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  • Slide 1

    Driving Profitable Growth:Improving Sales and Innovation Performance

    Bill Guest

    Revision: 2006.11.30

    Copyright © 2004, 2005 and 2006 by Bill Guest

  • Slide 2

    “Where once we optimized our organizations for efficiency and

    quality, now we must optimize our entire society for innovation.”

    National Innovation Initiative, Interim Report, July 2004

  • Slide 3

    Introduction – Bill Guest

    • Engineering, 12 years with GM and Delco Electronics• General Manager, engineering and design shop• VP Sales, electronics company• VP and General Manager, Leica ATS in Switzerland• General Manager, Bergstrom Off-Highway Group• Consulting, Dressta Construction Equipment• Teaching Operations Management, Shanghai, China• Exec. VP and CEO, Miquest Electronics (acquisitions in GR)• Principal, PM&I Consulting• Managing Partner, Metrics Reporting, Inc.

  • Slide 4

    Operations – Balanced Metrics

    Sales – Toolbox of Tools

    Innovation – Process & Reviews

  • Slide 5

    The Models

    Sources of Pragmatic Wisdom:Strategy: Sun Tzu, Ansoff, Porter, OhmaeManagement: Taylor, Barnard, Drucker, Kepner/Tregoe, Peters, Covey, CollinsQuality: Crosby, Deming, Juran, ShingoLeadership: Carnegie, Follett, Maslow, Herzberg, McGregor, Hersey, BlanchardChange: Kanter, Schein, HammerMarketing: Levitt, KotlerMeasurement: Kaplan/Norton, NivenTrends: Toffler, Naisbitt, Handy, HamelOrganizational Learning: Argyris, SengeInnovation: Drucker, Christensen and Raynor, Kim and Mauborgne, O’Banion

    “Pragmatic Wisdom”or

    “useful business knowledge.”

    The two models:• Leadership Framework

    • Metrics Matrix

    People x Systems = Results

  • Slide 6

    The Leadership Framework

    1. People2. Heritage3. Focus4. Path5. Gaps

    Leaders get the right people in and the wrong people out. Right people

    are thoughtful and capable individuals of character, always

    learning, with a bias for action, that are able to subordinate their egos to

    the achievement of the mission.

    Mission > Egos

  • Slide 7

    “Is Measurement Worth It?”Adapted from Balanced Scorecard: Step-by-Step by Paul Niven, 2002

    Measurement Non-measurementMeasure of Success Managed Organizations Managed Organizations

    Performance Management Items:Industry leader over past three years 74% 44%Financially ranked in top 3rd of their industry 83% 52%Success in last major change effort 97% 55%

    Culture Items:Agreement on strategy 93% 37%Communication of strategy 60% 8%Information shared openly and candidly 71% 30%

    Reference: Bullseye!, Hitting Your Strategic Targets Through High-Impact Measurement, William Schiemann, John Lingle, Metrus Group

  • Slide 8

    Why Measurement Managed Organizations Work

    Three universal truths (The Paul O’Neil Trilogy):

    • Every human being wants to be treated with dignity and respect,every single day.

    • People want to make a contribution with what they do, they wanttheir lives to have meaning.

    • All people want someone to notice what they do.

    Paul O’Neil is former CEO Alcoa and former Secretary of the Treasury (ASQ Quote)

  • Slide 9

    Why Measurement Managed Organizations Work

    Executive performance perspective:

    • Executives make 90% of their decisions intuitively*

    • Regular reviews of data . . . calibrates intuition

    • Engagement with the troops . . . calibrates intuition

    • Calibration enables executives to “Do the right thing” intuitively

    Footnote: Intuition at Work by Gary Klein, 2003.

  • Slide 10

    “Measuring more is easy. Measuring better is hard.”Charles Handy

  • Slide 11

    Metrics must reach into each of the 12 intersections to be

    fully balanced

    Footnote: HBR Jan/Feb 1992 – The Balanced Scorecard – Measures that Drive Performance, by Kaplan and Norton

    Four (4) Balanced Scorecard Perspectives

    Metrics Matrix

    Innovation

    Sales

    Operations

    Thre

    e (3

    ) Cor

    e B

    usin

    ess

    Proc

    esse

    s

    Employee Learning Internal Customer Financial

  • Slide 12

    Characteristics of a Business Process:

    Business processes can be clearly defined, documented,taught, and improved based on “lessons learned.”

    • A business process defines “how we do it around here.”• A business process is useful for training employees• Performance of the business process can be measured• When things go wrong, the “lessons learned” as a result of

    failure analysis can be used to improve the process

    This is how organizational knowledge is accumulated and refined

    Dressta Lessons

  • Slide 13

    Operations Business Process:

    The operations business process begins with a “pull signal”from a customer and ends with payment of the invoice.

    1. Receive customer order request (pull signal)2. Schedule / confirm materials availability3. Schedule / confirm labor and equipment availability4. Confirm delivery dates and quantities to customer5. Receive all materials7. Fabricate parts / Prepare for event8. Assemble, test, package, and ship / Deliver services9. Invoice customer10.Receive payment

    Example

  • Slide 14

    Operations Business Process Measurements

    Problem Resolution

    Revenue

    Profit - % Sales

    Return on Assets

    Days Payables

    Credit/Debit Memos

    Delivery - % On-Time

    Quality / Warranty Return Rates

    Customer Satisfaction

    Complaint Response Time

    Inventory Turns

    Environmental Impact

    % First Time Pass Final Test

    Quality - Scrap & Rework

    Supplier - Quality and DeliveryTimely Performance Appraisals

    Employee Satisfaction

    Lost Time Accidents

    Absenteeism

    Training Investment

    Employee Learning and Growth Perspective Internal Perspective Customer Perspective Financial Perspective

    • Four Balanced Scorecard Perspectives• Attention to Cause – Effect Alignment (Strategy Mapping)• Leading Measures to Lagging Measures

    Who should collect the data, perform the gap analysis, and report results?

