If you have any queries or like to discuss on these post them under comments.
Sunday, July 11, 2010
Wednesday, June 9, 2010
The term competition refers to a situation where two or more parties fight it out in the market for better share and gain. To get the better of the other, a business has to be proactive, dynamic and nimble. To out think, to act and adapt faster a business must acquire and harness its knowledge resources. When knowledge answers, businesses often innovate. Innovation well supported by knowledge help companies raise the bar and be competitive. Hence it is imperative, for companies that aspire to grow their businesses, to embrace knowledge and innovation.
Let’s dwell a bit on achieving competitiveness in an established market. We all know that a company can gain an edge over its competitors by achieving one or more of the follow viz., superior quality and service, Cost advantage, Ease of use and Aesthetic design. The following mind map captures various requirements for achieving each of these aspects of competitiveness.
Take a closer look at each of the requirements in the above map and try to figure out the role of knowledge in achieving them. A company that is aware of its knowledge repository and makes full use of it would keep delivering on all fronts and continue to grow.
Knowledge has its roots in learning. It is through learning that one builds up and strengthens his or her knowledge base. An encounter with a customer in an airport can open up a new way to serve and expand business. A business should identify all the available channels and points of learning to tap and convert that learning into a knowledge resource. Some can be accidental but many can be by design.
A company accumulates knowledge through its people, who learn and gather knowledge through various sources, in various ways and for various purposes. Knowledge thus gained should help a company to sharpen its competitive edge by improving processes, technology and the overall business performance. However not all willingly share knowledge for the greater benefit of an organisation. Two big challenges of knowledge management are making people share and use knowledge.
People, behind technology, beside machinery, in the cubicles, and those in the field make things happen in this highly competitive world. The knowledge they accumulate is vital for a company to grow. They learn and accumulate knowledge by doing, observing, questioning, reading, listening and brainstorming. The onus is on a company to make the best use of its knowledge assets.
A knowledge focused organization
Knows that knowledge acquired for business does not automatically translate into knowledge used in business. Like a plant, knowledge requires a conducive environment to thrive.
Knows what it knows, tracks & builds its knowledge repository
Puts in place a system that acts as a breeding ground for knowledge
Rewards and more importantly recognizes people for their contribution and making use of knowledge
Knowledge Management System
Any effort towards knowledge management must keep the major stakeholders (employees) of knowledge into consideration. A mere installation of knowledge management software won’t suffice.
Men distinguish themselves from the rest with the knowledge they possess. Asking them to share that knowledge with others to the common benefit requires greater commitment and a genuine system. Even after that it will be a tough task. The following question can stop one on his tracks. Who is responsible for the outcome, if I use other’s knowledge? This is where a comprehensive and well communicated KM system comes in handy for a company.
The following are imperatives for a successful knowledge management system.
- Well articulated knowledge strategy
- Firm commitment by the top and middle management
- Clearly defined roles and responsibilities with regard to KM system
- Strong and committed knowledge management team
- Clear reward and recognition system
- Comprehensive knowledge capture, transfer, storage, channelling and usage system
- Open work culture that encourages knowledge sharing and usage
- Facility for people to track and know the fate of their knowledge contribution
- Last but not the least, absence of blame culture and a clear accountability structure
Innovation is an act of starting something for the first time; introducing something new. By innovating we bring something new to the environment. This is how innovation is defined in dictionaries. In business, innovation often is associated with new products and services. However it can also be associated with new processes, practices, methods etc. that improve core operational parameters viz., cost, quality and time.
To innovate one needs to think and capable of thinking differently. It’s a combination of attitude and knowledge that breeds innovation. Innovation needs right climate and support. It cannot happen in a choked environment.
I will post later on supporting innovation in a business environment
Tuesday, June 1, 2010
A sale is complete only after the customer pays. Yet in client places I have come across people in sales function act as if their sale is complete with the purchase order from the customer. This is a familiar situation in many companies. Many may think that it's got to do with the attitude, and they may be right. But it is also a fact that performance assessment systems and definition of roles have contributed to it. If you ask sales guys on how their incentive system is structured, chances that 9 out of 10 would say it is 'sales volume' is highly likely. Collections are always an afterthought in assessing a sales person's performance.
Jobs performed, either directly or indirectly, generate revenue or focus on cost control. Revenue is generated only when your banker ticks up your bank balance and not when your customer signs the purchase order.
Pillars of Receivables management
It is important to assess sales performance in a balanced manner but receivables management is much more than that.
