Tag: Strategy

Playbook for Innovation

There are numerous definitions; perspectives and understanding exist for innovation in market place. It is educational to listen, analyze and understand various school of thoughts on the subject and most of it is useful. My definition on innovation for a profit organization is:“Innovation is a better or new method to bring efficiency or generate revenue”. As always, since Stone Age, innovation is the back bone for future & future economy and this message was echoed by The President of United States, The Prime Minster of India, major management consultants and chief executives of corporate world. In the recent survey conducted by McKinsey, 84% of executives say innovation is extremely important to their companies’ growth strategy. Strong message and emphasis on innovation from senior political leaders, management consultants and top executives motivates citizen of a nation and members of a corporate world to think and work on innovation. But the real challenge being faced by corporate world is lack of executional leadership capacity and refined steps to cultivate innovation.

In absence of executional leadership capacity,a structure for innovation within a corporate world, the members who would like to invest their time to be innovative, go down on a path which does not provide fruitful result. Innovation initiatives in an organization without a framework nor a structure is similar to the people who tirelessly worked hard, creative, extremely smart who were passionate to develop a flying machine by watching the behavior of birds. They were successfully able to fell down with wings in terms of flying.

In my own experience, I have seen in organizations where innovation program is established by placing suggestion boxes, launching bright idea database and introducing contemporary furnished conference rooms. When an organization is placing suggestion boxes for innovative ideas, the organization culture is too far behind in general communication. The immediate goal and focus of that organization should be to work on basic general organization communication.

“The real challenge being faced by corporate world is lack of executional leadership capacity and refined steps to cultivate innovation”

By just having a bright idea database, the employee who would like to take the organization imperatives and be part of it would come up with ideas which are impossible in reality due legal, regulatory, and compliance reasons. For instance; for an auto finance industry, a bright idea from an employee is to enter mortgage business segment. It is an idea, may be a bright idea but the company may not have license to be in that segment, nor capital to get into that market. Without this key information, employees are going to work very hard and think about the new ideas which are not practically possible to implement.

Playbook for Innovation:

  1. Establish an innovation program office
  2. Develop an innovation framework
  3. Communicate innovation framework to the organization
  4. Manage innovation
  5. Measure innovation
  6. Report innovation

1. Establish an innovation program office:

Make it as one of the performance measure of a strategic objective of a strategy map (strategy). Assign this task to an executive leader who has visionary ideas with executional insights – I called it as “executional leadership capacity”. It is challenging to find an executive leader in an organization with this trait.

2. Develop an innovation framework:

Let the program office develop this framework. The framework is a tool helps the organization to think outside the box within a business context boundary. There are five components to the framework. They are a) Organization change management: Partner with human resource department. Bring necessary training and coaching to the organization that helps members of the organization to think outside the box. Instill during the training that organization is willing to face both positive and negative consequence of each individual who are thinking outside the box. b) Business-IT alignment: Strong partnership with business team is critical for the innovation program office’s success. To accomplish it, identify partner relationship manager or IT ambassadors for each business unit and develop a sustainable bi-directional communication plan to enable fluid ideas flowing between all teams. c) Industry insights: Partner with the business strategy or business development team. Provide a periodic economical and industry data pertains to the business unit to entire organization. The organization must be aware of whom they are competing in the market, what is the market volume, market segment, how the distribution are spread out, what are the growth opportunities in the competitive landscape and etc. d) Business process competencies: Partner with business process management team or business process operation team or the team who manages the business process for the entire organization. This component of the framework should help the reader of the framework to understand how organization makes money.  e) Technology competencies: Identify technologically savvy and curious members in the organization and ask them to study game changing technology trends which are in the pipeline. At this time the game changing technology trends are: big data, mobile computing, social computing and cloud computing. The members must not be nominated by managers, the members of the team must be volunteered who wants to contribute in this domain.

3. Communicate innovation framework:

The framework is a document that contains all the above components. Make the framework available to the entire organization in all possible media and channels. If the organization management training and coaching technique is effective, organization will seek for the framework and keep it for their reference. It is program office responsibilities to keep the framework up to date and make it available to organization. The framework should also be made available as part of orientation training for new hire for both employee and contractor/consultants.

4. Manage Innovation:

It is the program office responsibility to guide organization to differentiate disruptive & sustained innovation combining with traditional and non-traditional approaches.

5. Measure Innovation:

It is the program office responsibility to measure how program office is performing by measuring number of disruptive & sustained innovative ideas submitted, reviewed, rejected, approved, funded, implemented, benefit realized and etc.

