RoundMap® : Framework 1 System

 

A Unified Approach to Systemic Change: Building Future-Fit Organizations

For years, our pivotal question has been: ‘What if we could shatter the traditional barriers of silos that limit our collective potential?’ After seven years of rigorous research and introspection, we’ve forged a groundbreaking understanding. Our mission transcends merely dismantling silos; it’s about nurturing a collaborative ecosystem where stakeholders are empowered to co-create and invest in a mutually desired future. It’s a commitment to collectively envision, craft with precision, and passionately chase a unified vision. This method evolves our collaboration into a potent force, marching us toward a future we all yearn to shape.

Breaking Silos with Visionary Dialogue

Silos within organizations create barriers to communication and collaboration, often stifling innovation. These silos persist not just due to organizational structure but also due to the cultural comfort they offer to individuals. People cling to silos because they provide a sense of security, recognition, and community. However, enforcing change is rarely effective, as it doesn’t address the underlying emotional and cultural ties that bind people to these silos.

A more effective strategy is to offer individuals compelling reasons to venture beyond their siloed environments. This involves initiating an open dialogue about the organization’s future—a vision that is co-created by involving everyone in the system. Through this inclusive conversation, individuals can collectively imagine the future they desire and contribute to designing the journey towards it.

When people are part of crafting a future that promises greater fulfillment, excitement, and alignment with their passions, they become more open to re-evaluating their current allegiances. This openness is crucial for questioning their present values and behaviors. It creates a space for new cultural norms to emerge, facilitating the dismantling of outdated structures and the formation of new, more collaborative, and innovative ways of working.

By ensuring that the envisioned future is more appealing and rewarding than the present, organizations can inspire their people to embrace change willingly. In doing so, they not only break down silos but also foster a culture that is agile, interconnected, and primed for continuous innovation.

One System: Building Resilient Organizations

Navigating away from the limitations of siloed structures, we adopt the Future-Fit Organization approach, centered around four critical components integral to sculpting organizations poised for systemic success in the future. The first two are what we refer to as the twin vectors of ethical prosperity, and the final two are critical learnings taken from ‘Team of Teams’ and ‘One Mission’ to build truly responsive organizations (see the figure below): 

1. Equitable Distribution of Profit: This step involves ensuring that profits generated by the organization are distributed in a fair and just manner among all stakeholders, including employees, shareholders, suppliers, and the community. By prioritizing equity in profit distribution, organizations can foster trust, loyalty, and collaboration among stakeholders, breaking down silo barriers by aligning everyone’s interests towards a common goal.
2. Striving for Responsible Growth: This step emphasizes pursuing growth in a manner that is sustainable, ethical, and considerate of social and environmental impacts. Instead of prioritizing short-term gains at the expense of long-term sustainability, organizations commit to responsible growth practices that balance economic prosperity with social and environmental responsibility. This approach unifies siloed departments by fostering shared values and objectives while bolstering the organization’s reputation and resilience.
3. Sharing Collective Insights: By encouraging open communication channels and platforms for sharing ideas, data, and best practices, organizations enable employees at all levels to contribute their insights and expertise. This not only fosters a sense of belonging, empowerment, and ownership but also breaks down silos by promoting cross-functional collaboration and innovation based on a collective understanding of challenges and opportunities.
4. Empowering Action: This step focuses on empowering employees with the autonomy, resources, and support they need to take initiative and drive positive organizational change. By fostering a culture of empowerment and accountability, organizations enable employees to break free from silo mentalities and hierarchies, encouraging collaboration, creativity, and problem-solving across departments and teams. Empowered employees feel motivated to work towards common goals, leading to greater agility, resilience, and success for the organization.

By embracing these principles, we envision an organization that is not just surviving but thriving—one that is equipped to face the future with resilience, innovation, and a deep sense of purpose. This is the essence of the Systemic Future-Fit Organization approach, a roadmap to success in a world that demands we think and act not just for today but for the sustainable future we all share.

