Friday, October 06, 2006
Performance Management Top Ten Tips
Everybody talks about improved performance but not many organisations can “walk the talk” and turn strategy into results. According to a recent study only 1 in 3 organisations carry out their plans successfully.
But what makes the difference between success and failure? If we knew the answer we could use performance management to drive faster growth and superior profits.
Performance management can be used in both large and small organisations. Here are the top ten tips for success:
1. Develop a strategy that combines internal and external factors of the organisation, your financial position and your customer requirements, both now and in the future. Email MikeWarren@GreyMatterUK.com for a free navigation chart.
2. Use your strategy to drive both the financial and non-financial performance of the business.
3. Engage and develop skilled, flexible and responsive people to recognise their role in the success of that strategy.
4. Focus on the few things that truly impact on your business. Measure what matters.
5. Involve as many people as possible, at all levels, to put the measures together.
6. Ensure people can clearly see, understand and connect their own day-to-day activities to the achievement of the strategy.
7. Establish a clear framework to work within, and then ask the same questions at each level of the organisation. "What are the measures telling us and what do they mean?”
8. Empower people at the operational level to manage the area of the business that best suits their skills and experience.
9. Allow people working at tactical level to focus on the organisational systems and procedures.
10. Let people who manage the longer-term direction of the business have the freedom to do so without constantly being called upon to resolve operational issues.
Find out more about our new performance management tool:
Propeller TM is a unique management tool that helps to balance financial and non financial objectives. It shows the critical success factors for your organisation in four key areas; people, operations, customers and finance and whether goals are being met.
Propeller TM is a communication tool that takes the key indicators from across the organisation and uses traffic lights to let everyone know if they are on target. It links objectives, initiatives and measurements to the implementation of the overall strategy.
Propeller TM is a framework that helps profit and non-profit organisations translate strategy into activities that improve leadership, culture and performance.
Wednesday, September 28, 2005
Tuesday, September 27, 2005
Innovation - The Secret of Success
Innovation is at the heart of long-term growth, shareholder returns, and the ability to remain at the leading edge of the market. Much has been said about innovation and its importance to the growth and prosperity of an organisation and this has raised a number of questions about what actually drives success. Whilst many companies appear to be creative and resourceful, they do not always achieve success. According to the Harvard Business Review (2004) only 1 out of 10 new product introductions succeed in the market, thus provoking numerous attempts to identify the key factors in an effort to improve the outcome.
Just to be clear about definitions: Creativity is about the generation of ideas and innovation is about putting them into action. Innovation is about making ideas happen, and is more a blend of people and processes.
RELEVANCE & IMPORTANCE
Research conducted by Mike Warren at GreyMatter involving 65 global organisations involved with innovation has identified two common themes; 1) that market orientation has to be directed towards clear product definition early in the innovation process, and 2) that success is driven by market-orientated teams who share their knowledge of current and future customer needs across all departments:
1. Clear Product / Project Definition:
- Unique and well defined benefits
- High purchase importance
- Orientated towards the market
- Highly visible benefits
- Close fit with business strategy
2. And the team responsible for implementation:
- Have shared vision and values
- Clear aims and objectives
- High emotional resilience
- Accountable for the entire project
The following list is a typical selection of measures frequently used in the healthcare industry:
Sales impact: How strong an impact the innovation had on the organisation’s sales revenues.
Profit impact: How strong an impact the project had on the organisation’s annual profits.
Net Present Value: The future impact of the project on the value of the firm. Projects with a positive NPV are expected to increase the value of the firm.
Profitability relative to spending: How profitable the organisation’s total new product efforts were, relative to the amount spent on them.
Success rate: The proportion of development projects that become commercial successes.
Percentage of sales by new products: The percentage of the organisation’s sales accounted for by new products introduced within the last “x” years.
Technical success rating: How successful the innovation was from a technical / technological perspective.
Meeting sales objectives: The extent to which the innovation met the organisation’s sales objectives for new products.
Profitability versus competitors: How profitable the new product development project was relative to competitors’ efforts.
Overall success: Everything considered, how successful the organisation’s innovation efforts were when compared to competitors.
