Source: E-mail dt. 7
June 2012
Emerging paradigms in business for inclusive growth and development
Dr. R. Karuppasamy
M.Com., MBA., M.Phil.,
Ph.D., PLME (IIM-Ahmedabad),
Director, Management Studies, SNS College of
Technology, Coimbatore, Tamilnadu, India.
and
C. Arul Venkadesh
B.Sc., MBA, PGDPM&IRLL, (PhD)
Faculty
– Department of Management Sciences, CIET College, Coimbatore, Tamilnadu, India.
Abstract
“Business, that's easily defined - it's other people's money”
~ Peter Drucker
The increase in the competition on the
markets changed in the last ten years the approach to business management. Today companies are more process-oriented
than in the past; in fact, in order to reduce the costs and keep pace with the
market, they are adopting an end-to-end strategy that involves both customers
and suppliers to synchronize all the business activities. At the same time,
companies have understood the importance of enforcing achievement of the goals
defined by their strategy through metrics driven management. Thus, the new
requirement of managers is to ensure that all processes are effective by
continuously measuring their performance through Key Performance Indicators
(KPIs) and score cards.
Communication and enforcement of the strategy is obtained
by sharing goals and measurements at all the company levels, thus promoting the
so-called information democracy. Translating the company strategy into a
detailed set of indicators that are closer to the operational tasks allows
employees to better understand the desiderata of managers. As stated before the
neologism often used to refer to this new picture in BI is exactly BPM. Describing BPM requires understanding how
management is carried out within a process-oriented enterprise where, beside
the classical organizational structure, a set of inter-division processes are
present.
Introduction
Business Strategy and Business Performance
Management (BPM) helps organizations to optimize business performance by
encouraging process effectiveness as well as efficient use of financial, human,
and material resources. BPM includes DW
but it also requires a brand new set of solutions that rely on different
technologies and deeply impact on the overall architecture of the BI platform the
organizational structure is a hierarchy of divisions, aimed at defining their
duties and responsibilities, and is usually organized on three different levels.
At the strategic level, the global strategy of the enterprise is decided.
The tactical level is usually composed by multiple
divisions, each controlling a set of functions; the decisions taken here are
related to the corresponding functions and must comply with the strategy
defined at the upper level. Finally, at the operational level, the core
activities are carried out; the decision power is limited to optimizing the
specific production activities in accordance with the main strategy. On the other hand, a process identifies a set
of logically related tasks performed to accomplish a defined goal.
Business Processes are orthogonal to organizational structure;
in fact they usually include tasks carried out by different divisions and
require decisions at different levels.
The key point of processes is that the focus is on the global business
goals rather than on the single tasks. Of course, employees involved in
processes must share the business strategy in order to synchronize their
behavior. This result can be achieved by
translating the top-level strategy into multiple goals at the lower levels,
each defined by a target value for a given indicator; each indicator measures a
specific task and should be easily understood by the employer who is in charge.
This approach, depicted in Fig. 1, is based on a closed-loop where:
1. The
strategy and the corresponding targets on indicators are influenced by the
enterprise performance as inferred from the information system;
2. The
actions/decisions taken at the tactical and operational levels are aimed at
matching current and target values for indicators;
3. The
actions/decisions fulfill the company strategy and determine its performance.
The closed-loop in the BPM approach Note that, while a business strategy is
with no doubt more than a simple set of target values.
The attempts made until now to share strategy policies and
directives among other levels failed owing to how every single employee
perceives the company. At least KPIs allow managers to get results without
Misunderstandings and personal definitions, while it resulted that implementing
behavioral business rules or application code limits the autonomy of the
employees with potential loss of flexibility.
Scope of Business Strategy
Each separates ‘businesses should
have its own business strategy so that a multiple business enterprise will have
a number of separate business strategies. This raises the practical question of
how to define the scope for each such business. Mathur and Kenyon (1997)
have examined this question rigorously. They suggest that there should be a
separate competitive strategy for each ‘offering’ defined as the unit of
customer choice.
The unit of customer choice depends on what the customer is
comparing when he or she makes the buying decision. Their many examples of
offerings suggest, for instance, that a 100g jar of Nescafé might be a separate
offering from a 200g jar of Nescafé if the closest substitute for the customer
is the same size jar of another make of instant coffee. They see the two
different sizes of jar as being different offerings and therefore requiring
different business strategies. This is certainly theoretically elegant but may
present a few problems in practice. To divide businesses so finely is
likely to be too much work and it is unlikely that it would be possible ever to
implement such fine-grained strategies. There is often a conflict between
theoretical rigour and practical constraints.
