Strategy for any vision directed organization is about the way the leaders of that organization fulfill its purpose in the environment in which they find themselves. This environment includes all the kinds of factors (PESTLE) that need to be taken into account – political, economical, social, technological, legal and environmental – and it also includes the future, since missions have to be carried out over long periods of time.

The tendency is to assume that this wider environment is either unchanging or predictable. Based on forecasts, strategic thinking is converted into plans that get frozen into budgets and structures. The plan assumes a future that validates the plan and this view of the future dominates our decision-making: it is the future we bet on without any way of guaranteeing it will come to pass. We call this the default scenario. It is usually based on some form of extrapolation or prediction.

This would be fine if these forecasts held but we live in a world increasingly shaken by discontinuities and sudden changes. Uncertainty plagues the future so that our plans do not hold up to the stream of real events. This failure of strategic plans does not mean that strategy and planning are invalid. It means we have to create a new approach to strategy and planning that takes into account the uncertainties of the future. We have to give a new meaning to strategy.

In a dynamic and changing environment, default scenarios lead us into shocks and surprises. Instead we have to develop a very flexible idea of strategy. It is no longer the fixed five or ten year plan, say, but a vision of a way ahead that is capable of being modified at every twist and turn of events and still allow progress towards our goal. By analogy it is like making the step from a ballistic artillery shell to a guided heat-seeking missile. The latter can deal with a moving target; the former cannot.

In a fluid environment there are many possible futures. It is somewhat like the weather. It may be fine; it may rain; what if it snows? Strategy must now embrace “what if?” questions that go beyond the reach of our habitual mindset. This requires us to think with multiple futures. Each “what if?” question requires a different story of the future; a scenario. Each story will be equally plausible if we can entertain its assumptions. All will challenge the assumptions upon which our default scenario is based. Scenarios are distinctly structured views of the future that are self-consistent and plausible.

Each distinct future is something from which we can learn how to reconcile our mission with the environment. In the face of the unknown there cannot be predetermined answers. Thus strategy ceases to be a fixed plan but rather a learning process that leads to continuous improvement in the alignment of the organization to its environment. In this way, scenarios are a powerful way of developing a learning organization.

Scenarios are powerful planning tools precisely because the future is unpredictable. Unlike traditional forecasting or market research, scenarios present alternative images instead of extrapolating current trends from the present. Scenarios also embrace qualitative perspectives and the potential for sharp discontinuities that econometric models exclude. Consequently, creating scenarios requires decision-makers to question their broadest assumptions about the way the world works so they can foresee decisions that might be missed or denied.

No one is secure anymore.  One of the most striking legacies of the 1990s will be the degree to which so many companies – even the ones that used to evoke a sense of security and stability – will fall victim to the performance imperative.  Not only is the threshold of acceptable performance rising at an unnerving pace; markets and shareholders are becoming much less forgiving of performance shortfalls.  Companies that can’t close the gap are at risk.  There is little or no sympathy left for the argument that conventional approaches to performance improvement will, sooner or later, deliver adequate results.

At the center of this turmoil are today’s CEOs, business leaders and entrepreneurs.  Living on the fault line where intensifying competition and calls for more transparent accountability collide, they must deliver more business performance than ever before – and in less time.  Quite understandably, many of them have turned to CP/WR as a way of leading their organizations to performance breakthroughs in exceptionally compressed periods of time.

To date, their experience has been mixed. CP/WR is not a universal panacea.  It is not always the right medicine.  Nor, once begun, does it always produce the desired results.

Used well, in the proper circumstances and with the proper preparations and precautions, it can indeed lead to immense performance gains.

Used poorly, however, it runs the risk of impairing already sluggish performance even further.  As with any powerful management approach, everything depends on when, where, and how well it is used.

The success stories are real and impressive: cost reductions of 50 percent or more, cycle time reductions of 70 to 90 percent, and error rate reductions on a similar scale.  But equally real are the disappointments, such as changes that have only a minor effect on the bottom line, like improving inventory handling in a single field warehouse.  When a major industrial firm re- engineered its accounts payable process, it achieved substantial percentage improvements in cost, time, and quality.  But accounts payable was not one of the small numbers of core processes that determined the company’s success or failure as a business.  For all its localized benefits, therefore, the re-engineering had little impact on overall performance.

Therein, it is critical for any organization attempting core process/work redesign program to first develop a set of business imperatives to be on the right track. This calls for organization to visualize what the future is like, make plans for it and formulate strategies to achieve its goals and objectives.

