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.

Sports and business — strategic similarities

There are vast similarities between business strategy and sports; let me tell you my story.

strategy and sports

Before becoming a strategy consultant with the KPMG Global Strategy Group, and before my Management and Organisation studies at Hanken, I was a professional footballer for 12 years in the top flights of five countries. I am now enjoying my second career, and I want to take this opportunity to share a few reflections – explore a common thread, if you like, on how organizations can manage short-term turmoil without losing course, and contribute some thoughts on how this common thread can be developed into executable strategy.

Both short and long-term goals are important

A strategy enables companies to tie their everyday activities to their mission, vision and values. In sports it materializes as a process of balancing long and short-term targets, since, as we all know, in team sports the focus is inevitably directed towards the next game, which is always the center of the universe.

Long-term evolution requires the discipline and buy-in to act in compliance with a predesigned plan, in which certain strategic elements endure in both bad and good spells. I know very well how the atmosphere in football clubs changes with the result of the last game. After a loss in Hungary, for example, one of the owners announced that the players are to be fined by the amount that would have been the bonus for a win. Following a derby win three days later, he insisted on champagne for everybody in the locker room. That is an extreme case of impulsive leadership and it might not be the optimal approach. But the reality often is that, regardless of the means, ever-improving results are needed in order for clubs to earn the privilege to worry about the long-term targets.

On the other hand, a strategic long-term plan provides the backbone for the much desired wins. Clubs like Barcelona, New England Patriots or Tappara will not easily abandon their characteristic style of play. This common thread from one season to the next is much more likely to produce a competitive sustainable advantage than constant change. In my experience, this symbiotic balancing between the long and short terms is an integral part of corporate business success, as well.

Identity and origin of strategy

No too long ago, I was a spectator at a game featuring my old club, FC Utrecht. Even though it had been a while since my last visit, I knew that they would frenetically press the opposition from the very outset of the game. That is in the DNA of the club and represents a common characteristic that all stakeholders in and around the club are proud of. In my view, the common thread between sports and business is that ‘if a customer does not know what a company stands for, and what its core competences are, he or she is less likely to buy into that company’s products or services’.

In my view, also, Michael Porter (renowned American academic at Harvard Business School) recognized the congruence between sports and competition. Just as companies need to analyse segments, megatrends and the competitive landscape, and seek to understand and develop best practices, a football team plans their game in relation to their opponents’ strengths and weaknesses, and, over the longer term, ruthlessly duplicates those methods that have led to success. This requires meticulous analysis, implementation skills, and, most importantly, a strategy that ties the needed changes into the organization’s current capabilities and identity.

But the view of Porter and his followers has somewhat overshadowed the idea that strategy can also develop within an organization, out of things it does well, with less initial planning. Ajax, for example, had a brilliant strategy as far back as 50 years ago, without probably even thinking explicitly about creating a strategy. They managed to create an environment and atmosphere where brilliant minds could flourish, which led to the creation of the “total football”. Clarity of values, vision, mission and purpose, i.e. the club’s common denominator, enables its players, coaches, scouts and management to gradually develop intrinsic knowledge and even create a platform for something revolutionary to be invented. The stories behind the success of Apple and many other market disruptors stem from similar settings.

To conclude, I recognize strategic similarities between sports clubs and corporations in that, for each of them, it is just as important to find the right balance between long-term targets and short-term wins, and between rigorous analysis of the environment and tangibly building upon one’s own inherent strengths.

Paulus Roiha has worked for 2+ years in KPMG’s Global Strategy Group. He has experience of several transactions and projects related to strategy and operations. Before enrolling to consulting, Paulus played football in the top flights of five different countries and represented Finland for 20 times. In his spare time, Paulus enjoys good food and all kinds of sports both as a participant (from skiing to padel tennis) and a spectator (from biathlon to American football).

Six key principles making Operational Excellence work for you

With only six key principles in focus, your company can excel in satisfying your customers, optimizing costs, and improving productivity in ways that create true customer value. Operational excellence (OE) helps your company not only to improve its quality and efficiency, but also to become more cost-effective than your competitors.

operational excellence

Operational Excellence (OE) has been defined as the point when “each and every employee can see the flow of value to the customer, and fix that flow before it breaks down”. It’s that simple. But, for companies to actually be able to create that kind of excellence, a clear strategy and a lot of hard work are required.

Companies that embark on an OE journey should remember that it is a never-ending voyage. Nevertheless, there are countless examples of failed OE transformations. In some cases companies focus too much on cost competitiveness, and forget the customer. What good is an efficient factory, if the customer no longer needs the product? In other cases an excessive focus on certain tools like Lean or Six Sigma draws attention away from people and from fostering a culture of continuous improvement based on delegation and management support.