Systemic Future-Fit Organizations

Systemic Future-Fit Organizations (SFOs) are conceptualized as inherently designed for longevity and prosperity in a rapidly evolving business ecosystem. These organizations adhere to:

1. Forward-Thinking: These organizations are characterized by their proactive approach to envisioning and preparing for the future. They anticipate trends, challenges, and opportunities, positioning themselves ahead of the curve to shape the future rather than react to it.
2. Business Vitality: These organizations prioritize building enduring vitality—beyond mere fitness to thrive in the current environment. They focus on creating a resilient and dynamic foundation that supports long-term growth, adaptability, and innovation.
3. Systems Thinking: They deeply comprehend their operational environment’s intricate and dynamic interplay, recognizing that every decision can ripple across the entire system.
4. Adaptability: They are nimble, capable of weathering and embracing the winds of change, constantly evolving to meet the shifting tides of market demands and global challenges.
5. Sustainability: Their strategies are rooted in the pursuit of enduring success, prioritizing the well-being of the environment, society, and the economy for generations to come.
6. Collaboration: They practice inclusive engagement, valuing the contributions of all stakeholders and actively working to unite diverse perspectives and skills in a common quest for excellence.
7. Empowerment: Empowering individuals across the organization is central to their ethos. By distributing authority and decision-making, these organizations cultivate a culture of trust and accountability, enabling every member to contribute to their full potential and drive collective success.
8. Purpose and Impact: Guided by a visionary purpose, they drive towards creating significant and positive change, ensuring their actions resonate with profound and lasting effects.
9. Aligning Strengths: These organizations understand how to leverage their inherent strengths and the positive core underpinning their past successes, using it as a springboard for future innovations and growth.
10. Innovation: A perpetual quest for breakthroughs characterizes their ethos as they seek out and implement novel solutions that redefine what’s possible.

This refined definition emphasizes a holistic, integrated approach to business, sustainable, adaptable, and forward-thinking, resonating with RoundMap’s ethos of promoting transformative, collaborative, and innovative practices for a sustainable and prosperous future.

Achieving Operational Excellence

In the heart of RoundMap’s philosophy lies the bedrock of enduring success: the Four Pillars that underpin the operational excellence of future-fit organizations. These pillars are not mere guidelines but the strategic cornerstones that organizations must internalize to navigate the complexities of tomorrow’s business landscape. 

Each pillar represents a fundamental aspect of our Unified System Approach ─ bolstering business vitality, designing for impact, harmonizing strengths, and cultivating empowerment ─ fostering a robust foundation for sustainable and resilient growth. Together, they form a coherent blueprint for companies aspiring to adapt to change and lead it. 

We invite you to explore these pillars, detailed comprehensively on our website, as they are instrumental in steering organizations toward a prosperous, interconnected, and innovative future.

Fostering Responsible Growth

Why should organizations adopt sustainable leadership?

1. Addressing Global Challenges: Adopting sustainable leadership allows organizations to directly contribute to solving global challenges such as climate change, inequality, and resource depletion. By integrating sustainability into their core strategies, businesses can innovate to reduce environmental impact, enhance social equity, and drive economic growth without harm. This proactive approach addresses pressing global issues and positions organizations as leaders in sustainability, attracting support from consumers, investors, and employees who prioritize ethical and sustainable practices.
2. Stakeholder Expectations: Meeting stakeholder expectations is crucial in today’s context where individuals and investors alike seek organizations with firm ethical, environmental, and social commitments. Sustainable leadership signals a commitment to these values, making organizations more attractive to prospective employees who prioritize purpose in their work. This alignment with broader societal values not only helps in attracting talent but also in retaining employees who are motivated by meaningful work and a positive organizational impact on global challenges. It meets the rising demand for corporate responsibility and sustainability, enhancing the organization’s reputation and competitive edge.
3. Long-Term Viability: Adopting sustainable leadership enhances an organization’s long-term viability by ensuring its operations are environmentally sound, socially equitable, and economically viable. This approach helps mitigate risks associated with sustainability challenges, such as regulatory changes, environmental disasters, and shifts in consumer preferences. By prioritizing long-term over short-term gains, organizations can adapt to market changes, innovate sustainably, and secure their future in a rapidly evolving global landscape, ensuring resilience and continued relevance in their industry.
4. Innovation and Competitive Advantage: Adopting sustainable leadership drives innovation and competitive advantage by encouraging organizations to develop new products, services, and processes that are both profitable and environmentally friendly. This approach fosters a culture of creativity focused on sustainability, attracting customers and partners interested in ethical and responsible business practices. It differentiates companies in the marketplace, making them more attractive to investors and consumers who prioritize sustainability, thereby securing a leading position in the transition towards a more sustainable economy.
5. Regulatory Compliance: Adopting sustainable leadership for regulatory compliance means aligning with current and anticipating future sustainability laws and standards, reducing legal risks, and avoiding fines. It positions organizations as industry leaders in compliance, enhancing their reputation and trust among stakeholders. This proactive stance can also lead to influencing policy developments, ensuring that the organization not only meets but shapes the standards of sustainable practices within its industry.