6. Report Innovation:

It is the program office responsibility to report all program office performance metrics to IT balanced scorecard to provide a holistic view on the organization performance.

IT Strategy: In the absence of a Business strategy

Business strategy drives IT strategy. But, what drives IT strategy in the absence of clearly defined business strategy?

Identification of successful business strategy in a dynamically evolving consumer and financial markets is extremely challenging and sometimes, it is impossible. Look back in few years, take business strategies of top companies and their result today, and hence the evidence of extreme complexity and challenge exist in defining successful business strategy for an organization in a dynamic market.

IT strategy supports business strategy in spite of the out come of the business strategy. True. However, the point is, some times business strategy can not be defined clearly or it does not exist and in that case, how the IT strategy should be defined.

In the absence of business strategy, IT strategy is to increase the value of IT organization.  Now the questions are, what is IT valuation and how to measure it, and finally how to increase it?

I had the opportunity to work with a purchase accounting project for a well known demerger in the auto industry.  I noticed, there is a significant market opportunity for a IT valuation model in spite of 3 of  big 4 consulting and accounting companies were heavily involved in that project. So I developed a simple IT valuation model to determine the fair market value of an IT organization to readjust the book value of IT assets.

To simplify it, let me put a different spin to IT valuation. Purchase accounting occurs after a merger or demerger occurs. But, before a merger or acquisitions occurs, an organization is evaluated for its market value. That includes tangible and intangible assets. The tangible assets are mostly fixed assets and over the years, valuation process for the tangible assets is more matured. Most of the IT valuation comes from intangible assets.  For a pure technology companies like Microsoft, Intel, the intangible assets of the organization can be quantified by patents, copy rights, trade mark and etc. For an IT organization supports a business function in banking and finance, oil and gas and etc, the intangible asset valuation is challenging.

In those scenarios, the intangible assets are:

  • An organization ability to adapt to market change in terms of capacity & capabilities. ie scale up or down infrastructure based on future requirements
  • An organization ability to develop a rapid applications for future requirement – skill set, processes, knowledge
  • An organization’s efficient operating cost mode –  in terms of license, hardware depreciation
  • An organization’s IT general controls and management – IT risk management, Security Management, compliance management

The above intangible assets of an organization improves the value of IT organization. It will be reflected  in case of merger or an acquisition.  In the absence of clearly defined business strategy, take the above strategic objectives of  IT strategy and plan.

The above IT strategy will reduce the cost, improve the over all reliability, flexibility, security and adaptability  of an IT organization. It requires investment and the question is how a CIO can justify the ROI for the above initiative.Biggest advantage of the above approach is, the initiative does not require any additional incremental cost. Since it has very high ROI, it will sponsor the project from its saving and improves the value of IT organization. When there is no clearly defined business strategy then the IT strategy is to improve the value of IT organization.

If any one interested to understand the granular details of the above IT strategy, practical difficulties of framing the strategy, actual results and etc. More blog postings will follow to provide the details of the above steps. Mean time, if you’re impatience and you need immediate information,  please do not hesitate to contact me.

IT Strategist Job

Predicting monotonic events are trivial, whereas,  preciously predicting the continuous non-monotonic events are impossible. For instance, , it is possible to predict that the Sun is to arise on east the next day. Well, assuming that our star, the Sun, is not sucked by an external moving black hole (Yes, black holes can move!! and it was recently proved). The probability for a black hole to swallow the Sun on next day is almost zero.  Like wise, preciously predicting continuous non-monotonic events like weather,stock market for next ‘n’ days are impossible.

Any profit organization events are non-monotonic and preciously predicting the organization future is impossible. but, strategist can define it or approximate it.

A strategist or chief architect can shape up a small state and make it as an empire. Strategist lays a strong foundation for growth and road map to flourish. He (or she) uses abstract and vertical thinking skills to study the past, analyse the current, and approximate the future.  Chanakya, was an strategist, who lived 2500 years ago,provided thought provoking ideas to Maurya Emperor Chandragupta and defined strategy to transform the entire kingdom.

Strategy in an organization starts with people. A strategy can be made successful only if the strategy has an exemplary communication management plan.  In communication plan the following questions must be answered..

  • Why do we have the new strategy?
  • What are the expected results of the new strategy?
  • Will we be successful?

Technical Architecture Component – Service Delivery Model

In a previous blog posting, I provided an exhaustive list of almost all technical components.  Each one of the component plays a role to enable holistic IT service to support business function.  However,to run a successful IT organization, does the IT organization required to have a handle on each component in the list?

