We don't really know why yet, but the power of narrative as an analytical device and as a memory aid is profound. In their article "Strategy Tools for a Shifting Landscape" Jacobides (HBR May 2010) suggests the application of narrative to the analysis of a business strategy as a powerful way to allow it to adapt and change.
Most traditional business strategy analysis focus on static analysis. The ubiquitous use of two dimensional graphs give testament to this. What is not captured well is changing variables and how they should effect the analysis and application of strategy - a calculus of strategy rather than a simple arithmetic.
Narrative is a powerful tool as it allows us to weave together fact and motivation, the subjective and objective, into a coherent whole that we have spent our whole lives practicing - the story framework.
How do we proceed?
Well, we must understand the story in terms of a plot and subplots. Company N is a suppliers of telco solutions to telecomms companies. Subplot - how do the capabilities associated with sales, integration etc promote this capability? Subplot - the people, the training etc.
All of the above could be considered the "corporate" playscript - or how the company in fact makes value for its customers.
Tuesday, July 6, 2010
Thursday, July 1, 2010
How do you cut costs without stategic change or spending anything?
You thought you were running a lean ship, but the order comes from above that you need a plan to cut costs. Moreover, you need 3 plans reflecting order of magnitude of cost reduction of 10%, 20%, and 30%. Also, this cannot be done by strategy change, purchasing new technology or major organizational change like off-shoring.
"When you've got to cut costs" by Coyne et al (HBR, May 2010)
Main idea - forget one overall solutions - look for the "death by a thousand cuts." The level of cutting required will be proportional to the impact to the busines
10 % -> Aim for incremental costs.
20% -> Redesign
30% -> Might have to kill off some of the programs
How can you get to 10%?
There are a few ways here, lets look at some of the more common.
1. Consolidating incrementals ->Look for low hanging fruit and lots of it. All non-discretionary costs are fare game here. For example, parties, critical perks, event tickets etc. You might want to combine events with other departments - for instance share training costs.
2. Take overdue personal action -> Restructure the jobs of any less than fully busy people and confront problem of underperformers.
3. Reduce spending on department management -> Most administrative organisations spend upto 20 % of their budget on self organisation.
4. Gain control of miscellaneous spending -> You know, those expenses that do not follow the normal channels. A new hard drive for instance.
5. Hold down pay increases -> Check where you employees stand in regards to the market rates. If you exceed market rates than consider holding down average pay rise in comparison to rest of company
6. Are there any rejected cost-savings ideas you could look at and re-propose?
Getting to 20%
To drop cost by 20% it would be imprudent to try to maintain the same degree of work. You should strive to eliminate any work for which the costs exceed the value. Start by determining all opportunities to reduce the organisations workload - all the activities that could possibly be eliminated.
You need to differentiate between people and processes/activities/. You need to rethink the activities in your department in 3 ways,
1. Talk to your counterparts -> How is the work in your department shaped by other groups in the organisation? You may be carrying costs that do not add value to your department. For instance, you may be creating informaiton for them, or waiting for them to do something. These cost may not be being recovered from them because the department requiring the work does bear the costs. There are several typical inefficiencies here
a. Eliminating liasons and coordinators -> Why do you need cooridnators between organisational silo's. This is more a reflection of a clear lack of interface and is inefficient.
b. Reduce excessive service levels -> Do you prepare long reports of information - when only the exceptions really matter or when the variances are quite small.
c. Change the process -> Are all your processes still necessary. Things change over time and a process that once served a purpose may no longer be necessary.
2. Move away from belt and suspender mind-set -> Are you catering for excess risk. Data backup is typical of this - everything is backup up when only 10% of things needs to be backed up. Do you really need to check everything, all the time - this is a waste of time.