Embracing Equitable Profit Distribution

Organizations should consider an equitable distribution of profits among stakeholders for several reasons that resonate with sustainability, innovation, and whole-system thinking, akin to those espoused by RoundMap®. Here’s why equitable profit distribution is essential:

1. Sustainability: Equitable profit distribution aligns with sustainable business practices by ensuring that the organization’s success benefits not just its shareholders but all stakeholders, including employees, customers, suppliers, and the community. This broader focus helps build a resilient business model that can sustain long-term growth and stability.

2. Stakeholder Engagement and Loyalty: Fairly sharing profits helps build stronger stakeholder relationships. It can mean better wages and benefits for employees, leading to increased engagement and productivity. For customers and suppliers, it can foster loyalty and long-term partnerships. Engaged stakeholders are more likely to support the organization through ups and downs, contributing to its resilience.

3. Social Responsibility: Businesses have a role in the broader social fabric. By distributing profits equitably, organizations reduce income inequality and support community development. This approach can enhance the organization’s reputation and brand image, aligning with consumers’ growing expectations for businesses to act responsibly.

4. Innovation and Continuous Improvement: When profits are reinvested into the organization for R&D, employee training, and other areas, it can spur innovation and continuous improvement. Equitable distribution can also mean allocating resources to initiatives that drive innovation rather than focusing solely on dividends and executive compensation.

5. Adaptability: An equitable approach to profit distribution can make organizations more adaptable. By ensuring that profits are used to bolster the organization’s foundation—through investment in technology, people, and processes—businesses can better navigate changes in the market and emerging challenges.

6. Brand Differentiation: In a competitive market, how a company treats its stakeholders can be a significant differentiator. Organizations known for fair and equitable profit-sharing can attract customers and talent who prioritize ethical considerations in their decisions.

7. Legal and Regulatory Compliance: In some regions, there are increasing legal and regulatory expectations for corporate social responsibility and equitable treatment of stakeholders. Proactively adopting equitable profit distribution practices can help organizations stay ahead of these requirements and avoid potential legal issues.

8. Collective Success: Ultimately, equitable profit distribution embodies the principle of collective success. It recognizes that the contributions of all stakeholders are vital to the organization’s achievements and seeks to reward them in a manner that reflects their value. This holistic approach to business success fosters a more cohesive, motivated, and committed stakeholder base.

By considering the equitable distribution of profits, organizations can align their operations with a model that promotes long-term success, stakeholder well-being, and a positive societal impact, resonating with the transformative and holistic principles advocated by RoundMap®.

Cultivating Customer Excellence

Why should organizations cultivate customer excellence?

Organizations should cultivate customer excellence for several compelling reasons, which align closely with the principles of sustainability, innovation, and whole-system thinking inherent in RoundMap’s vision. Here’s why focusing on customer excellence is crucial:

1. Enhanced Customer Loyalty: Customer excellence leads to higher satisfaction rates, fostering loyalty. Loyal customers are more likely to make repeat purchases, provide valuable feedback, and advocate for the brand through word-of-mouth. This loyalty is a sustainable source of revenue and organic growth.

2. Differentiation in Competitive Markets: Customer excellence can be a significant differentiator in crowded marketplaces. Organizations dedicated to understanding and meeting their customers’ needs can stand out from competitors, attracting more business and establishing a stronger market position.

3. Increased Customer Lifetime Value (CLV): By focusing on customer excellence, organizations can enhance the lifetime value of their customers. Satisfied customers are more likely to purchase additional products or services and less likely to switch to competitors, increasing the overall value they bring to the organization over time.

4. Improved Feedback and Innovation: Engaging with customers and striving for excellence provides valuable insights into customer needs and preferences. This feedback loop can drive innovation, helping organizations to adapt their offerings and develop new products or services that better meet customer demands.

5. Risk Mitigation: Excellent customer service can also mitigate risk. By effectively addressing complaints and turning negative experiences into positive ones, organizations can prevent escalations that might otherwise damage their reputation and financial health.