    Example

  • Slide 15

    3. How do we expand the

    product line?

    4. Can we afford the risks inherent

    here?

    1. How do we strengthen our core business?

    2. How do we grow into new

    markets?

    Strategic Growth Paths

    New Products

    Existing Products

    Existing Customers New Customers

    Innovation

    Sales

    DrivingGrowth

    Operations

  • Slide 16

    Sales Management

    A. Structured Process and Monthly Reviews

    B. Toolbox of Tools and Techniques

    C. Performance Measures and Gap Analysis

  • Slide 17

    Sales Business Process:

    The sales business process begins with the identificationof prospective customers and ends with multiple sales to those customers.

  • Slide 18

    Sales Process: (example for Capital Equipment)

    P. Qualify potential new customers1. Known need and willing to buy our brand2. Clear compelling event established3. Preliminary quotation at the customer4. Good mentors established

    5. Funding confirmed6. Contract negotiations7. Salesman reports that the deal is acceptable8. Verbal contract approval from the customer

    9. Order is at headquarters10. Order is accepted at headquarters11. Machine is shipped12. Customer satisfaction survey is completed

    Step 2

  • Slide 19

    2. Clear Compelling Event - Definition

    A clear compelling event means that it is clear what the customer needs to buy, when he needs to buy it, and why. The purpose of this step is to distinguish between a customer who isthinking about buying a new machine some day and a customer that has a specific need to buy a machine to perform a certain function by a specific date.

  • Slide 20

    2. Clear Compelling Event – Review Questions

    2.1 Why does the customer need a new machine?2.2 Can his existing machines do the work?2.3 What alternatives does he have rather than to buy a new

    machine?2.4 Is there specific project or special use for the machine?2.5 If so, what dates does the project need to be started and

    completed?2.6 What is the planned payback for the customer on this

    project?2.7 What are the consequences if they do not meet the project

    dates or the payback targets?2.8 What date does the customer need the machine?

  • Slide 21

    2. Clear Compelling Event – Review Questions

    2.9 When will the “Request for Proposals” be available?2.10 When are the proposals due?2.11 When will the customer award a contract?2.12 What will happen if he buys the machine 60 days later?2.13 Are there target prices for each of the machines in the

    deal?2.14 How accurate are the target prices?2.15 Are the target prices sufficient to purchase the machines

    needed?2.16 Has the customer documented any formal decision criteria

    to assist them with the selection of the best machine?2.17 What are the informal decision criteria at this customer?

  • Slide 22

    Sales Monthly Review

    • Top 25 Opportunities• Balance 50/50 – New Prospects/Existing Customers• For each opportunity review:

    • Step on Sales Process• Status• Competitive Position• Next Actions• Contact Frequency

    Customer Opportunity Ship Date Annual $ Step Status: Competitive Position: Next Actions: Frequency

    customer project first units due to the customer on this date

    annual sales expected from this opportunity

    Step that has been completed in the Sales Process

    The status of the deal in terms of what has been accomplished relative to progressing through our sales process. This should answer the most relevant questions from the last step achieved.

    The names of the top two competitors for this deal, each of their advantages, each of their disadvantages, and the decision criteria. The advantages and disadvantages must reflect the decision criteria and our relative position.

    This should who on our team will take what actions, to accomplish what results, by what specified target date. The next actions are the key action plans to advance the opportunity to the next steps of the sale process.

    This states how many weeks, the last four, we have had meaningful contact with the customer.

    Kinko's New store in Grand Rapids Michigan USA

    December 2004

    $2,000,000 4 Three of our executives have visited Kinko's in USA. Two executives have visited our plant. We know that to supply this Grand Rapids location is a start for our entry in all Kinko's.

    Xerox has outstanding service and support but at high prices. Cannon supplies small units but has not demonstated capability in large machines, support on small machines is good. Image quality, efficiency, and cost are the factors.

    Mr. Wu is to arrange a three week trip for a team of sales, marketing, engineering, and serive managers to visit at Kinko's headquarters to build relationships and confidence in our quality and ability to service the various Kinko's locations.

    3

    NOTE: Revise this matrix to eliminate the above example and to add your top 25 sales opportunities.

    MKT-6210: CCCC Top Sales Opportunity Matrix Revised: 2004.06.18

    Tool #3

  • Slide 23

    Sales Toolbox

    1. Sales Process2. Sales Probability Indexed to Sales Process Steps3. Opportunity Tracking Database / Matrix4. Two-Year Forecast5. Quarterly Forecast6. Target Market7. Opportunity Summary Sheet8. CRM / Database to collect details

    Opportunity Management

  • Slide 24

    Sales Process: (example for Capital Equipment)Probability

    P. Qualify potential new customers 0%1. Known need and willing to buy our brand 10%2. Clear compelling event established 20%3. Preliminary quotation at the customer 30%4. Good mentors established 40%

    5. Funding confirmed 50%6. Contract negotiations 60%7. Salesman reports that the deal is acceptable 70%8. Verbal contract approval from the customer 80%

    9. Order is at headquarters 90%10. Order is accepted at headquarters 100%11. Machine is shipped 100%12. Customer satisfaction survey is completed 100%

    Tool #2Tool #1

  • Slide 25

    Customer Opportunity Ship Date Annual $ Step Status: Competitive Position: Next Actions: Frequency

    customer project first units due to the customer on this date

    annual sales expected from this opportunity

    Step that has been completed in the Sales Process

    The status of the deal in terms of what has been accomplished relative to progressing through our sales process. This should answer the most relevant questions from the last step achieved.

    The names of the top two competitors for this deal, each of their advantages, each of their disadvantages, and the decision criteria. The advantages and disadvantages must reflect the decision criteria and our relative position.

