Formation 4

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Module IVExecution capacity of the

client

Roll-out

Action1

Action2

Action3

Action4

Action5

Qtr 1 Qtr 2 Qtr 3 Qtr4

Introduction

Conclusion

Module I

Module II Module III Module IV

Module V

Module VI


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2Module IVA.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

Contents of Module IV

Introduction

Assessment of execution capacity

• Operational capacity assessment

• Organizational capacity assessment

• Information technology capacity assessment


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Schedule for the A.T. Kearney Business Unit Strategy Training Program

Source: A.T. Kearney

Introduction

Dinner

Monday Tuesday Wednesday Thursday Friday

Introduction

Module II

Lunch

Final presentation

Conclusion

Module III

Case presentation

Case preparation

Dinner

Case preparation

Dinner Dinner

Module V

Case preparation

Lunch

Module I

Lunch Lunch

Dinner

Case preparation

Case presentation

Guest Speaker

Strategy literature

review

Module VI

Lunch

Module IV Guest Speaker

Case presentation

8-9

9-10

10-11

11-12

12-1

1-2

Time

2-3

3-4

4-5

6-7

8-9

9-10

10-?

7-8

5-6


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Positioning of Module IV in the overall training context

Module II

Structure and

dynamics of the

industry

Module III

Characteristics and

dynamics of the

individual companies

Module IV

Execution

capacity of theclient

Module VI

Implementable

recommendations

Module V

Definition and

evaluation of strategic

alternatives

Roll-out

Action 1

Action 2

Action 3

Action 4

Action 5

Qtr1 Qtr2 Qtr3 Qtr4


Module I

Identification of the key

issues of the

engagement

Note: The order of presentation of the curriculum elements should not be interpreted as a sequential guideline for a strategy engagement. Different

elements of the program may be referenced at different times in the engagement

Introduction


5/605Module IVA.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

The intention of Module IV is to assess the client’s execution capacity

To determine the degrees of strategic

freedom available to the client in terms of

the client’s capacity to execute strategy.

The purpose is that strategic decision-

making should be tailored to the specific

capabilities of the client

Focus


Introduction



Deliverable and techniques in Module IV

Deliverable Techniques

Assessment of execution capacity • Operational capacity assessment


• Information capacity assessment


Introduction




Introduction







What is execution capacity?

Execution capacity of a company refers to the

current and potential resource and capability base

available to the company with regard to operations,

organization and information technology


Definition

IntroductionAssessment of execution capacity


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A.T. Kearney’s distinguishing characteristic in strategy is the assessment of the

client’s execution capacity concurrent with the strategy formulation process

Implementation

Implementation

Strategy

analysis

Execution-

focused

analysis

Integratedevaluation

and planning

Concurrent

processes

PowerfulContributionsIterations Iterations

Assessment

of degrees of

freedom to

execute

Alternatives for

improving

execution

capacity

Assessment of

the situation

Generation

and evaluation

of alternatives


Note: The recommendations must have (i) high strategic potential as well as (ii) high likelihood of implementation and therefore bridge the gap between

strategy and operations



10/60


Execution capacity analysis focuses on identifying the resources and capabilities

available to the company within a reasonable planning timeframeIllustrative


• An assessment of the

client’s execution

capacity can determine

whether the client can

realistically implement

the strategic solution

• The client’s degree of

strategic freedom and

level of change readiness

to execute strategy can

also be determined

100%

100%100%

Information Technology

Operations

Organization

Note: All three execution capacity areas are, to a certain extent, linked to focus areas of A.T. Kearney, e.g. operational execution capacity could be seen in

relation to some of the operations practices; Organizational execution capacity could be seen in relation to the Enterprise Transformation methodology;

information technology capacity could be seen in relation to the Strategic Information Technology Practice and Jupiter



11/60


The three areas must be integrated when executing strategy, and therefore should

be evaluated together when assessing execution capacity


The three parts are not separate

entities, and any analysis of

one must be integrated with

analyses of the other twoelements. For example, the

organizational capacity

assessment will be a major part

of an IT or an operational

capacity assessment

Operations

OrganizationInformation

technology


Illustrative


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Why focus on execution capacity?