6. Employee Satisfaction and Engagement: Cultivating customer excellence often requires empowered, engaged employees who understand the value of the customer experience. This focus can improve employee satisfaction and engagement, as team members feel part of a purpose-driven effort to deliver outstanding service.

7. Sustainability and Social Responsibility: Customer excellence aligns with the broader goals of sustainability and social responsibility. Satisfied customers are likelier to engage with brands that demonstrate ethical practices, environmental stewardship, and community involvement, furthering the organization’s impact beyond its immediate customer base.

In summary, cultivating customer excellence is not just about improving transactions or solving immediate problems; it’s about building a sustainable, adaptive, and innovative organization that thrives by putting the customer at the center of its strategy. This approach aligns with RoundMap’s holistic, system-thinking philosophy, driving long-term success and differentiation in a competitive landscape.

The Biggest Challenge for Corporates

The biggest challenge of the corporate world is scaling for efficiency and maintaining the agility to innovate and adapt. Many corporations are initially designed for scale, leveraging efficiencies to drive down costs and capture market share. While effective for achieving rapid growth and competitive advantage, this strategy can become a double-edged sword, especially in rapidly changing markets. 

Here’s a deeper look into the issues associated with this scale-focused design:

1. Loss of Flexibility: As corporations scale, their processes and structures become more rigid. This rigidity can limit their ability to respond quickly to market changes, technological advancements, or shifts in consumer preferences. The focus on efficiency can inadvertently suppress creativity and innovation.

2. Innovation Paradox: Large corporations might find innovating within their existing operational frameworks challenging. The systems and processes that enable them to operate at scale can create barriers to exploring new ideas and approaches, leading to an innovation paradox where maintaining operational efficiency comes at the expense of adaptability and creative problem-solving.

3. Cultural Challenges: Scaling often leads to a more hierarchical and departmentalized organizational structure. This can dilute the entrepreneurial spirit and culture of collaboration that often drives effective solution development in smaller, more agile organizations. As a result, corporations might struggle to cultivate the internal dynamism needed for continuous innovation.

4. Overemphasis on Short-term Gains: A focus on scaling for efficiency frequently aligns with emphasizing short-term financial performance. This can divert attention and resources from investing in longer-term, potentially riskier initiatives that could drive sustainable growth and adaptability.

5. Market Disruption Vulnerability: Corporations optimized for efficiency are particularly vulnerable to disruption from more agile competitors who can introduce innovative solutions that better meet changing customer needs. These disruptors often prioritize effectiveness and customer value over operational efficiency, at least in their early stages.

6. Reversibility Challenge: As you’ve noted, the path to scaling for efficiency does not easily allow for a return to a more flexible, innovative posture without significant restructuring. Transforming a highly efficient operation into one that prioritizes adaptability and effectiveness requires a fundamental shift in corporate strategy, culture, and processes.

Addressing these challenges requires a balanced approach, as encapsulated in RoundMap’s principles of fostering business vitality, designing for impact, harmonizing strengths, and cultivating empowerment. Corporations must design systems and cultures that maintain operational efficiencies while enabling flexibility, encouraging innovation, and staying responsive to the evolving needs of customers and markets. 

This might involve adopting more fluid organizational structures, investing in continuous learning and development, and fostering a culture that values experimentation and accepts failure as part of the innovation process. By doing so, corporations can strive to navigate the complexities of scaling for efficiency without sacrificing their ability to create effective, adaptive solutions.

https://tinyurl.com/3nxe9h9v

Core Principles of the Integrated Business Framework. 8 Strategic Augmentation

 

RoundMap® harnesses advanced technology, such as AI and data analytics, to enhance the decision-making process and governance. This tech-friendly approach allows organizations to adapt to dynamic markets continually, standing resilient amidst profound market changes, while never swaying from its foundational principles.

In an increasingly complex business landscape, where decision-making often resembles navigating through a labyrinth in the dark, RoundMap’s augmentative principle emerges as a beacon of clarity and strategic foresight. This is not merely about data nor solely about intuition—it’s about fusing the two into a harmonious continuum that equips leaders with unparalleled vision. Imagine possessing a 360-degree, panoramic understanding of your organization, including the subtleties of culture and the concrete performance metrics. Now, realize that with RoundMap, this isn’t a lofty dream; it’s an attainable reality.

