Shorter business cycles call for more agile strategic planning

SU running

The time from strategic planning to execution has shortened. Most industries have already come to recognise and accept the ever more rapidly changing environment they need to operate in. Many products and services have shorter lifecycles nowadays; hence a strategic plan written years ago has little relevance.

Most companies will therefore benefit from shorter planning cycles in order to respond faster to the changing needs of their customers, suppliers and other stakeholders. In practice, this translates into a need to revisit the set plans more frequently. With excessively long strategy review cycles, the worst case scenario is that companies will plan for a market that does not exist in the same format anymore, or will otherwise plan outdated solutions.

So what to do instead?

Instead of revisiting the set plan once a year after a burdensome, months-long financial analysis period, a more agile approach that allows for easy revisits is required. It is of utmost importance, therefore, that all assumptions put into the forecasts and planning are clearly documented. If these baseline assumptions no longer make sense, all plans will need to be changed accordingly. Any significant shift in the relevant markets should trigger a review of the assumptions. By definition, no-one can predict the “black swans” in the market, but there are often subtle trends and indicators that might become surprisingly important in a relatively short period. These can easily be overlooked, and hence the market should be reviewed with great sensitivity. This more rigorous market analysis might reveal opportunities that competitors have not yet seen.

This sounds like hard work, but there should be clear, short-term action plans on how to execute new ideas. The start-up communities’ approach of “failing fast” applies to any organisation in this regard, and could prove to be an effective way of quickly acting on new initiatives, testing them, and either implementing them or moving on. The key is to have strong leadership and a governance model that supports this. An agile planning culture is not quickly built and requires consistent effort and commitment from the management.

Keeping one’s eye on the ball

Although the set long-term goals and vision are still paramount, the plan on how to get there, i.e. the strategy, should be revised more often, mirroring the changing priorities in the markets. Moreover, the strategic documentation must be clear, easy to communicate, concise and measurable, as you need to be able to determine whether the set plans were met.

Execution is crucial for success

No matter how well the planning has been done, we all know that the ability to execute is what separates the wheat from the chaff. The true test comes when plans are put into action. This phase reveals whether the planned strategy actually works and how customers react to it – and customer feedback must be noted and acted upon, rather than blindly following preconceived views and expectations concerning the market reaction.

Business model plans only take you so far; the operational changes needed in organisational models, processes, IT solutions and so on, will reveal whether the organisation has the capabilities to execute the plan and what type of revisions are needed.


Suvi Unkuri
works as an assistant manager in the KPMG Global Strategy Group. She has 8+ years of experience in management consulting, including market entry strategies/market analyses, commercial due diligence work, and integration PMO engagements. In her spare time she enjoys participating in various sports, reading, and honing her knitting skills.

 

How do you ensure you have the right strategy?

strategy

Make sure you ask the right question

I believe it was Albert Einstein who said: “If I had an hour to solve a problem and my life depended on the solution, I would spend the first 55 minutes determining the proper question to ask, for once I know the proper question, I could solve the problem in less than five minutes.” In my opinion this applies to strategy setting – spending time on identifying the right question is ‘time well spent’. The Oxford Dictionary defines strategy as ‘a plan that is intended to achieve a particular purpose’. When defining your company’s strategy you should start by asking what the company’s ‘particular purpose’ or long term overall aim is, and then how you can achieve it? In order to answer those questions, there typically is an abundance of lower level questions – key is to ask the right ones.

Apply a proven framework to structure the thought process

There are many strategy frameworks, some plain and simple, some extremely complex. Utilizing a proven framework ensures you will ‘cover all bases’, thus not forgetting anything essential. Within our practice we use our 9 Levers of Value framework. Firstly, you need to understand and align on the ambition and financial model. What are the desired financial outcomes? What is management’s investment and risk appetite, and for what timespan? Then, in order to realize the financial ambition, you need a business model and a supporting operating model.