Seamless and smooth sales order processing (SOP)
SOP is initiated at the receipt of Customer purchase order and ends with the delivery of product or service to the customer. Every activity along the line must support speedy processing of work along with the required quality. Any activity that holds up the process even for a brief period must be thoroughly examined and its purpose validated. I have come across businesses where the quality of a order is checked by people in production function. This kind of activity is often referred to as a control activity, to ensure that the interests of the business do not suffer. But in reality these types of activities often hurt customer interests and cause resentment among sales ranks, which in turn affect business interests.
It is the job of salesmen/women to ensure that the order they bring in matches with the quality expected by the business and its policies. The buck stops with them. Any order that they accept and receive must be processed without any hiccup or delay concerning the quality of the order. The interest of the business can be protected by making sure that the performance of the sales managers is evaluated based on the quality of orders that they bring in and not just by the volume of orders.
Quality of an order
Evaluate the quality of an order based on the volume of the order, the price, payment promise and the terms of the order.
There was an occasion when a company accepted a big order (around 150 pump sets) at Rs.1140 / unit. I was working on an assignment there and advised them against it since I had every reason and data to prove that it was not even covering their variable costs. It some how did not register in their minds and eventually they did sell at that price and recovered the payment after more than 3 months. It was a struggling company and execution of this order only added to their woes.
Payment promise is another aspect of a quality order. It refers to both the track record and the current expectation. It is difficult to validate it pre-sale, however a company must evolve a system whereby payment track record of customers is captured and linked to performance of respective sales people.
Terms of sale refers to other things including delivery and any other offers and concessions. A sale that results in lesser net revenue for the company must get lesser performance rating compared to other normal sales.
Assess the performance of sales managers and sales men based on the quality of orders they bring in. As long as their performance meets with the expectation on all the fronts, allow them a free hand in accepting orders of all quality. If the performance is not desirable then constrain them from accepting lower quality orders. Also link the incentive system to this performance rating. Rest assured your business interests would not be hurt by your sales men. No one would like their wings (freedom to accept orders) to be cut and not especially when their colleagues merrily flap around. Secondly incentives structured around proper sales performance would make them think twice before accepting an order.
Timely and quality customer service
It's a well known aspect of receivables management. If you service bad, you would not get your payment in time. Don't mess up with any customer and definitely not with your regular customers. Give them what you promise and Promise what you can give. See related article keeping your customers.
Payment follow-up and collection intelligence system
Your sales order processing is excellent, and your customer service is impeccable yet your receivables may get delayed because of customer financial troubles, bureaucratic customers and customers who want to delay for their own benefit. Develop a system and automate it to help speedier collection.
- Draw a matrix with age and size of receivables on the two axis
- Develop 4 or 6 pools of receivables based on the age and size of receivables
- Devise follow-up system that changes in tact and approach with the movement of the receivable through various receivable pools
- Increase the intensity and level of executives involved for various receivable pools
- With the help of technology capture information generated by the system (like customer feedbacks, dodgings, remarks and intelligence of people following up etc.). They help in understanding different customers, their ways and in evolving the follow-up system. In the long run patterns emerge and give better understanding of various things that delay collection and how to over come them.
It is always important to know how profitable a customer is to a business and where he costs and where he benefits it. Comprehensive customer rating systems would help a company avoid and if necessary qualify customers at Pre-sale and treat them accordingly. By improving the quality of customers, a company can easily control the age of its receivables. More importantly link them all, SOP, Customer service, PFCIS, and Customer rating system.
Thursday, April 29, 2010
Businesses want to create and deliver value to its customers and stakeholders. But not always things go as per plan. Operational issues and problems (OIPs) often derail many a plan and affect business performance. They render a business less profitable.
In any business the following, which we may refer to as core pillars of a business, form the basis of its existence, performance and growth.
- Mission, Vision, Strategy & Alignment
- Investment, Infrastructure and Resources
- Leading and Management
- Structure, Systems, Processes and Policies
- Execution of Work
Core pillars provide what a business requires. Right from defining business purpose to support and work, these pillars lend strength to the business. When these fall short of requirements they may then give rise to causes that cause operational issues and problems.
Operational issues and problems fall under following five categories. The first three of them are primary and direct, while the last two are contributing to the first three.