Researchers have been analysing the various factors involved in successful product innovation for over 40 years. In recent times the focus has concentrated more on the process rather than the idea itself, but the assumption that there might be a single universal factor driving success was flawed, so studies therefore tried to uncover an appropriate set of factors. Agreement does exist, however, about the positive impact on innovation of factors such as organisational culture, experience with innovation, and the multidisciplinary character of the management team.
Management Guru Peter Drucker’s view is that success is more likely to result from the “systematic pursuit of opportunities than from a flash of genius”. He points out that most innovative business ideas arise through the methodical analysis of seven areas of opportunity within the environment:
- Unexpected occurrences,
- Incongruities,
- Process needs,
- Industry and market changes,
- Demographic changes,
- Changes in perception, and
- New knowledge.
Drucker also notes that innovators need to look for simple, focused solutions to real problems and that grandiose ideas designed to revolutionise an industry rarely work. Innovation, like any other endeavour, takes talent, ingenuity, and knowledge.
Our own research suggests that product advantage, market driven ideas, meeting customer needs, and dedicated resources to implement the task, have the most significant impact on new product performance, but according to Drucker, “knowledge is the only meaningful resource today”. Hence, access to relevant information plays a leading role in the development of ideas.
A simple definition of the invention and innovation process is:
Innovation = Invention + Exploitation
The innovation process starts with scanning the environment to find something new and something different and then directing human and capital resources towards generating technical ideas, developing prototypes, and then transferring the ideas into manufacturing, distribution, and use. This “strategy building” involves the planning, implementation and effective integration of people, organisational processes, and action into a cohesive plan.
Strategy building identifies the resources that enable staff to work on the innovation. For the process to be effective, management must recruit suitably creative people to generate ideas, and action must be taken to support their productivity. It is clear that that the presence of a product champion (or the entrepreneur him/herself) is one of the necessary conditions for success.
A new product is like a baby, you can’t just bring it into the world and expect it to grow up and be a success. It needs a mother (enthusiasm) to love and keep it going when things get tough. It needs a paediatrician (expert information and technical skills) to solve problems that the mother can’t cope with alone, and it needs a father (authority with resources) to feed it and house it. Without any of these the baby may still turn out alright, but its chances of survival are a lot lower.
GreyMatter’s research indicates that the most critical tasks of a leader are:
- Setting a clear vision and direction
- Directing the desired behaviour
- Creating an environment and climate that encourages people’s abilities
- Deploying their own skills to maximum effect (not hands-on or hands-off but “hands-ready")
- Being seen to take responsibility at critical stages of the project.
But we also found several leadership weaknesses that were counterproductive to innovation, significant ones were;
- Poor interpersonal relationships,
- Autocratic attitude,
- Lack of profit orientation,
- Lack of market orientation,
- Lack of harmony with company objectives
The organisation’s culture is critical in fostering innovation. An organisation’s leaders play a key role in setting the climate and exemplifying the attitude and ways of working they would expect from others. A culture supportive of innovation is characterised by openness. Information should be freely available to those that need it and communication - generally face-to-face - is encouraged. People need to feel that they are trusted and supported and, as a result, that there is a freedom to challenge, act and comment. In this context people will follow the courage of their convictions and the views of the ‘nonconformist’ will emerge.
People are the only real source of long-term competitive advantage. Companies go to great lengths to support, encourage, thank and reward their team and to celebrate success. In these organisations, recruiting - and keeping - the right people is crucial. Successful teams generally include the functions that are directly or indirectly related to the design, engineering, manufacturing and marketing of the product for which they are. In this way, we obtain cross-functional teams formed by members from different specialities and with complementary skills. Each member must have an equal stake in the project and, as a team, must be accountable for the entire process, from beginning to end, not just one phase.
The creative performance of teams is enhanced by leadership interventions. GreyMatter believes that the single most important factor in determining the success of innovation initiatives is having a leader and a team with the ability and passion to turn ideas into business reality.
How the project team is organised and functions has been found to strongly influence successful innovation. The three main factors influencing successful team innovation are:
- The way teams are organized.
- The cross-functional nature of teams.
- Team accountability.