Our augmentative principle profoundly transforms how executives view and understand their business world. With the aid of 48 Thinking Caps, RoundMap systematically and intuitively maps out the ever-shifting dynamics of your enterprise, focusing not just on strengths and challenges but also on boundless opportunities that often lie hidden in plain sight. This multi-dimensional perspective is more than a tool—it’s a philosophy that blends expansive thought and cutting-edge technology that transcends traditional boundaries.

Through the fusion of augmented intelligence and generative chat agents, RoundMap lays out a vibrant tapestry of insights that range from culture to strategy, from purpose to execution. This is the new compass for today’s visionary leaders—a compass that doesn’t just point north but illuminates all directions, encouraging informed and emotionally intelligent decision-making. It invites you to go beyond merely reacting to challenges, urging you to proactively shape your organization’s future, embody an EQuitability ethos, and enrich your enterprise’s collective human experience.

As you explore this principle further, may you find both the enlightenment and the courage to lead from the whole as a symphony conductor who orchestrates an ensemble of various talents into a unified, captivating performance. Welcome to a new paradigm of leadership and decision-making. Welcome to RoundMap’s Augmentative Principle.

Application

The RoundMap® framework, a comprehensive and unified approach encompassing every facet of business, from strategic planning to client interaction, is an invaluable tool for organizations. RoundMap® guides strategic decision-making by integrating customer insights, market analysis, and goal establishment. This fosters a holistic understanding of business operations, cultivating cross-functional collaboration, distributive leadership, and consent-based decision-making. 

RoundMap’s Storycasting method ensures consistent and impactful messaging to stakeholders, while its delineation of leadership roles and responsibilities fuels leadership development and alignment with organizational goals.

Operational functions like marketing, sales, and customer service are streamlined within the framework, enhancing operational efficiency. 

RoundMap® encompasses change management and innovation strategies, assisting organizations in navigating transitions and uncovering growth opportunities. By furnishing measurement metrics and key performance indicators aligned with business goals, RoundMap® empowers organizations to monitor progress and enact data-driven decisions. Its adaptive structure maintains relevance in dynamic markets, while its role in fostering organizational alignment cultivates collaboration and a shared sense of purpose across all organizational tiers. 

Ultimately, RoundMap® functions as a comprehensive roadmap, expertly guiding organizations through strategic, operational, and communicative pursuits with unwavering clarity and effectiveness.

https://roundmap.com/

Core Principles of the Integrated Business Framework. 7. Distributed Leadership

 

RoundMap® adopts a forward-thinking stance towards leadership, endorsing a distributive model that juxtaposes traditional hierarchical structures. This paves the way for the distribution of decision-making responsibilities, fostering empowered and agile teams.

Embracing Distributed Leadership: Transformation Through Empowerment

The dawn of the information age brings with it complexity and dynamism that conventional hierarchical leadership structures can struggle to navigate effectively. The need for more fluent and adaptive leadership methods arises. One approach gaining significant traction is Distributed Leadership, a model emphasizing collaboration and decentralizing authority instead of sticking to rigid hierarchies. This model sees leadership as diffuse and spread across different organizational members based on expertise, not titles.

The DNA of Distributed Leadership

Distributed leadership breaks free from the convention where leadership is vested in a single authoritative individual or a top-tier executive team. Instead, it celebrates the idea that every team member, endowed with a unique assortment of skills, knowledge, and experience, can contribute to steering the organization. This innovative approach to leadership empowers individuals across all levels of the organization, nurturing a culture of shared responsibility, engagement, and ownership.

Pillars of Distributed Leadership

Embedded in the fabric of distributed leadership are several key principles:

• Autonomy: Autonomy fosters an environment where employees feel they can take initiative and operate independently. In the distributed leadership model, empowered team members can wield their authority and tap into their unique skills to contribute remarkably to their organization’s growth and success.

• The Power of Collaboration: Distributed leadership builds upon the concept of “distributed cognition,” suggesting that intelligence and understanding expand when we interact with people, tools, and routines. Thus, effective leadership practice becomes a concert of interactions among leaders, followers, and the context over time.

• Flipping the Hierarchy: A significant departure from traditional models, distributed leadership presents an ‘inverted hierarchy.’ This inverted pyramid pushes power and influence out and down, fostering an accessible leadership ecosystem with formal and informal leaders interspersed across the organization.

• Shared Decision-Making: In distributed leadership models, decision-making is a collective journey. It encourages all members to participate, facilitating a shared sense of ownership and responsibility, and cultivating a genuine democratized workplace.