    This should who on our team will take what actions, to accomplish what results, by what specified target date. The next actions are the key action plans to advance the opportunity to the next steps of the sale process.

    This states how many weeks, the last four, we have had meaningful contact with the customer.

    Kinko's New store in Grand Rapids Michigan USA

    December 2004

    $2,000,000 4 Three of our executives have visited Kinko's in USA. Two executives have visited our plant. We know that to supply this Grand Rapids location is a start for our entry in all Kinko's.

    Xerox has outstanding service and support but at high prices. Cannon supplies small units but has not demonstated capability in large machines, support on small machines is good. Image quality, efficiency, and cost are the factors.

    Mr. Wu is to arrange a three week trip for a team of sales, marketing, engineering, and serive managers to visit at Kinko's headquarters to build relationships and confidence in our quality and ability to service the various Kinko's locations.

    3

    NOTE: Revise this matrix to eliminate the above example and to add your top 25 sales opportunities.

    MKT-6210: CCCC Top Sales Opportunity Matrix Revised: 2004.06.18

    OpportunityDatabase

    Tool #3

  • Slide 26

    Long-term Forecastof Incremental Sales

    Tool #4

    Next Page

    Quarter: 1Q2004 2Q2004 3Q2004 4Q2004 1Q2005 2Q2005 3Q2005 4Q2005

    Sales Plan 1,000,000 1,104,100 1,219,000 1,345,900 1,486,000 1,640,700 1,811,400 2,000,000

    Weighted Sales ($) 996,456 1,108,503 1,225,578

    Variable Costs

    Variable Margin

    Fixed Costs

    EBIT

    Actual or Forecast Actual Actual Forecast

    Grand Manufacturing Two-Year Sales Forecast for: 2004 - 2005

  • Slide 27

    Quarter-by-Quarter ForecastTool #5

    Previous Page

    Customer Project SM Sales $ Prb. % Weighted $

    1 Grand Chair Brackets BG 50,000 20% 10,000

    2 Grand Chair Seat Bottoms BG 25,000 30% 7,500

    3 Grand Elec. Boxes FJ 15,000 60% 9,000

    4 Grand Elec. Plates FJ 25,000 50% 12,500

    5 Grand Plumb Tanks JP 30,000 10% 3,000

    6 Grand Boat Panels JP 145,000 90% 130,500

    7 Base Sales 1,108,503 95% 1,053,078

    8

    SM: BG = Bill Guest, FJ = Frank Jones, JP = Jane Peters Rev: 2004.06.22

    Grand Manufacturing Quarterly Sales Forecast for: 3rd Quarter 2004

    Total Weighted Sales Dollars for this Quarter: 1,225,578

  • Slide 28

    TargetDefinition

    Tool #6

    Worksheet 3.1: Your Target Market – Target Opportunities Define the following preferences for your target market: Products and services: ____________________________________________ Size of customer: _________________________________________________ Size of orders: ___________________________________________________ Industry sectors: __________________________________________________ Financial strength: ________________________________________________ Diversification of their customer base: _________________________________ Limitations for your own diversification requirements: _____________________ _______________________________________________________________ Other requirements: _______________________________________________ _______________________________________________________________ What is it that you don’t want?

    1. ____________________________________ 2. ____________________________________ 3. ____________________________________ 4. ____________________________________ 5. ____________________________________

  • Slide 29

    Customer: ______________________________________________________________________ Opportunity No: _____________________ Project Name: _____________________________________________________________________________________________________ Strategic Value of this account: ________________________________________________________________________________________ Customer contacts (name, title, phone and; DM, INFL, and APRV, also indicate decision style; Financial, Technical, Relationship, or Business): 1. _______________________________________________________________________________________________________________ 2. _______________________________________________________________________________________________________________ 3. _______________________________________________________________________________________________________________ 4. _______________________________________________________________________________________________________________ 5. _______________________________________________________________________________________________________________ 6. _______________________________________________________________________________________________________________ Date and who attended the customer plant tour: ___________________________________________________________________________ Date and who attended our plant tour: ______________________________________________________________________________ Formal decision criteria: _____________________________________________________________________________________________ Informal decision criteria: _____________________________________________________________________________________________ The perfect supplier: ________________________________________________________________________________________________ Our Unique Business Value: __________________________________________________________________________________________ Key points that should be included in the cover letter: ______________________________________________________________________ What are some potential “deal killers” for this deal: _________________________________________________________________________ The decision timing for this deal: _______________________________________________________________________________________ Issues that could cause a significant delay in the award of this deal: ___________________________________________________________ 1. Who is our toughest competitor? ____________________________________________________________________________________ 2. What are this competitor’s product advantages and disadvantages? _________________________________________________________ 3. What are this competitor’s business advantages and disadvantages? ________________________________________________________ 4. What does the customer like and dislike about this competitor? _____________________________________________________________ 5. What is this competitor’s selling price? ________________________________________________________________________________ 6. Who is our second toughest competitor? ______________________________________________________________________________ 7. What are this competitor’s product advantages and disadvantages? _________________________________________________________ 8. What are this competitor’s business advantages and disadvantages? ________________________________________________________ 9. What does the customer like and dislike about this competitor? _____________________________________________________________ 10. What is this competitor’s selling price? _______________________________________________________________________________

    OpportunitySummary

    Sheet

    Tool #7

    Grand Mfg.

  • Slide 30

    CRMSystem

    Tool #8CRM System

    Pick a solution that:• allows you to implement your process• is easy to use• is traveler friendly (hotel rooms)

    Note: The company owns the data.

