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Transcript of Formation 4
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Module IVExecution capacity of the
client
Roll-out
Action1
Action2
Action3
Action4
Action5
Qtr 1 Qtr 2 Qtr 3 Qtr4
Introduction
Conclusion
Module I
Module II Module III Module IV
Module V
Module VI
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2Module IVA.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING
Contents of Module IV
Introduction
Assessment of execution capacity
• Operational capacity assessment
• Organizational capacity assessment
• Information technology capacity assessment
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3Module IVA.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING
Schedule for the A.T. Kearney Business Unit Strategy Training Program
Source: A.T. Kearney
Introduction
Dinner
Monday Tuesday Wednesday Thursday Friday
Introduction
Module II
Lunch
Final presentation
Conclusion
Module III
Case presentation
Case preparation
Dinner
Case preparation
Dinner Dinner
Module V
Case preparation
Lunch
Module I
Lunch Lunch
Dinner
Case preparation
Case presentation
Guest Speaker
Strategy literature
review
Module VI
Lunch
Module IV Guest Speaker
Case presentation
8-9
9-10
10-11
11-12
12-1
1-2
Time
2-3
3-4
4-5
6-7
8-9
9-10
10-?
7-8
5-6
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4Module IVA.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING
Positioning of Module IV in the overall training context
Module II
Structure and
dynamics of the
industry
Module III
Characteristics and
dynamics of the
individual companies
Module IV
Execution
capacity of theclient
Module VI
Implementable
recommendations
Module V
Definition and
evaluation of strategic
alternatives
Roll-out
Action 1
Action 2
Action 3
Action 4
Action 5
Qtr1 Qtr2 Qtr3 Qtr4
Source: A.T. Kearney
Module I
Identification of the key
issues of the
engagement
Note: The order of presentation of the curriculum elements should not be interpreted as a sequential guideline for a strategy engagement. Different
elements of the program may be referenced at different times in the engagement
Introduction
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The intention of Module IV is to assess the client’s execution capacity
To determine the degrees of strategic
freedom available to the client in terms of
the client’s capacity to execute strategy.
The purpose is that strategic decision-
making should be tailored to the specific
capabilities of the client
Focus
Source: A.T. Kearney
Introduction
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Deliverable and techniques in Module IV
Deliverable Techniques
Assessment of execution capacity • Operational capacity assessment
• Organizational capacity assessment
• Information capacity assessment
Source: A.T. Kearney
Introduction
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Contents of Module IV
Introduction
Assessment of execution capacity
• Operational capacity assessment
• Organizational capacity assessment
• Information technology capacity assessment
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What is execution capacity?
Execution capacity of a company refers to the
current and potential resource and capability base
available to the company with regard to operations,
organization and information technology
Source: A.T. Kearney
Definition
IntroductionAssessment of execution capacity
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9Module IVA.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING
A.T. Kearney’s distinguishing characteristic in strategy is the assessment of the
client’s execution capacity concurrent with the strategy formulation process
Implementation
Implementation
Strategy
analysis
Execution-
focused
analysis
Integratedevaluation
and planning
Concurrent
processes
PowerfulContributionsIterations Iterations
Assessment
of degrees of
freedom to
execute
Alternatives for
improving
execution
capacity
Assessment of
the situation
Generation
and evaluation
of alternatives
Source: A.T. Kearney
Note: The recommendations must have (i) high strategic potential as well as (ii) high likelihood of implementation and therefore bridge the gap between
strategy and operations
IntroductionAssessment of execution capacity
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10Module IVA.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING
Execution capacity analysis focuses on identifying the resources and capabilities
available to the company within a reasonable planning timeframeIllustrative
Source: A.T. Kearney
• An assessment of the
client’s execution
capacity can determine
whether the client can
realistically implement
the strategic solution
• The client’s degree of
strategic freedom and
level of change readiness
to execute strategy can
also be determined
100%
100%100%
Information Technology
Operations
Organization
Note: All three execution capacity areas are, to a certain extent, linked to focus areas of A.T. Kearney, e.g. operational execution capacity could be seen in
relation to some of the operations practices; Organizational execution capacity could be seen in relation to the Enterprise Transformation methodology;
information technology capacity could be seen in relation to the Strategic Information Technology Practice and Jupiter
IntroductionAssessment of execution capacity
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11Module IVA.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING
The three areas must be integrated when executing strategy, and therefore should
be evaluated together when assessing execution capacity
Source: A.T. Kearney
The three parts are not separate
entities, and any analysis of
one must be integrated with
analyses of the other twoelements. For example, the
organizational capacity
assessment will be a major part
of an IT or an operational
capacity assessment
Operations
OrganizationInformation
technology
IntroductionAssessment of execution capacity
Illustrative
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12Module IVA.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING
Why focus on execution capacity?
