Archive for October, 2010|Monthly archive page

The Intelligent Enterprise takes shape

Business leaders are beginning to see the transformative power of data analytics to increase competitiveness, drive differentiation, reduce cost and foster business agility.  According to a recent MIT Sloan School of Business survey, many senior executives are now actively looking at how their collected data is being synthesized and used to dramatically redesign the way their organization’s go to market, get closer to their customers, and enable new business models.

In 2010, the Sloan School of Business surveyed almost 3,000 global executives on their goals, lessons and results around using data analytics.  Below are some of the highlights of the research:

Increased use of analytics correlates with higher performance

The results were striking:  There is a strong correlation between the degree of data analytics in an organization and their business performance.  Top performing firms were three times more likely to employ sophisticated data analytics than lower performing firms.  As an example, thought leaders referenced in the survey reported that higher levels of IT and analytics capabilities correspond to disproportionate increases in productivity gains. Moreover, top analytics performers reported greater ease and skill in handling the copious amounts of collected data than less advanced organizations.

Innovation is the number one business priority

 “Innovation to achieve competitive differentiation” was seen as the most prominent business priority (> 60% of respondents) as opposed to growing revenues, reducing costs and getting closer to customers.  Top performing companies were two times more likely to see analytics as a means of enabling innovation.  Examples of this innovation include new ways for companies to collect, synthesize and utilize data as well as the organizational structures and processes to support them.

Powerful analytics is more than just CRM

Building analytics excellence goes beyond ubiquitous data collection and data mining.  Intelligent Enterprises employ other powerful capabilities to help turn raw data into usable information that improves customer segmentation & targeting, fosters 1:1 relationships and enables supply chain efficiencies. These other components include data visualization, choice modeling & mathematical optimization and simulation & scenario building. 

Limited analytics knowledge is the major short-term adoption barrier

According to the survey, two out of the top three adoption barriers centered on a lack of specialized knowledge, resources and management vision.  Furthermore, this knowledge gap extended beyond employees directly responsible for analytics.  Most knowledge workers in areas like marketing, sales and operations need to be more comfortable and proficient in the new data-driven workplace.

Culture is critical to making analytics stick in the organization

Wishful thinking will not bring about the Intelligent Enterprise.  New technologies and methodologies must be accompanied by a shift in culture and organizational design.  In particular, management must be amenable to data-driven insights becoming core to decision-making (as opposed to hunches, history or best practice); information rights and communication flows must be expanded across the organizational and; traditional roles and structure must be tweaked to best exploit the use of the insights.  At the same time, responsibility for analytics must be centralized to ensure data integrity, clear ownership, easy access and operational efficiency.

Experimentation is the most practical implementation strategy

Most respondents emphasized the importance of conducting multiple experiments – as opposed to detailed planning – in order to best determine where and how the Intelligent Enterprise can take root.  Moreover, a ‘testing and learning’ approach was seen as a lower risk strategy for gauging organizational and cultural fit as well as setting priorities and generating early wins.  The respondents also reported that IT is not the driving force in the Intelligent Enterprise – although they are integral to its success.  Other departments (e.g., marketing, operations) as well as autonomous business units that have their own P&Ls are typically leading the charge.

For more information on our services and work, please visit the Quanta Consulting Inc. web site.

Fixing Executive Education

There is something wrong with executive education when substantial amounts of spending and effort, particularly in the areas of strategic thinking and change management,  do not appreciably improve the overall level of middle manager performance. Even though I teach executive education (strategy and organizational transformation) at a top business school, I have yet to see definitive research that links high levels of executive education with increased and sustained rates of individual and corporate performance. 

For the foreseeable future, corporate learning will remain a staple of executive efforts to improve productivity and the level of human capital. Enhancing middle management performance makes intuitive sense.  Furthermore, corporate education provides a number of ancillary benefits including enhanced morale and team building.  Yet, what can be done to close the educational gap between intent and performance? 

In my experience, there are many causes for poor executive educational performance.  For example, educators often have insufficient real-world and cross-functional business experience to teach complex subjects like strategy and change.  Secondly, student are rarely taught how to think strategically as opposed to using blunt instruments like benchmarking and SWOT analysis.

Thirdly, most programs rely on traditional lecturing and case studies to transmit information. Although this pedagogy has some advantages, it is not the best approach to imparting knowledge and triggering behavioral change.  Finally, most courses are siloed in terms of content and intent.  However, most managers recognize that problems and opportunities are never limited to one functional area or issue.

Given these challenges, what can firms do to improve educational effectiveness and pay back?

Increase relevance through customization

Many generic subjects like project management can be effectively taught in all organizations.  However, some complex areas such as change management and strategy are best taught by incorporating the company’s competitive challenges as well as organizational considerations into the content. 

Utilize practitioners who can facilitate

Not only do practitioners bring greater credibility to the classroom but they will also be able to convey richer insights and experiences as well as stimulate peer-based learning.

Leverage experiential methods

There is extensive research has shows that experiential teaching methods – simulations, games, and role plays – are superior to any other form of knowledge diffusion.

Teach strategic thinking

Typical strategy courses focuses on the “what” of strategy development and problem solving but little in terms of “how” you would accomplish this.  On the other hand, our programs emphasize learning-by-doing through the use of powerful tools such as problem visualization, making sense of data and business case development.

Follow up

Sobering research says that 90% of everything we learn  is forgotten 72 hours after we are first exposed to it.  Given this, we should not be surprised when individuals do not leverage their learnings in their jobs.  To drive real behavioral changes, corporate education must be an ongoing process and feature regular diagnostic checkpoints.    

Measure the results

Like any other investment, educational effectiveness and payback needs to be periodically measured through the actions of individuals & teams and the outcomes of their projects.