    Risk ManagementData Security

  • Slide 31

    Sales Business Process Measurements

    Share of Customer Spending

    Win/Loss - Overall

    Revenue Growth Rate

    Profit Growth Rate

    Days in Receivables

    Revenue - New Customers

    Revenue - Existing Customers

    Samples/Prototypes On-Time

    Win/Loss - Existing Customers

    Win/Loss - New ProspectsForecast Growth Rate

    Forecast Accuracy

    Sales Calls per Week

    Sales Pipeline Points

    Status, Next Act's, Comp. Pos.

    Profit per Salesperson

    Sales Training Hours

    Win/Loss by Salesperson

    New Opps. per Salesperson

    Revenue per Salesperson

    Employee Learning and Growth Perspective Internal Perspective Customer Perspective Financial Perspective

    Performance Measures and Gap Analysis

  • Slide 32

    Innovation Management

    A. Structured Process and Monthly Reviews

    B. Toolbox of Tools and Techniques

    C. Performance Measures and Gap Analysis

    Fog of Innovation

  • Slide 33

    Innovation Business Process:

    The innovation business process begins with the identificationchanges in society and the economy and ends in the launchof a new product or service to exploit that opportunity.

  • Slide 34

    Innovation Stage-Gate Process1. Strategic Direction Direction Clear2. Idea Generation Ideas Scored3. Concept Definition Concept Approved4. Funding Case Funding Approved5. Pilot and Test Launch Approved6. Launch Final Evaluation

    Stage 1 Gate1 Stage 2Gate

    2 Stage 3Gate

    3 Stage 4Gate

    4 Stage 5Gate

    5 Stage 6Gate

    6

    Strategic Direction

    HOW GATES WORK:YES, gate criteria are

    met, move to next step.NO, criteria are not met,

    idea is parked.

    The Innovation Funnel correlated to the Stage-Gate Process.

  • Slide 35

    Innovation Stage-Gate Process

    Stage: Gate: Gate Requirements:

    1 Strategic Direction Direction ClearThe organization's strategic direction has been clearly communicated to the innovation teams. (balanced scorecards, strategy maps, focus, divergence, and compelling tagline)

    2 Idea Generation Ideas ScoredA systematic search for innovation opportunities that drives the organization toward the achievement of the strategic direction is complete. Ideas are scored and prioritized based upon the organization's defined scoring methodology.

    3 Concept Definition Concept Approved An Idea Summary (Concept Definition) sheet including a clear description of the idea is presented to the innovation team.

    4 Funding Case Funding Approved

    The Innovation Project Business Plan including a clear description of the idea, focus, divergence, compelling tagline, cost, timing, description of benefits, and description of alignment to objectives is presented to the funding team. Top ideas are approved within budget constraints.

    5 Pilot and Test Launch ApprovedThis step is completed by the project team with concurrence of the management sponsor, project manager, and technical advisor as members of the decision team.

    6 Launch Final EvaluationSix months to one year after the innovation has been launched, the project team completes a post-launch review to compare actual results to planned outcomes. This review is presented to the innovation funding team.

  • Slide 36

    Strategic Direction

    Inno

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    Score

    Stra

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    irect

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    Sum

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    Lear

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    ImplementSearchB

    old

    - VIL

    Sco

    re

    Alig

    nmen

    t Sco

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    Inno

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    ea S

    umm

    ary

    Proj

    ect B

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    Plan

    Fina

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    Gui

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    Six

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    s Fo

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    Solid

    - PI

    Sco

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    Strategy

    Idea Generation

    Launch

    Pilot and Test

    Funding Case

    Concept Definition

    Innovation Tools Matrix

    Box indicates tools covered in this seminar.

  • Slide 37

    Innovation Monthly Review

    • Top 25 Opportunities• Balance among sources and types• For each opportunity review:

    • The Idea• Step on Innovation Process• PI Score• VIL Score• Total Score• Type• Next Actions Tool #2

    Category Idea / Opportunity Step PI ScoreVIL

    Score Total Type Comments, Status, Next Actions:

    Revised 2004.09.27PMIC Innovation Management Matrix

    Demographics

    Toda

    y

    Knowledge

    Existing

    Unexpected

    Incongruities

    Process

    Appeal

    Time

    Six

    View

    s of

    New

    Mar

    ket S

    pace

    Seve

    n So

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    s of

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    ppor

    tuni

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    Substitutes

    Groups

    Buyers

    Complements

    Structure

    Perception

  • Slide 38

    Innovation Toolbox

    1. Innovation Process (Stage-Gate)2. Opportunity Tracking Database / Matrix3. Understanding Innovation and Entrepreneurship4. The Knowledge Brokering Cycle5. Discovering New Points of Differentiation6. Essentials of Enlightened Experimentation7. The Value Proposition8. Ideas from the Seven Sources9. Ideas from the Six Views of New Market Space10. Ideas from Six Principles of a Learning-Centered College

  • Slide 39

    Innovation Toolbox (continued)

    11. The Value Curve12. The Buyer Utility Matrix13. Sustaining versus Disruptive Innovation14. Low-end versus New-market Disruption15. Scoring Ideas based on Principles of Innovation16. Scoring ideas based on Value Innovation Logic17. Scoring ideas based on Alignment18. Shaping ideas to be disruptive19. Recognize Champions20. The Lead User Process

  • Slide 40

    Category Idea / Opportunity Step PI ScoreVIL

    Score Total Type Comments, Status, Next Actions:

    Revised 2004.09.27PMIC Innovation Management Matrix

    Demographics

    Toda

    y

    Knowledge

    Existing

    Unexpected

    Incongruities

    Process

    Appeal

    Time

    Six

    View

    s of

    New

    Mar

    ket S

    pace

    Seve

    n So

    urce

    s of

    Inno

    vatio

    n O

    ppor

    tuni

    ties

    Substitutes

    Groups

    Buyers

    Complements

    Structure

    Perception

    Idea/Opportunity - Record the idea here

    Step Record the step in the process

    PI Score Principles of Innovation Score

    VIL Score Value Innovation Logic Score

    Total Add the two above scores

    Type SUS = SustainingLED = Low End DisruptionNMD = New Market Disruption

    Comments StatusNext ActionsNames of Champions

    Tool #2

    Grand Technologies

    The Seven Sources ofInnovation Opportunities

    The Six Views ofNew Market Space

  • Slide 41

    Category The learning college . . . Idea / Opportunity Score Comments; Status, Next Actions:

    Change. . . creates substantive

    change in individual learners

    Partners

    . . . engages learners in the learning process as full

    partners who must assum primary responsibility for

    their own choices

    Options. . . creates and offers as

    many options for learning as possible

    Collaborative

    . . . Assists learners to formand participate in collaborative learning

    activities

    Needs

    . . . Defines the roles of learning facilitators in

    response to the needs of the learner

    Documented

    . . . Succeeds only when improved and expanded

    learning can be documented for learners

    Metrics Reporting - Innovation Management Matrix - Education Worksheet

    Footnote: The six principles of a learning-centered college are from A Learning College for the 21st Century by Terry O'Banion, 1997.

    Six

    Prin

    cipl

    es o

    f a L

    earn

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    Tool #2

    The Six Principles of a Learning-Centered College

  • Slide 42

    Entrepreneurship

    The entrepreneur upsets and disorganizes, causing . . .

    . . . “creative destruction.”

    “The entrepreneur shifts economic resources out of an area of lower and into an area of higher productivity and greater yield”per J. B. Say. They create something new, something different, they change or transmute values. The entrepreneur always searches for change, responds to it, and exploits it as an opportunity.*

    * Footnote: Innovation and Entrepreneurship by Peter Drucker, 1985.

    Tool #3

    Healthy Economy

  • Slide 43

    Innovation is the Tool of the Entrepreneur

    Innovation vs. Invention:

    • Innovation is not invention• Innovation results in market space• Invention results in a patent

    Innovation is:

    • Search for change• Respond to change• Exploit change as an opportunity

    Tool #3

  • Slide 44

    The Knowledge-Brokering Cycle

    1. Capturing good ideas.Knowledge brokers scavenge constantly for promising ideas, sometimes in the unlikeliest places. They see old ideas as their primary raw material.

    2. Keeping ideas alive.To remain useful, ideas must be passed around and toyed with. Effective brokers also keep ideas alive by spreading information on who knows what within the organization.

    3. Imagining new uses for old ideas.This is where the innovations arise, where old ideas that have been captured and remembered are plugged into new contexts.

    4. Putting promising concepts to the test.Testing shows whether an innovation has commercial potential. It also teaches brokers valuable lessons, even when an idea is a complete flop.

    Footnote: HBR on Innovation, Building an Innovation Factory, by Andrew Hargadon and Robert Sutton, page 72.

    Tool #4

  • Slide 45

    Discovering New Points of DifferentiationMapping the Consumption Chain:1. How do people become aware of their need for your product or service?2. How do consumers find your offerings?3. How do consumers make their final selections?4. How do customers order and purchase your product or service?5. How is your product or service delivered?

    6. What happens when your product or service is delivered?7. How is your product installed?8. How is your product or service paid for?9. How is your product stored?10. How is your product moved around?

    11. What is the customer really using the product for?12. What do customers need help with when they use your product?13. What about returns or exchanges?14. How is your product repaired or serviced?15. What happens when your product is disposed of or no longer used?

    To analyze your customer’s experience, consider how five simple questions –what, where, who, when, how – apply at each link in the chain.Footnote: HBR on Innovation, by Ian MacMillan and Rita Gunther McGrath, page 134

    Tool #5

  • Slide 46

    The Essentials for Enlightened Experimentation

    1. Organize for rapid experimentationExamine and, if necessary, revamp entrenched routines, organizational boundaries, and incentives to encourage rapid experimentation.

    2. Fail early and often, but avoid mistakesEmbrace failures that occur early in the development process and advance knowledge significantly.

    3. Anticipate and exploit early informationRecognize the full value of front-loading: identifying problems upstream, where they are easier and cheaper to solve.

    4. Combine new and traditional technologiesDo not assume that a new technology will necessarily replace an established one. Usually, new and traditional technologies are best used in concert.

    Footnote: HBR on Innovation, by Stephan Thomke, page 199.

    Tool #6

  • Slide 47

    The Value Proposition

    Value = Product/Service Attributes + Image + Relationship

    1. Product / Service Attributes:a. Key product elementsb. Key service elementsc. Key delivery elementsd. Other functionality elementse. Quality f. Price

    2. Image Issues:a. Brand Imageb. Other Issues

    3. Relationship Issues:a. Convenientb. Personalc. Responsive

    Footnote: Based on Balanced Scorecard by Kaplan and Norton, pages 74 to 81,and Creating New Market Space by Kim and Mauborgne, HBR.

    Tool #7

  • Slide 48

    Seven Sources of Innovation Opportunities

    1. The unexpected – unexpected success, failure or outside event2. The incongruity – between reality as is, should be, or “ought to be”3. Innovation based on process need4. Changes in industry structure or market structure no one predicted5. Demographics (population changes)6. Changes in perception, mood, and meaning7. New knowledge, both scientific and nonscientific

    * Footnote: Innovation and Entrepreneurship by Peter Drucker, 1985.

    Tool #8

    Macy’s

  • Slide 49

    Six Views of New Market Space

    1. Looking Across Substitute Industries2. Looking Across Strategic Groups within Industries3. Looking Across the Chain of Buyers4. Looking Across Complementary Product and Service Offerings5. Looking Across Functional or Emotional Appeal to Buyers6. Looking Across Time

    Footnote: Creating New Market Space by Kim and Mauborgne, HBR.