The business model defines ’where a company plays’. The business model levers are the markets in which you are active, the propositions and brands you have and the customers you serve and channels you utilize to serve those customers. The operating model answers the question of ’how’ the value for the customer is realized.

Although the importance of each lever differs per industry and company, all levers should be considered and ‘in sync’ – regardless of whether the company is pursuing a significant change in their enterprise-wide strategy, or is searching for revenue growth opportunities, or wants to focus on their operating strategy and reduce costs.

The strategic plan should be agile

Numerous factors influence the success of a company. Customer preferences can quickly shift, new breakthrough technologies can rapidly be adapted, industries can mature at a different pace, and costs of material and labor can be predicted only to a certain extent. Since it is not a matter of ‘if’ but rather ‘when’ significant changes occur, being able to adapt the strategic plan accordingly is essential to adequately manage risks.

Ensure your strategy is pragmatic

A robust strategy will firstly help management to establish a shared view of a company’s long-term overall aim and of how this is to be achieved. When a strategy is pragmatic and implementable, it is easy to communicate it – not only to employees, but also to external stakeholders and investors, because ”it just makes sense”. An example of making a strategy more pragmatic are ‘must-win-battles’ which can be seen as key supporting pillars for reaching the long term overall aim.

As a strategy consultant I aspire to assist clients with the above challenges through our global network, frameworks, benchmarks and best practices and more personally through my facilitation, communication, inquisitiveness and active sharing of relevant insights from previous experiences. This must, of course, be combined with a healthy dose of common sense – so that, even if one’s head is up in the clouds, one’s feet must still be planted firmly on the ground.

And when you think you are finished, return to your initial question, because who claimed that was the right one to begin with?

Henk-Jan Kruit works as a Strategy and Operations Advisor in the KPMG Global Strategy Group. He has advised organizations in manufacturing and service industries for over 10 years, for example in Gross margin improvements, Sales & Operations Planning, Lean Six Sigma implementation, Integration management, Value Chain management and Strategy development. In his leisure time Henk-Jan enjoys spending time with family and friends and releasing energy through sports like snowboarding, cycling and swimming.

Compulsory Lean for Finnish Health and Social Care providers?

Public finances are in crisis, and tax money is being consumed by rapidly proliferating Health and Social Care (HSC) costs. Yet patient queues tend to lengthen. To tackle the productivity challenge, HSC needs a boost beyond that offered by the forthcoming HSC reform. Should Lean be declared mandatory for HSC service providers?

lean

The HSC reform should expedite integrated, customer-centric care processes

For the Finnish economy, spending on HSC is like pouring money into an ever-deepening pit. Availability of care requires more and more resources as the population ages and the dependency ratio increases. HSC production needs to become much more efficient. Increased competition and the freedom to choose service providers due to HSC reform will, wisely implemented, create welcome incentives to improve productivity and effectiveness.

However, productivity leaps can be achieved only if we rethink the core processes and start to design, implement and continuously improve customer-centric well integrated HSC processes.

The principles of Lean demonstrate a proven track record in boosting HSC service productivity

In terms of improving HSC service productivity, Lean principles are global best practices. Moreover, Lean has also proven itself in Finland, e.g. in the triage of the HUS’s Jorvi hospital, or in the TYKS Sapa public utility’s laboratory processes. The results benefit the service providers, employees, tax payers and, most of all, the customers. So should Lean be rolled out in all Finnish HSC organizations?

Looking at the benefits from a service provider’s point of view, we see a positive development in all areas of a traditional balanced score card:

– Lead times decrease,
– Customer satisfaction increases,
– The competence of the personnel develops and motivation improves,
– And, turnover and profitability improve.

On a broader note, Lean also supports attainment of the IHI Triple Aim targets of healthier populations, improved patient experience, and reduced costs of health care per capita.