• Flexibility: Flexibility leads to versatility in a distributed leadership model. Adaptable leadership styles working symbiotically with the demands and nuances of different situations allow various individuals to emerge as leaders when their expertise meets the requirements (source).

The Distributed Leadership Advantage

By fostering a distributed leadership model, organizations stand to gain in multiple dimensions:

• Increased Engagement: Since it empowers employees at all levels, distributed leadership increases engagement and commitment.

• Boost in Innovation: With diverse individuals stepping into leadership roles, their unique perspectives can lead to innovative solutions and strategies.

• Motivated Workforce: Emphasizing shared responsibility and collective success, this model can significantly enhance team morale and motivation.

• Accommodating to Complexity: As organizations grow and become more complex, distributed leadership can accommodate that complexity by distributing decision-making and leadership responsibilities.

• Resilience During Change: During periods of organizational change, a distributed leadership approach can help maintain stability and continuity by scattering authority throughout the organization.

Parting Thoughts

Distributed Leadership presents a paradigm shift in organizational stewardship, encouraging organizations to embrace adaptation, collaboration, and democratization as critical elements of success in today’s complex business landscape. Its principles serve as a guide for leaders to understand and navigate this transformative journey. By integrating this approach, businesses can foster a dynamic, empowered, and engaged community, equipped to navigate the challenges and seize the opportunities of the modern world. In a world of distributed work, matching it with distributed leadership creates a symphony of productive harmony, leading organizations to new horizons.

Edwin Korver

https://tinyurl.com/36adkshj

How to Sustain Your Strategic Management System

 

Managing strategy and sustaining a strategic management system is a multi-faceted effort and includes elements as diverse as: a) how well the organization is maintaining its focus on its strategic vision, plans and initiatives; b) whether or not people, systems, and communication activities are in place to maintain the momentum of desired change; c) establishing a sense of urgency in the workforce; d) aligning reward and recognition systems with strategy to motivate employees to do the right things; e) properly defining roles and responsibilities for “champions” to keep the workforce informed about the strategic priorities and desired levels of performance; f) organizing an office of strategic management or dispersing those responsibilities elsewhere for the deployment of strategy and performance reporting; and g) instilling a culture in the organization where “strategy is everyone’s job”.1   

While one would think that after investing the resources needed to effectively formulate strategy leaders would do the same to effectively implement strategy, often that is just not the case. And many times, strategy execution failure is the result of a simple lack of discipline and common business sense.  

Figure 1 illustrates simple routinely scheduled strategy progress and review sessions throughout the business year that can provide organizations with intelligence to act to sustain strategic management.

 Figure 1: Different Types of Review Meetings Needed to Sustain Strategy  

This simple meeting schedule might look like common sense, but it is surprising how many organizations lack this simple discipline. Nohria, Joyce and Robertson (2003) remind us that new management ideas heat up and fizzle out. So how can you tell which ones are critical for outperforming your competitors and sustaining your strategy? Nohria, Joyce and Robertson (2003) research revealed that most techniques have no direct impact on superior business performance. But what did was mastery of business basics! Hopefully maintaining this basic schedule will keep your team on track.  

Nohria, Joyce and Robertson (2003) also posit that to sustain superior (strategy) performance, you must excel at four primary management practices—strategy, execution, culture, and structure—and any two of four secondary practices—talent, leadership, innovation, and mergers and partnerships. The key to this “4 + 2 formula” is not which technique you choose within each practice, but how well and consistently you stick with it. There’s no recipe to follow.2 But maintaining a regular dialog organized around these topics will help your organization continue to strive for excellence.  

Sources

1. Balanced Scorecard Institute (2018). The Strategic Management Maturity Model™. Cary, NC.
2. Nohria, Nitin; Joyce, William and Robertson, Bruce. (2003, July). Adapted from: What Really Works? – Harvard Business Review.

Joe DeCarlo

https://balancedscorecard.org/

10 Steps of How to Implement the Value Chain Concept Successfully

 The value chain is one of the most powerful strategic tools. Michael Porter (the originator of the value chain concept) uses this tool to define what strategy is. However, the work of Porter looks more focused on strategy formulation than on strategy execution. There is a gap between understanding the concept of the value chain and implement it. So, let’s go to analyze how to implement in 10 steps the value chain tool successfully.