    Tool #9

  • Slide 50

    Six Principles of a Learning-Centered College

    The learning-centered college . . .1 . . . creates substantive change in individual learners2 . . . engages learners in the learning process as full partners who

    must assume primary responsibility for their own choices3 . . . creates and offers as many options for learning as possible4 . . . Assists learners to form and participate in collaborative learning

    activities5 . . . Defines the roles of learning facilitators in response to the needs

    of the learner6 . . . Succeeds only when improved and expanded learning can be

    documented for learner

    Footnote: Innovation in the Community College, Terry O’Banion, 1989

    Tool #10

  • Slide 51

    Tool #11 A

    The Value Curve

    Footnote: Value Innovation, byKim and Mauborgne, HBR.

  • Slide 52

    The Four VIL Questions (Value Innovation Logic)

    The key to discovering a new value curve lies in asking four basic questions:

    1. Which of the factors that our industry takes for granted should be eliminated?

    2. Which factors should be reduced well below the industry standard?

    3. Which factors should be raised well above the industry standard?

    4. Which factors should be created that the industry never offered?

    Footnote: Value Innovation, by Kim and Mauborgne, HBR.

    Tool #11 BThe Value Curve

  • Slide 53

    Tool #11 CValue Curve Worksheet

  • Slide 54

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    The Six Stages of the Buyer Experience Cycle

    Purchase Delivery Use Supplements

    Knowing a Winning Business Idea When You See One: Buyer Utility Map

    Maintenance

    Tool #12 A

    The Buyer Utility Map

    The Six Utility Levers

    • Customer Productivity• Simplicity• Convenience• Risk• Fun and Image• Environmental Friendliness

    Footnote: Knowing a Winning Business Idea When You See One, byKim and Mauborgne, HBR.

    Six StagesNEXT PAGE

  • Slide 55

    The Six Stages of the Buyer Experience CycleStage One: Purchase

    How long does it take to find the product you need?Is the place of purchase attractive and accessible?How secure is the transaction environment?How rapidly can you make a purchase?

    Stage Two: DeliveryHow long does it take to get the product delivered?How difficult is it to unpack and install the new product?

    Stage Three: UseDoes the product require training or expert assistance?Is the product easy to store when not in use?How effective are the product’s features and functions?

    Stage Four: SupplementsDo you need other products and services to make this product work?If so, how costly are they?

    Stage Five: MaintenanceDoes the product require external maintenance?How easy is it to maintain and upgrade the product?

    Stage Six: DisposalDoes use of the product create waste items?How easy is it to dispose of the product?

    Footnote: Knowing a Winning Business Idea When You See One by Kim and Mauborgne

    Tool #12 B

    The Buyer Utility Map

  • Slide 56

    Tool #13

    Sustaining vs. Disruptive

    Footnote: The Innovator’s Solution, by Christensen and Raynor.

  • Slide 57

    Tool #14

    Low-end vs. New-market

    Footnote: The Innovator’s Solution, by Christensen and Raynor.

  • Slide 58

    Scoring Ideas: Principles of Innovation Score (PI)

    Score each statement: 0 = Not True, 1= True1. We know from our analysis what the innovation has to beto satisfy an opportunity. We’ve talked to customers and usersto understand expectations, values, and needs. 0 12. The innovation is simple. It is focused on a specificneed that it satisfies “This is obvious. Why didn’t I think of it?” applies here. 0 13. This innovation starts small. 0 14. This innovation does one specific thing. It doesn’t try todo too many things at once. 0 15. This innovation aims at leadership. 0 16. This innovation is not too clever. It is acceptable toordinary human beings. 0 17. This innovation is something for the present. 0 18. This innovation is within our field of expertise. 0 19. This innovation builds on our strengths. 0 110. This innovation is acceptable to the target customers. 0 1

    Total PI (Principles of Innovation) Score: _________

    Tool #15

    Footnote: Drucker

  • Slide 59

    Scoring Ideas: Value Innovation Logic Score (VIL)

    Score each category: 0 = Not True, 1= Partially True, 2 = Very True1. Industry Assumptions 0 1 2This innovation shapes the industry’s conditions.

    2. Strategic Focus 0 1 2This innovation is a quantum leap in value to dominate the market. Competition is not the benchmark.

    3. Customers 0 1 2This innovation targets the mass of buyers and willingly lets some existing customers go. It focuses on the key commonalities in what customers value.

    4. Assets and Capabilities 0 1 2This innovation is not constrained by what the company already has. It considers: What would we do if we were starting anew?

    5. Product and Service Offerings 0 1 2This innovation thinks in terms of the total solution customers seek, even if that takes the company beyond its industry’s traditional offerings.

    Total VIL (Value Innovation Logic) Score: _________

    Tool #16

    Kim and Mauborgne

  • Slide 60

    Scoring Ideas: Alignment to Organizational PrioritiesTotal Alignment Score: _________ (Maximum score is 10 points, 5 + 5)

    Alignment Scale (for one or more items):

    5 Alignment is very strong4 Alignment is strong3 Alignment is moderate2 Alignment is weak1 Alignment is very weak0 No alignment

    Note: Alignment means that it is clear that the successful implementation of the idea/opportunity will help the college to achieve the Strategic Outcome or Strategic Priority. Alignment is cause and effect or enablement based.

    Alignment to Strategic Outcomes (Ends): _______ Points• Strategic Outcome One• Strategic Outcome Two• Strategic Outcome Three

    Alignment to Strategic Priorities and Direction: ______ Points• Strategic Priority One• Strategic Priority Two• Strategic Priority Three

    Tool #17

  • Slide 61

    For Top Ideas: Test / Shape to be DisruptiveThree sets of questions:

    The first set explores whether the idea can become a new-market disruption:

    Is there a larger population of people who historically have not had the money, equipment, or skill to do this thing for themselves, and as a result have gone without it altogether or have needed to pay someone with more expertise to do it for them?

