普华永道战略咨询分析工具全英文99页.ppt

Strategy Practitioner ToolsCore ToolsOctober 19990© 1998, PricewaterhouseCoopers L.L.P.DRAFT: FOR DISCUSSION ONLY /Version: 660_w3/ppt/sfSC111898KR-Sydney1© 1998, PricewaterhouseCoopers L.L.P.Table of Contents1ANALYSIS PLAN2BREAKTHROUGH MODEL3COMPETITIVE BENCHMARKING4COMPETITIVE POSITIONING5CORE COMPETENCTY ANALYSIS6CUSTOMER SEGMENTATION7EXPERIENCE CURVE8FINANCIAL MODELING9FIT VS. ATTRACTIVENESS MODEL10FIVE FORCES ANALYSIS11GANTT CHART12GAP ANALYSIS13GROWTH SHARE MATRIX14INDUSTRY VALUE CHAIN ANALYSIS15ISSUE TREE/ISSUE MAP16KEY PERFORMANCE INDICATORS17MARKET PROFITABILITY 18PORTFOLIO ANALYSIS19REAL OPTIONS/STRATEGIC OPTION20SCALE CURVE21SCENARIO ENVISIONING22SENSITIVITY ANALYSIS23SEVEN S FRAMEWORK24STAKEHOLDER ANALYSIS25SWOT26VALUE BASED MANAGEMENT27VALUE CHAIN ANALYSIS28VALUE TREE29 VOICE OF THE CUSTOMERSC111898KR-Sydney2© 1998, PricewaterhouseCoopers L.L.P.Analysis Plan SummaryThe analysis plan details a problem-solving process and specific analysis which must be developed to assess a hypothesis. The analysis plan must be flexible and that the analyses to be conducted and the deliverables to be produced may change during the course of the project.Analysis PlanCLIENT EXAMPLE: HYPOTHESIS/ANALYTICAL PLANHypothesisAnalysisInfo. RequiredInfo. SourceEnd ProductsOverall HypothesisOrganizational philosophy needs to be modifiedSupporting HypothesisExisting organization does not adequately support the business strategy•Define business system, operating environment•Define CSFs, organizational requirements along business system•Define how existing organization supports business system, CSFs•Key activities, processes by LOB•CSFs along business system by LOB•Existing organizational elements impacting business system•Management interviews•Secondary research•HR documentsBusiness System DiagramsActivityCSF~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~Even after adjusting for asset write-up, financial performance has not met corporate expectations or competitive standards due to an inappropriate organization (and cost) structure•Financial performance vs. competitors, budget/plans•Overview of cost structure (e.g., fixed vs. variable costs)•ROA, NI adjusted for asset write-ups•Historic and projected financial data•Asset write-up information•Summary cost, volume info for production units•Annual reports, 10Ks, 10Qs, etc.•Company financial reports•Financial department interviewsFinancial MetricsThe increasing complexity of business and the evolving importance of, and coordination required between specialized expertise requires changes in the decision-making process and information flows•Define actual vs. perceived vs. “real” organization chart, decision-making process/responsibilities; identify gaps•Define expertise, info required to make decision, organizational requirements•Define evolving nature of organization and information flows•Key decisions•Key individuals involved in decision-making process•Information flows•Management interviews•Organization charts•Memos/documents on management processes•System flow chartsData/Info FlowsOrg ChartsSC111898KR-Sydney3© 1998, PricewaterhouseCoopers L.L.P.ApproachAnalysis PlanWhen To ApplyWhen it is necessary to lay out problem-solving process in depth/detail and identify the analyses which need to be undertaken to validate the selected hypotheses• Define an issue on which a specific action depends and phrase it as a “yes” or no” question• Establish a hypothesis: a statement of likely resolution of the issue including the reasons for answering “yes” or “no”• Develop an analysis statement that outlines the “models” that will be explored in order to prove or disprove the hypothesis• Identify the likely location or means of obtaining data to accomplish the analysis• Develop end products (presentations) to graphically represent the output of the analysisSC111898KR-Sydney4© 1998, PricewaterhouseCoopers L.L.P.Citations - Client and Industry ExperienceAnalysis Plan• Compaq/Technology/Vasu Krishnamurthy• Galileo/Travel/ Spencer Lin & Vasu Krishnamurthy• Post Office Counters Ltd./Transportation Services/KIT database• PwC MCS/Consulting/Vasu Krishnamurthy• United Airlines/Travel/Vasu Krishnamurthy•Robert M. Grant, “Contemporary Strategy Analysis”, 3rd EditionSource ListSC111898KR-Sydney5© 1998, PricewaterhouseCoopers L.L.P.Breakthrough Model SummaryThe Breakthrough model focuses attention on most substantial opportunities for creating value for customers and shareholders.Breakthrough ModelExternalInternalIndustryCompanyTrends in theeconomicenvironment inwhich the marketsexistBest practicesacross this andsimilar industriesMarket/productstrategy and basisfor competitionCapabilities of the company’speople, processes,technology, systems andstructure1234Market/ProductRepositioningIndustryTransformationEnterpriseAlignmentBest PracticePerformanceSC111898KR-Sydney6© 1998, PricewaterhouseCoopers L.L.P.ApproachBreakthrough ModelWhen To ApplyUtilize the Breakthrough model to identify and categorize all opportunities to create substantial incremental shareholder value.When creating a Breakthrough model, the following criteria should be considered:• Summarize all opportunities to improve business performance from other analyses• Categorize them into four groups:• Enterprise alignment• Best practice performance• Market/product repositioning• Industry transformation• Determine approximate economic value of each type of strategySC111898KR-Sydney7© 1998, PricewaterhouseCoopers L.L.P.Citations - Client and Industry ExperienceBreakthrough ModelNon-PwC:•Toyota: the lean production system• Frito-Lay: end-to-end supply chain management and the use of advanced technology• Intel: high velocity product development• A: Internet based channels of distribution on behalf of shareholders. •Paul Elkin, “Mastering Business Planning and Strategy: The Power and Application of Strategic Thinking” Source ListSC111898KR-Sydney8© 1998, PricewaterhouseCoopers L.L.P.Competitive Benchmarking SummaryCompetitive Benchmarking is used to identify and measure the factors that determine why a process has specific cost, quality or timing attributes and incorporate the best practices into an actionable change plan. It does so in part, by comparing a company’s performance in key areas with respect to its competitors’ performance. Examples of presenting Competitive Benchmarking findings:Competitive BenchmarkingMonthsHome GoodsPerishablesApparel Average = 6.7 = Maximum# = Average or Most Common = Minimum02468101214161820ABCDEFGIJKLMNNEW PRODUCT DEVELOPMENT CYCLE TIMEBest Practices•~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~•~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~•~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~3.55.04.56.513.55.06.09.07.06.010.56.04.5SC111898KR-Sydney9© 1998, PricewaterhouseCoopers L.L.P.ApproachCompetitive BenchmarkingWhen To ApplyWhile not a comprehensive comparison, Competitive Benchmarking illustrates the efficiency of specific processes in comparison to a company’s competitors. Select companies to benchmark against carefully - remember that companies outside the client’s industry may be the best candidates. Ensure that data collected are comparable and the the right processes are benchmarked; those which have the biggest impact on customer service/satisfaction/value.• Examine the issues most important to the company’s situation to determine whether roles, processes, or strategic issues should by benchmarked• Identify key performance variables and determine which companies to use for comparison (both within company’s industry and outside the industry)• For process benchmarking, determine the metrics to be measured; these can be key performance indicators (KPI’s), or other measurements• Establish data collection methodology (industry sources, on-line databases, on-site visits, phone interviews, survey questionnaires, competitors, etc.)• Measure client company performance• Measure performance of competitors and best practice leaders• Illustrate the spectrum of performances on an appropriate graph• Determine gaps and reasoning• Develop action plans/recommendation to address gaps• Implement actions and monitor progressSC111898KR-Sydney10© 1998, PricewaterhouseCoopers L.L.P.Citations - Client and Industry ExperienceCompetitive Benchmarking• Ball Corporation/Packaging /Vasu Krishnamurthy & Mike Weiss• Motorola/Technology/Vasu Krishnamurthy• PwC MCS/Consulting/Vasu Krishnamurthy• United Airlines/Travel/Vasu Krishnamurthy • Paul Elkin, “Mastering Business Planning and Strategy: The Power and Application of Strategic Thinking”• Liam Fahey, Robert M. Randall, “The Portable MBA in Strategy”• Robert M. Grant, “Contemporary Strategy Analysis”, 3rd Edition• Michael Gould, Andrew Campbell, Marcus Alexander, “Corporate-Level Strategy: Creating Value in the Multibusiness Company” Source ListSC111898KR-Sydney11© 1998, PricewaterhouseCoopers L.L.P.Competitive Positioning SummaryCompetitive Positioning analysis shows how a company is positioned in its industry relative to its competitorsPositioning MapExample: EntertainmentHighLowLowHighChannel StrengthContent Strength•Intellectual property strength•Product strengthLowMediumHighMarket StrengthCompetitive PositioningSC111898KR-Sydney12© 1998, PricewaterhouseCoopers L.L.P.ApproachCompetitive PositioningWhen To ApplyTo show clients that you understand their market and position. Can also be used to develop strategic recommendations.STEPDATA REQUIREDSOURCE(S)1. Choose axes that are relevant to customer decision-making (first) and those which differentiate suppliers (second)2. Illustrate where competitors lie on map(s)3. Interpret map for strategic implications (e.g., clusters or open spaces)•Information on industry as a whole•Information on competing companies’ strategies and positioning•Trade associations•Trade periodicals and publications•Information services•Analyst reports•Various companies’ annual reports and other public information•Interviews with competitor management •Industry expertsSC111898KR-Sydney13© 1998, PricewaterhouseCoopers L.L.P.Citations - Client and Industry ExperienceCompetitive Positioning• Barclays Global Investors (BGI)/Banking/KIT database • Blue Cross/Insurance/Mike Weiss• Boots/Retail/KIT database• Galileo/Travel/ Spencer Lin & Vasu Krishnamurthy• Giddings & Lewis/Machine Tool/Vasu Krishnamurthy• Osh Kosh B’ Gosh?SP/Retail/Mike Weiss• PwC MCS/Consulting/Vasu Krishnamurthy• Save & Prosper/Banking/KIT database•Paul Elkin, “Mastering Business Planning and Strategy: The Power and Application of Strategic Thinking”•Robert M. Grant, “Contemporary Strategy Analysis”•Henry Mintzberg, James Brian Quinn, Sumantra Ghoshal, “The Strategy Process” •Henry Mintzberg, James Brian Quinn, “The Strategy Process: Concepts, Contexts, Cases”Source ListSC111898KR-Sydney14© 1998, PricewaterhouseCoopers L.L.P.Core Competency Analysis SummaryCore Competency Analysis provides a practical and systematic process to identify a company’s core competencies and assess key competitive advantages.Examples of Core Competency Models:Core Competency AnalysisMarketingExample: McDonald’sCustomerRefill SupportSales/DistributionOtherCustomer ServiceCritical Strategic Capabilities (SC) - The capabilities in which a company is a leader. These capabilities are the source of competitive advantage.Critical Enabling Capabilities (EC) - The capabilities in which a company is competitively equivalent to other market leaders. These capabilities are often the source of a barrier to entry.Strategic/Financial PlanningTechnologyDevelopmentProductDevelopmentMfg/JointVentureCore Competence (CC) - A competence which delivers a sustainable competitive advantage in current markets, provides access to a wide variety of markets, and makes a significant contribution to the perceived customer benefits of the end product.Primary Capabilities (PC) - Minimum functional and technical requirements necessary to participate.COMPETENCIES MODEL - FRAMEWORK•Fast, affordable, fun, family dining experience•Marketing and brand mgmt.