Our research suggests that success is derived from an in-depth understanding of the dynamics of the markets in which the company operates and a real perception of the needs of customers. Another factor for success is a deep understanding of how the product is positioned against the competition. Companies that compete on the basis of their own strengths and avoid head-on competition are more likely to realise success. In particular, they can compete on the basis of quality, design and service rather than cost.
Drucker recommend four different strategies that can turn opportunities into profitable action:
- Being the first and strongest with an innovation, which if successful, will guarantee market dominance
- Outflank the entrenched opposition with a novel, powerful platform,
- Entering a market area or niche that can be claimed almost exclusively
- Change the rules by marketing the product or service in a different way.
Robert Cooper is also a great proponent of “process” within new product development. He believes that a unique superior product with such elements as; value-for-money, relative product quality, and superior end-user benefits, are decisive factors in successful innovation. Successful innovating companies often have an interesting blend of formal and informal approaches - sometimes relying on intuition rather than in-depth analysis and shifting their focus from creating “better and more” to “new and different”. This type of climate within a business is one of the strongest drivers of new product development performance, and an organisation’s leadership, management, mission and values, together with the way people are both challenged to perform and supported while they do so, can inspire those people to pursue innovation with passion, energy and commitment.
Cooper has also established from his benchmarking study that there were three critical drivers of new product performance:
High quality new product process; this process whether explicit or implicit includes activities in a new product project from idea to launch. Success requires a high quality process.
Resource commitment; adequate resources available for the process.
New product strategy; a clear and well-communicated innovation strategy for the business unit.
And if product innovation were to be a success, then a thorough understanding of certain macro-environmental factors would also be essential:
- Customers’ needs and wants.
- The competitive situation.
- The nature of the market.
From a practical viewpoint this would involve market research, market assessment, customer tests, and market trials prior launch.
Most innovative companies have learned the power of teams, but they go further, with team members extending outside of the organisation - to suppliers, collaborators, partners and, if appropriate, customers can also be part of the innovation team. One key elements is trust between members of the network. Innovations that challenge and replace the established market formula with a new vision are encouraged. For example, it may be necessary to change the route market, perhaps by altering business processes or distribution. Moreover, for the implementation of radical innovations, it may be necessary for an organisation to change the way it is perceived by customers so that they can relate its brand image to products aimed at a completely different market.
The Fuzzy-front-end
The “fuzzy-front-end” activities are the first important step in the innovation process because they qualify and define the project. The key questions that were raised in our research were:
- Is the project an economically attractive one?
- Will the product sell at sufficient volumes?
- Who exactly is the target customer?
- How should the product be positioned?
- What features should be built into the product to give it a differential product advantage?
- Can the product be developed at the right cost?
- What is the likely technical solution?
Many projects are poorly defined when they enter the development phase. This is often the result of weak pre-development activities: the target user is not well understood, user needs and wants are vague, and required product features and attributes are not clearly defined. With a poorly defined project, Development Engineers waste considerable time seeking definition and recycling back several times to “get the product right.” Better project definition, the result of a QFD and/or stage-gate process, will speed up the innovation process. For further information on these processes log-on to http://www.greymatteruk.com/An innovative idea rarely remains the same from beginning to end. The original concept that started the project is seldom the same as what is commercialised. Within the total innovation process, the time to make design changes is not when the product is moving out of development and into production. QFD and stage-gate encourage changes to occur earlier in the process rather than later, when they are inevitably more costly. The result is a considerable saving in time and money at the back-end of the project and a more efficient innovation process.
Many management teams believe that they are market-orientated, but the evidence shows otherwise in the area of innovation. In one study of new product case histories (Cooper and Kleinschmidt 1987), only 16 percent of the total effort expended on new product projects went to market-oriented activities. The breakdown for the average project in man-days spent was:
- Technical and production activities, 78 percent.
- Market-oriented activities (including launch), 16 percent.
- Evaluative and financial activities, 6 percent.
If launch activities are removed, the amount devoted to efforts such as market assessment, detailed market studies, customer tests, trial selling and test marketing, shrinks even further.