    To use the product or service, do customers need to go to an inconvenient, centralized location?

    This idea can be a new-market disruption: YES NO

    The second set of questions explores the potential for a low-end disruption:

    Are there customers at the low end of the market who would be happy to purchase a product with less (but good enough) performance if they could get it at a lower price?

    Can we create a business model that enables us to earn attractive profits at the discount prices required to win the business of these over-served customers at the low end?

    This idea can be a low-end disruption: YES NO

    Once an innovation passes the new-market or low-end test, there is still a third critical question to answer affirmatively:

    Is the innovation disruptive to all of the significant incumbent firms in the industry? If it appears to be sustaining to one or more significant players in the industry, then the odds will be stacked in that firm’s favor, and the entrant is unlikely to win.

    This idea is disruptive to all key players: YES NO

    Tool #18

    Christensenand Raynor.

  • Slide 62

    For Top Ideas: Recognize the ChampionsThe success of innovations is to a great extent dependent upon the activities and the abilities of individuals who enthusiastically support the new product or process. These individuals are your entrepreneurs.

    List the individuals that have emerged in the following three roles:

    1. The power promoter role: (Management Sponsor)Management of conflicts resulting from incompatible demands for resources and from incompatible power positionsCognitive Activities: Goal formation, problem definition, confirming strategic fit

    2. The process promoter role: (Project Manager)Management of conflicts between different departments with different objectives and persons with antagonistic motivesCognitive Activities: Project and interface management, networking, providing information about human and financial services

    3. The technology promoter role: (Technical Expert)Management of conflicts due to contradictory perceptions and informationCognitive Activities: Search for new information, assessment of existing solutions, generation of new alternatives

    Based on: Promoters and Champions in Innovations: by Jurgen Hauschildt, The International Handbook on Innovation, 2003

    The “troika” of power, process, and technology promoter.

    Tool #19

  • Slide 63

    For Top Ideas: Identify the Lead Users

    Through a networking process identify lead users at the leading edge of the target market and related markets.

    From these lead users, identify other lead users and experts in the field. Note the experts that can be useful to guide product development.

    From the lead users and experts identify key ideas that will be useful in developing an innovative product.

    Based on: Creating Breakthroughs at 3M: the lead user process, HBR on Innovation, von Hippel, Thomke, and Sonnack.

    Tool #20

  • Slide 64

    Innovation Business Process Measurements

    Profit - New Products

    % Sales on InnovationHours in Customer Collaboration

    New Products per Year

    % Customers per New Product

    Revenue - New Markets

    Profit - New Markets

    Revenue - New Products

    Concept to Market Time

    New Customers / Markets

    New Opportunities per Month

    New Projects Funded per Month

    Lead-Users Identified

    Advancement of Opportunities

    Innovation Pipeline Points

    Hours Worked on Innovation

    Number of Innovation Champions

    Innovation Training Hours

    Employee Attendance in Reviews

    Employees Contributing Ideas

    Employee Learning and Growth Perspective Internal Perspective Customer Perspective Financial Perspective

    Performance Measures and Gap Analysis

  • Slide 65

    Why Measurement Managed Organizations Work

    Three universal truths:

    • Every human being wants to be treated with dignity and respect,every single day. . .

    . . . {Engaged in reviews vs. ignored}

    • People want to make a contribution with what they do, they wanttheir lives to have meaning. . .

    . . . {Tools build capacity, human capital}

    • All people want someone to notice what they do. . .

    . . . {Accountability for performance measures}

    Paul O’Neil is former CEO Alcoa and former Secretary of the Treasury (ASQ Quote)

  • Slide 66

    “We help leaders to improve the key performance objectives that cause financial success.”

    Bill Guest is an international consultant, conference speaker, and practitioner on both innovation and corporate metrics. Bill Guest teaches and consults extensively in the area of organizational performance measurement and improvement. Organizations need to implement the right processes, tools, and measurements to support their performance improvement objectives. Bill has developed a crisp, clear, no nonsense approach to organizational performance improvement. He developed and implemented these techniques, withexcellent results, during his 25 years of industry experience with various organizations in the roles of engineer, supervisor, vice president sales, general manager, executive vice president, and CEO. Since 1999, he has been working with clients around the world to teach them these straightforward techniques and provide step-by-step coaching as they use these techniques to achieve their goals.

    Bill Guest, 616.430.0828, [email protected]

  • Slide 67

    Suggested Reading ListThe following books and articles are suggested reading for those wishing to read the original authors and prepare more fully to implement the ideas in Driving Profitable Growth.

    Harvard Business Review articles:1. Putting the Balanced Scorecard to Work by Kaplan and Norton, Harvard

    Business Review, 1993, OnPoint edition available2. Having Trouble with Your Strategy? Then Map It by Kaplan and Norton,

    Harvard Business Review, 2000, OnPoint edition available3. Creating New Market Space by Kim and Mauborgne, Harvard Business

    Review, 1999, OnPoint edition available4. Knowing a Winning Business Idea When You See One by Kim and

    Mauborgne, Harvard Business Review, 2000, OnPoint edition available5. Blue Ocean Strategy by Kim and Mauborgne, Harvard Business Review, 2004

    Books:1. Innovation and Entrepreneurship by Peter Drucker, 1985.2. Innovator’s Solution by Christensen and Raynor, 2003.3. Balanced Scorecard: Step-By-Step by Paul Niven, 20024. Blue Ocean Strategy by Kim and Mauborgne, 20055. The Harvard Business Review on Innovation, 20016. Innovation in the Community College by Terry O’Banion, 1989

    Notes:1. The Essential Drucker includes some of the material from Innovation and Entrepreneurship. This book is a

    wonderful overview of Drucker’s works.2. The Harvard Business Review on Innovation contains Creating New Market Space and Knowing a Winning

    Business Idea When You See One by Kim and Mauborgne and a few others listed in Driving Profitable Growth.