In the next post of this Power of Rewriting the Rules series, we’ll talk about the Power of Scenarios, and how scenarios provide a common vocabulary and an effective basis for communicating complex—sometimes paradoxical—conditions and options.

Our seven acts of kindness.

When we take, we make a living; when we give, we make a life

 Winston Churchill

Great success is achieved in life when we enjoyed positive relationships with people around us. We subscribe to the belief that human beings are designed to thrive in relationships. Therein, it is through the demonstration of REAL LOVE that we can be successful. REAL LOVE Brings Out Our REAL SELVES; the people we want to become…the BEST!

So, not only does LOVE stand a chance in this world, but in fact it is our only chance. LOVE starts with ourselves and must become part of everything we do. When we make that important decision to lovingly be the best, our difficulty to ‘Let Go’ of our past unwanted practices and unpleasant habits eases up; and  our desire to ‘Let In’ new loving ways of doing things better and differently begins to flow more naturally from our hearts.

Henceforth, our role is to open our hearts and minds daily to give love and respect, and to look for opportunities to share it with others – your family members, your friends, your colleagues, your customers, etc. – through your actions.

When we seek to enrich the lives of people around us through our Acts of Loving Kindness, we experience a richness of loving relationships  better than anything money or fame could bring. We will find the most satisfying form of success and have a joy unlike any other.

REAL LOVE is something within our capabilities, originating in our attitudes and culiminating in our actions. When we realise LOVE is not just a feeling but rather an action, we are ready to begin in small ways to change ourselves positively and love better.

Remember, Kindness and Compassion are qualities that cannot be bought or owned – you LIVE them!

Alluding to the table on cost reduction, there are obvious improvements in the areas ranging from design for manufacturability to billing, and some of these improvements gains are as much as 90% as in the case of Ford Accounts Payable (see appendix on Cost Reductions) Using the various frameworks of comparative business analysis for measuring the success of corporate performance, we will ascertain whether the benefits reaped from cost reduction strategy alone are adequate for companies to establish long term competitive advantages. If not, what then are its limitations?

And finally, if companies cannot ultimately sustain competitive advantage on the basis of low cost/price alone, what do they need to employ to work in tandem with?

Frameworks of Comparative Business

Increasingly, the “V” word – value – is the mantra sprouting from the lips of corporate executives. In boardrooms and executives suites worldwide, officers and directors are striving to respond creatively to the demand for increased stake-holders’ value. Though there are many concepts of creating value that have evolved to measure the performance of corporate success, we will examine the three frameworks for comparative business below:

1. Value added Framework of Bernard Cox
2. Added Value Model of John Kay
3. Value Chain of Michael Porter

1. B. Cox Value Added Framework

1. Using this value added framework¹ we can know the operating ratios of a business change when business conditions alter. The lump of value added is determined by the cost recovery conditions of the business and that value added represents internal cost recovery after the payment to suppliers has been made. When a business moves from one set of market circumstances to another, labor’s share of value added and cash share of value added adjust in a variable manner. Cost reduction is limited by changes in market conditions. The case study of Toyota Motor Corporation illustrates the changing market fortunes through its operating ratios (refer to table I). During the period 1984 to 1991, the company was able to preserve the operating ratios of the business because as value added expanded labor costs moved upwards roughly in line with the increase in value added². The Japanese car manufacturer was able to take advantage of a booming domestic car market in which sales expansion provided the financial resources for further expansion in factory space, new product development and overseas distribution. However, for the period 1992 to 1995, Toyota has found it progressively difficult to recover costs of production from sales which has fallen roughly 15 to 20 percent. In contrast, employment levels and total labor costs have been gently rising during the last five years. As internally cash generated from operations fell, capital expenditure was reduced more or less in line with the loss of cash., limiting their ability to maintain an international business advantage. In the text by Womack, Jones and Roos ‘The Machine that changed the world’(1990) it was claimed that Toyota was a world class manufacturer because physical productivity was twice that of US companies. Why did such a large physical productivity advantage not translate into robust financial performance when market conditions changed? Well, it might be observed, at this juncture, that the managerial rhetoric which provides the foundation for the lean enterprise cannot in the absence of strong market conditions on its own underwrite strong financial performance. Therefore, for companies which have to operate in mature markets the problem of recovering costs is increasing difficult and made double problematic when the market is subjected to intensified competition from imports. This “double jeopardy” is because the total value of product markets, like individual product, have a trajectory which describes a pattern of growth, maturity, cyclicality and possibly even decline (Raymond Vernon 1981). In the case of a business which is on the mature stage of market growth the financial constraints that this imposes limit the possibilities for enhancing or maintaining international comparative business advantage. Thus, under mature market conditions, business is required to consider policies designed to, other than cost reduction, increase the frequency of product renewal, introduce new technology which established product mix flexibility or globalize business activity into overseas markets through direct exports and/or overseas production and distribution.
2. In the absence of strong growth in real sales revenue, changes in the political and institutional relations established the precondition for a conflict of interest between the various stakeholders as illustrated in British Gas. The reduction in purchase costs (suppliers) had rewarded the consumers with a reduction in real sales price per unit but the real internal conversion (value added per unit) have remained constant and employment has fallen by one-third since privatization. It is partially true that the loss of employment serve to support the argument that increased efficiency has been achieved and benefits of this passed on to the consumer. But these employees were sacrificed to find the funds to cover dividends rather than reduce an average gas bill. Thus where conditions dynamically change, the value added analysis assess the impact of cost reduction and the adjustments for the various stakeholders.
3. According to B. Cox “ payrolls normally account for a large proportion of value added—average is about 70 percent in UK manufacturing industries.” In most of the advanced manufacturing economies the average of labor costs in value added is 65 to 85 percent.In general terms international businesses will seek cost advantage by taking labor costs out of the product or service. However, there are limits to a firm’s ability to reduce the number of physical labor hours it takes to make a product. Once these limits have been reached, the firm can only seek to maximize the pay to productivity ratio and the social cost mark-up for pensions etc. The evidence on the international cars business (see table II in appendix)  demonstrated the technical limit of hour reduction and suggests that all the different national sectors, old and new, are converging on the same low build hours³. This makes the Koreans (350 hours in 1980) competitive because the scope for sustained further hours reduction is apparently limited by product and process characteristics; on the evidence of America and Japan, 150 hours +/- 20 appears to be the irreducible build hour requirement. Technically, therefore, all car manufacturers are able to apply international best practice in the pursuit of reducing labor hours that are embodied in the product. However, the trajectory of hours reduction reaches its technical limit because an average car will always, in the absence of fundamental technical breakthrough, require 150 hours to produce.Therein, the pressure of rising labor costs have made companies such as Toyota, Honda, Nissan, etc into considering a relocation of production into low labor cost regions. Relocating production and purchases into low labor cost economies makes sense for all the Japanese manufacturers because a large per cent of total production costs are purchased from suppliers located in Japan.

We certainly look forward to your continued support next year. It is only through your graciousness that we are able to lift the spirits of these children and give them the hope to fight the good fight, and keep the faith.

Once again thank you for your support and look forward to seeing all of you again next year for our 7th Annual EdWhistler Charity Run 2012!

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You can purchase the publication from Edward Whistler International. Feel free to contact us at 6398 0988 to place your orders.

The book will be available in major bookstores (Kinokuniya, MPH, Popular/Harris) and Medic Drugstore from 1st November 2011.

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Do mark your calendar for this fun-filled event for a noble cause!!!

EdWhistler Charity Run 2011 
Saturday, 12th November 2011
7.15am to 10.00am
Playground @ Big Splash
5km (Men’s and Women’s Open) and 2km (Kids)

Race Flag-Off is at 8.00am

Now into our 6th year, EdWhistler Charity Run – The F.A.I.T.H Medallion will make every effort to bring more fun and laughter to your this year…. and not forgetting exciting prizes!

We look forward to your forthcoming support and loving kindness to lift the spirits of the children from our nominated beneficiary – Children’s Cancer Foundation (CCF). Your gracious presence and support will give them the hope to fight the good fight, keep the faith. All donations and proceeds raised from this event will go directly to CCF. All donations are tax deductible.

Join the Run and Register Now!!!

Once again, we are proud to emerge top for the Team Challenge for the second consecutive year.  Well done EWI Team!!!

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In addition, EWI presented 2 Partners of the Year Award to 2 of our clients, who have been with us for more than 10 years – Mr Chris Chan of Ultra Industrial Automation and Mr Ricky Yeo of Acez Group of Companies. The atmosphere that evening was fantastic with Ms Apple Hong, MediaCorp Celebrity, presenting her pet project – A Book of Happiness to raise funds for North East Community Development Council.

We would like to thank all our clients who attended.

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