Lower work pressures for HSC employees and taxpayer savings

For HSC employees, Lean offers greater opportunities to influence and predetermine their own work, and to engage in multi-professional cooperation. All of these decrease work strains and anxieties. And when work pressures decrease, nurses and other employees have more time to take care of their patients and more energy to get through the working day. The home care in the Helsinki district of Vuosaari is a good example. Less urgent work was scheduled outside peak periods, and the work was evened out in line with Lean principles.

Taxpayers benefit from Lean through improved HSC services provided at less cost. Thanks to effective and efficient HSC services, citizens return to work faster and contribute more to the coffers of the taxman.

What should our next Lean step be?

If I would be King for a day, I would enforce Lean for all HSC organizations. But, in absence of such power I have no other choice but to inspire decision makers with success stories of Lean, give my full support to the Lean practitioner network, and persistently support organizations to leash the full potential of Lean.

What could your organization achieve with Lean, and what should be your next step?

Antti Turpeinen works as a Strategy and Operations Advisor in the KPMG Global Strategy Group. He has advised organizations in manufacturing and service industries for over 10 years in Lean, Supply Chain, Operations and Strategy development. In his leisure time Antti organizes a low-threshold sporting activity program known as “Matala Kynnys” for school pupils, and he also plays football for FC Simpsons.

Trust issues with your Data and Analytics

Just 34% say they have a high level of confidence in their operational Data and Analytics (D&A), according to a recent KPMG study.

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I can’t say I’m surprised about the huge trust gap. Having worked on many operating strategy and cost related projects, I have experienced the challenge of collecting reliable data over and over again. I have also designed and built several D&A solutions, and battled to ensure data quality, while reducing complexity and increasing transparency.
During my career, I have come to learn a few critical things that, when done right, help create D&A that business leaders will use and trust.

1. Find the right person for the job

Dealing with databases and Business Intelligence tools requires a different language and mindset. All too often, a lot of time and effort is wasted on building unnecessarily complex solutions and reports, just because business and IT people don’t understand each other. Poor communication in the design phase places trust at risk.
Building successful D&A, requires someone who can stand in the middle ground between business and IT, and define requirements in ways that allow for implementable and easily understandable technical solutions. I find that the best results are achieved when companies involve users with the right skills and analytical curiosity. Every organization has these persons – so make sure you pick the right one to lead and drive development of your D&A initiatives.

2. Invest time in training

Creating trust takes time, and developing D&A is no different. If people do not understand where data is extracted and how KPIs are calculated, they have a hard time trusting the figures. If you are fortunate enough to have included the users in design and development, you are halfway to success. Just don’t forget to spend time communicating and teaching the entire user base, in order to convince the other half. Also make sure that you make proper provision for training in your budget. Otherwise, the investment will fail to deliver the desired benefits.

3. Let analytics build trust in the data

D&A tools nowadays allow users to go beyond static dashboards and explore the underlying data. Enabling such analytics is a very powerful way to build trust. Many operational KPIs, such as utilization rate, cost efficiency and safety indicators, are ratios. Unless users can analyse the underlying components, it’s difficult for them to be sure of the data quality, let alone draw the right conclusions. I am an advocate of self-service analytics tools, as I have seen their ability to win over the trust of employees.

4. Ensure effective maintenance

Nothing breaks trust faster than inaccurate data. Seeing your production yield at an unrealistic level of 250% or a safety indicator showing 0 events, just after you read about an injury on the company intranet, will keep users from coming back.

Make sure you establish clear responsibilities for the data and clear lines of support when things go wrong or need modification. Too often, I have seen users switch back to old Excel reporting, just because their change requests have not been answered promptly. As business and operating models undergo rapid change, make sure that your D&A is not left behind. It takes a lot to win confidence, but little to lose it.

The same study that revealed the huge trust gap, also discovered that the majority of businesses see their competitive advantage as being underpinned by D&A. Regardless of whether your particular concern is operational efficiency, or understanding your customer, or managing risk and compliance, it is increasingly important to build D&A capabilities. Personally, I predict successful outcomes in all cases where sufficient resources and time, plus the right skills, are allowed to focus on delivering well-thought-out and tested solutions.