•Training•Franchise mgmt.•Product innovation•BigMac recipe•High quality, low price product sourcing•Efficient operation•Hamburger preparation•Menu selectionSC111898KR-Sydney15© 1998, PricewaterhouseCoopers L.L.P.ApproachCore Competency AnalysisWhen To ApplyEmploy Core Competency analysis to evaluate a company’s capabilities in each function of the value chain with a hierarchical model which identifies capabilities and the degree to which they provide competitive advantage and can be leveraged. Please note that there is a risk of defining too narrowly the market in which the client competes, thus focusing on the wrong competency requirements or a subset of the competencies required to effectively compete. It is key that those projects and programs that aim at developing core competencies should not be open to re-prioritization at a later stage. Adhere to the following guidelines when analyzing core competencies and developing a Competencies Model - Framework:• Interview company senior management and business line management as well as competitor management• Define company’s business system and activities performed within each function - Based on the total range of capabilities identified, ask the questions:• Which ones do we have to be “good at”?• Which ones do we have to be “market/world leading at”? • Determine whether each activity is a primary capability, a critical enabling capability, a critical strategic capability, or a core competence, based on the degree to which the activity provides competitive advantage and can be leveraged• Note that while all the identified capabilities will be critical to achieve the vision and strategy, the questions will help distinguish core from non-core by invoking management attention and reflection in a systematic and structured mannerSC111898KR-Sydney16© 1998, PricewaterhouseCoopers L.L.P.Citations - Client and Industry ExperienceCore Competency Analysis• Galileo/Travel/ Spencer Lin & Vasu Krishnamurthy• Giddings & Lewis/Machine Tool/Vasu Krishnamurthy• MetLife/Insurance/KIT database • PwC MCS/Consulting/Vasu Krishnamurthy• Save & Prosper/Banking/KIT database• David A. Aaker, “Developing Business Strategies”, 5th Edition • Robert M. Grant, “Contemporary Strategy Analysis”, 3rd Edition • Michael Gould, Andrew Campbell, Marcus Alexander, “Corporate-Level Strategy: Creating Value in the Multibusiness Company”• Henry Mintzberg, Bruce Ahlstrand, Joseph Lampel, “Strategy Safari: A Guided Tour Through the Wilds of Strategic Management”• Henry Mintzberg, James Brian Quinn, Sumantra Ghoshal, “The Strategy Process”• Henry Mintzberg, James Brian Quinn, “The Strategy Process: Concepts, Contexts, CasesSource ListSC111898KR-Sydney17© 1998, PricewaterhouseCoopers L.L.P.EstablishEstablishSegmentation Segmentation ObjectivesObjectivesData Data AssessmentAssessmentModel Model ConstructionConstruction Build Closed Loop Build Closed Loop Performance Performance Tool ToolWhat are the objectives of the segmentation? Better ROI, redistribute spending, change sales efforts?What data is needed to meet the objectives?How much of that data can be obtained internally? externally?What data is essential to the segmentation?What data can be a focus for further improvement in the future?Define the variables of the model with accessible data?Develop an analytical tool that utilizes the variables to determine a customer ranking or grouping (ie most ideal partner to most inefficient partner).Refocus internal efforts based on segmentation outcome.Establish a way to capture the key data needed to segment customer base.Utilize the data on an ongoing basis to improve performance and continually reward the better performing customers.Customer Segmentation MethodologyHigh level work flow for a customer segmentationCustomer Segmentation Methodology SummarySC111898KR-Sydney18© 1998, PricewaterhouseCoopers L.L.P.Customer Segmentation SummaryCustomer segmentation is a division of a market into distinct groups of buyers who might require separate products and/or marketing mixes.THE CONVERTER MARKET CAN BE SEGMENTED USING TWO VARIABLES: ECONOMIC RISK AND FABRIC INNOVATION•Hold inventory•Credit problem•Basic fabrics“Opportunistic” Strategy•Specialty products•Narrow customer baseNiche Strategy (specialized product to narrow customer base)•Sell to manufacturers before fabric purchase•Established credit•Broad customer base•Basic fabricsLow-Cost Strategy•Sell to manufacturers before fabric purchase•Established credit•Focused customer base•Novel fabrics (“fashion forward”)Differentiation Strategy (specialized product to broad customer base)Economic Risk•Inventory position•Credit status•Product mix•Customer baseFabric Innovation•Percent novelties•Order size•Number of collectionsHighLowHighLowCustomer SegmentationSC111898KR-Sydney19© 1998, PricewaterhouseCoopers L.L.P.ApproachSTEPDATA REQUIREDSOURCE(S)1. Identify segmentation variables and segment the marketa) Survey Stage: Conduct interviews/focus groups with consumers to gain insight into motivations, attitudes, and behaviorb) Analysis Stage: Apply factor analysis to data to remove highly correlated variables; apply cluster analysis to create a number of maximally different segments2. Form segments by looking at consumer characteristics as well as consumer responsesa) Geographic Segmentationb) Demographic Segmentationc) Psychographic Segmentationd) Behavioral Segmentation•Results from focus groups, interviews, and surveys•Customer characteristics: demographics, statistics, etc.•Focus groups, interviews, surveys•Company dataWhen To ApplyApplicable when it is useful to better identify marketing opportunities, to develop the right offering for each target market, or to be able to reach the target market in the most efficient manner possible.Customer SegmentationSC111898KR-Sydney20© 1998, PricewaterhouseCoopers L.L.P.Citations - Client and Industry ExperienceCustomer Segmentation• Galileo/Travel/ Spencer Lin & Vasu Krishnamurthy• General Mills/CIP/Johan Sauer• Giddings & Lewis/Machine Tool/Vasu Krishnamurthy• The Littlewoods Organization/Retail/KIT database• PwC MCS/Consulting/Vasu Krishnamurthy •Paul Elkin, “Mastering Business Planning and Strategy: The Power and Application of Strategic Thinking”•Robert M. Grant, “Contemporary Strategy Analysis”•Henry Mintzberg, James Brian Quinn, Sumantra Ghoshal, “The Strategy Process”Source ListSC111898KR-Sydney21© 1998, PricewaterhouseCoopers L.L.P.The Experience Curve forecasts future trends in cost/labor and determines the relative cost position of various competitors. The tool quantifies cost savings, theoretically achieved through experience gained in conducting a process.Experience Curve SummaryThe Experience CurveEXPERIENCE CURVE FOR WIDGETS - PROJECTIONS5040302010200400600800100020004000Unit Volume (Thousands)Unit Cost($)197419751976 1977 1978197919801981 1982 19831984Slope 20%SC111898KR-Sydney22© 1998, PricewaterhouseCoopers L.L.P.ApproachExperience CurveCreating the Experience Curve requires yearly accumulated production volume for the entire indicative and individual competitors, and the unit cost for the entire industry and competitors (use price data if cost data is not available.) Data can be secured from government agencies, trade associations, and from internal company data.Step 1Plot accumulated volume for different years against unit cost on a log/log scale (unit cost should be deflated by using a general index such as the GNP deflator, or specific indices for the various pars of cost such as materials and labor.)Step 2Add a standard regression line to the graph.CAVEATS: •Cost figures must be defined in the same manner by all sources of data. If company cost-accounting data is used, it may need to be adjusted for overhead allocations and other costs not considered to be part of the activity, process, or product under study. If price data is used pricing behavior of participants needs to be considered•Innovation within any functional area (e.g., product, process, distribution) can render the current experience curve useless as a strategy tool. Therefore, it is important to understand the environmental and customer trends in order not to rely too heavily on this analysis•The experience curve is only an analytical concept, and there is no guarantee that costs will actually decrease according to it. The company must actively manage costs downWhen to ApplyThe Growth Share Matrix may be overly simplistic, market share does not always correlate with profitability and not all businesses have the same asset intensity. Conclusions are sensitive to business and market definitions; where lines are drawn. Practitioners must be creative, careful and consistent with market data. SC111898KR-Sydney23© 1998, PricewaterhouseCoopers L.L.P.Citations - Client and Industry ExperienceExperience Curve Source List• David A. Aaker, “Developing Business Strategies”, 5th Edition• The Boston Consulting Group, “Perspectives on Strategy”• Robert M. Grant, “Contemporary Strategy Analysis”, 3rd Edition• Henry Mintzberg, Bruce Ahlstrand, Joseph Lampel, “Strategy Safari: A Guided Tour Through the Wilds of Strategic ManagementSC111898KR-Sydney24© 1998, PricewaterhouseCoopers L.L.P.Financial Modeling SummaryFinancial ModelingThe financial model will allow us to test management assumptions and understand how different actions may affect performance on some key competitive dimensions.SC111898KR-Sydney25© 1998, PricewaterhouseCoopers L.L.P.ApproachWhen To ApplyFinancial Modeling is effective in analyzing how a company’s performance, in core areas of business, will be affected by pursuing different courses of action. This tool facilitates an understanding of various cause-effect and provides a model by which to test various "what if" statements.Financial ModelingFollow these steps to successfully create a Financial ModelStep 1Gather information on key drivers ie.