BEST PRACTICE AWARD-WINNING ENTERPRISE CASES

This book encapsulates best practice research from globally recognized enterprises and provides guidance to enable you to rapidly implement your strategy through integrated CPM efforts. It also draws from my direct experience as vice president leading one of Kaplan and Norton’s Balanced Scorecard consulting divisions; senior vice president of global performance at Crown Castle International (Crown); and client, research, study group and advisory experiences with award-winning and high-performing organizations. Case studies include winners of these awards:

• Kaplan and Norton Global Balanced Scorecard Hall of Fame Award

• U.S. President’s National Malcolm Baldrige Quality Award

• Deming Quality Award

• American Quality and Productivity Center (APQC) Best Practice Partner Award

• Governor’s Sterling Award (based on Baldrige Criteria)

• Wall Street Journal “Top 20 Most Improved Companies in Shareholder Value Creation”

• Fortune “100 Best Companies to Work For”

• Forbes Best Managed Companies

I’m against a homogenized society, because I want the cream to rise.

—ROBERT FROST

Award recipients and high performers present a rich source of strategy management best practices for your CPM program and offer a leading edge perspective. I am grateful to the Crown executive team and employees. While my team facilitated CPM processes, Crown employees brought them to life. They earned Kaplan and Norton’s coveted Balanced Scorecard Hall of Fame Award, the globally recognized APQC Best Practice Partner Award, and contributed to Crown being ranked on The Wall Street Journal’s list of “Top 20 Most Improved Companies in Shareholder Value Creation” (out of over 1,000 listed companies).

Chapter 2 explores reasons why companies fail to implement their strategies, including Kaplan and Norton’s “four barriers,” MIT Dr. Fine’s research on Clock Speed, and five project blockers learned from years in the field. Chapter 3 provides a summary of over two dozen Five Key Principles best practices as a handy reference tool. Chapters 4 through 8 are devoted to in-depth case studies, one chapter for each of the Five Key Principles, developed in collaboration with leading award-winning enterprises and their CPM leaders. Chapter 9 provides a self-scoring CPM program diagnostic and a resource section on leading edge CPM research, a lifelong pursuit.

WHY READ THIS BOOK?

Optimum performance will be the only option for the business managers of tomorrow. The Five Key Principles in Bob Paladino’s book and his method of molding them into daily effort will be the blueprint for highly successful leaders to deliver the expected positive results.

—PRESTON ATKINSON, CHIEF OPERATING OFFICER,
WHATABURGER, INC.

Executives today are expected to demonstrate results faster than ever before; chief executive officer (CEO), chief financial officer (CFO), chief operating officer (COO), and chief information officer (CIO) turnover has accelerated rapidly in the past 10 years. HR Magazine reports CEO churn is at an all-time high. Increasingly, new CEOs enter a company, fail to deliver, and are sent packing. Sometimes, if they do produce results, other companies snatch them up. Either way, the process starts all over again. Turnover among chief executives soared 53 percent between 1995 and 2001, according to the 2002 study “Why CEOs Fall: The Causes and Consequences of Turnover at the Top,” conducted by Booz Allen Hamilton of McLean, Virginia. The number of CEOs who left their jobs under pressure more than doubled during that period, and average CEO tenure plunged more than 23 percent, according to the study of 2,500 publicly traded companies. More recently, Booz Allen Hamilton reported the rate of departure for underperformers quadrupled since 1995, with European and North American CEOs topping the list of involuntary exits in 2005. Global CEO departures reached record levels for the second year in a row, and may be peaking, according to the fifth annual survey of CEO turnover at the world’s 2,500 largest publicly traded corporations. The study also found that performance-related turnover set a new record in North America.¹

A different study—“CEO Turnover and Job Security”—released by Drake Beam Morn (DBM) estimates that two-thirds of the world’s companies have changed CEOs at least once in the last five years.² Clearly, the amount of time allotted to implementing strategies to achieve results has been compressing. This book provides reasons why companies fail to implement their strategies and offers a blueprint for change.

The measure of success is not whether you have a problem to deal with, but whether it’s the same problem you had last year.

—J. F. DULLES

Fortune magazine reports, “If making the Fortune 100 Best lists is an enormous accomplishment, consider how tough it is to repeat the feat every single year. Just 22 companies have appeared on our list every year since its 1998 inception.”³ Between 1998 and 2004, the turnover of Fortune 500 companies has been staggering.