Current
position
Required
position
Key question
Does the client have the
execution capacity to move from
its current position to the positionrequired to successfully carry out
recommended strategies in terms
of:
• Resources?
• Capabilities?
Illustrative
Source: A.T. Kearney
IntroductionAssessment of execution capacity
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13Module IVA.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING
An execution capacity assessment helps to identify resource and capability
requirements for the client
Source: A.T. Kearney
100%
100%100%
Information Technology Organization
Gap Current resource and
capability level
Focus
• An assessment of a client’s degrees of strategic
freedom to execute and an analysis of alternatives for
improving its execution capacity is built on an
evaluation of the client’s current performance vis-à-vis
what will be required to execute the strategy
• The analysis will focus on answering:
– Is the current resource and capability level
sufficient to ensure competitiveness for the client?
– In which functional areas have “gaps” been
identified?
– Which specific “gaps” are critical hurdles for
further success?
– To what extent can the “gaps” be eliminated?
– Is the client ready to implement changes?
Operations
IntroductionAssessment of execution capacity
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To identify and assess a business unit’s execution capacity, one must analyze its
resources and capabilities
Capabilities
Resources
• Tangible or intangible factors that are owned or
controlled by the company (e.g. plants, items of
capital equipment, cash, information)
• The company’s capacity for undertaking a particularactivity by deploying and cooperating resources
(e.g. delivering highly reliable services)
• They are developed over time through complex
interactions among the company’s resources
• Capabilities, unlike resources, are based on
developing, carrying and exchanging knowledgethrough the company’s human capital
Source: A.T. Kearney
IntroductionAssessment of execution capacity
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15Module IVA.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING
Contents of Module IV
Introduction
Assessment of execution capacity
• Operational capacity assessment
• Organizational capacity assessment
• Information technology capacity assessment
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16Module IVA.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING
Defining operational execution capacity
Operational execution capacity is the extent to which
the client can employ its operational resources and
thus create capabilities to perform the activities
required to implement a new strategy within a
reasonable time frame
Definition
Source: A.T. Kearney
DescriptionAssessment of execution capacity Operational capacity assessment
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Operational execution capacity is the first dimension of the assessment
Source: A.T. Kearney
100%
100%100%
Information technology
Operations
Organization
Key questions
• Does the client have sufficient degrees of strategic
freedom or to what extent is the client constrained by
the current situation to execute operational tasks?
– What is the client’s current level of operational
resources and capabilities?
– How are the current resources and capabilitiesutilized?
– How well is the client positioned in the supply
chain?
– Does the client control all relevant activities in the
value chain?
• What alternatives exist to improve the client’s
execution capacity and to what extent will its current
level of operational resources and capabilities limit
the client‘s opportunities to implement the optimal
strategic solution?
Assessment of execution capacity Operational capacity assessment Description
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18Module IVA.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING
The client’s operational resources must be analyzed to understand the extent to
which the company can support its strategy execution
Source: Slack, N. et. al. (1995); Operations Management
The
operations
functionSuppliers Customers
Operational resources
Purchasing
Technical
engineering
Product/services
development
Marketing
Accounting
and financePersonnel
Assessment of execution capacity Operational capacity assessment Description
A f i i O i l i U
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High operational ability can contribute a range of performance advantages that
can be drawn upon in designing a business unit strategy
Source: Slack, N. et. al. (1995); Operations Management
Doing things correctly A quality advantage
Doing things quickly A speed advantage
Doing things cheaply A cost advantage
Changing what you do A flexibility advantage
Doing things on time A dependability advantage
Assessment of execution capacity Operational capacity assessment Usage
A t f ti it O ti l it t U
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In essence, the execution strategy is dependent on the operation’s handling of its
performance objectives
Source: Slack, N. et. al. (1995); Operations Management
Error-free
processes
Ability to
change
Fast
throughput
High total
productivity
Internal effects of the five
performance objectives
Quality Flexibility
Dependability
Costs
Speed
• On-specification products
and services
• Frequent new products/services
• Wide products/service range
• Volume and delivery adjustments
• Dependable delivery• Short delivery lead time
• Low price, high margin, or both
Reliable
operation
Assessment of execution capacity Operational capacity assessment Usage
Assessment of execution capacity Operational capacity assessment Example
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21Module IVA.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING
An overview of the client’s strengths and weaknesses can be realized through an
analysis of its operational resources
Source: Slack, N. et. al. (1995); Operations Management
3
Differences between retail banking and corporate banking
Source: A.T. Kearney
Retail banking
Dependability and
flexibility must be
improved
Corporate banking
Cost is the majorweakness for
corporate banking
Cost
Dependability
FlexibilityQuality
Speed
Retail banking
Corporate banking
Assessment of execution capacity Operational capacity assessment Example
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22Module IVA.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING
3Source: A.T. Kearney
Identify resources along the value chain and understand their relative strengths
Source: A.T. Kearney
• Warranty
• Speed
• Service
network
• Quality and
effectiveness
of customer
service
(Walt Disney,
Marks &
Spencer)
Resources
Capabilities
R&DProduct
DesignManufacturing
Marketing
and SalesDistribution Service
• Channels
• Inventory
• Warehouses
• Distribution
fleet
• Efficiency
and speed of
distribution
(Federal
Express)
• Brand/
reputation
• Advertising/
promotion
• Salesforce• Package
• Brand
management
and brand
promotion
(Procter &
Gamble,
PepsiCo)
• Raw materials
• Size of plants
• Location of
land and
buildings
• Capacity for
continual
improvements
in production
processes
(Toyota,
Nucor)
• Flexibility and
speed of
response
(Benetton)
• Physical
characteristics
• Quality
• Expertise in
design
• Design
capability
(Apple)
• Patents
• Copyrights
• Research
facilities
• Skills ofresearch
personnel
• Capability in
basic research
(Merck, AT&T)
• Ability to
develop
innovative new
products (Sony)
• Speed of new
product
development
Operational resources can be identified at each step of the value chain
Define the value
chain
Define resources
Define capabilities
Assessment of execution capacity Operational capacity assessment Example
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23Module IVA.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING
3Source: A.T. Kearney
Assess the strength of each capability
Identify critical capabilities required to deliver customer value and assess the
company’s strengths and weaknesses in these areas relative to competitors’
Capabilities required WeightAssessment of capabilities
1 2 3 4 5
%
%
%
%
• Lead time
• Manufacturing
flexibility
• Delivery within 24
hours
• Highly reliable
service
Source: A.T. Kearney
Client
Top performer
Identify how the
current resources
can be improved and
which additional
resources should be
acquired to fill this
gap
Key operational
success factors
Determine the
importance of the
capability with
respect to the key
success factors
Assessment of execution capacity Operational capacity assessment Example
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24Module IVA.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING
3Source: A.T. Kearney
• MSI medium scale integration serving thehigh end
• No low-end product
• 2 plants
• Backwards integrated into integratedcircuit manufacture
R&DProduct
DesignManufacturing
Distribution
& SalesService
• USD 3m budgetsplit amongvariablecost reduction,sales support anddevelopment
• Direct sales force forsystems and customersegment regionallyorganized
• Sales agent network for business segmentsupplemented with five
direct salesmen
Client • Servicehandled bysales agents
• USD 9m budget • 10% solid state products
• A 1,000 for high end, A 100 for midrange, A 10 for low range
• Essentially an assembly operation
• Purchases chips externally
• Direct sales force forall segments
• Systems sales forcespecialized bycustomer group
Com-
petitor A
• Servicehandled byagentnetwork
• Subcontracted • Low end product only, but rumors of amedium product in development
• 100% solid state
• Foreign sourcing and assembly
• Infiltrating client's salesagents network
Com-
petitor B
• Infiltratingclient'ssales agentnetwork
• Can the client bethe technicalleader in thesystems market?
• Can client adopt a modular design?
• Should a low end product beoutsourced?
• Can client move to adirect sales force inthe business segment?
A benchmarking analysis can help to uncover key issues and questions related to
the client’s ability to exploit its current resources and capabilities Example: Security system
Source: A.T. Kearney
Compare qualitative differences to competitorsDefine the valuechain
Define the competitors
and benchmark
Pose key questions
p y p p y p
Assessment of execution capacity Operational capacity assessment Methodology
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25Module IVA.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING
3
Methodology for performing an operational capacity assessment
1 2Output
• A determination of
the company’s
ability to execute an
intended or proposed
strategy
• An identification of
the critical
operational success
factors
• An assessment of the
company's
operational resources
and capabilities
• A gap analysis that
illustrates where the
company lacks
adequate resources
and capabilities
Input
• Strategic era
analysis
• Strategic planning
framework
• Ratio analysis
• Client
data/interviews
• Expert interviews
• Analyst reports
• SEC filings*
• Trade journals
• Customer surveys
• Annual reports
• Determine which resourcesand capabilities are mostcritical to successfullyimplement the strategicinitiative
• Identify the level ofresources and capabilitiesavailable within thecompany:
– Purchasing – Personnel – Accounting and finance – Marketing – Product/service
development – Technical/engineering
• Draw an operational map
using the key success factors• Identify the resourcesemployed to perform currentvalue chain activities, anddetermine how efficientlythe resources are beingutilized
• Pose critical questions: – How can the client re-
deploy the resources todeliver products/servicesdifferently?