The principles to follow

In my experience there are six basic principles you should follow to make excellence work in your favour – principles that underline the whole OE exercise. They form the basis of both lasting competitive advantage and pure operational strategy.

1. Customer centricity – Customers should be at the heart of your organisation’s operational design. Existing and future customer needs should be identified, and these should drive not only current operational management processes, but also future change investments.

2. Process thinking and process management are at the core of your business. The organisational design should be aligned to the customer value chain, with clear end-to-end process ownership, and consistent language and definitions used to manage the process.

3. Flexible capability is delivered when there is a commitment to developing a multi-skilled workforce, supported by robust learning and development mechanisms and deployed effectively through flexible operations management.

4. Operational culture can be a source of competitive advantage when effort, performance and motivation are mobilized towards the achievement of strategic goals and enhanced customer experience. You should strive for consistency in acceptable behaviours across functions and teams, and all decisions should be guided by clearly articulated priorities.

5. Cost optimization – Costs should be fully understood and linked to processes, products and customers, and should be rigorously controlled. This should lead to sustainable cost reductions through an effective change portfolio and broad consideration of different strategic drivers.

And last, 6. Governance frameworks should be clear, ensuring that accountability is defined. This leads to rapid, reliable decision-making, based on evidence and made at the appropriate level in your organisation.

In my opinion, Operational Excellence should become self-evident for the whole organization. Everybody needs to “get it”, and to pay constant attention to the many details of how work is performed. Getting Operational Excellence right can be a bumpy road. Following my six principles makes your journey a lot easier.

Berndt Wickholm is a director in KPMG’s Global Strategy Group enhancing performance in Strategic and Operational areas in a wide array of industries. He has 18 years of international experience in Strategy execution and supply-chain consulting. Offline, Berndt is a foodie, spending time in the kitchen and balancing with a bit of snowboarding and golf.

Eliminate waste by Value Stream Mapping

As a production manager, you have probably noticed as I, that production is only as good as its weakest link. Improving areas other than the weakest link is sub-optimization, and will not improve production output. What I have experienced, is that Value Stream Mapping can be a useful tool to help you identify the weakest link and improve your production and supply chain as a whole.

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Do you generate value or waste?

A value stream map in a manufacturing environment shows all the steps needed, from the raw material flow at the beginning of the production process to the completion of the end product and its shipment to the customer.

All steps are plotted on the map to visualize the actual process. The map includes both value-adding activities and waste. The aim is naturally to eliminate the waste as much as possible, while still considering the process as a whole to ensure that no sub-optimization occurs.

When you do value stream mapping, the first phase is to plot what the current state looks like. The raw material supplier is at the start of the process and the customer at the end. Between these points, the company’s own process steps need to be defined. Throughout the process, you will find work in progress and inventories, which are important to identify and document. Information flows are also plotted on the map, showing how information flows both internally and externally to and from suppliers and customers. As a result, you will have a map that clearly illustrates what the process currently looks like, with supporting data (cycle times, changeover times, inventory levels, etc.) related to each step describing the very nature and performance of your production process.

Find your way to an efficient supply chain

In the second phase you start to plan for an ideal or Future-State map where the goal is to eliminate as much waste as possible. In the Current-State map there might be several findings of waste e.g. large amounts of inventory, processes producing at their own schedule or long lead times compared to processing time. Start with checking whether all the process steps can deliver to meet customer demand. Next you could check where continuous flow can be implemented, and where, in the process, a WIP inventory with a pull system may be needed. You also need to decide which step in the process should be scheduled (the pacemaker process), which sets the pace for the rest of the production. Finally, list the process improvements needed to ensure that the value stream flows in line with your planned future state.

Current production facilities or product designs might restrict waste reduction possibilities in the short term. Therefore it is important that you identify the waste reductions that are possible with the current setup, and those that might need more time to implement due to significant investments or other major changes. This will clarify the needed effort over both the short and long terms.

When your Future-State map is ready, it is time to plan how it will be achieved. This stage is crucial since the whole value stream mapping exercise is of course worthless if the improvements are not realized in practice. Implementation of the future state should be split into actionable steps, persons responsible should be assigned for each action, and schedules should be agreed and committed to. To ensure that things get done, set up a PMO!

Klas Holmberg is Senior Associate at the KPMG Global Strategy Group (GSG) with experience in operations management with clients in e.g. transportation, food & beverages and process industries.