PS. Read the full report here.

Oskar Palva is a Senior Manager at KPMG Global Strategy Group. He has worked as an Advisor for Finnish and multinational companies for close to 10 years, mainly in industrial manufacturing and the chemicals sector. Oskar has experience in growth and innovation, operating strategy, performance improvement and data and analytics. Outside of the office, he enjoys a game of tennis, a good meal and the countryside.

Anticipation as a core competence

In today’s unstable business environment, companies need a new principle of leadership and management if they want to continue to be successful. Some of my clients have adopted anticipation as a core competence of their organizations and an integral part of their management systems.

anticipation

About a skipper

It all started when, during one of our strategy workshops, I commented that managing a business is very similar to skippering a sailing boat on an ocean voyage. Every skipper has a destination in mind prior to setting sail (the goal). Every skipper plots a course to get there (the strategy). Every skipper chooses a good crew to assist him/her (the management team), and every skipper ensures that the navigation system is functioning (business intelligence).

Once the voyage is underway, the skipper’s job is mostly anticipation – checking for shifts in the wind direction, anticipating the approach of thick fog that would prevent visibility, keeping an eye on the barometer to predict rough seas and heavy weather. Depending on the severity of the predicted storm, the skipper might set a new course (a new strategy) while there is still time. This is exactly similar to managing a company.

How to anticipate the future directions?

Being able to anticipate changes in external circumstances and make the necessary adjustments swiftly is an organizational competency.

Today’s leaders need not only to react faster, but also to be anticipatory. When you’re anticipatory, you’re creating changes and combating disruption from the inside-out, rather than being disrupted from the outside-in. You should always ask yourself: “What events/trends will disrupt my journey to market?” or “What disruptions will change how my customers behave?”

When you’re anticipatory, you can not only accurately foresee these threats, but also turn them into opportunities to grow, to create new products, new services, and new markets. In this case, disruption will become your source of competitive advantage.

So the question is, how do you become more anticipatory?

 

Bozorg Amiri is Partner and Head of the Global Strategy Group in KPMG Finland.

Five cornerstones of digital strategy for B2B companies

During recent years, digitalization has finally emerged as the key strategic driver on B2B companies’ management agenda. Most industrial companies are focusing on the Industry 4.0 program and running proof-of-concept programs with Internet of Things (IoT) and Robotic Process Automatization (RPA) solutions.

evolution

B2B companies are thus waking up to the same disruptive forces that changed the playing field in most B2C industries ten years ago. Luckily they won’t need to sail in uncharted waters, as they can learn from front-runners in consumer industries that had to make similar transformations earlier.

I believe the following are the cornerstones of a successful digitalization strategy:

1. It must generate business benefits and financial value. Digital strategy, as all strategy, is ultimately the responsibility of CEOs and business owners, even though IT professionals still often set the digitalization agenda and drive individual ventures because the subject-matter is considered technical. However, it is important to remember that digital strategy is all about customer and business benefits and creating financial value, not about the successful delivery of IT projects.

2. It must be customer-centric. All business cases for change need to start by specifying the customer problems the company intends to solve. They need to analyze how customer experience will be affected at the numerous touchpoints where customers interact with the company. The success of all projects needs to be measured by customer-related KPIs. Too often, digitalization is seen as a back-office IT systems exercise and there is a failure to realize that even internal projects can cause changes at the customer interface. No project should be approved without customer validation.

3. It must be agile. You will most likely need to speed up the cycle of internal development processes. As digitalization initiatives affect a wide range of internal and external stakeholders, it is important to move ahead steadily, and in small increments. This “fail early and fast” mentality is often challenging for B2B companies with heavy processes and slow decision-making, but paramount for success in the digital age.

Agility is much more than a project management methodology. Agility should be applied to all aspects of an enterprise from organizational culture and management systems to cross-team relationships and budgeting processes.