– Can the client lever/stretch the resources toincrease productivity?
– Can the client reconfigurethe resources to achieve adifferent set ofcapabilities?
– How can the client’scurrent capabilities beapplied in a differentactivity?
– How can the client better
use the resources to focuson different customergroups?
• Compare the company’s keyoperational resources and capabilitiesinternally and against competitors’
• Conduct high-level gap analysis toassess current capabilities
• Pinpoint the most criticalgaps to be closed
• Use knowledge of operationsto (re-) formulate strategicalternatives
Identify theclient’s operational
resources and
capabilities
Assess itsstrengths and
weaknesses
Determine themost critical
gaps
Source: A.T. Kearney
* Reports filed by publicly held companies with the Securities and Exchange Commission: e.g., 10K, 10Q
p y p p y gy
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26Module IVA.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING
Conclusion
Source: A.T. Kearney
Key points
Weaknesses
References
Strengths
• Colis, D., and Montgomery, C. (July-August 1995); Competing on Resources: Strategy in the 1990s• Grant, R., (1996); Contemporary Strategy Analysis• Wernerfelt, B. (1984); A Resource-based View of the Firm, Strategic Management Journal, Vol. 5
• Hamel, G. and Prahalad, C.K. (May-June 1990); The Core Competence of the Corporation, HarvardBusiness Review• Stalk G., Evans. P, and Shulman, L.E. (March-April 1992); Competing on Capabilities; Harvard
Business Review
• Should be performed concurrently with all other analyses of the industry, client, and competitorcompanies to relate strategic thinking to company capabilities• Purpose of the analysis is to understand the company’s capacity or degrees of freedom to execute
certain strategies• Heavily interlinked with the company analysis in Module III• Benchmarking (see Module III) might provide additional insights
• If properly defined, a very strong technique used to ensure that a strategy is implementable
• If resources and capabilities are incorrectly assessed – An otherwise sound and logical strategy may be rendered useless – The performance measurement systems may be adversely affected
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Contents of Module IV
Introduction
Assessment of execution capacity
• Operational capacity assessment
• Organizational capacity assessment
• Information technology capacity assessment
Assessment of execution capacity Organizational capacity assessment Description
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Organizational execution capacity refers to the extent to which an organization can
bring about change
Organizational execution capacity is the client’s ability
to change the organizational dynamics so as to increase
effectiveness. This refers to the degree to which the
organization can handle organizational change processes,
including changes in resources and capabilities within its
structure, style, staff, shared values and skills
Definition
Source: A.T. Kearney
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Organizational execution capacity is the second dimension of the assessment
Key questions
Source: A.T. Kearney
100%
100%100%
Information technology
Operations
Organization
• Does the client have a sufficient degree of strategic
freedom to execute the required organizational changes?
– Are the current organizational resources and
capabilities geared to undertake change?
– Are the necessary systems and skills in place?
– Can the organization, especially the management,
deliver the needed results?
- Historical performance
- Commitment and willingness – To what extent is the staff motivated and committed
to pursue organizational changes?
• What alternatives exist for improving the execution
capacity?
– To what extent can the current level of organizational
resources and capabilities be (re-)allocated within
a reasonable time horizon? – How can the client’s resources and capabilities be
stretched and leveraged?
– To what extent is it necessary to acquire new skills?
