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.
C. Arul Venkadesh B.Sc., MBA, PGDPM&IRLL, (PhD)
Faculty – Department of Management Sciences, CIET College, Coimbatore, Tamilnadu, India.
“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.
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.
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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