• From the cash flow analysis performed as part of the SVA• Data and insight from Voice of the Customer is another source of insightStep 2Map the relationships and identify factors which reinforce one another vs. those that have a negative relationship (e.g. increase in price may have a negative effect on demand)Step 3Build the financial model based on the cause-effect relationships identifiedStep 4Gather data from industry analysis or internal corporate dataStep 5Test the quality of the model by doing manual calculations on some "what if” Step 6Perform "what if" to assess the completeness of the modelSC111898KR-Sydney26© 1998, PricewaterhouseCoopers L.L.P.Citations - Client and Industry ExperienceFinancial Modeling• Flemings Fund Management Ltd (FFML)/Banking/KIT database• Galileo/Travel/ Spencer Lin & Vasu Krishnamurthy• Osh Kosh B’ Gosh?SP/Retail/Mike Weiss• PwC MCS/Consulting/Vasu Krishnamurthy• United Airlines/Travel/Vasu Krishnamurthy•Robert M. Grant, “Contemporary Strategy Analysis”, 3rd EditionSource ListSC111898KR-Sydney27© 1998, PricewaterhouseCoopers L.L.P.The Fit vs. Attractiveness Model optimizes strategy by developing a sense of the realistic state of the market and company affairs. The Model compares product fit with a market to product fit with a company’s objectives.Fit vs. Attractiveness Model SummaryThe Fit vs. Attractiveness Model•Baked Goods•Bulbs•Cheese•Fruit•Kitchenware•Meat/Seafood•Nursery Stock•Snacks/Candy•Stationery•Decorative Accessories•Indoor Plants•Nuts•Seeds•Trees/Shrubs•Gourmet Food•Bed/Bath•Pool/Patio/Gardening•Crafts•Personal Care/Grooming•Specialty Apparel•Camping Equipment•Children’s Apparel•Drug/Vitamins/Health Food•Hardware/Tools•Hosiery/Lingerie•Women’s Apparel•Men’s Apparel•Women’s Large Size Apparel•Athletic Equipment•Fishing Equipment•Hunting Equipment•Sporting Good ApparelCategoryFit WithCompanyHighMediumLowLowMediumHighCategory AttractivenessCATEGORY EVALUATION - SPECIALTY/SPIN-OFFCategories included in existing or planned specialty booksRecommended additional specialty book ventureEXAMPLESC111898KR-Sydney28© 1998, PricewaterhouseCoopers L.L.P.ApproachFit vs. Attractiveness ModelStep 1Identify product, category or market overall attractiveness as being low, medium, or high. Plot along x-axis.Step 2Identify product category, or market fit with company objectives as being low, medium, or high. Plot along y-axis.Step 3Evaluate newly created matrix; aim to reveal products, categories, or markets that fall under high overall attractiveness and high fit with company objectives.When to ApplyThe Fit Vs. Attractiveness Model is used to analyze a new product or service offering’s fit within a company, in comparison to the overall attractiveness of the product or offering. This particular model requires judgements which are subjective in nature; one should be aware that this model may oversimplify the market situation.SC111898KR-Sydney29© 1998, PricewaterhouseCoopers L.L.P.Citations - Client and Industry ExperienceFit vs. Attractiveness ModelSource List• Galileo/Travel/ Spencer Lin & Vasu Krishnamurthy• PwC MCS/Consulting/Vasu Krishnamurthy•Paul Elkin, “Mastering Business Planning and Strategy: The Power and Application of Strategic Thinking”•Henry Mintzberg, James Brian Quinn, Sumantra Ghoshal, “The Strategy Process”SC111898KR-Sydney30© 1998, PricewaterhouseCoopers L.L.P.Five Forces Analysis SummaryThe Five Forces Analysis evaluates the attractiveness of an industry.Five Forces AnalysisDRIVERS OF MARKET ATTRACTIVENESSPOTENTIAL ENTRANTSEntry barriers are high if there are:•Economies of scale•Product differentiation•Capital requirements•Limited access to distribution channels•Restrictive government policies•Potential retaliatory reaction of incumbentsINDUSTRY COMPETITORSRivalry is intense if:•Competitors are numerous or roughly equal in power or size•Industry growth is slow•There are high fixed costs or the product is perishable•The product lacks differentiation or switching costs•Capacity is augmented in large increments •Exit barriers are high•Rivals are diverse in strategies, origins, and "personalities"SUBSTITUTESThreat of substitutes is high if:•There is an abundance of products or services that serve the same function•The price-performance tradeoff of substitutes is attractiveSUPPLIERSBargaining power of suppliers is greater if:•The supply industry is dominated by a few companies or is more concentrated than the buying industry•The supply product is differentiated or there are high switching costs•There are few substitutes•The buying industry is not an important customer of the supply industry•The supply industry poses a credible threat of forward integrationBUYERSBargaining power of customers is greater if:•The customer group is concentrated or buys in large volume•Products purchased are undifferentiated•Products purchased represent a significant portion of the customer's cost•Customers earn low profits, creating incentive to lower purchasing costs•The product purchased is unimportant to the quality of the customer's product•Switching costs are low•Customer group poses a credible threat of backward integrationSC111898KR-Sydney31© 1998, PricewaterhouseCoopers L.L.P.ApproachWhen To ApplyUse the Five Force analysis to evaluate a market’s structure and the trends affecting a market’s profitability. Please note that the structural conditions alone do not provide a quantification of total future market profitability or the viability of a company. Therefore, it is important to integrate company specific insights and confirm that the model accurately reflects what is happening in the market. Five Forces AnalysisFive Forces analysis utilizes a four step approach and is applied as a starting point for understanding a market’s attractiveness:Step 1:Collect dataStep 2:Evaluate strength of key forces, including: (What about technology?)• Buyers• Suppliers• Substitutes• Competitors• Potential entrantsStep 3:Qualitatively assign a high, medium or low score to each key forceStep 4:Assess the overall effect of the forces on industry attractiveness and strategic implicationsSC111898KR-Sydney32© 1998, PricewaterhouseCoopers L.L.P.Citations - Client and Industry ExperienceFive Forces Analysis• Aerospace & Electronics Alliance/Multi-Industry/KIT database• Galileo/Travel/ Spencer Lin & Vasu Krishnamurthy• Iberdrola and Johnson & Johnson/TC-Utilities/KIT database• la Caixa/FM-Banking/KIT database• Levi Straus, Merk and Motorola/Multi-Industry/KIT database• PwC MCS/Consulting/Vasu Krishnamurthy Source List• David P Baron, “The Nonmarket Strategy System”, Sloan Management Review, Fall 1995• Liam Fahey, Robert M. Randall, “The Portable MBA in Strategy”• Robert M. Grant, “Contemporary Strategy Analysis”, 3rd EditionSC111898KR-Sydney33© 1998, PricewaterhouseCoopers L.L.P.GANTT ChartA GANTT chart gives the expected timeline for the engagement based on the client’s needs and our experience and expertise.GANTT ChartIDNameScheduledFinish3/143/213/284/44/114/184/25MarApr1234567891011123/26/933/26/934/23/934/12/933/30/934/1/934/5/934/7/934/8/934/9/934/12/934/19/93MobilizationPwC MobilizationSCM MobilizationDesign customerservice processMap communicationModel economicdecisionsIdentify costdriversIdentify valuedriversSpecify CSactivitiesSpecify CS informationneedsSpecify CSresourcePrepare trainingmaterialsSC111898KR-Sydney34© 1998, PricewaterhouseCoopers L.L.P.ApproachGANTT ChartWhen To ApplyWhen it is necessary to Illustrate for the client a rough timeline for the proposed engagement.•Determine the approximate duration for each task.•Understand the prospective client's time constraints.•Using a project management software tool such as Microsoft Project, determine the specific timeline for the project•Work either forward from an anticipated start date to determine the approximate time of completion, or backward from a client's "must-complete-by" date to determine the necessary duration of tasks, or bothSC111898KR-Sydney35© 1998, PricewaterhouseCoopers L.L.P.Citations - Client and Industry ExperienceGANTT Chart• Chrysler/Automotive/Vasu Krishnamurthy• E.B.Eddy - Forestry & Wood Products Division/Agriculture, Forestry & Fisheries/KIT database• Giddings & Lewis/Machine Tool/Vasu Krishnamurthy• RBMG/Mortgage Banking/Vasu Krishnamurthy• United Airlines/Travel/Vasu Krishnamurthy•Henry Mintzberg, James Brian Quinn, Sumantra Ghoshal, “The Strategy Process” Source ListSC111898KR-Sydney36© 1998, PricewaterhouseCoopers L.L.P.Gap Analysis SummaryAn analysis ranking critical success factors against a company’s ability to attain them and their criticality to succeeding with a particular product or service.Gap AnalysisCall center adaptation(e.g. 7x24)Source software/agreementEnsure software quality and securitySoftware vendor contactsNegotiate contracts with software vendors and distribution channelsDevelop product offering mix and marketing expertise (e.g. non-traditional distribution; CD-ROM)Appropriate Internet interfaceModify software as neededObtain strong patentsEvaluate Atlas softwareMarket and feasibility assessmentsFinancial projections (marketing)Technical supportDongle capability and manufacturing sourcePayment methodHigh PriorityCore ChallengeQuick HitLowest PrioritySource CD-ROM and disks manufacturersDIFFICULTY FOR COMPANY TO ATTAINLowHighHighCRITICALITYTOPRODUCTSUCCESSSource: PW analysis, industry interviewsEXAMPLE:SC111898KR-Sydney37© 1998, PricewaterhouseCoopers L.L.P.ApproachGap AnalysisWhen To ApplyWhen you must understand which critical success factors present the greatest challenge in order to focus efforts.STEPDATA