Assessment of execution capacity Organizational capacity assessment Usage
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The organizational execution capacity should be measured with respect to both
tangible and intangible resources of the company
Tangible
Intangible
Physical
Source: Grant, R.M. (1996); Contemporary Strategy Analysis
Organizational
capabilities and
resources of the
company
Financial
Human
Reputation
Technological
The company’s borrowing capacity and its internal funds
generation determine its investment capacity and its cyclical
resilience
The size, location, level of technology, and flexibility of plant
and equipment; location and alternative uses for land and
buildings; reserves of raw materials as they determine the
company’s set of production capabilities and determine the
potential for cost and quality advantage
Stock of technology including proprietary technology andexpertise in its application of know-how; resources for
innovation (research facilities, technical and scientific
employees)
The training and expertise of people determine the skills
available to the company; the adaptability of employees
determine the strategic flexibility; the commitment and loyalty
of employees determines the company’s ability to maintain
competitive advantageReputation with customers through the ownership of brands,
established relationships with customers, the association with
a company’s products with quality, reliability, etc.; the
reputation of the company with the suppliers of components,
finance, labor services and other inputs
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31Module IVA.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING
A number of key factors will indicate the client’s organizational execution capacity
• Debt/equity ratio
• Ratio of net cash to capital expenditure
• Credit rating
• Resale values of fixed assets
• Age of capital equipment
• Scale of plants
• Alternative uses of fixed assets
• Number and significance of patents
• Revenue from patent licenses
• R&D staff as a percentage of total employment
• Educational, technical, professional qualifications of employees
• Pay rates relative to industry standards
Source: Grant, R.M. (1996); Contemporary Strategy Analysis
Resources Key indicators
• Brand recognition
• Price premium over competing brands• Percentage of repeat buying
• Objective measures of product performance
• Level and consistency of company performance
Financial
Physical
Technological
Human
Reputation
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3Source: A.T. Kearney
Determine the organizational structure of the company to identify the management
levels and skill base that is available
General Manager
Purchasing Operations Finance
...
.........
...
...
...
...
...
...
...
...
Source: A.T. Kearney
Is the organizational design and skill base optimal to implement the strategy
Understand the
decision mechanism
of the company – Who are the key
decision makers?
– Who has the
power?
Head of
Region A
Head of
Region B
Head of
Region C
Head of
Region D
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3Source: A.T. Kearney
Mapping of the management’s capabilities
Managerial experience and skill levels determine the management
team’s capacity to undertake strategic change
1 = Poor
10 = Very good
Curriculum Vitae
• Leadership capabilities
• Technical skills
• Experience inimplementing change
• Flexibility and mobility
• Commitment to change
• Operational skills
• Linguistic abilities
Middle management Mr. X
6
2
7
6
8
1
1
3
4
10
9
1
6
5
Mr. Y Mr. Z
1
2
3
4
10
8
6
Note: A.T. Kearney executive search may be able to provide insights on key success factors in different countries
Source: A.T. Kearney
To which extent are
the individuals in the
management groupready and capable to
undertake change?
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3Source: A.T. Kearney
Middle management’s capabilities map
Map the capabilities for all management levels on defined dimensions
Current managerial capability available
Expected capability requirements
Source: A.T. Kearney
Knowledge of
company product range
Ability to run staff
on project basis
Willingness
to make and
accept
mistakes
Ability to appraise staff using
customer based measures
Ability to flexibly
deploy staff
Knowledge
of customer
business
issues
To what extent are the
individuals in the
middle management
group ready and
capable to undertake
changes?
Dimensions will differ
depending on the level
of management
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3Source: A.T. Kearney
The management group has not properly followed through previous
strategies
The organization’s track record for the execution of previous strategies should
impact future strategic recommendations
Source: A.T. Kearney
Minutes of
the Board
meeting of
…
Not
implemented
Major
changes
Minor
changes
Implemented Decisions
madeDate
As original
By analyzing the
historical decision-
making process of the
client, a picture of
change willingness
can be depicted
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3Source: A.T. Kearney
Analysis of past success and failure
Identify the client’s relevant project management experience in executing new
strategies
New strategy
periods
Major changes
suggested in the
strategic plan
Breakthroughs
achieved
Problems during
implementation
Source: A.T. Kearney
Understand
management’s attitude
toward previous
change programs.
Understand their
reasons for success and
failure
Use strategic era
analysis as an input
Understand change
management programs
that have been
implemented
Understand
breakthroughs
Define concrete
problems encountered
during implementation
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3Source: A.T. Kearney
An actual engagement showed that the client had not considered the consequences
of its objectives
As a consequence of the “client’s” objective, the organization will lack
managers in the future Number of managers
50
100
• Is this realistic?
• Is the human
resource
department ready
to pursue such a
task?