Infographic adapted from SCOR Process Framework (Supply Chain Council): How to Implement the Value Chain

The 10 steps of value chain

The first step is defining the Business Strategy of the firm. I mean defining our main Value Discipline (Operational Excellence, Customer Intimacy or Product Leadership according to Michael Treacy and Fred Wiersema) or our Core Business (Infrastructure Management, Customer Relationship Management or Product Innovation according to John Hagel III and Marc Singer). Be aware that both are quite similar strategic frameworks to define our strategy. The good point of these approaches to strategy is that those are probably more specific than Porter Generic Strategies (Cost Leadership, Differentiation, and Focus). This is important because the Value Discipline and Core Business frameworks make a better fit between strategy and processes/activities. Processes/activities are the key element for implementation.

In 1996, Porter in his famous HBR article “What Is Strategy?” declared that Operational Effectiveness is not a strategy. He explained that Japanese companies rarely have strategies and those were based on Operational Effectiveness in the 1980s. He suggested that competitors could quickly imitate best practices, management techniques, and so on. However, after two decades from the publication of the article the reality is other. Japanese companies (Toyota, Honda, Bridgestone, Canon, Ricoh, Seiko, Sony, Panasonic, Nikon, Yamaha, etc.) still enjoy of an important Sustainable Competitive Advantage. So, according to the facts we should consider that Operational Excellence is a working strategy.

Some of the Operational Effectiveness tools (benchmarking, best practices, performance management, change management, and so on) are helping us to implement the concept of the value chain despite the Value Discipline chosen.

The second step could be called Configuration. Now, we are aligning the Value Discipline chosen with some of the main functional strategies (Business Model, Marketing, Production, Logistics/Stock, and Performance). This step helps us to define our business strategy deeper in order to have an actionable strategy.

Many firms used to fail in the strategy execution rather than in the strategy formulation process. Failed strategies that demand a turnaround used to involve re-focusing on target industries, product, markets or activities of the value chain. So, the configuration step is one of the most important steps analyzing the value chain. Usually a BCG Matrix or other strategic portfolio tools should be used to get a deeper inside.

The third step is Segmentation. There is a common mistake that is “trying to be everything to all customers.” This used to mean that we are not able to excel in any particular segment because we lose focus. Without the correct focus (segmentation), the value chain implementation will have a high risk of failing.

Then the fourth step should be Process Reengineering. There are a few common mistakes that make firms fail in performing re-engineering:

• Limit the concept of process re-engineering to improve current activities (tactical level): Why do not you use re-engineering  to perform different activities? (Strategic level as Porter suggests.) We can use re-engineering at tactical level, strategic level or both. The strategic level should have higher organizational impact. Are you measuring how many of your reengineering initiatives belong to tactical and strategic level?
• Lack strategic thinking on the value chain: Focusing too much in operational processes and neglecting the strategic activities. We should wonder ourselves: what are the key activities that our value proposition is requiring?
• Fail to see the potential of outsourcing: Some people could be afraid of outsourcing because outsourcing could be interpreted as we are not able to improve those processes or activities internally. Indeed, it is very difficult to compete with specialized firms which offer outsourcing services. Therefore, it is a worthy solution to use outsourcing firms in order to leverage us on their Competitive Advantages. Outsourcing is a tool that can bring massive value to our firm (focus, expertise, reduce complexity, flexibility, savings, and cash-flow improvements.)
• Reduce re-engineering tools to process mapping and the ISO norm: Modern re-engineering processes cannot be understood without using analytical and improving techniques like Lean and Six Sigma. Furthermore, other complementary management tools are needed like performance management, best practices, project management, or change management.
• Substitute process knowledge for common sense: Inexperienced reengineering people are not likely able to detect problems, make a diagnostic, and fix the problem quickly. So, their job is based mainly on interviewing users and asking them for solutions. The value that they add is “using common sense” to the input received from the business users. Common sense is necessary, but it is not enough to generate a Competitive Advantage. Highly effective re-engineering required of a deep knowledge of the best class processes (supply chain process, sales process, etc.)

• Reinventing the wheel in process re-engineering: There are a few well-developed process frameworks from prestigious organizations (APICS Supply Chain Council – SCC, American Productivity & Quality Center – APQC or Value Chain Group – VCG). However, there are people who do not follow any proven process framework. In those cases they are probably reengineering based on common sense what will take too much time, cost and the result would be poorly compared with competitors using those frameworks.