For more information on our services and work, please visit the Quanta Consulting Inc. web site.

New market penetration: a passage to India

Growth-focused North American companies can no longer ignore India.   Traditionally known as a center for business process outsourcing, India is rapidly joining the ranks of the first world as a major market for consumer goods and services.

According to the IMF, India is projected to generate GDP growth of 9.7% in 2010 and 8.4% in 2011.  Much of this growth can be traced to burgeoning consumer demand.  According to Stewart Hall, economist for HSBC Securities Canada:  “India is essentially a high-growth economy.  It’s a story fueled to a large extent by domestic consumption.”    Domestic growth, according to the IMF, is being driven by a “low reliance on exports, accommodative polices and strong capital inflows.” 

There remains considerable room for economic expansion arising from strong economic fundamentals.  These include: growing urbanization, a large, young workforce, and an expanding service sector.  All of these factors are contributing to the emergence of a sizable, materialistic and ambitious middle class. According to McKinsey, the India’s middle class is forecasted to grow from about 5% of the population to more than 40% by 2025, creating the World’s fifth-largest consumer market.

 Given the opportunity, what factors should companies consider when crafting their Indian-entry strategy?

Understand that India is a country of contrasts – A week and fractured government and hundreds of millions of poor and illiterate people coexist with a dynamic management class and World Class technology.

Consider India’s diversity – India is unique in many ways:  home to 1.2B people, governed by 28 different states plus the federal government; possessing 24 official languages with hundreds of dialects; absorbs a myriad of religions, ethnic groups and cultures and; encompasses a variety of climatic zones ranging from the frigid Himalayas, to monsoon-drenched jungles.

Be wary of business challenges – Despite advances, India continues to score poorly on every “Ease of Doing Business” measure.  In most of the country, the infrastructure is inadequate and will be challenged to support future growth without substantial investment. Regulations and bureaucratic practices can vary dramatically between jurisdictions.  Corruption is rife and many local firms continue to enjoy tacit privileges not available to foreigners.

Get engaged locally – While your market entry strategy should be driven by the type of products and services delivered, firms need to cultivate an extensive coterie of local (private and government) contacts and business partners who can smooth market penetration and stick handle through government regulations.  Foreign companies must also be mindful of local sensitivities and customs and not appear patronizing or uncaring.

Consider new business models to serve consumers – Although national wealth has been growing steadily, meaningful disposable income is now only reaching the vast majority of people.  To reach these consumers, North American companies need to be creative about how to deliver useful products at significantly more affordable prices than their home markets.  Examples of the radical product innovation required include the $2500 Nano car and the recently announced $35 government-developed tablet PC.  Finally, expect incumbent firms to aggressively defend their market share.

Leverage India’s strengths as part of a larger regional strategy – With its British legal system, widespread use of English and strategic location, India can effectively serve as the hub of a larger South Asian network.

Be patient – Despite its riches, India remains a frustrating market for the uninitiated.  Market penetration and investment returns will require longer time horizons.  Moreover, developing the necessary trust with local parties will take a considerable amount of time and effort. 

For more information on our work and services, please visit the Quanta Consulting Inc. web site.

Green companies outperform in times of volatility

It is conventional wisdom that sustainability and corporate social responsibility (S&CSR) programs can improve an organization’s image, morale and recruitment efforts, not to mention make a positive environmental impact.  Yet, many executives remain skeptical that these initiatives can deliver tangible business benefits and are the best use of scare capital and management attention.  Not surprisingly, many firms view the current recession as a time to batten down the hatches and not pursue unnecessary investments.   

This view can now be challenged by hard data. New research from AT Kearney, a consultancy, suggests that executives should think twice about cancelling or deferring sustainability initiatives during recessionary times.  The study showed that companies that are committed to launching and maintaining S&CSR initiatives will outperform their peers in financial returns.

In the second half of 2008, AT Kearney looked at 99 US public companies spanning 18 industries to understand how S&CSR-focused companies fared against sustainability-specific market indices.  Sustainability-based practices were defined as tangible programs that were geared toward protecting the environment, promoting social well-being and driving business results. 

The study’s results were instructive:

Sustainability-focused firms out performed in almost every sector.  Sixteen out of 18 industries awarded better returns to S&CSR-focused companies.  The 2 industries that underperformed were Construction & Materials and Personal & Household goods.

The performance differential was significant.  The difference in shareholder value between companies after 6 months was 15% or an average of $650 million. The industries with the highest 6 month stock price differential were Media, Automobiles & Parts (each 133 vs index), Financial Services (125 vs index) and Industrial Goods & Services (123 vs index)

Why did some companies do better than others?  For one thing, the market could be rewarding a longer term, more comprehensive and genuine commitment to S&CSR and risk management versus more ad hoc efforts.  In particular, sustainability driven innovation, supply chain optimization and green product development will yield higher returns in a firm that treats S&CSR as a strategic priority with proper funding and focus.  In addition, better financial results could be attributed to stringent governance, risk management and compliance efforts needed to fully deploy and manage S&CSR programs.

There are important implications for the poorly performing companies. Half measures with sustainability programs may be a waste of money and effort.  Laggard companies should consider one of three strategic options: 

  1. redouble their S&CSR investment and focus to catch up to leading competitors;
  2. look for market or supply chain ‘white space’ where they can leapfrog competition;
  3. abandon all sustainability efforts (except what is government-mandated) and direct their capital elsewhere.

For existing high performers, staying the course can be very rewarding.  Firms should consider increasing their sustainability focus if they deem it to be a major driver of competitiveness and market differentiation.

Despite some clear findings, managers should treat these results cautiously. The second half of 2008 was an atypical period in the public markets.  Likely many of the findings would be different during a more stable economic period.

For more information on our work and services, please visit the Quanta Consulting Inc. web site.