- Wastage issues
- Delay issues
- Quality issues
- Control & Management issues
- Work cultural issues
Though containing OIPs require constant efforts, companies cannot work on same issues again and again over their life time. Often symptoms attract more effort than the real problem. To remedy it and address core operational issues and problems we need to understand them better. OIP Framework is an effort in that direction
The OIP framework helps businesses to identify and understand operational issues and problems in an effective manner. It helps businesses to understand and analyse OIPs before trying to resolve them. With the help of OIP framework companies can identify, understand and contain issues and problems that affect their operational performance in an effective manner. The structure of OIP framework is as follows
1 Categories of OIPs
1.1 Types of OIPs
1.1.1 Causes of OIPs
The general OIP framework contains 5 categories, 21 different types of OIPs and 54 different causes. OIP framework help businesses improve their operational performance
How OIP framework works?
What may not be clear to people at the top may be clearer to people near the surface due to their proximity to action and other people. They often see, hear and perceive the happenings but not always air them. Not often they take it beyond their level, even if they air them. OIP framework ropes in these very people to capture the types and causes of OIPs and how significant and big they are in affecting the operational performance of the business. People are involved and facilitated to contribute in the following manner.
- Key people are identified (Managerial up to supervisory level)
- Orientation on OIPs and the method
- Defining OIPs
- Discussing various categories and types of OIPs
- The OIP Framework diagram will be introduced and explained
- Understanding each of the listed causes and how they cause OIPs
- How to contribute using the framework?
- Identification of OIPs, their causes along with significance and contribution ratings
- OIP framework worksheet will be used
Combating the OIP virus
The identification of OIPs and their causes using the OIP framework is only a beginning. For a business to rein in OIPs it takes further efforts to win over them. The following diagram represents various stages in an OIP fight, which may have to be repeated periodically to keep the business OIP free.
Fig.1 - Stages in combating the OIP virus
A business free of OIPs would appear in every business leader’s wish list and may even top it. It may not be possible to get rid of OIPs completely but surely businesses can work towards achieving that dream state. Realistically companies can keep improving in their fight to eliminate OIPs. With every ground gained, and every inch protected, OIPs can be kept at bay and may even be eliminated eventually. The important thing is ‘constant fight against OIPs’. Never accept any part of it as given or acceptable. Always consider it to be something that should be done away with even if it is there for a very long time.
To know more about the OIP framework and to avail the services of N.Balajhi, Business Consultant, you may contact him at firstname.lastname@example.org
Wednesday, January 13, 2010
Businesses grow but not all business grows continuously. In fact continuous growth is elusive even for the ones led by the best of business minds. There may be periods of flatness or even temporary slump due to external environment but as long as a business turns up in quick time and resumes its growth journey, we may deem a business as growing continuously.
To grow, a business has to perform. Continuous performance ensures continuous growth. The word performance has different meanings to different people. To some it may simply mean more money generated. To some it may refer to quality of product or service. And to some it may mean return on investment. None of it are wrong but even all of it do not capture what performance is all about in a business context, especially when we talk about business growth. An all encompassing business performance would mean performance at all the three levels viz.,
Strategic performance involves articulating vision and formulating strategy. Competitive performance involves harnessing knowledge and innovating to achieve operational excellence. Operational performance involves delivering quality product / service on time at effective cost. The picture given alongside captures three layers of performance in a pyramid.
Mostly people relate performance to operational performance. As long as the external environment is conducive and friendly to the business then efficient operational performance alone may suffice. However competitive pressures are part and parcel of today’s business environment and add to it the side effects of globalisation, companies can no longer rest on their operational laurels. They have to transcend competitive and strategic performance levels successfully in order to grow and maintain the growth momentum.
Operational Performance vs. Competitive Performance
Operational performance involves successfully delivering on three traditional yardsticks viz., Time, Quality and Cost. The operational mantra is to consume optimal resources and delivering high quality of work in the least possible time.
A company sans operational issues and problems would deliver on operational yardsticks 24x7. In the absence of any changes in the environment this performance would suffice for a company to be competitive. However changes in the environment induced by the market / competition / economy / regulation / society etc. can derail even the best of companies priding in efficient operational performances put up yesterday. It would not be suffice to deliver efficiently (by yesterday’s standards) when the environment is constantly changing. In a changing environment, what is efficient yesterday is not efficient today. A company needs to learn, know, adapt and innovate in order to remain competitive and lead the pack. It has to evolve and dump work practices, policies, systems, products, services, technology etc. that were rendered obsolete by the environment.
Companies that harness knowledge and foster innovation enrich their operations and constantly raise the bar. These companies will remain competitive and often capture the best of the market. The competitive performance factors viz., Knowledge and Innovation become a source of improvement for performance on operational yardsticks viz., Time, Quality and Cost. An operationally efficient company achieves operational excellence by managing and exploiting its competitive performance factors. A strong Operational performance means operational efficiency. A strong competitive performance means operational excellence.