Lately, my former  colleague and good friend, who works for GE now, have been discussing the importance of oral and written communication skills in an executive level job.  During those discussion, it occurred to me that the next generation corporate communication will be much more simplified and tailored to individual audience. An executive from Gen Y, may not have patience to read a document to understand the status of a company or progress of a project.  The type of communication tools and channels will be used by Gen Y executives are yet to discovered but it is  incubating for evolution.

Keeping those thoughts in my mind, instead of using a traditional method like Venn diagram to communicate direct  involvement level in technical components  by an IT organization, I would like to use the  abstract pictures to demonstrate current involvement and transition to a different level by adapting managed service and cloud computing concepts.

When IT organization is  a cost center (it means it does not directly generate revenue for the company), the organization required to focus on technology stack which provides competitive advantage to its core business. It is particularly essential during this challenging economical time to focus on technologies that impacts business bottom line. The IT organization must have no or minimum direct involvement in non strategic technical components.

The figure 1. abstract picture provides current IT direct involvement in four categories. I have seen, still companies have internally maintain and manage payroll systems for its employee. For an instance, if an IT organization is supporting financial service or retail business, there is absolutely no competitive advantage for that organization to manage internal payroll systems. The reason is not just for cost saving, but the key point is focus.

Around fifteen years ago, the options were limited to leverage outsourced payroll service but now, there are lots of options available to receive world class service on common business services. Common business services are, but not limited to, payroll, badge system, email, infrastructure system softwares, infrastructure monitoring, corporate communication tool set, learning and development, pension, benefits,  IT asset management, IT Finance management and etc. These services are readily available from a third party providers as a service. These services are all required for any IT organization but, generally not a differentiator for cost center IT organization.

IT organization’s senior executives and CIO wanted their organization to focus on technologies directly contributes to their business bottom line.  The systems/technologies that  touches the end user of their core business, and the systems directly used to support the business process.

Managed service and cloud computing are two solution available to let the organization focus on differentiator technology and let the partner perform the rest.

Managed service is a concept to leverage partners to provide a pre-term service.  IT organization manages the partner in a SLA level with no or very minimum involvement in solution design. Managed service deals are designed for fixed terms for fixed service portfolio. This deal package limits organization’s agility to fluctuate their service portfolio requirement based on its business needs.

Cloud computing is  an elastic managed service concept and it provides flexibility to scale up or down based on business needs with no prior commitment  on terms and service portfolio.  On cloud computing service offering from various providers like google & amazon, IT organization required to FOCUS on differentiator technologies and manage the rest by managing the SLA but not by technology (technical component)

IT Waste Management..

hmm.. Do you know what is being wasted in your IT organization?

Nirvana (the highest level of maturity) is not reality in IT organization. It is a stretch goal. There are always room for improvement in any IT organization.

Some time back, a set of projects were perceived as a high business value projects and in last few months the business climate or economical climate might have changed and the project could be in the brink of extinction.

Some time back, a set of skills was perceived as a core competency for the future organization and due to the recent merger or acquisition or economical situation, the business strategy changed and hence the IT strategy. The core competency developed few years ago is not core any more in the current environment.

Some time back, a set of tools bought to enable efficiency with in the organization is not really working out due to various reasons..

What ever the situations may be, the past investment made in technology, people, process may not be currently required with in the organization.

IT Waste Management must be part of IT finance management group and IT finance manager/director is responsible for IT waste management function.

IT Waste Management Process:

Trigger:
Change in business strategy, IT strategy,executive leadership (end up by changing the IT strategy) or  merger, acquisition

  1. Clearly understand the current direction of company
  2. Clearly understand the change in direction due to the trigger
  3. Identify the gaps
  4. Assess the impact of directional change in terms of
    • Vendor Contract  – Hardware/software/Purchase service/Professional service
    • Intellectual  capital loss (work with HR and IT senior management )
    • System landscape  (work with Architecture team)
  5. Identify the retirement plan or reusable plan for all IT assets. Multiple teams like architecture, HR, procurement all need to work together to develop the above plans.
  6. Execute the plan. Realize and monitor the benefits
  7. Report the sun downed systems to IT controlling as IT impairment assessment. The IT intangible assets which are in the books can be adjusted and would bring tax benefits to the company.

The systems which are sun downed or retired in the process must be reported to IT controlling as a IT asset impairment assessment to reflect the new IT intangible asset value in the books. It would bring tax saving to the company.

The above steps are part of IT waste management process and must be performed every 3-6 months in every IT organization.  It will bring operational and cost efficiency to any IT organization.