Based on its growth
ambitions, the company
must double its
management resources
within 2 years
1997 1999E
Source: A.T. Kearney
Show the
development required
to make the changes
Indicate “story”
behind slide
Pose questions
that create a
reality check
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Methodology for performing an organizational capacity analysis
Outputs
• Strengths and
weaknesses of the
organizational
structure
• Determination of
measures required to
raise the
organizational
capabilities up to the
level necessary to
implement the
strategy
Inputs
• 7S
• Strategic era
analysis
• Strategic planning
framework
• Client
data/interviews
• Expert interviews
• Analyst reports
• Annual reports
• SEC filings*
• Trade journals
• Press clippings
• Customer surveys
• Clarify the formal and
informal organizational
routines
• Assess organizational
capabilities:
– Staff
– Systems
– Skills
– Shared values
– Style
– Structure
• Map current resources
and capabilities against
those that will be needed
to implement the strategy
• Determine the strengths
and weaknesses of both
the organizational
structure and the skills
possessed by the
organization
• Define the most critical gaps
and determine the measures
necessary to close them (e.g.
make versus buy decisions)
1 2 3
Analyze the
organizational
structure
Assess the
strengths and
weaknesses
Evaluate the
critical gaps to
be closed
* Reports filed by publicly held companies with the Securities and Exchange Commission: e.g., 10K, 10Q
Source: A.T. Kearney
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Conclusion
Source: A.T. Kearney
Key points
Weaknesses
References
Strengths
• Should be performed concurrently with all other analyses of the industry, client, and competitor
companies to relate strategic thinking to company capabilities• The purpose of the analysis is to understand the company’s capacity or degrees of freedom to execute
strategies• Draws heavily upon the analyses taught in Module III• The 7S analysis in Module III provides insights on organizational strengths
• Helps the team develop strategies that are implementable and executable from an organizational perspective
• If resources and capabilities are incorrectly assessed – Otherwise sound and logical strategy may be rendered useless – Performance measurement systems may be adversely affected
C f M d l IV
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Contents of Module IV
Introduction
Assessment of execution capacity
• Operational capacity assessment
• Organizational capacity assessment
• Information technology capacity assessment
I f ti t h l l i i ti l h th th i i iti ti
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Information technology analysis is essential whether the company is initiating a
strategic change or only evaluating the implementation of its existing strategy
Information technology execution capacity is defined by the
extent to which the client’s information technology system
provides a basis for executing strategy. Accordingly, it
concerns the degree to which the information technology
resources and capabilities can be a lever for implementing
change. This entails not only understanding the client’s
present capabilities, but also evaluating new technologies
available on the market and their potential to support new
strategic options.
Definition
Source: A.T. Kearney
I f ti t h l ti it i th thi d di i f th t
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Information technology execution capacity is the third dimension of the assessment
Note: A.T. Kearney‘s Strategic Information Technology Practice (and Jupiter) can in many instances be helpful to determine key areas of focus
Source: A.T. Kearney
100%
100%100%
Information technology
Operations
Organization
Key questions
• How can information technology help the company in
implementing the strategy?
• Can new technical solutions allow for strategic options
previously not open to us?
• Does the client have sufficient degrees of strategic
freedom to execute the required information technology
changes?
– What are the IT resources and capabilities available to
the company?
– How does the client’s present IT system reflect the
current needs of the organization?
– To what extent can the present IT system undertake
change?
– Are the necessary systems and skills in place?
• What alternatives exist to improve the company’sinformation technology execution capacity?
In addition to considering a company’s IT potential we must rethink the
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In addition to considering a company’s IT potential we must rethink the
relationship between strategy and technology, and thereby ask how IT can impact
strategy
In our new thinking we
must also ask:
“How will IT impact our
business strategy?”
Traditionally we have
been asking:
“How will IT support
our business strategy?”
Strategy
Technology
Source: A.T. Kearney
This entails helping clients to understand and exploit new technologies in order to
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This entails helping clients to understand and exploit new technologies in order to
develop new business capabilities that will create competitive advantage
New Technologies and
Key ConceptsEliminating Barriers
Understanding the
new Business Context
Developing new
Business Capabilities• Digitalization
- Virtualization
• Network Connectivity
- Interactive reach
• Form (Ticketless travel)
• Time (E-mail)
• Place (Video conferencing)
Source: A.T. Kearney
The company’s IT capability should be analyzed by leveraging SITP skills and