Current

position

Required

position

Key question

Does the client have the

execution capacity to move from

its current position to the positionrequired to successfully carry out

recommended strategies in terms

of:

• Resources?

• Capabilities?

Illustrative




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An execution capacity assessment helps to identify resource and capability

requirements for the client


100%

100%100%

Information Technology Organization

Gap Current resource and

capability level

Focus

• An assessment of a client’s degrees of strategic

freedom to execute and an analysis of alternatives for

improving its execution capacity is built on an

evaluation of the client’s current performance vis-à-vis

what will be required to execute the strategy

• The analysis will focus on answering:

– Is the current resource and capability level

sufficient to ensure competitiveness for the client?

– In which functional areas have “gaps” been

identified?

– Which specific “gaps” are critical hurdles for

further success?

– To what extent can the “gaps” be eliminated?

– Is the client ready to implement changes?

Operations



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To identify and assess a business unit’s execution capacity, one must analyze its

resources and capabilities

Capabilities

Resources

• Tangible or intangible factors that are owned or

controlled by the company (e.g. plants, items of

capital equipment, cash, information)

• The company’s capacity for undertaking a particularactivity by deploying and cooperating resources

(e.g. delivering highly reliable services)

• They are developed over time through complex

interactions among the company’s resources

• Capabilities, unlike resources, are based on

developing, carrying and exchanging knowledgethrough the company’s human capital




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Introduction






16/60


Defining operational execution capacity

Operational execution capacity is the extent to which

the client can employ its operational resources and

thus create capabilities to perform the activities

required to implement a new strategy within a

reasonable time frame

Definition


DescriptionAssessment of execution capacity Operational capacity assessment


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Operational execution capacity is the first dimension of the assessment


100%

100%100%

Information technology

Operations

Organization

Key questions

• Does the client have sufficient degrees of strategic

freedom or to what extent is the client constrained by

the current situation to execute operational tasks?

– What is the client’s current level of operational

resources and capabilities?

– How are the current resources and capabilitiesutilized?

– How well is the client positioned in the supply

chain?

– Does the client control all relevant activities in the

value chain?

• What alternatives exist to improve the client’s

execution capacity and to what extent will its current

level of operational resources and capabilities limit

the client‘s opportunities to implement the optimal

strategic solution?

Assessment of execution capacity Operational capacity assessment Description


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The client’s operational resources must be analyzed to understand the extent to

which the company can support its strategy execution

Source: Slack, N. et. al. (1995); Operations Management

The

operations

functionSuppliers Customers

Operational resources

Purchasing

Technical

engineering

Product/services

development

Marketing

Accounting

and financePersonnel

Assessment of execution capacity Operational capacity assessment Description

A f i i O i l i U


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High operational ability can contribute a range of performance advantages that

can be drawn upon in designing a business unit strategy


Doing things correctly A quality advantage

Doing things quickly A speed advantage

Doing things cheaply A cost advantage

Changing what you do A flexibility advantage

Doing things on time A dependability advantage

Assessment of execution capacity Operational capacity assessment Usage

A t f ti it O ti l it t U


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In essence, the execution strategy is dependent on the operation’s handling of its

performance objectives


Error-free

processes

Ability to

change

Fast

throughput

High total

productivity

Internal effects of the five

performance objectives

Quality Flexibility

Dependability

Costs

Speed

• On-specification products

and services

• Frequent new products/services

• Wide products/service range

• Volume and delivery adjustments

• Dependable delivery• Short delivery lead time

• Low price, high margin, or both

Reliable

operation

Assessment of execution capacity Operational capacity assessment Usage

Assessment of execution capacity Operational capacity assessment Example


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An overview of the client’s strengths and weaknesses can be realized through an

analysis of its operational resources


3

Differences between retail banking and corporate banking


Retail banking

Dependability and

flexibility must be

improved

Corporate banking

Cost is the majorweakness for

corporate banking

Cost

Dependability

FlexibilityQuality

Speed

Retail banking

Corporate banking




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3Source: A.T. Kearney

Identify resources along the value chain and understand their relative strengths


• Warranty

• Speed

• Service

network

• Quality and

effectiveness

of customer

service

(Walt Disney,

Marks &

Spencer)