Are you still creating your growth plan in a wrong way?

After working on several client cases, I have noticed that preparing a successful growth plan requires a significant team effort from people in finance as well as different parts of the business and operating model. Still, in many cases the growth plan seems to be built up the wrong way around, often resulting in discrepancies between the growth plan and the financial ambition.

The answer for a successful business plan would be inductive thinking. This allows an organisation to describe the future state and then work backwards to come up with an actionable plan to reach the defined target state.

growth plan

Two ways to create a growth plan – which one do you choose?

I recognize two general ways to create a growth plan. In the first alternative, business owners are asked to assess their growth options, analyse them, select the most attractive ones, and finally prepare the plans on how to seize the opportunities. Then they work together with the finance function in order to translate the plans into forecasts. There may be a sensitivity test or two, but after some iteration these plans are combined into an organization level growth plan and forecast. The plan is then approved, and ready to be executed.

The second way, the right way, to prepare a growth plan starts from the desired end result. Instead of working deductively from the growth options to the actual plan and related financial outcomes, the starting point should be the financial ambition of the organisation as whole. “Where do we want to be in the next 3, 5 or 7 years?” should be the first question asked. When the management team is aligned on the financial ambition, it is safe to start backtracking to the actual growth plan. This approach also ensures that the whole management team is focused on the future rather than the as-is state of the business.

Will your business model deliver your growth objective?

At this point it may become evident that the business model choices, which otherwise would have been made at the start of the process, are actually insufficient to meet the financial ambition. There may be a need to reconsider the markets where you are playing, the core customers you are serving or the value propositions you are offering.

At KPMG Global Strategy Group (GSG) we have recognized that this may seem as an overwhelming task for many organizations, but it ultimately guides the thinking to focus on those growth options that really can contribute to reach the financial objectives. The end result is a solid, fact-based growth plan which has better chances to keep you on track from the start.

Henri Nieminen is a member of the KPMG Global Strategy Group (GSG). He has a passion for supporting organizations and executive teams in defining their ambition and developing innovative strategies that drive agility and growth. Henri has a broad industry experience across mergers and acquisitions, growth strategy and data and analytics situations.

Strategy as a Service – An alternative to traditional consulting projects

The concept of professional services is undergoing a major change: while many companies still engage consultants project-based, there is a growing trend for on-going use of services. This enables quick response and flexibility to changing needs. 

Traditionally, advertising companies have been experts in this way of working when utilizing flexible teams of art directors and copywriters to offer their clients the best possible resourcing for the case at hand. Instead of projecting every opportunity into a manageable workload these professional service providers (PSPs) are promoting and utilizing frame agreements to ease their clients’ buying processes – and increase the possibilities to sell more.

Strategy consultants as in-house business developers

Strategy consultants are beginning to increasingly use the same model as advertisers. In essence, strategy consultants are working much like in-house business development resources but without the same level of fixed costs. As the supply of continuous relationships in strategy consulting is growing, there are plenty of opportunities for companies to actually engage in Strategy as a Service. Depending on the need, a strategy consultant can help with:

– Support in corporate strategy development
– Business unit or location specific growth strategy
– Innovation and new business creation
– M&A and DD
– Strategy execution and implementation
– Program management office support or lead

 

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Strategy as a Service for you?

A few years back I was very fortunate to work with a client in a business relationship that resembled the idea of Strategy as a Service. We were engaged in five separate consulting assignments with the client, but the assignments were closely linked together. At a time, two, or even three, assignments were going on simultaneously, and the PSP was very much driving the strategy development of the client company. PSP representatives were part of the client management team and working closely with other levels of the organization as well.

Based on my experience, what clients more increasingly look for, is implementation expertise and long-term partnerships. Strategy as a Service business model should be differentiated in a way that a PSP can commit to client’s success and metrics. When deciding what to keep in house and what to buy from an external service provider, clients should consider the following scenarios:
– Overhead minimization compared to in-house resources – Strategy as a Service will reduce the needed overhead
– Open book way of working to ensure results – Strategy as a Service will be more transparent
– Avoiding over-productization of tools and methodologies – Strategy as a Service will be hands-on problem solving

So next time you are about to engage an external consultant for a strategy project, why not consider to acquire his services as a service?

 

Kim LehtoDirector Kim Lehto is a member of the KPMG Global Strategy Group (GSG). He has a vast experience from helping clients in leading and implementing demanding strategy and transformation projects.

In his spare time Kim enjoys spending time with his family at the leisure house, sailing, playing football and golf.