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The company s IT capability should be analyzed by leveraging SITP skills and
employing the Jupiter the framework in our work. Jupiter has aligned its
competencies and deliverables along 5 phases
How does IT
impact my business strategy
Foresight
Insight
I need insightinto my IT
challenge &opportunity
Plan
I understand thechallenge, but Ineed a plan and
an approach
Implementation
I have an IT plan, but I wantimplementation
leadership
Hindsight
I haveimplemented but, I wantassurance
Source: A.T. Kearney
The SITP core competencies are teams of people who are particularly skilled
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The SITP core competencies are teams of people who are particularly skilled
within a certain area of expertise
Plan Implementation Foresight Insight Hindsight
IT Alignment
Digital Economy
Source: A.T. Kearney
Large Scale Program Management
Transforming the IT Organization
Enterprise Implementation
Electronic Commerce
Business Intelligence Systems
Enterprise Modeling
Key Jupiter deliverables in foresight and insight are relevant to strategy work
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Key Jupiter deliverables in foresight and insight are relevant to strategy work
Source: A.T. Kearney
Information technology is a key enabler for management objectives
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Information technology is a key enabler for management objectives
Source: A.T. Kearney
Strategic
• Increased sales
• Competitive advantage
• Market positioning• Partner integration/
virtual enterprise
Infrastructure • Integration
• Flexibility
• Lower IT costs
• Standardization
Information • Increased control
• Better information• Better integration
• Improved quality
Transaction • Cut costs
• Increase throughput
Organizational
changes
• Flatten organization
• Responsiveness
• Flexibility
• Performance breakthrough
• Knowledge management
• Skills management
Information technology can be used to create value throughout the value chain
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gy g
Source: A.T. Kearney
Planning modes
Inbound
logistics
Automated personnel scheduling
On-line procurement of parts
Operation Outbound
logistics
Marketing
and sales
Service
Automated
warehouse
Flexible
manufacturing
Automated
order
processing
Telemarketing
remote
terminals for
sales persons
Remote service of
equipment
Computer
scheduling of
repair trucks
CAD - electronic market research
Company
infrastructure
Human resource
management
Procurement
Technological
development
An generic value chain with example areas that can be improved via IT developments
The company’s information technology resources and capabilities play an integral
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50Module IVA.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING
p y gy p p y g
part of the strategic planning process
• Management must assess the opportunities created by information
technology (benefits/risks and sustainability of advantage)
• Management must align business unit strategy and informationtechnology strategy
• Management must assess how technology might impact existing
competencies and methods of doing business
Strategic information
technology planning
Company resources
and capabilities
Strategic analysis Strategic choiceInformation
technology priorities
Source: A.T. Kearney
The company's IT capability should be analyzed by looking at the following
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p y p y y y g g
elements
What are the technical
standards comprisingthe company’s
information processor?
Computing
What are the technical
standards for the main
application system?
Applications
What are the technical
standards defining the
network?
Network
What are the standards
defining how data iscollected, stored and
retrieved?
Data
External technological environment
The corporate/business unit IT-organization
Source: A.T. Kearney
IT can have a major influence on the company’s ability to implement strategy
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Strategy
• Is the IT function centralized at corporate level?
– Bureaucratic?
– Efficient?
– Flexible?
– Responsive to local needs?
• Are the users responsible for directing, developing
and implementing it?
The IT function
• Does IT management respond to user challenges?
– Technical manager vs. functional executive
– Planning and control vs. strategic and political – Structure vs. conceptual and visionary
– Reactive vs. proactive external posture
– Hands-on internal style vs. hands-off
The IT management
• Is the local IT department able to support the
strategy? – Service focused?
– Multiple technologies?
– Support units?
– Change flexibility?
– Development backlog?
– Maintenance backlog?
– Communication between technological experts
and user?
The IT department
• Does the organization see IT as a key element in
building competitive advantage?
• Do a majority of employees have free access tocustomer product or financial information?
• Does the organization protect information?
The IT culture
Source: A.T. Kearney
An analysis of the company's relevant IT project management experience might
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53Module IVA.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING
provide interesting insights
Source: A.T. Kearney
• What major IT projects have been
implemented during the past 5 years?
• Where and why were the projects
initiated?
• Who managed the projects?
• What was the failure and/or success of
these projects?
• What were the major problems in
implementing change?