The most interesting result of Cooper’s research is that those firms that did proportionately more market-related activities had a higher success rate. Overall, successful new products had considerably more time, money, and energy devoted to market-oriented activities than did failures. In successful projects, three times as many man-days and twice as much money were devoted to preliminary market assessment than was the case for failures. Twice as much market research (measured in both man-days and pounds spent) was conducted in successful products as in failures. But in both cases, the amounts were still small. Successful products had more than twice as much money spent on customer tests of the product, as did failures. Six times as much money and twice as many man-days were spent on the launch of successful products as for failures.
The mission of the team
The first step taken on most innovation projects is to ensure that the whole team understands the mission and the scope of the project. This information is summed up in a mission statement created at the start of the first team meeting. A good mission statement includes descriptions of:
- What the team will do (what is the scope).
- Why are they doing it - conceptually, this is a list that describes the current market.
- Who the customers are that they are supposed to address.
- What are the milestones that need to be met.
- Who will approve and implement the results.
The stage-gate system (Cooper, 1990) is a management tool that provides a guide to stronger market orientation in the innovation process. Those market-related activities, so often omitted or poorly handled in most new product projects, are built into the process by design, not as an add-on. The stages of the process typically include a number of market-related activities, such as user needs and wants research; concept tests; competitive analysis; development of a detailed marketing plan; product tests with customers; trial selling; and formal launch. GreyMatter recommends the use of PC based decision support software such as PD-Trak to help formalise the new product development process.
A team leader needs to be appointed by the team. The team leader is not the manager of the team, but can better be described as the chairman, facilitator, or coach. This distinction is important for the team to operate effectively in a balanced, self-directed way. This issue was emphasised by the results of our survey, where several respondents declared a successful outcome despite having a poor leader. One respondent outside of this group suggested that in these cases leadership was being confused with management, leading to a conclusion that poor managers were not a key success driver. The role and responsibilities of a good innovation leader are to:
- Create an environment of trust, open communication, creative thinking, and cohesive team effort.
- Provide the team with a vision of the innovation project objectives.
- Motivate and inspire team members.
- Lead by setting a good example (role model) - behaviour consistent with words.
- Facilitate problem solving and collaboration.
- Ensure discussions and decisions lead toward closure.
- Ensure that team members have the education and training to participate effectively on the team.
- Encourage creativity, risk-taking, and constant improvement.
- Familiarize the team with the customer needs, specifications, design targets, the development process, design standards, techniques and tools to support task performance.
- Coordinate meetings with the product committee, project manager and functional management to discuss project hurdles, required resources or issues/delays in completing the task.
The team helps to reach consensus on:
- What to do,
- The best ways to do it,
- The best order in which to accomplish it,
- The staffing and resources required.
A market-orientated team should provide input to process from all areas of business. The concerns of marketing, design, deployment, and support organisations are discussed and dealt with early in the process. Team members, as well as others called in to help the team, gain intimate knowledge of customer wants and of the functional perspectives of the other team members. This spreads team building awareness through the organization.
Cross-functional, market-orientated teams bring together people from various disciplines and facilitate the understanding of customer requirements. These teams are formed with personnel from different functional departments to support the design, development and transition to production of a new product. The team should consist of people from all disciplines that can positively impact the development of the product and improve competitive factors, not just personnel from the various design engineering disciplines. This team concept is intended to promote open discussion and innovative thinking resulting in superior products, more efficient processes and ultimately a more satisfied customer.
Innovation Culture
Culture is the way things are done in an organisation - its personality. It comprises of the assumptions, values, norms, needs and behaviours of stakeholders. Culture is particularly important in an innovative environment. Managers have realised that despite the best-laid plans, being innovative means not only changing structures and processes, but also changing the corporate culture as well. Important advantages of a market-orientated team within an innovation culture are the structured manner of communication between the different members and the sharing of information during the innovation process. The customer / supplier focus of the team is equally important. The team agrees the vision of developing a product or service that will excite and delight the customer to such an extent that they will part with their money.