Research shows that CEOs and enterprises benefit from a CPM Office, Officer, and integrated processes based on the Five Key Principles more than ever to enable higher organizational performance. High-performing enterprises practice these Five Key Principles:

Principle 1. Establish and deploy a CPM Office and Officer.
Principle 2. Refresh and communicate strategy.
Principle 3. Cascade and manage strategy.
Principle 4. Improve performance.
Principle 5. Manage and leverage knowledge.

EXHIBIT 1.1 Five Key Principles of CPM

Exhibit 1.1 shows the CPM Office at the center of the Five Key Principles. The Office integrates and facilitates the Five Key Principles concurrently throughout the enterprise; dozens of best practices and case studies are discussed throughout the book.

PRINCIPLE 1: ESTABLISH AND DEPLOY A CPM OFFICE AND OFFICER

By three methods we may learn wisdom. First, by reflection, which is noblest; second, by imitation, which is easiest; and third, by experience, which is bitterest.

—CONFUCIUS

This book short draws from all three learning methods above. Principle 1, Establish and Deploy a CPM Office and Officer, is at the center of the CPM efforts and is responsible for implementing strategy through a portfolio of CPM methods, processes, and frameworks collectively referred to as the Five Key Principles. This Office reports to the CEO or a CEO direct report to integrate a defined set of CPM processes to drive global and local performance. Basically, they aid contemporary CEOs and their teams to deliver results faster. This book devotes significant attention to better understanding and providing in-depth case studies to define the new, vital role in enterprises. As a former executive in the Office of the CEO and currently a practitioner assisting enterprises to establish and execute the duties of the CPM Executive, I provide a road map to key roles and responsibilities. Crown will serve as a reference point for each CPM principle, complemented by numerous case studies as told by the executives from award-winning enterprises and last valuable experiences from the field. Although my title at Crown was Senior Vice President Global Performance, for purposes of establishing common terminology for this book I shall refer to this role as the CPM Officer and the department as the CPM Office.

Five Key Principles provides a lean best practice case study approach to strategy management to simplify and bring together disparate methods into an integrated, simplified CPM framework. Many public and private enterprises create islands of CPM expertise but fail to provide for an integrated CPM framework to drive results. Have you heard these comments in your organization? Are there some disconnects in implementing strategy?

• “We complete our strategic plan each year but it sits on the shelf until next year.”

• “The executives always roll out the initiative du jour.”

• “The folks in quality know about quality, we don’t, it is too complicated.”

• “The sales team deals with the customer, we only focus on operations.”

• “They never communicate the strategy, I am not high enough in the company.”

• “We are too busy fighting fires to deal with strategic issues.”

• “Our dashboard has hundreds of measures, but which ones are important?”

Five Key Principles cases are told by experienced executives. The cases have been selected to enable you to understand how to rapidly integrate and leverage proven methods and processes to manage strategy. This book is based on my direct experience as a CPM Officer, on best practices research with enterprises that have won numerous awards, and direct consulting experience to high performing enterprises.

We learn from pattern recognition, repeating steps and processes that enable us to build and achieve. Over many years, I have studied strategy management patterns of success, both as a Crown executive and as a global consultant providing professional services on behalf of Towers Perrin, PricewaterhouseCoopers, and Kaplan and Norton’s firm The Balanced Scorecard Collaborative (a Palladium company). I have had the good fortune and privilege of collaborating with globally known experts and thought leaders in the CPM field who have provided validation for establishment of a dedicated CPM executive role in enterprises to drive meaningful change.

INTEGRATING PRINCIPLES 2 THROUGH 5 CPM PROCESSES AND METHODS

Measurement without the opportunity to improve is harassment!

—W. EDWARDS DEMING (FATHER OF QUALITY)

The current fragmented approach to strategy management has resulted in islands of competencies (see Exhibit 1.2) rarely optimized. Many programs fail, many companies fail.

Recall the turnover of companies in the Fortune 100 list. Further, with so many experts today marketing single tools, so-called silver bullets, how do you know where to start? The “experts” would have you believe their wrench, hammer, or screwdriver is the panacea or single solution to your performance problems. However, is your organization one-dimensional? How do you simultaneously deal with global competition, accelerated outsourcing, shortened product and service life cycles, customers that are more sophisticated, fleeting intellectual property, a mobile labor force, and demanding investors? How could you expect one method to address all these challenges?