REQUIREDSOURCE(S)1. Determine the trademark axes for the matrix2. Determine the company’s existing strategy against the industry3. Generate alternative strategic options for the company and plot them on the matrix•An understanding of the client’s current positioning, vis-a-vis competitors•Understanding of strategic options available•Interviews with senior management•Analyst reports•Industry experts•Interviews with competitors•Trade publicationsIs this the correct text???????????SC111898KR-Sydney38© 1998, PricewaterhouseCoopers L.L.P.Citations - Client and Industry ExperienceGap Analysis• Flemings Fund Management Ltd (FFML)/Banking/KIT database• Galileo/Travel/ Spencer Lin & Vasu Krishnamurthy• General Motors/Automotive/KIT database• Philips/Multi-Industry/KIT database• PwC MCS/Consulting/Vasu Krishnamurthy• David A. Aaker, “Developing Business Strategies”, 5th Edition • Robert M. Grant, “Contemporary Strategy Analysis” 3rd Edition• Michael Gould, Andrew Campbell, Marcus Alexander, “Corporate-Level Strategy: Creating Value in the Multibusiness Company” Source ListSC111898KR-Sydney39© 1998, PricewaterhouseCoopers L.L.P.Growth Share Matrix SummaryGrowth Share Matrix STARSQUESTION MARKSCASH COWSDOGSNOMAN’SLAND30%0%MarketGrowthRateExpected Growth if Available; Otherwise 3-Year Historical Growth Rates4x2x1.5x1x.5x.25xCompany’s Sales or ShareLargest Competitors Sales or Share?The Growth Share Matrix is examines a company’s portfolio of businesses, depicting the company’s cash flow position by plottingeach business’ relative market share against industry growth. This tool assists companies in determining which business units should be a focal point for growth strategies. Two examples of Growth Share Matrices appear below:Market Growth RatePPO Nat’l AccountLocal Group Cost Plus and ASODental Stand-AloneNational Account ControlNational Account ParTraditional/ Comp Local Group MetroTraditional/ Comp Local Group OutstatePPO OutstateDirect Pay CompMedicareLifeHMOPPO5.03.02.01.51.00.70.50.30.2Each circle represents a different businessCircle size represents proportional salesData needed for each business unit:1.Sales2.Market growth3.Sales of largest competitor(or market share data)4.0SC111898KR-Sydney40© 1998, PricewaterhouseCoopers L.L.P.ApproachGrowth Share MatrixWhen To ApplyThis tool aims to eliminate management distraction in small unprofitable business and guides management to access the appropriate resource levels needed for allocation to promising new businesses/core businesses. Although a useful tool, it has been criticized as being overly simplistic. Market share does not always correlate with profitability and not all businesses have the same asset intensity. Conclusions are sensitive to business and market definitions; where lines are drawn. When using this tool, practitioners should be creative, careful and consistent with market data.Creating the Growth Share Matrix requires sales data, market growth information and market share data. This information canbe found in the following sources: company data/financial statements, trade publications, interviews with senior management andindustry expert/analyst opinions. The following steps will assist in creating a Growth Share Matrix:Step 1Plot relative market share on x-axisStep 2Plot market growth rate on y-axis • Use expected growth if available, otherwise use 3 year historical growth ratesStep 3Each circle (plot) should represent a different business • The size of the circle should be proportionate to salesSC111898KR-Sydney41© 1998, PricewaterhouseCoopers L.L.P.Citations - Client and Industry ExperienceGrowth Share Matrix• Galileo/Travel/ Spencer Lin & Vasu Krishnamurthy• PwC MCS/Consulting/Vasu Krishnamurthy• David A. Aaker, “Developing Business Strategies”, 5th Edition• Robert M. Grant, “Contemporary Strategy Analysis”, 3rd Edition• John Micklethwait & Adrian Wooldridge, “The Witch Doctors: Making Sense of the Management Gurus”Source ListSC111898KR-Sydney42© 1998, PricewaterhouseCoopers L.L.P.Growth Share Matrix SupplementLosing Market ShareHolding Market ShareGaining Market ShareMarket Growth RateBusiness Growth Rate30%0%30%Use 3-year historical growth rates (use 5-year if business is highly cyclical)Data needed for each business unit:1. Sales2. Market Growth3. Sales of largest competitor(or market share data)Each circle represents a different businessCircle size represents proportional salesIt is useful to accompany the Growth/Share Matrix with a Growth/Growth Matrix, which shows those businesses that are gaining share and those that are losing share. This matrix will often suggest additional analyses, examining the strategy of those businesses losing share.SC111898KR-Sydney43© 1998, PricewaterhouseCoopers L.L.P.Industry Value Chain Analysis SummaryThe Value Chain Analysis can operate on two levels: as a strategic tool to facilitate an understanding of where the key strengths and weaknesses lie within an organization and as a more operational tool to look at supply chain management issues. Limitations include: difficult to estimate where value is created (or destroyed) without more detailed analysis, e.g. ABM, relatively static model, should not be applied in nonmanufacturing or non process oriented companiesIndustry Value Chain AnalysisSC111898KR-Sydney44© 1998, PricewaterhouseCoopers L.L.P.ApproachIndustry Value Chain AnalysisWhen To ApplyUnderstand opportunities for adding value by improving the various elements of the value chainStep 1Identify the key primary and support activitiesStep 2Identify value added at each stageStep 3Assess the contribution of each stage to the organization's competitive advantageStep 4Identify the key cost driversStep 5Assess potential for increasing value and decreasing costsThe value chain analysis is at its' simplest a high level diagnostic to see where the organization needs to improve or maintain value creation.SC111898KR-Sydney45© 1998, PricewaterhouseCoopers L.L.P.Citations - Client and Industry ExperienceIndustry Value Chain Analysis• Galileo/Travel/ Spencer Lin & Vasu Krishnamurthy• Paul Elkin, “Mastering Business Planning and Strategy: The Power and Application of Strategic Thinking”• Liam Fahey, Robert M. Randall, “The Portable MBA in Strategy”• Robert Grant, “Contemporary Strategy Analysis”• Henry Mintzberg, James Brian Quinn, Sumantra Ghoshal, “The Strategy Process”• Henry Mintzberg, Bruce Ahlstrand, Joseph Lampel, “Strategic Safari: A Guided Tour Through the Wilds of Strategic Management” Source ListSC111898KR-Sydney46© 1998, PricewaterhouseCoopers L.L.P.Issue Tree/Issue Map SummaryAn Issue Tree/Issue Map typically begins with a broad question and defines the sequence of key issues (phrased as yes or no choices) that will support a specific answer. A practitioner would use issue maps to frame options, usually later in the project.A more detailed example is included as a supplement. However, a basic representation can be found below.Issue Tree/Issue MapIssue Map(Yes/No Tree)?YesNoSC111898KR-Sydney47© 1998, PricewaterhouseCoopers L.L.P.ApproachIssue Tree/Issue MapWhen To ApplyThis tool is most effective when considering discrete or well-defined alternatives and is extremely practical for communication related issues. A practitioner should be recognize that an Issue Tree/Issue Map requires strong knowledge of problem or issue, client and industry. It can be frustrating to push decision branches to yes/no questions and difficult (time consuming) to create MECE options.An Issue Tree/Issue Map ensures logical integrity of the problem solving framework and reduces potential for oversights ormissed opportunities. Follow these 5 steps to successfully create an Issue Tree/Issue Map:Step 1Identify the key issuesStep 2Define the starting points (i.e. what factors drive these issues?)Step 3Identify all possible outcomesStep 4Develop the logic flow connections among these optionsStep 5Start overSC111898KR-Sydney48© 1998, PricewaterhouseCoopers L.L.P.Citations - Client and Industry ExperienceIssue Tree/Issue Map• BCBSF/ /Chuck Stern• Galileo/Travel/ Spencer Lin & Vasu Krishnamurthy• United Airlines/Travel/Vasu Krishnamurthy•Strategic Change MBA Training Source ListSC111898KR-Sydney49© 1998, PricewaterhouseCoopers L.L.P.Issue Tree/Issue Map SupplementWill likely movements in prices and demand allow Client to achieve reasonable profitability if it carries on as presently?Is client prepared to wait for this?Can client achieve reasonable profitability by better sales and marketing efforts?Carry on as presentlyImprove sales and marketing effective-ness by selecting target segments and refocusing effortsDefine and implement profit improvement programsDefine and implement reinvestment programAnalysisAnalysisAnalysisAnalysisAnalysisAnalysisActionDress up for saleDevelop harvest strategyYesNoIs client worth more to others than to its parents?YesNoWould major investment provide client with reasonable profitability?YesNoCan client achieve reasonable profitability by reducing its costs?Go to AYesNoYesNoYesNoA213456Note that this issue map for evaluating an SBU’s strategy sets up six analyses in order.SC111898KR-Sydney50© 1998, PricewaterhouseCoopers L.L.P.Answers to EachFind another basis for competing, i.e., value not cost14“The modernized Client Name”10Can Client Name economically develop and lead the introduction of this S3 technology7Will current state-of-the-art technology be replaced, putting Client Name at a disadvantage with a modern plant?6Will modernization be forced on Client Name as a “ticket to play the game”?5Can Client Name economically “leapfrog” competition in production technology?2Would further integration economically develop a sustainable low-cost position?1Over the next 12-18 months, can Client economically become the low-cost producer through optimization of the current plant?13“Build strength through capacity”12“Niche/milk”11“Change the game”15“Aggressive leadership in technology”16“Leadership exploitation” 17“Build strength through integration”18“The excellent manufacturing company”Find the market segments that are not cost-sensitiveModernize all plants as quickly as possibleExpand capacity to a point that maximizes profitMinimize any current modernization; participate in S3 development; lead introductionMinimize current modernization; be aware and flexible to convert when appropriateIntegrate backward and forward to an extremeMake cost management/ productivity a “way of life”9Can Client Name “change the game” (i.e., compete on