Bright Future for Auto-Industry

Simplifying a complex problem by breaking into small solvable parts and using knowledge learned in a driving school during a fatal accident are simplification and abstraction techniques widely used in a practical  world. Have you ever noticed the behavior of a person during  a fatal accident? During an accident, provided the person is not seriously injured and able to think to their capacity, the capacity (volume) and capability (strength) of the person is fully utilized to face and over come the situation. The capacity, capability and the effective utilization of it during the crisis or fatal accident increases exponentially.  If some one deeply think about why most of the people become effective during the crisis is due to extreme focus the brain forces itself to get over the situation. That is ultimatum for some of existing meditation techniques and the same reason why some of the adventures sports like rock climbing are very attractive. It is a kind of enforcement mind brings to mind itself. But at the same time, mind does not perform the strategic analysis  to its best during the crisis mode and that is the same reason why the best supreme court lawyer hires another lawyer when they face a crisis.

How this is relevant to current auto industry?

Well, GM and Chrysler both have had faced a separate fatal accidents.  Both are utilizing their capacity, capability and utilizing it effectively. When it comes to survival, as Maslow theory in the management suggests, your basic needs becomes top most priority and enlightenment are out of focus.  The decisions and execution made in last few weeks generally would have taken decades in their corporate culture. Executive management totally understand how to move forward. With assistance with auto task forces, concessions with unions, agreement with debtors ,reduction in  dealer network, dropping a brand, focus on fuel efficiency and quality  are good signs for a great recovery.

Why a great recovery waiting for them?

Four years ago, US market sold 17.5 Million units per year. This year, industry is struggling to sell 10 Million units. The average car age in America today is 9 years old.  Car purchase is the second biggest purchase a consumer would make after the American dream of owning a house.  Consumer confidence is the key and it is and it will continue to gain slowly for next 9 months and rapidly after that.  The credit market is far better than it was 6 months ago with enough capital infusion to credit market. Introducing better credit standards, oversight and governance, the credit market is stabilizing. The moment a person believes their jobs are safe, the consumer confidence in stock market, retail purchase, credit market will raise and the consumer is going to donate their 10 years old car to charity and buy the fuel efficient (Hybrid, Diesel, Electric) car. Both GM, Chrysler are making tough choices now and getting  ready to meet the huge market demand in 18 months.

Until then, sit tight and be part of the touch choices and move Detroit to new 2011++ future.

Yes I hear you.., I have not written a blog for almost a month.. that is mainly due to my last few weeks focus on completing  the graduate course on Linear Algebra. I had my finals yesterday and thinking about, should I take Dynamical Systems and Choas theory in summer. It will definetely help to model the current economical situation!!!

Big 3’s Product & Pricing Strategy for Cross over

Last Friday, I had a fatal accident. Miraculously no body was seriously injured. I was waiting (moving slowly 10-15 mph speed) in the traffic on the freeway and a pick truck  rear ended me at the speed of  75-80 mph.  This is the second time (first time, a deer came infront when I was on the freeway)  I had a serious accident and this time also He sent help along with the accident. Immediately (within less than 2 mins) after the accident, a medical doctor,a fire fighter and a moral supporter (he works for GM) were knocking my car’s door and made sure I was fine. They were travelling 2 -3 cars behind me and they noticed the accident live in their naked eye.  All of them were surprised I was alive after the accident.  My cross over and his pick up truck were totaled.  I thought none of our air bag went off. But, when I got the accident report from state police, his air bag went off.  I’m back in the market to buy a replacement car.

I utilized this opportunities to study the big 3‘s brand,product and  pricing  strategy. Generally, I try to reverse engineer a company’s strategy by observing and studying their product line, pricing, people, customer services and etc. I would say, my success in the reverse engineering the company’s strategy is Trader’s Joe.  If you are strategy person, you can easily paint their company’s strategy by looking into their unique product line, people in their store and their key differentiators.  I tried to reverse engineer the big 3 product and pricing strategy for the cross over product and compared it with other major automotive.

When I did this study, I had my consumer hat with strategist eye, architect’s view and  project manager’s approach.  My entire findings very well could become a  M.B.A (Corporate Strategy) capstone project. I summarize it in the blog a high level executive version.

Requirements:
Cross over – 6 or 7 seater with high safety rating, leather seat, dvd navigation, iPod integration, 40 gb Hard disk, Phone,  and decent mileage around 20 mpg in high way.