4. It must improve the process. When planning for digital operational excellence, the driver should be process improvements, not the technical tools. When considering IoT or RPA systems, for example, there are no comprehensive off-the-shelf products that will digitalize your operations. You will need to tailor a solution to specifically suit your processes and cause the largest operational improvements. You will need to understand where automation and digitalization can bring the most value, and only start looking at the technology after the business case is clear.

Much can be learned from the e-commerce storefronts opened by old brick-and-mortar retailers who concentrated on online channels and marketing, but neglected to align their internal organization and supply chain accordingly. Too often digitalization means a pretty external frontend, with poor internal end-to-end processes supporting delivery.

5. It must incorporate ecosystems thinking. Digitalization transcends the boundaries of your company. You will need to integrate your processes and supporting systems much more closely with both customers and suppliers. A number of companies are being transformed into platforms where they own the customer relationship, but the services are provided by a wide variety of partners. This requires changes in the business model (e.g. managing strategic alliances and creating joint earning models) as well as in the operating model (e.g. opening APIs).

 

Toni Heinonen works as a Senior Manager in KPMG’s Global Strategy Group. He has 17 years of experience in management consulting, ranging from growth strategies and M&A to large-scale transformation projects. Toni has worked extensively with technology, media, telecoms, consumer services and other industries that have been heavily disrupted by digitalization.

Outside of his work, Toni enjoys jogging, outdoor activities with his dog, playing musical instruments, and photography.

Get the true value out of management systems

Certification of a quality, environment, safety or other management system proves that your company has invested time and effort into developing and standardizing ways of working. It will also be regarded positively by customers and stakeholders. In many industries, the standards are a strict customer requirement.

management system

The value in management systems can be split into two parts – internal and external. During my time as an advisor, I have seen systems focusing on external value – getting accredited. Fortunately many companies have understood the true value – striving for internal excellence as well as receiving the external accreditation.

The external value comes from the “stamp” of the system. But if this is your only goal, beware!

Receiving accreditation can open up new markets, bring new customer relationships and secure existing ones, satisfy regulatory bodies and create a feeling of trustworthiness.

There is of course nothing wrong with satisfying customer requirements and wishes, but if ISO 9001, ISO 14001 or OHSAS 18001 (ISO 45001 in the future) certification is only an afterthought, a ‘tick in the box’, the company will likely struggle to achieve accreditation in the first place, let alone keep it in future audits.

To truly gain internal value, the management system needs to be built from inside the organization.

Think about how your company can most benefit from creating a structured management system, no matter whether it is a quality, safety or any other system. Following the ISO guidelines means that you should start from the company and its unique operating environment, and gradually progress towards leadership, resourcing, operations, measurement and, most importantly, continuous improvement.

First design, then implement, then measure and improve. Always keep in mind the business perspective – the management system is built to support the business – not vice versa!

Planning is easy – implementation is the hard part

Implementation of a management system means rethinking and redesigning parts of your operating environment, processes, ways of working, communications, change management and a variety of other essential company activities. This is the hardest part and requires good skills in change management, process development and communications.

The required effort, in terms of pure working hours, will be significant. According to our experience, a cross-functional project team must be created to avoid delegating the management systems design and implementation only to the company’s quality function or EHSQ manager.

The true value will be reached through effort and support at all management levels

Rebuilding the management system in a holistic way is a major project, and must be included among the company’s strategic objectives. With management team’s full buy-in and support, as well as sufficient internal and external expert resources, the end result will be much more than a barely-passed external audit – a functional management and continuous improvement system with significant long-lasting benefits.

 

Ville Huovinen is a Manager at KPMG Global Strategy Group. He has worked as a Strategy and Operations Advisor with Finnish and multinational companies for close to 10 years in various development programmes, including improving supply chain performance, designing and implementing management & performance systems, as well as building and running Program Management Offices. Outside office hours Ville enjoys cooking, cycling and travelling.