something other than cost?)8Will capacity expansion be required to economically develop the cost leadership position?4Are external factors likely to foreclose on this cost position?3Is this position sustainable?YesNoNoNoNoNoNoNoNoNoNoYesYesYesYesYesYesYesYesYesIssue Tree/Issue Map SupplementEXAMPLEThis study was to assist management at a diversified parent co. develop a “vision” for the future of its “heritage” business - a paperboard subsidiary. While returns had been attractive in this subsidiary, management was questioning whether further investment was advisable.SC111898KR-Sydney51© 1998, PricewaterhouseCoopers L.L.P.Key Performance Indicators SummaryAlthough there are many approaches to performance management and various types of KPIs: Strategic KPIs, Financial KPIs, Organizational KPIs and City KPIs, this particular example focuses on Strategic KPIs (SKPIs). Founded on the concept of a Balanced Scorecard, the Strategic KPI management technique highlights those factors that are critical to maintaining the strategic direction of a business. The Balanced Scorecard is a measurement framework which focuses on the four primary perspectives of corporate performance. Each perspective focuses on a particular question fundamental to the future prosperity of the overall business.Key Performance Indicators - KPIBUSINESS DEVELOPMENTPERSPECTIVE…how do we look to our owners?FINAL PERSPECTIVE…how can we further develop?CUSTOMER PERSPECTIVE…how do our customerssee us?INTERNAL PERSPECTIVE…what must we excel at?The Balanced ScorecardSC111898KR-Sydney52© 1998, PricewaterhouseCoopers L.L.P.Key Performance Indicators Summary - continued...The Balanced Scorecard drives performance throughout the organization. There is a direct line of integration between the Vision of the organization and the Strategy that is being pursued. It also provides the top level “scoring” mechanism to ensure each aspect of the business is on-track. The link between objectives, SKPIs, targets and initiatives is illustrated below.Key Performance Indicators - KPIFINANCIAL PERSPECTIVEThe Balanced Scorecard ApproachOBJECTIVES SKPI TARGETS INITIATIVESAAA AAA AAA AAABBB BBB BBB BBBCCC CCC CCC CCCDDD DDD DDD DDDBUSINESS DEVELOPMENT PERSPECTIVEOBJECTIVES SKPI TARGETS INITIATIVESAAA AAA AAA AAABBB BBB BBB BBBCCC CCC CCC CCCDDD DDD DDD DDDCUSTOMER PERSPECTIVEOBJECTIVES SKPI TARGETS INITIATIVESAAA AAA AAA AAABBB BBB BBB BBBCCC CCC CCC CCCDDD DDD DDD DDDINTERNAL PERSPECTIVEOBJECTIVES SKPI TARGETS INITIATIVESAAA AAA AAA AAABBB BBB BBB BBBCCC CCC CCC CCCDDD DDD DDD DDDTHE VISION“to achieve sustainableoutstanding results through a continuous focus on brand valuesand customer service”THE VISION• deliver customer satisfaction• continuous improvement• develop quality people• meet shareholder expectationsSC111898KR-Sydney53© 1998, PricewaterhouseCoopers L.L.P.ApproachKey Performance IndicatorsWhen To ApplyUse the Strategic KPI approach to determine what factors will be the foundation for ensuring a culture of continuous performance improvement and preparing the overall business for both the boom and recessionary periods which typify the economic cycles in which corporations operate. It is particularly effective to visualize the direct correlation between an organization’s vision and the strategy which is being pursued to satisfy that vision.Step 1Assign each of the organization’s Business Objectives to the appropriate Strategic KPI; these SKPIs will represent measurement tools used to track progress. Examples regarding the Financial Perspective are as follows:ProfitabilityNet profit Margin (%)Return on Total Funds (%) Shareholder IncomeDividend Level ($)Dividend Cover (times)GrowthSales Trend (year on year growth)StabilityGearing (Debt: Equity) RatioInterest Cover (times)Step 2Set and clearly communicate a stretching yet achievable target level of performance to each SKPI Step 3Identify, implement and continually review specific initiatives which will enable the organization to achieve the aforementioned targetsSC111898KR-Sydney54© 1998, PricewaterhouseCoopers L.L.P.Citations - Client and Industry ExperienceKey Performance Indicators• DuPont/Chemicals/Vasu Krishnamurthy• Ericsson/Technology/KIT database• Flemings Fund Management Ltd (FFML)/Banking/KIT database• International Paper Company/Multi-Industry/KIT database• SAP/CIP/KIT database• Sega of America/Technology/KIT database• Valco/Chemicals/Vasu Krishnamurthy• Paul Elkin, “Mastering Business Planning and Strategy: The Power and Application of Strategic Thinking”• Robert M. Grant, “Contemporary Strategy Analysis”, 3rd Edition Source ListSC111898KR-Sydney55© 1998, PricewaterhouseCoopers L.L.P.Market Profitability Modeling SummaryMeasures current and predicts future market profitability by company profit margins.Market ProfitabilityTOTAL MARGINS OF HMOs CONTROLLED BY NETWORK MANAGERSMargins($ Billions)SC111898KR-Sydney56© 1998, PricewaterhouseCoopers L.L.P.ApproachMarket ProfitabilityWhen To ApplyWhen you would like to forecast industry profitability.STEPDATA REQUIREDSOURCE(S)1. Collect margin data in dollars for industry competitors for the current year and aggregate2. Predict the same margins for a determined future year and aggregate3. Graph current and future aggregate margins•Competitor margin data•Company financial statements•Moody’s company data Bloomberg•Industry Associations/PublicationsSC111898KR-Sydney57© 1998, PricewaterhouseCoopers L.L.P.Citations - Client and Industry ExperienceMarket Profitability• Braun/CIP/KIT database• PwC MCS/Consulting/Vasu Krishnamurthy• David A. Aaker, “Developing Business Strategies”, 5th Edition • Robert M. Grant, “Contemporary Strategy Analysis”, 3rd Edition Source ListSC111898KR-Sydney58© 1998, PricewaterhouseCoopers L.L.P.Portfolio Analysis/Product Portfolio Analysis SummaryThis analysis illustrates product performance and suggests product strategies; for example: high competitive position coupled with high market attractiveness suggests investing to grow at the maximum digestible rate.Portfolio Analysis/Product Portfolio AnalysisSC111898KR-Sydney59© 1998, PricewaterhouseCoopers L.L.P.ApproachPortfolio Analysis/Product Portfolio AnalysisWhen To ApplyBest utilized to consider the relative strengths of a company’s array of products and determine appropriate strategies for each.When presenting portfolio analysis/product portfolio analysis findings, use the following guidelines:• Use available internal and external sources to collect data on indicators of market attractiveness and competitive position such as market share, % revenue growth, and revenue in absolute dollars for each of the company’s product lines• For each product:• graph growth rate vs. relative market share• scale the data points to reflect product revenue in absolute dollars• Divide each axis into three sections - low, medium, and high - to form nine subdivisions on the graphSC111898KR-Sydney60© 1998, PricewaterhouseCoopers L.L.P.Citations - Client and Industry ExperiencePortfolio Analysis/Product Portfolio Analysis• Allstate Insurance Company/Banking/KIT database• Vanguard/Banking/KIT database• David A. Aaker, “Developing Business Strategies”, 5th Edition• The Boston Consulting Group, “Perspectives on Strategy” Source ListSC111898KR-Sydney61© 1998, PricewaterhouseCoopers L.L.P.Real Options/Strategic Options SummaryProduces positioning maps to assess various strategic options.Traditionally, the financial tool most widely relied on to estimate the value of strategy, discounted cash flow (DCF) valuation, assumes that management will follow a predetermined strategic plan, regardless of how events unfold or what new information is obtained. Ideally, executives would like to address flexibility and uncertainty in their strategies when assuring them. Option pricing is a tool which enables executives to do just that, improving decision making about the sequence and timing of a portfolio of strategic investments. Option space is a way to visualize the various options for an executive; it gives them a way to “draw” a strategy in terms that are neither wholly strategic nor wholly financial but some of both. Real Options/Strategic OptionsDiscountStoresClientGeneralStoreSpecialtyStoresNon-CostCostGeneralMerchandiseSpecialtyMerchandiseWHERE TOCOMPETEEXISTING STRATEGYHOW TO COMPETEOption Space Divided into Regions “The Tomato Garden”higherlowerVolatilityValue-to-cost1.00.0Region 6: Never. Rotten tomatoes, InvestRegion 1: Now. Ripe tomatoes, InvestRegion 5: Probablynever. Late blossoms and small greentomatoes Less promising green tomatoesRegion 4: Maybe laterInedible, but very promising tomatoesRegion 3: Probably laterRegion 2: Maybe now. Imperfect but edible tomatoesSC111898KR-Sydney62© 1998, PricewaterhouseCoopers L.L.P.ApproachReal Options/Strategic OptionsWhen To ApplyWhen you wish to identify various strategic options (positioning), which outline where and how to compete.STEPDATA REQUIREDSOURCE(S)1. Determine the trademark axes for the matrix2. Determine the company’s existing strategy against the industry3. Generate alternative strategic options for the company and plot them on the matrix•An understanding of the client’s current positioning, vis-a-vis competitors•Understanding of strategic options available•Interviews with senior management•Analyst reports•Industry experts•Interviews with competitors•Trade publicationsSC111898KR-Sydney63© 1998, PricewaterhouseCoopers L.L.P.Citations - Client and Industry ExperienceReal Options/Strategic Options• GTE CyberTrust/Banking/KIT database • Kellogg Company/Food & Beverage/KIT database• Robeco Bank SA/Banking/KIT database• Star System Inc. - E-Commerce Workshop/Banking/KIT database•Robert M. Grant, “Contemporary Strategy Analysis”•Timothy Luehrman, “Investment Opportunities as RealOptions:Getting Started on the Numbers”, HBR, July 1998•Timothy Luehrman, “Strategy as a Portfolio of Real Options”, HBR, September 1998 Source ListSC111898KR-Sydney64© 1998, PricewaterhouseCoopers L.L.P.Scale Curve SummaryThe Scale Curve identifies the benefits derived from economies of scale.Scale Curve10.05.01.00.50.112345678910n1An1An1An1An1At1An1An1An1An1A©1An1At1A©1AClient AClient BCompetitor CCompetitor BKeySUPPORT LABOR SCALE EFFECT - CONVENTIONAL FIGHTER AIRCRAFTEXAMPLERatio of Support Labor Hours to Touch Labor HoursTotal Annual Program Touch Labor Hours (000)Client Plane base hoursSLOPE = 67%SC111898KR-Sydney65© 1998, PricewaterhouseCoopers L.L.P.ApproachScale CurveWhen To ApplyWhen it is necessary to determine if there is a benefit to derived from economies of scale.