EXHIBIT 1.2 CPM Processes Disconnected

Only the fool learns from his own mistakes, the wise man learns from the mistakes of others.

—OTTO VON BISMARCK

The beauty of the hammer is that it can readily fix the problem of the nail. What about the problem of the crooked screw or loosely fitting bolt? Does your organization suffer from many tools or competencies that lack integration? Do process owners or department heads conflict at times? Nevertheless, when do you use which tool? At what speed do you introduce these tools to the organization? How will you optimize the many moving parts in your organization? By now this simple metaphor has highlighted the fact that one tool or process is not sufficient today; your organization has many interrelated issues and pressures and requires a CPM executive to facilitate an integrated toolbox and provide guidance and direction to vital CPM processes.

Five Principles provides a clear road map for executing enterprise strategy by drawing on and integrating multiple methods to optimize results. The book provides a lean, simplified approach to development and use of integrated CPM. How long will your CEO or boss remain patient? Experience in strategy implementation captured in book case studies is the best teacher and guide.

SUMMARY

The organizations selected for in-depth case studies have earned several notable awards, some multiple awards. Exhibit 1.3 displays a subset of awards, those reserved for truly distinguished performances and granted to a very limited group of recipients. For example, the U.S. President’s Malcolm Baldrige National Quality Award is reserved for just five organizations annually. The Fortune “100 Best Companies to Work For” is a broader group, but, as thousands of companies apply, recipients are a very distinguished group. Similarly, Fortune magazine reports thousands of enterprises use the Balanced Scorecard but approximately a dozen annually earn the coveted and globally renowned Balanced Scorecard Hall of Fame Award.

Case study enterprises offer unique insights to their CPM processes, methods, approaches, roles, responsibilities, organization, and results for your research and reuse to accelerate your CPM program.

EXHIBIT 1.3 Award-Winning Case Study Companies

MY PROMISE

Five Key Principles provides practical executive and practitioner best practice examples on how to establish the new CPM Office to manage strategy using integrated CPM processes. I am fortunate to have experienced hundreds of improvement programs and projects at Fortune 500 companies, government agencies, and nonprofit organizations over the past 20-plus years. I am glad to report that most were successful. In this book I am not evangelizing theory but rather providing proven, real-world implementation insights from award-winning organizations.

An honest tale speeds best, being plainly told.

—WILLIAM SHAKESPEARE

• NOTES

1 Chuck Lucier, Paul Kocourek, and Rolf Habbel, Strategy+Business, “CEO Succession 2005: The Crest of the Wave” Summer 2006, www.boozallen.com.

2 Robert Grossman, “Forging a Partnership Executive Turnover,” HR Magazine (April 2003).

3 “Blue Ribbon Companies 2004,” www.fortune.com Web site, November 4, 2005.

CHAPTER 2

Why Do Most Companies Fail to Implement Their Strategies?

Planning is an unnatural process; it is much more fun to do something. And
the nicest thing about not planning is that failure comes as a complete surprise.

—SIR JOHN HENRY-JONES

This chapter discusses the four barriers, popularized by Kaplan and Norton, that companies encounter by failing to realize their strategic objectives. This chapter expands this thinking and brings a brand new perspective on the strategic context for these failures. We turn to MIT professor Dr. Charles Fine’s research on industry rate of change, or “Clock Speed,” and its impacts on companies brought about by failing to understand and develop strategic and management processes to address it. In reactionary efforts to address the four barriers and Clock Speed, enterprises often commence corporate performance management (CPM) projects, many of which fail. For this reason, we will touch on the top five blockers that undermine well-intended business improvement efforts. Five Key Principles offers a comprehensive, lean, and proven approach for strategy implementation and management.

FOUR BARRIERS TO STRATEGY IMPLEMENTATION

One of my fondest and most enlightening professional growth experiences was leading one of Kaplan and Norton’s Balanced Scorecard consulting practices. Not only did I have regular interactions with Bob and Dave, but I also had the opportunity to participate with them on research, conferences, and study projects. During these years, my practitioner and client teams designed and implemented the Balanced Scorecard in scores of enterprises. I found myself immersed in a kind of applied research firm where the founders, arguably the most prolific and successful business thinkers of our time, provided a wellspring of new ideas the consulting division innovated and deployed with clients. In turn, the consulting clients provided a rich environment for discovering new approaches to adapting the strategy-focused organization (SFO) principles of the Balanced Scorecard to drive results.