  • Slide 68

    Action ItemsFor each core business process, implement:

    1. Structured Process and Monthly Reviews (CEO & CFO)2. Toolbox of Tools and Techniques3. Balanced Performance Measures and Gap Analysis

    Use the IT staff as a strategic force:

    1. Senior executives own the processes and attend the reviews2. Assign IT personnel as support staff to each executive3. Create databases to manage opportunities company-wide4. Own the performance measurement of the leading indicators5. Own the gap analysis function on all performance measures6. Implement digital dashboards to keep everyone informed

  • Slide 69

    The Leadership Framework1. People – Leaders get the right people in and the wrong people out. Right people are thoughtful and capable individuals of character, always learning, with a bias for action, that are able to subordinate their egos to the achievement of the mission.2. Heritage – The organization has a clear understanding of its core values, the things it won’t change, and the discipline to act in alignment with them.3. Focus – A mission to be the best (in something specific), and clear measurable balanced objectives (financial, customer, internal, and learning & growth) that will lead to the actions that will cause the organization to achieve its mission.4. Path – A systematic deployment of resources to achieve the organization’s priorities with leaders insuring open vigorous debate and the integration of the best ideas to determine the right actions.5. Gaps – Constantly seeking to understand perfection for all performance areas and measures, understanding the gaps between the current reality and perfection, creating cause and effect linkages, and the necessity to take action to eliminate the gaps.

  • Slide 70

    Metrics “Reach” into the Core Business Processes

    Metrics must be balanced according to:

    • The four (4) balanced scorecard perspectives of financial, customer, internal, and employee growth and learning

    • The three (3) core business processes of operations, sales, and innovation.

    Metrics are fully balanced when they “reach” into each of the12 intersections formed by the matrix.

    Once the metrics are defined the next step is to assign primaryand supporting responsibilities.

  • Slide 71

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    PleasingCustomers Innovationby Superior

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    Essential Metrics Matrix

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    Share of Customer Spending

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    % Customers per New Product

    Problem Resolution

    Win/Loss - Overall

    Revenue - New Markets

    Profit - New Markets

    Revenue Growth Rate

    Profit Growth Rate

    Days in Receivables

    Revenue - New Products

    Concept to Market Time

    New Customers / Markets

    Revenue

    Profit - % Sales

    Return on Assets

    Days Payables

    Credit/Debit Memos

    Revenue - New Customers

    Revenue - Existing Customers

    Samples/Prototypes On-Time

    Win/Loss - Existing Customers

    Win/Loss - New Prospects

    Delivery - % On-Time

    Quality / Warranty Return Rates

    Customer Satisfaction

    Complaint Response Time

    New Opportunities per Month

    New Projects Funded per Month

    Lead-Users Identified

    Advancement of Opportunities

    Forecast Growth Rate

    Forecast Accuracy

    Sales Calls per Week

    Innovation Pipeline Points

    Hours Worked on Innovation

    Number of Innovation Champions

    Innovation Training Hours

    Inventory Turns

    Environmental Impact

    % First Time Pass Final Test

    Quality - Scrap & Rework

    Supplier - Quality and Delivery

    Sales Pipeline Points

    Status, Next Act's, Comp. Pos.

    Profit per Salesperson

    Sales Training Hours

    Employee Attendance in Reviews

    Employees Contributing Ideas

    Timely Performance Appraisals

    Win/Loss by Salesperson

    New Opps. per Salesperson

    Revenue per Salesperson

    Employee Satisfaction

    Lost Time Accidents

    Absenteeism

    Training Investment

    Employee Learning and Growth Perspective Internal Perspective Customer Perspective Financial Perspective

    The “Essential Metrics” Menu

  • Slide 72

    The “Essential Metrics” Responsibilities Matrix

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    CC CC CC CC CC BU CC CC CC BU CC BU CC CC CC CC BU CC CC CC BU CC CC CC

    C C C C C K K C C K K C K K C C K C C C C C C C

    P P P

    P P S P S P S P P P S P P S

    S S P S

    P S P P S

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    S P S S P S S S P S S P S

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    Essential Metrics Responsibility Matrix

    *** P = Primary Responsibility S = Support Responsibility

    Employee Learning and Growth Perspective Internal Perspective Customer Perspective Financial Perspective

    Corporate Core / BU Specific

    Continuous / Key Improvement

    CEO

    VP Sales

    CFO

    VP Operations

    Quality Director

    VP Human Resources

    VP Engineering

    VP Purchasing

  • Slide 73

    The “Path to Excellence” ModelA systematic, rational approach to achieving organizational excellence.

    FOCUS > DATA > PRIORITIZE > ANALYZE > ACTION > REPORT > BENCHMARK >>>> EXCELLENCE

    The Seven Steps:

    1. FOCUS on Business Priorities Establish key improvement objectives based on organizational priorities.

    2. Gather DATA Design and implement effective data gathering.

    3. PRIORITIZE Opportunities Use Pareto Charts to determine priorities for improvement projects.

    4. ANALYZE Causes Use Fishbone Analysis to identify the root causes of problems.

    5. Take ACTION Implement corrective actions (Force Field Analysis to clarify barriers/support).

    6. Track, Verify, and REPORT Track and verify fixes. Report progress regularly (quarterly mgt. reviews).

    7. BENCHMARK and Reset Goals Benchmark against the best. Reset goals annually based on results.

    The P2E Model is designed to guide organizations to get onto the path to world-class excellence. The model is effective to assist teams to gain the highest return from existing quality systems. It also provides a clear rational basis for management to move forward to effectively utilize various continuous improvement tools and programs.

    Innovation Tools Matrix