•Gather cost information of producing a service or a product at various volumes•Display information in scale curve for relevant products or functionsSC111898KR-Sydney66© 1998, PricewaterhouseCoopers L.L.P.Citations - Client and Industry ExperienceScale Curve• BCBSF/ /Chuck Stern• Robert Grant, “Contemporary Strategy Analysis” Source ListSC111898KR-Sydney67© 1998, PricewaterhouseCoopers L.L.P.The Scenario Envisioning concept is an inductive, “top-down” approach to developing future industry/market scenarios. The approach hypothesizes future scenarios independent of the past and present upfront and then links them to past and current trends. The scenarios are then used in simulating business outcomes such as consumer preferences, business systems and competitive actions, which in turn are used to identify value added opportunities and future strategies. PricewaterhouseCoopers’ Scenario Envisioning has been developed to assist companies in mapping the possible future of an industry in transition. Decision makers are using Scenario Envisioning to rethink how the driving forces of their industry might combine in surprising ways. In these new models of the future, they test current strategy, develop and explore other options. Executives practice operating and understanding their business in states that current rivals don’t expect, making decisions today that will enhance their organization’s chances of succeeding tomorrow.Most managers expect Scenario Envisioning to begin with prefabricated world visions of economic and geopolitical trends. In contrast, Scenario Envisioning develops customized pictures of a company’s future markets that are distinctly different from the present and yet quite possible. Hence, managers experience what it would be like to operate in new markets and serve customers with new needs.Scenario Envisioning SummaryScenario EnvisioningSC111898KR-Sydney68© 1998, PricewaterhouseCoopers L.L.P.Scenario Envisioning is a powerful approach for companies in industries that are experiencing rapid discontinuous change – where the future cannot be extrapolated from the past and present. Scenario Envisioning fulfills the key needs for formulating strategy in a rapid discontinuous change environment. The central conflict in economics ….is the battle between past and future, the war between the existing configuration of industries and the industries that will soon replace them,” observed the Wall Street Journal recently. A few years ago, planners labeled such industry transformation “discontinuity,” or a break in established trends. A more descriptive word is “convergence,” one type of discontinuity that creates a new set of customer values and products when two or more industries or technologies collide. This phenomenon has already redefined many markets and is even transforming whole industries. Executives today tasked with formulating strategic plans face the uncertain future of these converging industries.Scenario Envisioning can be employed, but not limited to the following situations:• Organization leaders who seek to understand the emerging future and its implications for making immediate decisions.• Management beginning corporate repositioning, strategic visioning, or re-invention initiatives• Managers of such functions as mergers and acquisitions, research and development, marketing and sales who need to test the consequences of current and potential decisions in different competitive futures• Staff units needing to depict, assess and communicate the implications of the alternative futures facing their organizations as part of the planning cycle• Corporate development managers who want to monitor emerging technologies and potential competitive conditions• Product and service marketers who track the rapid evolution of customer needs• Senior executives who integrate and coordinate mergers and acquisitions, joint ventures and strategic alliances and who need a clear vision of the outcomes and benefits of these ventures.Scenario EnvisioningWhen to ApplySC111898KR-Sydney69© 1998, PricewaterhouseCoopers L.L.P.Scenario EnvisioningApproachThrough PricewaterhouseCoopers’ work with companies in evolving industries, a ten-step approach has been developed that previews innovative and nontraditional industry and market capabilities.Innovative hypothesis about the future, based on extensive expert industry knowledge and research are formulated for study and review. The scenario team converts these theories of logical futures - ones that diverge from the past and present trends - into a set of distinctly different scenarios.Develop Future Industry ScenariosStep 1Define the broad future industry and market context within which the scenarios will be developed. For example, the banking industry, the broader context may be financial services or even personal information services.Step 2Identify the paramount forces that will shape this industry and market context. For example, what consumer, regulatory, social, legal and technological changes can or could exert the most powerful influence on your industry? How do these interact on a global basis? Which of these is the most uncertain?Step 3Identify the boundary parameters - the full range of uncertainty - of the paramount forces. For example, if regulation is one of the paramount forces, could the industry be intensively regulated or completely deregulated?Step 4Develop logical but innovative hypotheses that explain how the most powerful and uncertain forces could interact. For example, will a major segment of the banking industry evolve into an on-line personal with building industry, fostered by deregulation and increasing consumer technological capability?Step 5Create a set of scenarios that show how a few key unpredictable forces with the highest impact could interact. Using a matrix model, the interaction of two or more unpredictable conditions results in a number of distinct possibilities. The goal is to cover a comprehensive spectrum of market conditions.SC111898KR-Sydney70© 1998, PricewaterhouseCoopers L.L.P.Scenario EnvisioningApproach cont.Key business outcomes of the scenarios such as value chains and competitive dynamics are simulated. By viewing the potential evolutionary paths of markets , decision makers can anticipate what moves will put a company into the most advantageous position. Assess Economic Potential and Define Strategy OptionsStep 8Simulate business outcomes and such as new value chains and new competitor dynamics created by the evolutionary paths of the scenarios. This will identify which segments of your industry may have increased profit potential and which types of market participants are likely to reap the benefits.Step 9Assess your company’s capabilities and compare them to capabilities needed to compete in the various scenarios. Identify the company’s capability gaps and develop potential solutions to overcome them.Step 10Develop, prioritize, and select a portfolio of optimal strategic options to compete successfully in each of the scenarios, and compare them with the present direction. This will allow the company to rehearse its potential future.Step 7Plot the evolutionary paths of the scenarios. For example, the delivery of broadband TV to the home by fiber optics cable may not occur for many years. In the meantime, a variety of “compromise” technologies such as direct broadcast satellite TV, ISDN phone lines, and ultra-fast modems, may flourish.Step 6Test the credibility of the scenarios by assessing the viability of enabling events required to make them happen. For example, as today’s youngsters quickly adapt to interactive games, will the market for this type of entertainment continue to grow as they mature?SC111898KR-Sydney71© 1998, PricewaterhouseCoopers L.L.P.Citations - Client and Industry ExperienceScenario Envisioning• Hollywood Studio/EntertainmentAt a major Hollywood Studio, PwC was employed to lead studio executives through the Scenario Envisioning ten step approach. Please refer to Sample Deliverables. • Galileo/Travel/Spencer Lin & Vasu KrishnamurthyAt Galileo, PwC used the Scenario Envisioning tool to develop potential diversification strategies.Deliverables are available for review.• Tetra-pack/?/E-Business/Susan?• Saul J. Berman and Steve Redwood, “Developing Strategy in Changing Markets: A Case Study in Scenario Envisioning” • Strategic Change: Scenario Envisioning Approach to Strategy Development Source ListSC111898KR-Sydney72© 1998, PricewaterhouseCoopers L.L.P.Industry Driver Impact•New entrants•New/substitute products•New markets•M&A activity•Shifting business models and economics•Technology•Regulation•Consumer DispositionHIGHLOWLOWHIGHEnvironment Driver ImpactStatic IndustrySlow Incremental ChangeTransforming IndustrySteady Evolutionary ChangeDynamic IndustryRapid Discontinuous ChangeScenario EnvisioningTraditional StrategyDevelopmentBudgetary PlanningIdeal StrategyDevelopmentScenario Envisioning SupplementSC111898KR-Sydney73© 1998, PricewaterhouseCoopers L.L.P.High- Level ApproachScenario Envisioning SupplementStep 1:Step 2:Step 3:Step 4:Step 5:Step 6:Define future industry/market contextIdentify paramount forces that will shape this contextIdentify boundary parameters of the paramount forcesCreate a set of scenarios within these boundary parametersTest credibility of scenarios by assessing viability of enabling eventsModify and select scenarios for further analyses based on Step 5Step 7:Step 8:Step 9:Step 10:Simulate business outcomes such as consumer preferences, business systems and competitive actionsAssess client’s capabilities in context of scenarios and business outcomesIdentify client’s capability gaps and develop potential solutionsDevelop portfolio of optimal strategiesSimulate Business Outcomes and Develop StrategyDevelop Future Industry ScenariosSC111898KR-Sydney74© 1998, PricewaterhouseCoopers L.L.P.Sensitivity Analysis SummarySensitivity analysis assesses the effects on profits and cash flow when changes are made in key variables. The reliability of a sensitivity analysis is only as good as the reliability of the estimated key variables for each case. Ensure that the variables changed in each case are the variables with the most impact on the end result (revenues, profit, etc.)Sensitivity AnalysisAnnual Project Cash FlowSC111898KR-Sydney75© 1998, PricewaterhouseCoopers L.L.P.ApproachSensitivity AnalysisWhen To ApplySensitivity analysis should be used to determine