One of Norton’s key findings is that “9 out 10 companies fail to implement their strategies.”¹ Exhibit 2.1 provides a framework and evidence to help us understand why this is true.

The “four barriers” explains this failure rate. I will describe each barrier shortly, but in keeping with my promise for practical advice, I will also include some best practice client case examples to demonstrate how successful enterprises have overcome the four barriers. The number of failed strategies, mergers and acquisitions, and bankruptcies in Corporate America has left large groups of investors dismayed and perplexed. It has also resulted in public outcry for increased regulatory action and controls and reporting transparency to protect investors. Publicly traded companies have been faced with increased disclosure and mandatory compliance with the Sarbanes-Oxley Act (SOX), one of the most far-reaching acts of its kind in recent memory. How could so many bright and energetic executives and their teams fail to understand the key drivers of value in their business and poorly execute their company strategies? Some companies unfortunately resorted to the unsavory practice of fabricating results rather than executing on sound business strategies supported by solid budget and performance management practices. But just what are the barriers to success? How does use of integrated CPM methods enable achievement of company strategy objectives?²

EXHIBIT 2.1 Four Barriers to Strategy Implementation

Barrier 1: Vision

The difference between a vision and a hallucination is the number of people that see it.

—T. PAULSON

The “vision barrier” research shows that only 5% of company employees fully understand their company’s strategy. Why is it so hard for employees to understand the company’s direction? In developing Strategy Maps and Balanced Scorecards for scores of companies, I learned that the strategy is rarely communicated in terms that relate to people’s everyday objectives, roles, and responsibilities. In your organization, take a survey by randomly asking 10 people to define or share their understanding of your company strategy. You will be amazed at how few can discuss it.

For example, during a trip to the field in the early days at Crown, I asked local office employees about the company strategy. Their responses ranged from “make money for shareholders” to “help customers,” which are good intentions but they lack clear actionable and measurable content. These employees did not clearly see how their daily activities drove Crown’s strategy. With the establishment of the CPM office and implementation of the CPM processes including the Strategy Map, Balanced Scorecard, six sigma, customer surveys, and knowledge management processes, responses to later surveys were tied more closely to company strategic objectives and measures, and strategic awareness was dramatically improved. Later, employee responses to the same questions about their role in company strategy resulted in more focused responses:

Employee Responses to How They Felt Their Role Impacted Company Strategy
Prior to CPM Process Implementation	With Established CPM Processes (all figures are illustrative)
Make money for shareholders	Improve working capital (objective) by reducing days sales outstanding from 60 days to less than 15 days (measure)
Help customers	Reduce order to installation cycle time (objective) from over 80 days to under 50 days (measure) to increase customer satisfaction from 4.0 to 5.0 (measure) in our customer surveys

Responses improved from the initial “make money for shareholders” to the more mature response, “improve working capital (as the objective) by reducing days sales outstanding (DSO in accounts receivable (the related measure).” Clearly this is an improvement and one more reliably linked to results. Similarly we went from the early response of “help customers” to a more focused one of “reduce order to installation cycle time (the objective), from 80 days to 50 days (the first related measure) to increase customer satisfaction from 4.0 to 5.0 rating (the second related customer measure).” The improved employee understanding of company strategy and their role in driving specific results is obvious. Companies challenge themselves in the absence of CPM methods to harness the creativity and energy of their people, a primary resource. In summary, Crown overcame the vision barrier by observing all Five Key Principles:

Principle 1. Establish and deploy a CPM Office and Officer.
Principle 2. Refresh and communicate strategy (Strategy Maps).
Principle 3. Cascade and manage strategy (balanced scorecard).
Principle 4. Improve performance (six sigma).
Principle 5. Manage and leverage knowledge.

We will review the five key principles in depth in Chapters 4 through 8.

Barrier 2: Management

The brain is a wonderful organ. It starts working the moment you get up in the morning and does not stop until you get into the office.

—ROBERT FROST

The “management barrier” indicates that 85% of executive teams spend far less time discussing strategies and strategic issues than traditional operating results. Is it no wonder that strategy implementation rates are so low? Why do leaders spend so much time in company meetings but fail to grasp the message conveyed by company reports and analyses? Companies frequently have disconnects among financial, customer, and operational objectives, measures, and targets until they are defined and used in a CPM environment.