Resources

Capabilities

R&DProduct

DesignManufacturing

Marketing

and SalesDistribution Service

• Channels

• Inventory

• Warehouses

• Distribution

fleet

• Efficiency

and speed of

distribution

(Federal

Express)

• Brand/

reputation

• Advertising/

promotion

• Salesforce• Package

• Brand

management

and brand

promotion

(Procter &

Gamble,

PepsiCo)

• Raw materials

• Size of plants

• Location of

land and

buildings

• Capacity for

continual

improvements

in production

processes

(Toyota,

Nucor)

• Flexibility and

speed of

response

(Benetton)

• Physical

characteristics

• Quality

• Expertise in

design

• Design

capability

(Apple)

• Patents

• Copyrights

• Research

facilities

• Skills ofresearch

personnel

• Capability in

basic research

(Merck, AT&T)

• Ability to

develop

innovative new

products (Sony)

• Speed of new

product

development

Operational resources can be identified at each step of the value chain

Define the value

chain

Define resources

Define capabilities




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Assess the strength of each capability

Identify critical capabilities required to deliver customer value and assess the

company’s strengths and weaknesses in these areas relative to competitors’

Capabilities required WeightAssessment of capabilities

1 2 3 4 5

%

%

%

%

• Lead time

• Manufacturing

flexibility

• Delivery within 24

hours

• Highly reliable

service


Client

Top performer

Identify how the

current resources

can be improved and

which additional

resources should be

acquired to fill this

gap

Key operational

success factors

Determine the

importance of the

capability with

respect to the key

success factors




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• MSI medium scale integration serving thehigh end

• No low-end product

• 2 plants

• Backwards integrated into integratedcircuit manufacture

R&DProduct

DesignManufacturing

Distribution

& SalesService

• USD 3m budgetsplit amongvariablecost reduction,sales support anddevelopment

• Direct sales force forsystems and customersegment regionallyorganized

• Sales agent network for business segmentsupplemented with five

direct salesmen

Client • Servicehandled bysales agents

• USD 9m budget • 10% solid state products

• A 1,000 for high end, A 100 for midrange, A 10 for low range

• Essentially an assembly operation

• Purchases chips externally

• Direct sales force forall segments

• Systems sales forcespecialized bycustomer group

Com-

petitor A

• Servicehandled byagentnetwork

• Subcontracted • Low end product only, but rumors of amedium product in development

• 100% solid state

• Foreign sourcing and assembly

• Infiltrating client's salesagents network

Com-

petitor B

• Infiltratingclient'ssales agentnetwork

• Can the client bethe technicalleader in thesystems market?

• Can client adopt a modular design?

• Should a low end product beoutsourced?

• Can client move to adirect sales force inthe business segment?

A benchmarking analysis can help to uncover key issues and questions related to

the client’s ability to exploit its current resources and capabilities Example: Security system


Compare qualitative differences to competitorsDefine the valuechain

Define the competitors

and benchmark

Pose key questions

p y p p y p

Assessment of execution capacity Operational capacity assessment Methodology


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3

Methodology for performing an operational capacity assessment

1 2Output

• A determination of

the company’s

ability to execute an

intended or proposed

strategy

• An identification of

the critical

operational success

factors

• An assessment of the

company's

operational resources

and capabilities

• A gap analysis that

illustrates where the

company lacks

adequate resources

and capabilities

Input

• Strategic era

analysis

• Strategic planning

framework

• Ratio analysis

• Client

data/interviews

• Expert interviews

• Analyst reports

• SEC filings*

• Trade journals

• Customer surveys

• Annual reports

• Determine which resourcesand capabilities are mostcritical to successfullyimplement the strategicinitiative

• Identify the level ofresources and capabilitiesavailable within thecompany:

– Purchasing – Personnel – Accounting and finance – Marketing – Product/service

development – Technical/engineering

• Draw an operational map

using the key success factors• Identify the resourcesemployed to perform currentvalue chain activities, anddetermine how efficientlythe resources are beingutilized

• Pose critical questions: – How can the client re-

deploy the resources todeliver products/servicesdifferently?