the range of profit/loss and cash flow possibilities for a potential project by changing key revenue and cost variables.When creating a sensitivity analysis model, there are three key steps.Step 1:Create a pro forma base case for the project in questionStep 2:Determine range of low to high numbers for each of the established variablesStep 3:Replace base case numbers with low and, then high case numbers separately to determine the overall outcome range SC111898KR-Sydney76© 1998, PricewaterhouseCoopers L.L.P.Citations - Client and Industry ExperienceSensitivity Analysis• Braun/Multi-Industry/KIT database• Compaq/Technology/Vasu Krishnamurthy• Motorola/Technology/Vasu Krishnamurthy• National Brands Limited/Food & Beverage/KIT database• Top European Brewery/Food & Beverage/KIT database• David Matheson and Jim Matheson, “The Smart Organization: Creating Value through Strategic R&D” Source ListSC111898KR-Sydney77© 1998, PricewaterhouseCoopers L.L.P.Seven S Tool SummaryThe 7-S Framework StrategyCritical Success Factors (CSFs)Capabilities/SkillsProcesses/SystemsStaffCulture/StyleStructureKey factors needed by the company to effectively implement the strategyA coherent statement of actions aimed at gaining a sustainable advantage over competitionCapabilities possessed by the organization as a whole as distinct from those of individuals; some companies perform extraordinary feats with ordinary peopleThe process and procedures through which things get done from day-to-day and the systems that facilitate themThe people in the organization considered in terms of corporate demographics, not individual personalitiesThe way managers collectively behave with respect to use of time, attention and symbolic actionsThe organization chart and accompanying baggage that show who reports to whom and how tasks are divided up and integratedThe 7-S framework provides a means to analyze the building blocks of an organization that ultimately serves to support its strategy. The bottom level of the pyramid represents the more tangible components of the company which provide the foundationfor achieving the company’s goals.SC111898KR-Sydney78© 1998, PricewaterhouseCoopers L.L.P.Seven S Tool SummaryThe 7-S FrameworkStrategyProcesses/ SystemsStaffCulture/ StyleStructure•What is current strategy?•What is future strategy•How well is it communicated?•Does it vary by region?•What must be done well to achieve strategy?•How well are these currently being done?•Do people have the right skills?•Is the level of staffing appropriate?•How does the culture impact effectiveness and change readiness?•How well do performance measures support goals?•Does structure make sense?•What are the best practices?•Do the administrative functions adequately support customer and region needs?•Can this be done more effectively?•What are the best practices across regions?•How effective are systems and processes at supporting customer and strategic goals?Critical Success Factors(CSFs)Capabilities/Skills•What skills are needed to support CSFs?•Do these capabilities currently exist?•What are the current core capabilities?•Are they supporting CSFs and Strategy?When performing a 7-S assessment, a practitioner must address several key questions along each of the model’s dimensions.Organizational strengths and weaknesses must be identified and the gap between the organizational requirements must bedetermined.SC111898KR-Sydney79© 1998, PricewaterhouseCoopers L.L.P.ApproachThe 7-S FrameworkSTEPDATA REQUIREDSOURCE(S)1. Document mission/shared vision2. Document strategy3. Evaluate key skills and capabilities4. Evaluate support levers, decision processes/systems, staff, culture/style and structure•Mission Statement•Business plans•Annual strategic plans•Organization charts•Training manuals•Position descriptions•Budgeting process documentation•Performance measures•Company documents•Interviews with key executives and staffWhen To ApplyWhen it is necessary to evaluate the building blocks of an organization that serve to support its mission and allow it to execute its strategies. Information for this analysis is difficult to obtain in some areas without extensively interviewing company personnel. The model as a simple description of the status quo; it should move the analysis forward to identify areas in which the organizational building blocks are not supporting the strategy.SC111898KR-Sydney80© 1998, PricewaterhouseCoopers L.L.P.Citations - Client and Industry Experience7- S Framework• DuPont/Chemicals/Vasu Krishnamurthy• MCS Market Strategy/FIP/Steve Malloy• Rover/Automotive & Transportation/KIT database• United Airlines/Travel/Vasu Krishnamurthy• Paul Elkin, “Mastering Business Planning and Strategy: The Power and Application of Strategic Thinking”• Liam Fahey, Robert M. Randall, “The Portable MBA in Strategy”• Henry Mintzberg, Bruce Ahlstrand, Joseph Lampel, “Strategy Safari: A Guided Tour Through the Wilds of Strategic Management” Source ListSC111898KR-Sydney81© 1998, PricewaterhouseCoopers L.L.P.Stakeholder Analysis SummaryThis tool reveals stakeholder expectations, identifies potential conflicting objectives, and allows management to make conscious choices on which stakeholders to prioritize, and how to deal effectively with those that are not prioritized.Stakeholder AnalysisSC111898KR-Sydney82© 1998, PricewaterhouseCoopers L.L.P.ApproachStakeholder AnalysisWhen To ApplyStakeholder analysis is used to understand the objectives and interests of various stakeholders in order to identify potential conflicts of interest. While some conflicts are not readily resolvable, discussing them will raise awareness of their existence.Adhere to the following criteria when performing an analysis of stakeholder interests:• Identify potential stakeholders at the client organization• Identify potential objectives through discussions with management, key owners, union representatives, etc.• Support the objectives by available secondary information (e.g., union purpose statements)• Identify potential areas of conflict and discuss with management potential actions to resolve the conflictsSC111898KR-Sydney83© 1998, PricewaterhouseCoopers L.L.P.Citations - Client and Industry ExperienceStakeholder Analysis• All State/Insurance/Julia Stamberger• Crown Life Insurance Company/Insurance/KIT database• Dana/Automotive/Mike Weiss• Frito Lay/CIP/Mike Weiss• la Caixa/Banking/KIT database• Pillsbury/CIP/Julia Stamberger• Shell Italia/Energy (Petroleum)/KIT database• Paul Elkin, “Mastering Business Planning and Strategy: The Power and Application of Strategic Thinking”• Liam Fahey, Robert M. Randall, “The Portable MBA in Strategy”• Michael Gould, Andrew Campbell, Marcus Alexander, “Corporate-Level Strategy: Creating Value in the Multibusiness Company”• Henry Mintzberg, Bruce Ahlstrand, Joseph Lampel, “Strategy Safari: A Guided Tour Through the Wilds of Strategic Management Source ListSC111898KR-Sydney84© 1998, PricewaterhouseCoopers L.L.P.SWOT Ana;ysis is a framework used to identify the Strengths, Weaknesses, Opportunities, and Threats an organization is facing. SWOT provides a high-level understanding of the internal challenges and direction of a company, and the external environment’s developing forces. SWOT can be simultaneously simple and powerful, providing an overall assessment of a business.SWOT Analysis SummarySWOT AnalysisOpportunities to Increase Revenue•Leverage existing client relationships •New areas of business –Content management–Digital asset management–Internet applications•Increased demand for current services–Cost reduction–Change management–revenue enhancement–new business opportunities–infrastructure development•Growth through acquisition or alliance•Increased consultancy needs due to regulatory changesThreats•Competition aggressively targeting EMC industry clients•Building of resources slower than market growth•Limited ability to quickly recruit and effectively deploy qualified consultants with deep industry experience•Potential conflicts of interest as client list grows•Shrinking client base due to industry consolidation Strengths•Entertainment industry expertise and thought leadership –EMC 2000–Technology Forecast–ETC–Publications•Functional experience–Financial systems–Strategy development•Large, existing client base in entertainment•Concentrated focus through EMC practice, marketing and PR efforts•Broad range of consulting services•International network of partners and consultants•Strong vendor relationships (e.g., Oracle, SAP) to leverage•High visibility with CFOs gained through financial systems projectsWeaknesses•Not enough consultants with industry expertise and functional experience to meet demand•Minimum media client experience•Internal competition for industry vs. functional resources•Limited visibility in the “business issues” market on the CEO and COO level •Inconsistent client management and consulting skills•Limited ability to respond quickly•No software package to leverageSC111898KR-Sydney85© 1998, PricewaterhouseCoopers L.L.P.ApproachSWOT AnalysisSWOT Analysis involves a 4 step approach, requiring input from both internal and external sources, including, interviews with senior and business line management, as well as, expert opinions from industry analysts and trade publications. Step 1Interview company managementStep 2Perform competitive analysisStep 3List strengths and weaknesses of companyStep 4Determine opportunities and threats the company facesWhen to ApplySWOT is tool, used to identify market opportunities facing a company, competitor issues, and key success factors to leverage. It can be effective in combining various issues identified through other forms of analysis. SC111898KR-Sydney86© 1998, PricewaterhouseCoopers L.L.P.Citations - Client and Industry ExperienceSWOT Analysis• Paul Elkin, “Mastering Business Planning and Strategy: The Power and Application of Strategic Thinking”• Liam Fahey, Robert M. Randall, “The Portable MBA in Strategy”• Robert M. Grant, “Contemporary Strategy Analysis”, 3rd Edition• Henry Mintzberg, Bruce Ahlstrand, Joseph Lampel, “Strategy Safari: A Guided Tour Through the Wilds of Strategic ManagementSource List • Galileo/Travel/Spencer Lin & Vasu Krishnamurthy• Philips/Multi-Industry/KIT database• PwC MCS/Consulting/Vasu Krishnamurthy• PwC Specialty Chemicals Point of View/Energy Practice & Strategic Change/KIT database • Ralston Purina Company/CIP/KIT database• US Postal Service/Multi-Industry/KIT databaseSC111898KR-Sydney87© 1998, PricewaterhouseCoopers L.L.P.Value Based Management SummaryVBM advocates the use of strong management processes in tandem with value-based performance metrics to make strategic decisions for a company. Value-based performance metrics for making better decisions. Value-based management is an integrative process designed to improve strategic and operational decision making throughout an organization by focusing on the key drivers of corporate value. VBM can be a key component in improving organizational effectiveness, because it provides an unambiguous and precise performance metric, namely value, upon which to build an organization. Previously, some management theories have not been based upon the bottom-line impact on the business. For example, in total quality management (TQM), the lack of value-oriented performance targets and measures contributed to failure. Value Based Management2015105005101520Value CreationValue DestructionReturnonEquityCost of EquityFRAMEWORK FOR SBU ANALYSISEXAMPLESC111898KR-Sydney88© 1998, PricewaterhouseCoopers L.L.P.ApproachValue Based ManagementWhen To ApplyTo evaluate whether a company’s financial results have created or destroyed shareholder value. Can be applied in business unit analysis or to the organization as a whole.