Traditional measurement and management tools do not account for intangible assets, such as customer relationships, employee skills, knowledge, innovativeness, customer relationships, employee skills, and knowledge that are increasingly the source of corporate value and competitive advantage in today’s economy. The Strategy Map, however, does. For a high-technology company, the Strategy Map might show that employees need selected skills, motivation, and knowledge to develop new products, provide for merger integration, excel at employee relations, and be operationally efficient.³ Citing a best practice example, prior to its development of Strategy Maps and Balanced Scorecards, Bob Paladino & Associates, LLC telecommunication client Sprint Nextel conducted multiday operating review meetings covering hundreds of indicators in a well-intended effort to identify key management actions. This leading company then developed a strategic plan, Strategy Map, and balanced scorecard to focus on key strategic and operational objectives. Performance-based content of these meetings changed dramatically. Current meetings are far more strategically management focused.

Meeting Content	Prior to Using the Strategy Map and Balanced Scorecard for Meetings (%)	Using the Strategy Map and Balanced Scorecard to Manage Meetings (%)
Focused on historical data and replaying history	80	10
Problem solving	10	20
Discussing strategic issues, forward looking	10	70
Totals	100%	100%

With the establishment of the CPM office and the use of integrated CPM processes and tools, executive meetings have been reduced from days monthly to about half a day. Meetings now are sharply focused on the top-underperforming objectives as indicated by balanced scorecard measure results and on specific key actions and initiatives to “move the dial” toward improved results. The integration of these CPM processes enabled a critical shift in focus from lengthy, data-driven meetings to focused issue and strategic solutions-based meetings. In this case, our best practice telecommunications company overcame the management barrier. This telecommunications giant overcame the meeting management barrier by observing three of the Five Key Principles:

Principle 1. Establish and deploy a CPM Office and Officer (i.e., CSO).
Principle 2. Refresh and communicate strategy (Strategy Maps).
Principle 3. Cascade and manage strategy (Balanced Scorecards)

Barrier 3: Resource

It is thrifty to prepare today for the wants of tomorrow.

—AESOP, “THE ANT AND THE GRASSHOPPER”

The “resource barrier,” shows that most companies do not link budgets to strategy. In short, companies may be pursuing financial strategies that differ from or, worse, may be in conflict with their operational and customer strategies. For instance, you may have an operating unit making its financial targets at the expense of not investing in preventive maintenance, in essence deferring inevitable interruptions in performance that impact customers until next quarter or year. One of the best examples of a major improvement in this arena lies with a utility client. The utility CPM executive integrated strategic planning, Strategy Mapping, budgeting (operational and capital), and Balanced Scorecard management processes. The budgeting process provided a robust initiative scoring approach aligned with the Strategy Map clearly prioritized and funded strategic and operational projects, spanning business units and budget accounts. Through fact-based initiative scoring linked to strategy, the utility overcame the resource barrier and posted measurable improvements in results by observing three of the Five Key Principles:

Principle 1. Establish and deploy a CPM Office and Officer.

Principle 2. Refresh and communicate strategy. (Strategy Maps and Budgeting)

Principle 3. Cascade and manage strategy. (Balanced Scorecards)

Barrier 4: People

That some should be rich, shows that others may become rich, and, hence, is just encouragement to industry and enterprise.

—ABRAHAM LINCOLN

The “people barrier” shows us that management incentives link to the company strategy only 25% of the time. Conversely, most companies are rewarding management for activities not linked to company strategic and operational plans. M7 Aerospace offers a solution. One of M7 Aerospace’s business units focused on contract logistics support (CLS) for government State Department planes established team- and individual-based Balanced Scorecards linked to the annual bonuses. Bonuses focused its entire globally distributed workforce from headquarters in Houston and San Antonio, Texas, to remote teams on U.S. military bases as far away as Kaneohe Bay, Hawaii; Ramstein Air Base in Germany; and Sigonella Base in Italy. Business unit and support services have Balanced Scorecards to focus on strategic and operational objectives, measures, targets, and initiatives. M7 Aerospace in general and the CLS program in particular overcame the people barrier in a highly competitive industry to align a globally distributed workforce by observing three of the five key principles:

Principle 1. Establish and deploy a CPM office and officer.

Principle 2. Refresh and communicate strategy. (Strategic Plan, Strategy Maps)

Principle 3. Cascade and manage strategy. (Balanced Scorecard, Incentives)

In summary, we learned from leading enterprises that establishment of a CPM Officer and CPM processes provided a strong countermeasure and allowed their organizations to overcome the four barriers to strategy implementation. In Chapters 4 through 8, more in-depth case studies provide you with visibility into and opportunities to leverage CPM best practices.