• Assume that organizations need a specialized process re-engineering team to lead re-engineering rather than support it: I think that is more powerful having the owners of the processes leading and performing the re-engineering tasks. When the re-engineering come from users used to bring more powerful organizational changes and the reengineering is better embedded into the organization. Leading the re-engineering process from inside the areas (supply chain, customer relationship, human resources, etc.) is an indicator of the firm maturity and the quality on the staff. For this approach, organizations need a re-engineering team that train users and offer support rather than decide what must be changed.

Probably the best indicator that we have a solid business strategy and value chain execution is having the capability to replicate successfully strategies in different geographies (e.g. Zara/Inditex or McDonalds). Be aware that replication is quite difficult to achieve without robust and well defined processes.

Fifth step used to be ignoring for many organizations. Timeline is a key element to properly execute activities. Do you think is the same using 5 minutes for machines’ setup times than 5 hours? Do you think is the same unload trucks from 7:00 AM to 12:00 AM than allowing unload any time of the day? Obviously not, so process without timeline means processes not well defined. This will create coordination problems between different areas, friction between people performing sequential activities, problems measuring the important responsiveness KPIs, etc. Probably the most important issue to not defining timelines is that we would be unable to implement the “sense of urgency” in our organization. I mean urgency to satisfy customers’ needs, urgency to invoice customers on time, urgency to receive customers’ payments that improve our cash flow, and so on.

The next step is the sixth, Performance Management (Metrics). Nowadays, it is well known what it is a Key Performance Indicator (KPI). Nonetheless, many firms are not able to answer the following questions:

• What are the strategic attributes of the company?
• What are the overall health, diagnostic and root cause KPIs for any strategic attribute?
• How many KPIs should we have?
• What KPIs should we measure?

The answer of those questions is important in order to be sure that we have in place the correct KPIs to monitor our value chain. We should remember that “what it is not measured, it is not improved it.”

Once that we are able to define our KPIs, the next questions are:

• Where is the information that we need?
• How can we extract that information?
• What are the dashboards or scorecards that we are using to present and communicate properly the KPIs?

Seventh step, Benchmarking: This management tool allows us to compare the performance of our main processes or activities with those of other comparable organizations (internal or external). So, this tool is allowing us to prioritize our value chain initiatives according to the higher gap between our current situation and the potential future state (higher potential benefits) and lower implementation risks.

Eighth step, Best Practices: As Michael Porter said: we could argue that the rapid diffusion of best practices means that competitor can quickly copy them. However, thinking in that way we would likely underestimate implementation diversity and complexity. Thus, we would not consider the competency to implement as source of Competitive Advantage. Why is implementation a source of Competitive Advantage? Because the implementation capability is very complex to imitate and used to make a huge difference between firms competing. For instance, if we ask a few chefs to cook a written recipe, with similar conditions (ingredients, oven, etc.), we will likely realize that the result of each chef can be reasonably similar but very different. Imagine the differences in results with the following circumstances that affect defining and executing the company’s value chain:

• Activities: There are more than 1.000 activities (APQC) and like Porter mentioned trade-offs arise from activities themselves.
• Best practices: There are hundreds of best practices, and trade-offs arise from best practices themselves too.
• IT systems: Companies have different IT systems (Google, SAP, Oracle, Microsoft, etc.) with specific customizations what means that not all the best practices can be implemented in all the IT platforms or in the same way.
• People: Each organization has different people with different mindsets and skills. So, the perceptions of which activities are an opportunity or which are risky rely on the teams of each particular firm.
• Culture: Each organization has its specific culture. For instance regarding innovation we have innovators, early adopters, laggards, and so on.

Other advantage of using best practices is that push us to monitor the external environment in which we are following competitors. Additionally, best practices should help us to think out the box and to foster the creation of our own best practices list which could mean performing different activities than our rivals.

When we are talking about strategy execution, the variable people cannot be missed. Thus, the step ninth is Organizational Design where we assess any gap between the current inventory of our skills and the competencies level.

Finally, the step tenth Change Management considers a much broader implementation concept than just people issues. This is the last step for the value chain implementation, but it is not the less important. It is usual to find failed value chain initiatives where the design team is just blaming users because they did not implement properly. It is true that end users are responsible for delivering results too, although it is well known that there are many handicaps to make things happen. Thus, the design team is responsible for having a change management program, and a periodic follow-up that guarantees the success of all the initiatives.

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• Posted by: Javier González Montané

https://strategok.com/