General Motors:

GM has following major division operated in North America:

and Luxurious product

(I’m ignoring their product line like Holden in Australia , Daewoo in South Korea, Opel in Europe, Vauxhall in UK)

Surprisingly all of their division except Hummer has a cross over product.  I made an assumption, that I decided to buy a GM cross over and explored how GM  product line is helping me (motivated and committed consumer)to make my choice. By going over their cross over product from buick, chevy, gmc product web site, I could find one major differences between all these products. Their product names are different. Other than that, I could not identify any other difference in their features offering. There is no differentiators among these products.  I was so confused. I wanted to compare their pricing

GM Cross Over Pricing:
All of these product pricing are in the same price range. A fully loaded Buick is same as Cadillac. Saab, Saturn price spill over to each other. There are too many choices to the buyer with no differentiators.

It is clear that each division within GM is competing with other divisions within GM. I don’t know when these strategy worked successfully. In this web 2.0 and 3G world, even the enemies in the battle field collaborate on common problems.  I don’t know competing internally really is a good strategy. Wasting their energy fighting internal. Instead focus that energy to fight your real external competition.

Conclusion:

  • GM’s individual brand strategy does not appear to be aligned to the over all GM’s corporate strategy
  • GM Cross over product strategy – Neither it is too cumbersome  to reverse engineer it nor there was no cross over product strategy from GM company stand point
  • GM Pricing Strategy – No differentiators among their products. Their pricing spill over between their products. 
  • Confuses the consumer who decided to buy a GM product.

Ford

After Ford’s recent sale of Jaguar and Landrover division to Tata motors, Ford product line is not as complicated as GM. It has the following division.

  • Ford
  • Mercury
  • Volvo

Luxurious product division:

  • Lincoln

Ford division itself has following cross overs.

  • Flex
  • Edge
  • Taurus X

Mercury & Volvo also have cross overs products.  Volvo is utilizing the web 2.0 for the product marketing. They use youtube, twitter, flicker, for their cross over product to create a user community and make them feel good that they own the volvo product and allow the owners to freely collaborate.  It provides insight to Ford/Volvo that what are the problems being faced by the current owners and can be taken into the future models. It also helps Volvo on the preemptive    by closely monitoring the problems faced by current Volvo owners. Great Concept.

Conclusion:

  • Ford’s brand strategy is better and it will become best if they could find a buyer for Volvo.
  • Ford’s Cross over product strategy – It is not straight forward to reverse engineer it. It appears they have cross over product strategy from Ford company stand point. There is a differentiators  in the style, product feature and appearance. There are lot of room for improvement. They still need to make tough choices to streamline the cross over product within the company. Over all in each product line, there should be only three products. Low end, middle ground and high end. They are not there but close.
  • Ford’s cross over product Pricing Strategy – All the cross over products in Ford is in the same price range.
    • Fully loaded Taurus X price is same as the low end Lincoln. There is a price spill over between products.

 

Chrysler

There are three brands under Chrysler.

Since Chrysler announced that they are stopping Pacifica, Durango and Aspen I’m not taking those products into consideration. It means, there is no cross over product Chrysler Brand within the Chrysler LLC company. Pacificais the piooner in the cross over product space and it is unfortunate it will not be continued. I believe the key reason for pacifica not be successful in the market is due to the initial pricing was too high and product/pricing strategist were targeting agains Lexus. It must be a tough decision for Chrysler to stop the great product. I, personally love Pacifica and when I drew it for couple of years in 2004/5 and I made my own sticker and had it at the back of the car. “Pacifica is great and we love it”

Dodge Journey is the only cross over product in the Chrysler product portfolio. Jeep, Grand Cherokee is close to a cross over but it is a SUV.  Fully loaded Dodge Journey comes around $35K.

Conclusion:

  • Chrysler’s cross over product strategy is the best among big 3.
  • Need differentiator (like fuel efficiency or unique style, uconnect is not enough to differentiate )
  • Chrysler’s cross over product Pricing Strategy needs re visitation.  The base price is in correct range.   The fully loaded Dodge Journey price is high.

When I compared the big3’s product,brand and pricing strategy with Honda’s strategy. It is easy to draw a conclusion. If I decide to buy Honda cross over product, as a consumer, I have three choices with clear differentiator. It has CRV, Pilot and Acura’s luxurious RDX & MDX.  There is slit spill over in the price range between Pilot and Acura. It is easy to pick a product from their line if someone decides to buy Honda.

Performing all this study, I bought the same vechicle I had before and this is the thrid time I’m leasing the same vechicle but this time it is clean diesel bluetec technology.