•Properly allocate overhead to business area, and calculate profitability*•Determine measure of business risk and required returns through extensive external analysis of similar public companies•Allocating equity or assets among the business units•Determine cost of equity and return on equity*For Business Unit AnalysisSC111898KR-Sydney89© 1998, PricewaterhouseCoopers L.L.P.Value Based ManagementAppendixBusiness Valuation5.Calculate and interpret results4.Estimate continuing value3.Estimate cost of capital2.Forecast performance1.Analyze historical performanceäCalculate NOPLAT and invested capitaläCalculate value driversäDevelop an integrated historical perspectiveäAnalyze financial healthäUnderstand strategic positionäDevelop performance scenariosäForecast individual line itemsäCheck overall forecast for reasonablenessäDevelop target market value weightsäEstimate cost of non-equity financingäEstimate cost of equity financingäSelect appropriate techniqueäSelect forecast horizonäEstimate the parametersäDiscount continuing value to presentäCalculate and test resultsäInterpret results within decision contextSC111898KR-Sydney90© 1998, PricewaterhouseCoopers L.L.P.Citations - Client and Industry ExperienceValue Based Management• Amoco/Energy (Petroleum)/KIT database• Compaq/Technology/Vasu Krishnamurthy• Delta/Transportation/Dave Morgan• Motorola/Technology/Vasu Krishnamurthy• Union Pacific/Transportation/Dave Morgan• Copeland, Kaller and Murrin, “Valuation: Measuring and Managing the Value of Companies• Robert M. Grant, “Contemporary Strategy Analysis”, 3rd Edition• Michael Gould, Andrew Campbell, Marcus Alexander, “Corporate-Level Strategy: Creating Value in the Multibusiness Company” Source ListSC111898KR-Sydney91© 1998, PricewaterhouseCoopers L.L.P.Value Chain Analysis SummaryThe Value Chain Analysis is functional on two levels: as a strategic tool to facilitate an understanding of where the key strengths and weaknesses lie within an organization and as a more operational tool to evaluate supply chain management issues. Value Chain AnalysisSC111898KR-Sydney92© 1998, PricewaterhouseCoopers L.L.P.ApproachWhen To ApplyEmploy Value Chain analysis as a high level diagnostic used to determine where an organization needs to improve or maintain value creation. It is most effective when applied to manufacturing or process oriented companies and is not a substitute for more detailed analysis such as AMB or the Relatively Static Model.Value Chain AnalysisListed below are key features to consider when creating a Value Chain Analysis model:• Separate the company’s business into primary and support activities and list the primary activities performed in each component• Identify the critical success factors for each component and evaluate the company’s strengths/weaknesses for each• Identify the key cost drivers• Assess potential for increasing value and decreasing costsSC111898KR-Sydney93© 1998, PricewaterhouseCoopers L.L.P.Citations - Client and Industry ExperienceValue Chain Analysis• Amoco/Energy (Petroleum)/KIT database• Crown Life Insurance Company/Insurance/KIT database• Galileo/Travel/Spencer Lin & Vasu Krishnamurthy• MetLife/Insurance/KIT database• Rhone Poulenc/Chemicals/KIT database• Save & Prosper/Banking/KIT database• The New Zealand Refining Company Ltd(NZRC)/Energy (Petroleum)/KIT database Source List• David A. Aaker, “Developing Business Strategies”, 5th Edition • David P Baron, “The Nonmarket Strategy System”, Sloan Management Review, Fall 1995• Liam Fahey, Robert M. Randall, “The Portable MBA in Strategy”• Robert M. Grant, “Contemporary Strategy Analysis”, 3rd Edition• Henry Mintzberg, Bruce Ahlstrand, Joseph Lampel, “Strategy Safari: A Guided Tour Through the Wilds of Strategic ManagementSC111898KR-Sydney94© 1998, PricewaterhouseCoopers L.L.P.Value Tree SummaryThis tool is useful to develop a comprehensive list of potential value creation driversValue TreeSC111898KR-Sydney95© 1998, PricewaterhouseCoopers L.L.P.ApproachValue TreeWhen To ApplyWhen it is necessary to develop a comprehensive list of potential value creation drivers• Begin with a standard value tree consisting of benefit type, first-order drivers, and second-order drivers • Determine "third-order drivers," i.e., those specific activities which constitute the second-order drivers, based on one's industry knowledge and any company-specific information • Use the available information and insights from other tools (e.g. Dupont Analysis, Enterprise Diagnostic, and Lean Producer Chart) to determine which benefit drivers might be the specific areas of company concern• “Run the numbers” to model potential profit improvementSC111898KR-Sydney96© 1998, PricewaterhouseCoopers L.L.P.Citations - Client and Industry ExperienceValue Tree• Compaq/Technology/Vasu Krishnamurthy•Strategic Change MBA Training Source ListSC111898KR-Sydney97© 1998, PricewaterhouseCoopers L.L.P.Provide Technical SupportDeliverGoodsRelation ManagementVaried performance in 1996Not flexible due to campaign structureStart-up problems with NNSome problems with labelingSome problems with wrappingOverall, strong on delivery performanceGood on urgent deliveryConsignment stocks are well receivedStrong technical competenceSpeed of response - reactiveJoint R&D with few selected companiesSome positive signs towards closer co-operationVery good with selected clientsVery good when "going gets tough"Reactive, not proactiveDo not bring technical staff to meetings/not structuredTechnical issues not always dealt with by technical staffAttitude to pricing is short-termLack of initiative/not spontaneousNot open about market information and strategyToo dependent on one key personUnclear about strategic directionNo unity of approachConfusing account handlingEasy to get hold ofTech. competenceContinuity of representativesFrequency of visitsOpenness, sharing informationHonesty, integrity, trustAvailabilityComplaints handlingTechnical knowledgeProcess knowledgeSpeed of responseSolution orientatedProactiveUndamaged deliveryUrgency deliveryFlexibilityTimed delivery (JIT)Delivery reliability/securityUnderstanding clients businessAbility to listenOrder winningGivenCrucialWeaknessesStrengthsPerformanceProcess7.27.76.78.187.57.37.87.47.9Timed delivery (OW))Delivery reliable.(OW)Urgency delivery (C)Flexibility (C)Undamaged del. (G)56789XXXCompetitor7.67.78.377.87.68.17.58.37.67.86.9Speed of resp. (OW)Solution orient.(OW)Technical know. (C)Knowl. of cust. (C)Availability (G)Complaints handle.(G)56789XXXCompetitor7.87.87.37.57.47.96.87.987.57.47.47.68.17.67.8Honesty/integr. (OW)Ability to listen(C)Underst. client (C)Relationship (C)Easy to get hold (G)Technical comp. (G)Continuity of rep(G)Freq. of visits (G)56789XXXCompetitorsVoice of the Customer SummaryVoice of the CustomerThe Voice of the Customer is a framework for understanding what are critical factors from the customers' point of view and how well the corporation performs compared to its competitors.SC111898KR-Sydney98© 1998, PricewaterhouseCoopers L.L.P.ApproachVoice of the CustomerWhen To ApplyThe Voice of the Customer is used to determine which analysis will yield the relative importance of each value driver to the customers. By associating each value driver with business processes and capabilities, one can use the result to make strategic choices on where to focus and how "good" the corporation should aspire to be on the criteria. A practitioner should note that this technique does have a few limitations/points of concerns:• Voice of the Customer survey provides an assessment of what customers currently believe to be the case, not future needs, requirements, etc. It is therefore important to include non-customers and a discussion with management about what might become the requirements of the future• It might be a good idea to have a selection of managers and employees answer the same questions. Often, you will find a gap between what is internally perceived to be important and what the customers says. In itself a disturbing and revealing fact that should raise some interesting discussions.Step 1Preparation• Look through existing corporate material on customer surveys• Perform a focus group workshop to raise the various dimensions that might concern customers (intern and with a selection of customers)Step 2Develop the questionnaire and test it. Make sure to have customers focus:• Criteria: order winning, crucial, given• Comparison: Better than competitors, equal, competitors better• Ranking: on a scale from 1 to 5 Step 3Perform the survey. NOTE: Make sure to include the voice of non-customersStep 4Assemble the results according the the VoC presentation outline.SC111898KR-Sydney99© 1998, PricewaterhouseCoopers L.L.P.Citations - Client and Industry ExperienceVoice of the Customer• Baxter/Pharmaceuticals/KIT database• Coach Leather/Retail/KIT database• Hormel/CIP/Johan Sauer• Polaroid/CIP/KIT database•Jon Anton, Debra Perkins, “Listening to the Voice of the Customer: 16 Steps to a Successful Customer Satisfaction Management Program” •William Barnard, Thomas F. Wallace, The Innovative Edge: Creating Strategic Breakthroughs Using the Voice of the Customer”•Price Waterhouse, “Better Change” •Voices into Choices : Acting on the Voice of the Customer Source List。