In practice, the problem is more often the reverse of the
Nescafé example in that a business is defined too broadly and,
consequently, a single strategy is expected to apply to all its facets. One
reason for this is that a division or region considers a ‘business strategy’
for its business that includes several distinct offerings. If the genuinely
different needs of the different offerings are not separated, the resulting
strategies can only be muddled and less useful than they might have been. There
is a need for a balance in choosing the scope for each ‘business’. If the scope
of the business is defined at too low a level, the work becomes too much.
If the level is too high, the analysis loses its rigour. In Practice, the
problem is usually that this question of scope is never clearly posed, not that
it would be difficult to provide a workable answer.
Emerging Business Strategic Initiatives
a) Meeting the real needs of customers
The needs of customers are one major driver of business
strategy. It is essential to understand the needs and to identify how to
satisfy these needs more fully, more exactly, or more portably than
competitors. Business strategy is therefore about beating competitors in
meeting customer needs; beating competitors for other purposes may be fun but
it is a distraction. It follows from this that a deep analysis and
understanding of customers’ Needs inessential to produce a good business
strategy. It is necessary to understand the nature and scope of customers’
needs, how these needs differ between different groups or Individuals, and how
these needs are changing. It is normally the responsibility of the marketing
function to understand these needs. Business strategy is therefore market driven
and likely to have very heavy involvement of marketing people. This does not,
however, mean that a business strategy is the same thing as a marketing strategy.
Business strategy is also heavily influenced by strategic intent, by
financial and human constraints, and in fact by everything that makes the
chief executive’s job different from the marketing director’s.
In the BMW case example, there is no evidence that BMW
defined clearly exactly how the BMW/Rover combination was expected to
look from the customers’ point of view or how it would help BMW to meet
customers’ needs better. Five years after the take-over, the BMW’s brand strategy
still looked like two separate companies. In1999, Rover launched the Rover 75
that appears to compete almost directly with its executive models. At the same
time, BMW was developing the MX5, a four-wheel drive vehicle, in apparent
competition with Rover’s Land rover range. BMW may have had a clear strategy
for how the merged entity would meet customer needs but we cannot detect it.
b) Exploiting genuine competence in business strategy
The major driver of business strategy is the competence of
the enterprise. We have described various analytical techniques for measuring
resources and identifying capabilities. The
ultimate goal is to identify a unique core competence that can provide the
basis for differentiating ourselves from our competition. This is not easy to
do and probably more business strategies go wrong because they failed to be
honest in their assessment of their own capabilities than because they
misunderstood customer needs. In the Nolan, Norton case example, the widening
impact of information technologies caused the scope of Nolan, Norton’s
consulting assignments to broaden and to require larger teams with broader
skills in people and change management. This was recognized during the process
of formulating strategy and one of the reasons for selling out to Peat, Marwick
was to provide this wider skill base.
C) Providing sustainable competitive advantage
The best business strategies are those
which use the capabilities of the firm to address customer needs in a way
which leads to sustainable competitive advantage. Chapter 8 described how
competitive advantage may be assessed, but also suggested that competitive
advantage had some of the elusive qualities of the Holy Grail. In practice, business strategies may have to
tolerate less lofty achievements than long-term sustainable advantage. The business strategy has to address the
issue of competitive advantage realistically in the context of that business.
This may require an admission that former competitive advantages are being
eroded so that the strategy is as much defensive as offensive. As John Kay (1999) has pointed out,
businesses, like people, have to go through good times and bad times. It is
probably impossible to achieve competitive advantage permanently and the
excellent corporation that can achieve a permanent and irreducible lead is a
myth. The business strategy must describe what the basis of competition is, how
this basisis changing, and how the strategies take
advantage of these changes.
Conclusion
The initial task in Business management is typically the
compilation and dissemination of a mission statement. This document outlines, in
essence, the raison d'etre of an organization. Additionally, it specifies the
scope of activities an organization wishes to undertake, coupled with the
markets a firm wishes to serve & Performing a situation analysis,
self-evaluation and competitor analysis: both internal and external; both
micro-environmental and macro-environmental with this assessment, objectives
are set. These objectives should be parallel to a time-line; some are in the
short-term and others on the long-term. Business Strategy - is concerned more
with how a business competes successfully in a particular market. It concerns
strategic decisions about choice of products, meeting needs of customers,
gaining advantage over competitors, exploiting or creating new opportunities
etc.
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