Management and Strategy

Evaluating any new venture is really difficult. It is a very subjective process. The environment is so uncertain that using traditional tools like DCF or IRR will never work. Following is one approach for evaluation of such ventures

1. Develop a reverse income statement
2. Lay out all the activities needed to run the venture i.e. Pro forma operations specs (sales, manufacturing, shipping and equipment and depreciation)
3. Track all assumptions
4. Revise the reverse income statement based on assumptions and operations specs
5. Plan to test assumptions at milestones

The process is really an interesting way of looking at ventures. It is what we normally call backward planning in regular project management, only here we are doing reverse evaluation of venture. Basically trying to take profits we want to make and calculating back how much we will need to invest and will it be worth it.

Source: Discovery driven planning by Rita Gunther McGrath and Ian C. MacMillan(HBR:95406)

Aggregate project plan enables management to improve the way it manages the development function.

Following are eight steps of an aggregate project plan

1. Define project types as either breakthrough, platform, derivative, R&D or partnered projects
2. Identify existing projects and classify them by project type
3. Estimate average time and resources for each project type based on earlier experience
4. Identify existing resource capacity
5. Determine the desired mix of projects
6. Estimate the number or projects that existing resources can support
7. Decide which specific projects to pursue
8. Work to improve development capabilities

Source: Creating project plans to focus Product Development by Steve C. Wheelwright and Kim B. Clark (HBR: 92210)

Following are some dangerous implicit assumptions made by managers

1. Customers will buy our products because we think it is a great product
2. Customers will buy our products because it is technically superior
3. Customers will agree with our perception that the product is “great”
4. Customers run no risk in buying from us instead of buying from past suppliers
5. The product will sell itself
6. Distributors are desperate to stock and service the product
7. We can develop the product on time and on budget
8. We will have no trouble in attracting the right staff
9. Competitors will respond rationally
10. We can insulate our product from competition
11. We will be able to hold down prices while gaining market share rapidly
12. The rest of our company will gladly support our strategy and provide help as needed

It is important to overcome these assumptions. Confidence is good over confidence is recipe for failure.

Source: Discovery Driven Planning by Rita Gunther McGrath and Ian C. MacMillan(HBR: 95406)

This is from an article I read today “Skills that make up executive intelligence”

Intelligent leaders:

• Pursue feedback that may reveal errors in their judgments and make appropriate adjustments
  
• Recognize when serious flaws in their ideas or actions require swift public acknowledgement of mistakes and dramatic change in direction
  
• Recognize their personal biases or limitation sin perspective and use this understanding to improve their thinking and their action plans
  
• Appropriately articulate the essential flaws in others arguments and reiterate the strengths in their own positions
  
• Recognize when it is appropriate to resist others objections and remain committed to a sound course of action.

This is from an article I read today “Skills that make up executive intelligence”

Intelligent leaders:

• Recognize the conclusions that can be drawn from a particular exchange
  
• Recognize the agendas and motivations of individuals and groups involved in a situation
  
• Anticipate the probable reactions to actions or communications
  
• Accurately identify the core issues and perspectives that are central to a conflict
  
• Appropriately consider the probable effects and possible unintended consequences that may result from taking a particular course of action
  
• Acknowledge and balance the different needs of all relevant stake holders
  

This is from an article I read today “Skills that make up executive intelligence”

Intelligent leaders:

• appropriately define a problem and differentiate essential objectives from less relevant concerns
  
• Anticipate obstacles to achieving their objectives and identify sensible means to circumvent them
  
• Critically examine the accuracy of underlying assumptions
  
• Articulate the strengths and weaknesses of the suggestions or arguments posed
  
• Recognize what is known about a issue, what more needs to be known and how best to obtain the relevant and accurate information needed
  
• User multiple perspectives to identify probably unintended consequences of various action plans.
  

In business, innovation rarely springs from a flash of inspiration. It arises from a cold-eyed analysis of seven kinds of apportunities

• Unexpected Occurrences
• Incongruities
• Process needs
• Industry and Market Changes
• Demographic changes
• Changes in Perception
• New Knowledge

Innovation requires knowledge, ingenuity, and above all else focus.

Source: The Discipline of Innovation by Peter F. Druker (HBR:R0208F)

Leadership is the art of getting someone else to do something you want done because he wants to do it.

Dwight D. Eisenhower

Following are 2 primary approaches in human resource management

Control Approach: The goal is to reduce labor costs or improve efficiency by enforcing employee compliance with specified rules and procedures and basing employee rewards on some measurable output criteria

Commitment Approach: This system shapes desired employee behaviors by forging psychological links between organizational and employee goals. The focus is on developing committed employees who can be trusted to carry out job tasks

 

I think Control approach never works, this was the traditional approach used in core manufacturing units. Commitment approach is the one companies should be using.

Following are characteristics of lean manufacturing systems

• Just-in-time inventory systems and lean staffing that minimize production buffers
  
• Rapid machine setups to permit small production runs by reducing changeover times
  
• Use of work teams on the production line
  
• Extensive training to develop multi skilled workers
  
• Job rotation to facilitate on-the-job learning of multiple tasks and skills
  
• Off-line problem solving or quality circle groups that involve employees in continuous improvement activities