INDUSTRY CLOCK SPEED: A NEW CONSIDERATION TO IMPLEMENTING STRATEGY

I wasted time, and now doth time waste me.

—WILLIAM SHAKESPEARE

In addition to establishing the CPM Office and deploying CPM processes and methods to overcome the four barriers, your enterprise also is dealing with new and accelerating market forces not fully appreciated even a decade ago. The speed of information, inventions, and competitive innovation has been transforming the enterprise landscape for over 100 years but recently at an accelerating rate. The past 10 years bear witness to some of the most transformational forces in U.S. history: global competition, the emergence of China and India as trading partners, wholesale outsourcing of industries, and unbundling and rebundling of company value chains. Overcoming the “four barriers” using integrated CPM processes more rapidly takes on a new significance in light of the acceleration and greater impact of market pressures on today’s enterprises. It is no longer sufficient for companies to have and to use methods; they must deploy and choreograph them rapidly and judiciously to confront strategic and operational issues for competitive advantage.

MIT Professor Charles Fine researched and published his findings on industry transformation in his book Clock Speed, Winning Industry Control in the Age of Temporary Advantage.⁴ I was so intrigued by his findings that I completed his executive education course to gain insights directly.

Facts are stubborn things; and whatever may be our wishes, our inclinations, or the dictates of our passions, they cannot alter the state of facts and evidence.

—JOHN ADAMS

What Is Clock Speed?

Fine sets the stage for us by carefully documenting the Clock Speed, or evolution of businesses, embodied in his quote, “In the natural world, species evolve, that is, they change to meet new challenges or they die. The same genetic imperative operates in business.”⁵ Clock Speed provides concrete examples of how industries exhibit different rates of evolution, hence the book’s name. Strategically minded CPM executives and programs must understand and integrate CPM processes not only to deal with today’s challenges but also to help the enterprise for evolutionary changes. Clock Speed provides us with a template for understanding evolutionary dynamics of industries. Fine states, “The faster the industry Clock Speed, the shorter the half life of competitive advantage.” As a result, the strategic management processes should identify and leverage your competitive advantages.

A wise man will make more opportunities than he finds.

—FRANCIS BACON

The most valued contribution of Clock Speed from a strategic perspective is what Fine postulates as the “double helix” model (visualize a horizontal figure ∞), which borrows from Nobel Prize winners James D. Watson and Francis Crick, who discovered the molecular structure of DNA. The model proposes quite convincingly that strategic adjustments occur in predictable patterns; your CPM Office and CPM processes must incorporate strategic and operational methods to address these patterns.

Vertical Industry Structure (Left Side of the ∞)

A vertical market-competitive advantage comes from economies of scale in fabrication of components; control over delivery, quality, and rates of technical change; reduced vulnerability to holdup by suppliers; and a quicker information flow. Vertical markets have limited direct competition, and competitive threats do not exist. However, a trade-off does exist; the vertical nature of the market reduces the competition for complementary products and drives slower adoption.

The transition from a vertical market to a horizontal market increases the competitiveness of the market. Niche competitors provide incentives for firms to give up pieces of production, which increases entry and supplier power. Higher dimensional complexity limits the economy of scale and increases potential vulnerability to holdup, while organizational rigidities decrease the transparency of information. All this increases the pressure to disintegrate and increases both competition and adoption.

In theory there is no difference between theory and practice.
In practice there is.

—YOGI BERRA

Horizontal Industry Structure (Right Side of the ∞)

A horizontal industry is highly competitive. Competitors enter the market freely driving down profits and competing on costs. Firms seek to use their small differentiated advantage to push other competitors out of the market. As prices drop through price wars, adoption accelerates and the market continues to expand from new entrants.

