ism group presentation june 15
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ISM Group 3:Francis, Jitu,Ridge & Tina
June 15, 2010
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Strategy is the art of creatingvalue.
It is the way a company links together
Knowledge & relationshipsCompetencies & customers
... to bring value to customers at a profit
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Value Chain:The traditional model
InboundLogistics
Marketing
Distribution
Productor
Service
Marketing
Marketin
g
Marketing
Marketing
Marketing
Marketing
Marketing
Marketing
Sales &
Marketing
Production
Value Value Value
Va
lu
e
Value
Customer
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InboundLogistics
Service
Distribution
Production
Marketing
Company
Supplie
r
Custome
r
Value
Value
The right business, the right products and market segments,
the right value-adding activities
traditionalthinking
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Strategy is the art of creatingvalue.Today...
Strategy is no longer a matter of positioning afixed set of activities along a value chain
Successful companies dont just addvalue, theyreinventit
Focus is on the value-creating system itself
Different economic actors (suppliers, bupartners, allies, customers) work together to co-produce value
Key strategic task: reconfiguration of roles &relationships among these constellation of actors
mobilize the creation of value in new forms andby new players
goal: create an improved fitbetweencompetencies & customers
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reinvent value through ValueConstellations
http://www.google.com/imgres?imgurl=https://reader010.{domain}/reader010/html5/0531/5b0f0ea9b7c4d/5b0f0ead20419.j
Constellations:Services
Goods
Design
Management
Support
Entertainment
http://www.google.com/imgres?imgurl=http://jeremyfain.files.wordpress.com/2007/07/value-chain.jpg&imgrefhttp://www.google.com/imgres?imgurl=http://jeremyfain.files.wordpress.com/2007/07/value-chain.jpg&imgref -
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more s mp eperspective
http://www.talentfirstnetwork.org/wiki/images/8/8f/Tanev1.png
From: To:Trends
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From a small Swedish mail order furniture operation intothe worlds largest retailer of home furnishings
(2009) Revenue Euro 22.71 B; (2008) Employees 127,800
(Aug 2009) 301 stores in 37 countries, 12,000
(Sept 2007-2008) 470 million website visitors
Winning business formula: Simple, high quality Scandinavian design
Global sourcing of components
Knock-down furniture kits (customers transport/assemble themselves)
Huge suburban stores with plenty parking space
Amenities: coffee shops, restaurants, day-care facilities
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Welcome to IKEA!!
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Lower prices 25%-50% below , passed on to customers:Low-cost components
Efficient warehousing
Customer self-service
But MORE THAN THE LOW PRICESIKEA redefined roles, relationships and organizational
practices of the furniture business
Result: INTEGRATED business systemMatches competencies of participants efficiently & effectively
Value reinvented (Family outing destination!)
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Customers: customers not only consume value but they alsocreate value
More than co-produced furniture, co-produced improvements infamily living
Mobilize them to easily do certain things never done before
Suppliers: IKEA gets low cost but good quality suppliesworldwide, disperse sourcing (specialization), purchase them inhigh volumes, providing technical assistance, leased equipment
towards world quality standards
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Internal: Network of strategically-located huge warehouses (aslogistical control points, consolidation centers, and transit hubs),efficient product planning & forecasting
Result: work-sharing, co-producing in creating MORE VALUE perperson
Customers as suppliers (time, labor, info, transport)
Suppliers as customers (of IKEAs business and tech services)
IKEA no longer a retailer but the central star in a CONSTELLATION ofservices, goods, design, management, support, entertainment
LOGIC OF VALUE as guiding principle: more than products &
services, companies compete based on offerings (e.g. not justshopping but entertainment)
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French Concessions:
Strategy as the way a company linkstogether
Knowledge & relationshipsCompetencies & customers
... Use assets and relationships to deliver valueusing core competencies
... Keep fit current (enlarge knowledge basecontinuously)
... If so large, new knowledge propelcompanies into new businesses
... New relationships with new customersblossom
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French Concessions:
Compagnie Generale des Eaux(Generale)
(1992) $27B revenue
6th largest French companyLyonnaise des Eaux Dumez (Lyonnaise)
(1992) $18B revenue
11th largest; the biggest private watercompany in the world serving 40Mcustomers in 6 continents
Technologically dynamic and successfulglobal players
In the water business servin 37M French
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French Concessions:
Both have subsidiaries providing cities andtowns with EVERYTHING: heating systems,sewers, utilities to hazardous waste
treatment, municipal construction, nursinghomes, golf courses, AND funeral services
Generale: local recreation center (Aqualand)and cable TV
Lyonnaise: manages the citys monuments,art museums, gardens and parks
All these grew organically, but how?