Questions
The information technology infrastructure stages of change readiness
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3Source: A.T. Kearney
A.T. Kearney’s “information infrastructure stages of changes readiness”
model provides a checklist to assess the company's information technology
capabilities
Source: A.T. Kearney
CapabilityStage 2
Awakening
Stage 1
Innocence
Stage 3
Commitment
Stage 4
World class
• Information
technology systems
linkages with the
business
• Stand-alone
information tech-
nology “strategy”
• Linked to work
processes
• Linked to agenda
for today’s
business
• Linked to agenda
for tomorrow’s
business
• Informationtechnology
alignment
• Around thetransaction • Around lineorganizations • Around lineorganizations and
product lines
• Around customer-driven processes
• Orientation of
information
system
• Process
transactions
• Data exists, but not
readily available
• Support period
accounting
• Fragmented
departmental
data
• Support planning
with operational
data
• Shared data
• Support process
flow, internal and
external
• Concurrent
visibility of data
• Technology base • High dependence
on mainframes and
mini-computers
• PC’s/workstations
used in significant
numbers
• PC’s/workstations
are interconnected
• PC’s/workstations
access information
globally (internal
external sources)
• User base • Technicians only • A few initiatives • Broad based users
are computer
literate
• Users are trained
to develop own
inquiry/tools
The stages of
change readiness
In order to assess
client strengthsand weaknesses,
IT capabilities
should be
evaluated with
respect to the four
stages of change
readiness
Map the IT organization
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The IT organization and its areas of responsibility in company X
Source: A.T. Kearney
Source: A.T. Kearney
The overview gives
a good picture of the
hierarchical
structure and activity
areas of the client
Areas of
responsibility
Description of
area
Responsible for all
financial
applications
Responsible for all
sales information
Responsible for
store-level-systems
(PCs and software)
Program/applicationManager - financial Program/applicationManager - sales Micro systemsManager OperationsManager
Responsible for
• Monitoring daily
workloads of
system
• Administration
phonemail system
• Set-up and repair
corporate PC’s
IT director
Map the client’s IT architecture
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3
Identify the client’s application base starting with its architecture
Source: A.T. Kearney
Source: A.T. Kearney
External userExternal user
Data warehouseCIS/MIS/reporting
Admini-stration ofdocument
Internaladmini-stration
Routing/switching/converting
Booking Billing
Authorizing
User interface
Provision ofdata adjustmenttransformation
Provision ofdata adjustmenttransformation
Identify the key
components of the
client’s IT structure
Understand processes, strengths
and weaknesses
Analyze the IT organization’s ability to develop applications
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3
Company X spends most of its resources on maintenance
Source: A.T. Kearney
Source: A.T. Kearney
3941
59
6159
41
MIS resources spent on
development vs. maintenancePercent
70
86 8580
70
60
1995 1996
Rated by user (functional quality)
Rated by MIS (technical quality)
Quality assessment of MIS
development applicationPercent
Look at factors
such as MISexpenditure
Understand the
performance of
the MIS
department
The users’
satisfaction with
applications is a
key indication of
MIS’s ability to
developcompetitive
solutions
19971995 1996 1997
Develop
Maintain
Assess users’ perception of the company’s IT capabilities at a high level
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3
Department Y must improve some of its IT capabilities
Source: A.T. Kearney
Key indicator
• Quality of current
applications
• Do the applications
match the requirements
• Software performance
• Availability of IT
solutions
• Responsiveness of IT
service
• Technical assistance
• Consulting of users
Very good Good Satisfactory Not good
Department XDepartment Y
Source: A.T. Kearney
Define the key
IT performance
indicators for
the client
Map the
execution
capabilities of
the client
Methodology for performing an information technology capacity assessment can be
extracted from the Jupiter framework
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1 2 3 4
extracted from the Jupiter framework
Outputs
• Client’s IT
execution capacity
detailed by the
strength of
individual IT
resources and
capabilities
Inputs
• Technology
trends
• Client
data/interviews
• Expert interviews
• Analyst reports
• Trade journals
• A qualitative framework
that maps each major
application system
against business value on
one axis and
functional/technical
adequacy on the other
• Business value may be
based on one or more
considerations, such as:
– Support for KSF – Support for new
business direction
– Critical information
needs
– Customer satisfaction
• This describes the
current state of
information technology
within an organization,
with respect to:
– Strategy
– Organization and
management
– Policies and processes
– Systems (applications
and data) – Infrastructure
(technology and
communications)
– IT costs
• This assesses the
potential impact on the
IT organization as a
result of any change
initiative
• The following are
typically assessed:
– Management
– Structure
– People
– Workflow and procedures
Employ the
Application value
framework
Study the Current
baseline
Perform the IT
organization
change readiness
assessment
Perform the IT
portfolio
investment/value
analysis
Source: A.T. Kearney
• This provides a
qualitative assessment of
the investment and
subsequent value of the
current IT portfolio with
respect to it being able to
address the needs of the
business. The intent is to
show a causal link
between business
objectives and ITinvestment
Conclusion
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Key points
Weaknesses
References
Strengths
• A.T. Kearney Strategic Information Technology Practice
• Jupiter
• Should be performed concurrently with all other analyses of the industry, client, and competitorcompanies to relate strategic thinking to company capabilities
• Understand the company’s capacity or degrees of freedom to execute certain strategies
• Can be related to the technology portion of the value chain
• An identification of the current IT and capabilities resources will outline the key areas of concern
– Key IT drivers
– IT as an enabler or constraint
• If resources and capabilities are incorrectly assessed – Otherwise sound and logical strategy may be rendered useless – Performance measurement systems may be adversely affected