application of vision they can be motivating and obligating. BSc’s can be used for translating the company’s long-term strategic goals and promoting a stronger commitment to achieve those goals in a measured fashion. BSc’s can integrate strategic planning and budgeting processes within a business. Scorecards conducted with alternative focuses could give different necessary insights i.e. providing superior service to customers. Personal Scorecards can motivate employees and promoting the value of scorecards can be used to help the management build a consensus view around how the organisation translates its vision and strategy.
Risks arise if a minimum threshold for a critical subject of the strategic measures is not established. Financial compensation tied to operations may be unpredictable and might become difficult to manage under changing circumstances. If a BSc analysis is not communicated beyond the boardroom to stakeholders vision might not be shared. “The culture of an organization may limit the level of success that may be achieved8”. Unless appropriate investments are made in implementing the selected strategy, the scorecard may not provide attainable goals.
The BSc is a tool which can be used to measure improvements in certain areas (i.e. more market/client receptive). To best promote awareness and adoption of a BSc programmes communicate potential benefits with all stakeholders. Targets should be set with forethought of linking process, financial, customer and growth aims. Well-crafted BSc’s can guide an organisation to adapt to emerging or changing marketplaces, to be consistent in application investment must be made and an open approach to organisational and process change taken.
Best Practise Benchmarking provides a useful tool for setting standards. The underlying principle is one of auditing the strengths and weaknesses of the firm and identifying the directions for future development of competitive advantage. Good BPB projects can provide an objective in depth analysis and act as a powerful change motivator. Working from best-practise approach introduces cross-industry data in a structured framework that allows for translation of practise between industries.
Though potentially valuable BPB requires confidentiality and has associated expenses for duration of the project. Benchmarking objects should also be carefully considered as BPB projects without clear goals and targets might be wasteful. Finally BPB must be performed against suitable competitors or non-competitors. Small changes in the industry can mean other ways of doing things which may not be directly applicable to your own business and processes.
BPB has the potential to be a key tool in furthering the aims of any business. In order to be best used though those competitors/non competitors which are judged against must be very carefully selected for their appropriateness. Quality Benchmarking and focusing on clients should be objective therefore the business may seek external advice/consultancy.
Organisational Development (OD) and Learning is about becoming more flexible and increasing the awareness and opportunities for the business. More involvement with partners, customers, industry related stakeholder community networks will help inform the business of roles, shifts and form new skills and relationships. It can promote new ideas, processes, alternative approaches and broaden realm of awareness and influences. A commitment to learning also increases Knowledge resources for the business, such that workers have more resources to draw from and better sources to inspire new ideas. An OD programme can also promote flexibility in working practices.
The three-stage process of Unfreezing the old behaviour, moving to a new level of behaviour, and refreezing the behaviour at the new level helps inspire thinking away from a ‘way we do things here’ attitude. OD promotes business flexibility and receptive when the knowledge resources seem insufficient to maintain satisfactory competitiveness. OD is a step towards breeding a culture of Continuous Improvement (CI) within the business.
Conclusions and recommendations:
Attempt to better our knowledge of our costumers’ needs and satisfaction by conducting a survey to find out how our clients feel about our operational services. This would include our project management, technology, end-to-end services, and assessing quality of all deliverables. This will help the company assess demand-pull from the target market.
Due to the need for objectivity we would recommend that an external consultant is brought in to conduct the SWOT analysis that will scan internal and external environments in order to target key areas of strength and potential competition and improvement. An experienced internal Project Manager (PM) preferably with a background in process improvements and familiarity with key project engineering/software design groups should be appointed to liaise.
Meet with key staff and discuss a Benchmarking programme for the weaknesses (both from the survey and SWOT analysis) in order to become more responsive to customer needs.
Company E should create a programme of improvements as recommended by the Benchmarking project. A Balanced Scorecard should be used to create shared vision on how to implement these changes amongst management and employees.
These activities performed on first instance will only capture the current situation within the business. Therefore as part of a longer term Organisational Development and Continuous Improvement (CI) programme we would suggest that assessment activities are carried out regularly.
To review information and to explore relevant opportunities for the business we would recommend appointing an ‘Innovation Team’ made up of staff from relevant business areas within the company. They may also provide a conduit to feedback information of new processes and trends to their respective groups.
They may be formed into a Cross-Function-Team (CFT) which could discuss ways the improving the company and resources based on those findings of the above tools/ subsequent investigations. For coherency of vision the CFT may be chaired by the PM involved in the SWOT assessments.
To broaden awareness of activities within industry communities we suggest encouraging groups to form broader relationships with other technology stakeholders such as Suppliers, Universities, Professional bodies and Government agencies9. Forecasting tools may then be used to better predict market shifts and opportunities. Potential for a Knowledge sharing exercise with the Canadian parent company should also be investigated. This will help the company better understand trends and technology pushes towards the target market
If any potential product or process improvements are thought to be required the team should seek acceptance of their ideas and ratify their potential projects through senior management.