Getting to 30%
Alot of cost savings can come from finding ways to better work in parallel with peer departments withing the organisations.
a. Coordinating Parallel Activities -> Consolidate procurement.
b. Shift the burden to the most efficient location -> or, outsourcing. Eg. payroll, recruiting, benefits management, media planning and so on. People need a good reason to feel the pain of outsourcing - so if you can combine a few different services into one there will be more incentive.
c. Eliminate duplicated analysis -> Do you have multiple departments analysing the same event. It would be more efficient to create one department to do the analysis from multiple perspectives would it not?
d. Eliminate low-value meetings and forums -> Avoid "Meetings Monday." Consider organising an ongoing audit of all regularly re-scheduled meetings to figure out which ones cab be re-purposed, consolidated or eliminated.
e. Restructure of cut cross department activities -> Are all your activities giving you the best value for the cost - do you really need 6 interviews of potential employees when 3 will do the same job?
f. Eliminate programs - Which programs do not deliver much bang for buck and deliver low value for high cost? Get rid of them.
e. Are you overservicing someone else in the organisation?
"When you've got to cut costs" by Coyne et al (HBR, May 2010)
Main idea - forget one overall solutions - look for the "death by a thousand cuts." The level of cutting required will be proportional to the impact to the busines
10 % -> Aim for incremental costs.
20% -> Redesign
30% -> Might have to kill off some of the programs
How can you get to 10%?
There are a few ways here, lets look at some of the more common.
1. Consolidating incrementals ->Look for low hanging fruit and lots of it. All non-discretionary costs are fare game here. For example, parties, critical perks, event tickets etc. You might want to combine events with other departments - for instance share training costs.
2. Take overdue personal action -> Restructure the jobs of any less than fully busy people and confront problem of underperformers.
3. Reduce spending on department management -> Most administrative organisations spend upto 20 % of their budget on self organisation.
4. Gain control of miscellaneous spending -> You know, those expenses that do not follow the normal channels. A new hard drive for instance.
5. Hold down pay increases -> Check where you employees stand in regards to the market rates. If you exceed market rates than consider holding down average pay rise in comparison to rest of company
6. Are there any rejected cost-savings ideas you could look at and re-propose?
Getting to 20%
To drop cost by 20% it would be imprudent to try to maintain the same degree of work. You should strive to eliminate any work for which the costs exceed the value. Start by determining all opportunities to reduce the organisations workload - all the activities that could possibly be eliminated.
You need to differentiate between people and processes/activities/. You need to rethink the activities in your department in 3 ways,
1. Talk to your counterparts -> How is the work in your department shaped by other groups in the organisation? You may be carrying costs that do not add value to your department. For instance, you may be creating informaiton for them, or waiting for them to do something. These cost may not be being recovered from them because the department requiring the work does bear the costs. There are several typical inefficiencies here
a. Eliminating liasons and coordinators -> Why do you need cooridnators between organisational silo's. This is more a reflection of a clear lack of interface and is inefficient.
b. Reduce excessive service levels -> Do you prepare long reports of information - when only the exceptions really matter or when the variances are quite small.
c. Change the process -> Are all your processes still necessary. Things change over time and a process that once served a purpose may no longer be necessary.
2. Move away from belt and suspender mind-set -> Are you catering for excess risk. Data backup is typical of this - everything is backup up when only 10% of things needs to be backed up. Do you really need to check everything, all the time - this is a waste of time.
Getting to 30%
Alot of cost savings can come from finding ways to better work in parallel with peer departments withing the organisations.
a. Coordinating Parallel Activities -> Consolidate procurement.
b. Shift the burden to the most efficient location -> or, outsourcing. Eg. payroll, recruiting, benefits management, media planning and so on. People need a good reason to feel the pain of outsourcing - so if you can combine a few different services into one there will be more incentive.
c. Eliminate duplicated analysis -> Do you have multiple departments analysing the same event. It would be more efficient to create one department to do the analysis from multiple perspectives would it not?
d. Eliminate low-value meetings and forums -> Avoid "Meetings Monday." Consider organising an ongoing audit of all regularly re-scheduled meetings to figure out which ones cab be re-purposed, consolidated or eliminated.
e. Restructure of cut cross department activities -> Are all your activities giving you the best value for the cost - do you really need 6 interviews of potential employees when 3 will do the same job?
f. Eliminate programs - Which programs do not deliver much bang for buck and deliver low value for high cost? Get rid of them.
e. Are you overservicing someone else in the organisation?
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