As adoption slows, firms identify technical advantages in one subsystem and gain competitive advantage over their many competitors. This market power encourages bundling with other subsystems to increase control and add more value. Further increases in market power in one subsystem encourage engineering integration with other subsystems to develop proprietary integration solutions. Competition begins to decrease as suppliers are squeezed out of the market and larger firms regain vertical control.⁶

The double helix model provides some insights into the reordering of industry leaders and contributes to the shortening of tenure in senior executives discussed earlier. We will continue to learn from this model in conjunction with a set of CPM methods including the Strategy Map when we review strategic planning in Chapter 5. The Strategy Map offers particular value to companies in fast-changing industries like telecommunications, where tactics, strategy, and market positioning may need rapid revision. It helps organizations understand performance drivers and cause-and-effect relationships across the perspectives, enabling more rapid and proactive decision making and a better understanding of the impacts of those decisions. Companies can be more focused and set realistic targets—and better communicate strategy and show accountability to all employees.⁷

Why is it that there are few seats available on airlines today but there is no room in the industry for defunct TWA or Eastern Airlines? Why are shoppers flocking to metropolitan malls, but Zayres or Hills stores have disappeared? Why are Starbucks stores sprouting up everywhere, but few local coffee shops exist? In all these cases, the incumbents failed to adjust to changing industry dynamics and deploy value-adding strategies to deal with new players.

Big Blue and Supply Chain Unbundling

It’s like déjà-vu, all over again.

—YOGI BERRA

IBM presents an instructive case to illustrate Clock Speed and market forces at work. Observe IBM’s now-famous decision to outsource its PC operating system to Microsoft Windows and its PC processors to Intel; this so-called Win-Tel supply chain in turn created billions in value for the Microsoft and Intel shareholders. These two companies have come to dominate their industries globally with the famous “Intel Inside” and “Windows” brands. IBM decided to outsource to allow it to focus on its core strengths, marketing and branding. While it is common to develop supplier rivalries, what is most telling about this example is the next scene in the play that exemplifies market forces at work: IBM in 2005 sold its PC division to China’s Lenovo. Why? I believe Dell, a company not even on IBM’s radar screen a decade earlier, overcame IBM’s marketing supremacy by redefining its supply chain and using mass customization to the end consumer as a strategic weapon. Continuing this story, Dell recently outsourced the help desk portion of its value chain overseas. How do I know this? Well, when my new Dell PC keyboard failed while typing this manuscript, I found myself struggling to understand Dell’s overseas help desk person. Dell’s “on-site” premium service program entitled me to receive, by mail, “on-site” at my office a replacement keyboard and tiny screwdriver for me to complete installation. My Dell laptop now serves less proudly as a bookend. My new laptop from a competitor has true on-site service. Has the Dell value chain unbundled too far? What are your enterprise’s pressure points, what market forces are at work to transform your business model? Does your CPM program incorporate and respond to these market forces?

The four barriers and Clock Speed inform us about the strategic level, but this is not the full story. There are CPM process and project-level blockers that regularly repeat themselves. That is, management reacts to the four barriers and impacts from industry Clock Speed by undertaking single or multiple CPM projects. Along the way, however, things go off the tracks.

TOP FIVE BLOCKERS TO CPM PROJECT AND PROCESS SUCCESS

The things that hurt, instruct.

—BENJAMIN FRANKLIN

This section is not be found in today’s textbooks; rather it reflects many years of assisting enterprises to turn around or restart troubled programs. CPM processes such as Six Sigma problem solving generally begin as projects, demonstrate results, and become formal CPM processes. The successful evolution of the project to the process stage is essential to the establishment of an integrated set of CPM processes in your enterprise. For example, after your company’s three-day strategy meeting offsite, do you have a list of action items lost in your notebook because day-to-day business has taken over? This section it identifies five pitfalls to avoid during the project or process development phase. How can we help the proverbial CPM acorn grow into the strong oak tree? Although there are dozens of reasons for failure, five blockers show up most frequently.

I hear and I forget. I see and I remember. I do and I understand.

—CONFUCIUS

BEST PRACTICE AWARD-WINNING ENTERPRISE CASES

WHY READ THIS BOOK?

PRINCIPLE 1: ESTABLISH AND DEPLOY A CPM OFFICE AND OFFICER

INTEGRATING PRINCIPLES 2 THROUGH 5 CPM PROCESSES AND METHODS

SUMMARY

MY PROMISE

• NOTES

FOUR BARRIERS TO STRATEGY IMPLEMENTATION

Barrier 1: Vision

Barrier 2: Management

Barrier 3: Resource

Barrier 4: People

INDUSTRY CLOCK SPEED: A NEW CONSIDERATION TO IMPLEMENTING STRATEGY

What Is Clock Speed?

Vertical Industry Structure (Left Side of the ∞)

Horizontal Industry Structure (Right Side of the ∞)

Big Blue and Supply Chain Unbundling

TOP FIVE BLOCKERS TO CPM PROJECT AND PROCESS SUCCESS

Blocker 1: Executive and Management Attention Spans