Effective teamwork is important to successful innovation. Teams have a vast capacity to drive an organisation beyond its boundaries. When managed well, teams stimulate creativity and new ideas and make an organisation more adaptive to market forces. If however, a firm’s culture is not aligned with the innovation process, then there is a likelihood of failure. Several signs indicate potential failure of the innovation process. The checklist below shows some indications which management and the team should look for to try to prevent the innovation process from failing:
- Conflicting information from management
- Dismantling of team for higher priorities
- Little or no training for team
- Low morale within team
- Low skill level for team members
- Many team members leaving organisation
- No communication between team members
- No group sessions among team
- No incentives to keep team motivated
- No one in charge
- No project manager interest
- No structured method for new product development
- Organisation of team not working
- Shortage of team members
- Team losing sight of project goals
- Team member not accountable for actions
- Too many reassignments of team members
- Too much overtime
- Unavailability of needed tools
- Uncommitted senior management for project
- Uninformed team members
- Unsuitable working environment for team
- Working with unrealistic deadlines
WISDOM
- Innovation requires time - time to think, to experiment, time to talk about possibilities and ideas.
- People need to share their vision through curiosity, talent and motivation.
- Leaders need the wisdom to manage & evaluate ideas, recognising and rewarding those involved.
- The team needs to know how the project fits into the overall business strategy of the company
CULTURE
- Innovation is a blend of people and processes.
- Innovation means doing something that hasn’t been done before, which implies risk. If there is no risk, there is no innovation.
- Innovation is driven by a market-orientated team built around a common objective and trust.
- Trust requires honesty and openness.
- Culture promotes the articulation of and distribution of ideas.
- Senior managers have to demonstrate their commitment.
- Communication is needed to discuss problems with the project, handle conflicts within the team as well as with the users.
- Every team member has to be informed and involved in making decisions that affects the team.
- Incentives help to ensure a focused and dedicated staff. It is important that the incentives are tied to the project’s success.
REACH
- Innovation requires new processes, time, energy, commitment and resources.
- Innovation requires communication of new information - between co-workers, customers, suppliers, competitors and researchers.
- Reach enables ideas to be implemented.
- Customers have to be involved in the innovation process
A system where team members, customers and suppliers can easily transfer knowledge between each other is a good way to improve the team’s competence.
As a conclusion to this study, GreyMatter has developed several useful diagnostic tools to allow self-assessment of the gaps between an idea and its successful commercialisation. You can find these on the website www.greymatteruk.com or email MikeWarren@GreyMatterUK.com
Monday, September 26, 2005
About GreyMatter
GreyMatter delivers general business advice on how to get the most out of the people, processes and systems in your organisation. We take you beyond the day-to-day running of the business and inspire you to innovate and make improvements that increase your profitability. We have some unique tools that get beneath the surface of the business and bring out your core competencies – those things that make your company successful by being unique and better than your competitors.
GreyMatter believes that Marketing and Innovation are the key to sustainable growth – we can help you make the right decisions for your business development by using tried and tested best practice techniques learned from some of the biggest companies in the UK. GreyMatter is creative and fun to work with. We take a real interest in your business – we help you to get grants and funding wherever possible and will introduce you to designers and ICT companies when their expertise is needed.
GreyMatter offers free business advice to qualifying small and medium size businesses in Wales. We help you to develop a business plan and a marketing strategy that takes your company forward, step-by-step, towards your vision, objectives and values. Here are some of the recommendations our clients have made:
“GreyMatter have really helped us to pull together a business plan and strategy for expansion – they have crossed the boundaries between grant aid, and business support and led the way towards new markets and customers in Europe” – Jane Balz, Director, LCR Capacitors, Ebbw Vale.
“Thanks for the valuable contribution to the success of our programme, with clearer identification of our goals and mission – interesting to see from an outside view how our structure needs to change”
- Miriam Mason, Technology Manager, UK Atomic Energy Authority.
“Over the years we have had increasing competition in our industry – I was so impressed with Mike’s approach at GreyMatter, he’s joined us as a consultant and will be looking for new ways to expand- especially in the field of joint ventures” – John Edwards, MD, Relax In Comfort, Ponyclun
“I strongly believe that GreyMatter will help your firm to solve your problems with insight, intelligence, skill and integrity” – Peter Raven, Professor of Marketing, Seattle University.
For more information about GreyMatter and to access some useful tips and recommendations on how to grow your business, visit our website at http://www.greymatteruk.com/