French understanding of the business
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French Concessions:
Unique public service set-up (rooted to 19th centuryhistory)
Production of public infrastructure is privatesector responsibility while the government has
the political responsibility (governance)Private companies act as concessionaires (e.g. 30
years renewable): Project design & specifications
Capital
Build the infrastructure
Manage the assets
Bear the risks (spare the govt from spiraling debt and
operational waste)
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French Concessions:
Effect: Both successfully developed how theyview their COMPETENCIES and their businessstrategies
Elevated to: Urban-systems designer &outfitter
Core competency: More than water orutilities, its financial, social, legal,
managerial and technical engineeringconstellations that ensure SMOOTHOPERATION of PUBLIC SERVICEINFRASTRUCTURES.
Their formula:
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French Concessions:
Result: customers continuously evolvingVALUE CREATIONGenerales 2,000 subsidiaries and Lyonnaises
720, grouped according to specialization or
metier, richly connected to: help services build on each other
open the door to new services (ad hoc flowering of co-productive relationships among & betweensubsidiaries)
Now investing on a broader range oftechnologies and expertise (going green, goingglobal, p.214-215)
LOGIC of PUBLIC RESPONSIBILITY asguiding principle: continue providing cities &
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Privatization of a State-
Owned Enterprise in thePhilippines
Feb 1997: (Water crisis) MWSS awarded concession contract to
Manila Water Company (along with Maynilad Water Services, Inc.)Manila Water provides water services to more than 1 million
households in the East Concession area through more than 680,000
water service connections and 51,000 sewer service connections.
More significantly, of the more than five million people connected to the
water network, 1.5 million people or about 230,000 households belongto the low-income communities.
With its solid track record of efficiency and financial viability, it is
recognized as one of the most successful public-private partnerships in
the world.
A listed company in the Philippine Stock Exchange
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Privatization of a State-
Owned Enterprise in thePhilippines
Privatization of public services = complex changes
in the social, economic, social, regulatory and evenpolitical structures
Internally: transformation in ownership &organizational structure, and operations
managementKey to Manila Waters success: how transformations
were managed
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Key ChallengesRegulatory Framework:
Boracay Island Water: Joint venture with Phil Tourism
Authority (20%); Laguna Water: partnered with LagunaLGU
conflict of interest for local politicians, political sensitivities
Over time, it built its legitimacy through its water forthe community program (went beyond the 1997
concession contract)Managing shareholder/stakeholder expectations
Greater good vs. selective good
Quick vs. long-term return
Future vs. present generation
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Lessons LearnedLesson #1: Its not the People (its the Process)
Retained 90% of MWSS employees; dispellednotion that public sector EEs are slow inresponse to customer demands
Invested on training & motivation
Corporate Transformation: Empowered &
decentralizedIntroduced territory management
Integrity & Performance-based culture
Execution-Oriented (People, Process and
Structure) Customer Service
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Lessons LearnedLesson #2 Customer-FocusGreater understanding of consumer
behaviour & consumption patterns
Addressed Health and Safety needs (schools,orphanages, hospitals, city jails, markets)
Customer Complaints acknowledged 24hours, resolved in 2 days
Number of Households Served (in thousands)
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
382 418 457 543 634 717 809 909 986 1,032 1,086
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Lessons Learned
Lesson #3: Process
Use of Business Systems like SAP (businessmanagement software), CRM, Computer &Internet Business Systems (CIBS), BusinessProcess Management (BPM) for processengineering
Efficiency & ease of use
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Lessons Learned
Lesson #4: Reducing Non-Revenue Water
Not just an engineering solution, but also hasits socio-political dimension
Non-Revenue Water (%)
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
53.0% 51.0% 52.0% 54.0% 50.7% 43.4% 35.5% 30.3% 23.9% 19.6% 15.8%
http://www.manilawater.com/section.php?section_id=2&category_id=9&article_id=47
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Why is Manila Water as avalue constellation story?
The companys core competence is not water or
even utilities but rather the financial, social, legal,managerial, and technical engineering that ensures
the smooth operation of public infrastructures.
The secret of value creation is building a better andbetter fit between relationships and knowledge. In
other words, an ever-improving fit between
competency and consumers.
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ISM Group 3:Francis, Jitu,Ridge & Tina
June 15, 2010
Thank you!
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