– Can the client lever/stretch the resources toincrease productivity?

– Can the client reconfigurethe resources to achieve adifferent set ofcapabilities?

– How can the client’scurrent capabilities beapplied in a differentactivity?

– How can the client better

use the resources to focuson different customergroups?

• Compare the company’s keyoperational resources and capabilitiesinternally and against competitors’

• Conduct high-level gap analysis toassess current capabilities

• Pinpoint the most criticalgaps to be closed

• Use knowledge of operationsto (re-) formulate strategicalternatives

Identify theclient’s operational

resources and

capabilities

Assess itsstrengths and

weaknesses

Determine themost critical

gaps


* Reports filed by publicly held companies with the Securities and Exchange Commission: e.g., 10K, 10Q

p y p p y gy

Assessment of execution capacity Operational capacity assessment Conclusion


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Conclusion


Key points

Weaknesses

References

Strengths

• Colis, D., and Montgomery, C. (July-August 1995); Competing on Resources: Strategy in the 1990s• Grant, R., (1996); Contemporary Strategy Analysis• Wernerfelt, B. (1984); A Resource-based View of the Firm, Strategic Management Journal, Vol. 5

• Hamel, G. and Prahalad, C.K. (May-June 1990); The Core Competence of the Corporation, HarvardBusiness Review• Stalk G., Evans. P, and Shulman, L.E. (March-April 1992); Competing on Capabilities; Harvard

Business Review

• Should be performed concurrently with all other analyses of the industry, client, and competitorcompanies to relate strategic thinking to company capabilities• Purpose of the analysis is to understand the company’s capacity or degrees of freedom to execute

certain strategies• Heavily interlinked with the company analysis in Module III• Benchmarking (see Module III) might provide additional insights

• If properly defined, a very strong technique used to ensure that a strategy is implementable

• If resources and capabilities are incorrectly assessed – An otherwise sound and logical strategy may be rendered useless – The performance measurement systems may be adversely affected


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Introduction





Assessment of execution capacity Organizational capacity assessment Description


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Organizational execution capacity refers to the extent to which an organization can

bring about change

Organizational execution capacity is the client’s ability

to change the organizational dynamics so as to increase

effectiveness. This refers to the degree to which the

organization can handle organizational change processes,

including changes in resources and capabilities within its

structure, style, staff, shared values and skills

Definition


Assessment of execution capacity Organizational capacity assessment Description


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Organizational execution capacity is the second dimension of the assessment

Key questions


100%

100%100%


Operations

Organization

• Does the client have a sufficient degree of strategic

freedom to execute the required organizational changes?

– Are the current organizational resources and

capabilities geared to undertake change?

– Are the necessary systems and skills in place?

– Can the organization, especially the management,

deliver the needed results?

- Historical performance

- Commitment and willingness – To what extent is the staff motivated and committed

to pursue organizational changes?

• What alternatives exist for improving the execution

capacity?

– To what extent can the current level of organizational

resources and capabilities be (re-)allocated within

a reasonable time horizon? – How can the client’s resources and capabilities be

stretched and leveraged?

– To what extent is it necessary to acquire new skills?

Assessment of execution capacity Organizational capacity assessment Usage


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The organizational execution capacity should be measured with respect to both

tangible and intangible resources of the company

Tangible

Intangible

Physical

Source: Grant, R.M. (1996); Contemporary Strategy Analysis

Organizational

capabilities and

resources of the

company

Financial

Human

Reputation

Technological

The company’s borrowing capacity and its internal funds

generation determine its investment capacity and its cyclical

resilience

The size, location, level of technology, and flexibility of plant

and equipment; location and alternative uses for land and

buildings; reserves of raw materials as they determine the

company’s set of production capabilities and determine the

potential for cost and quality advantage

Stock of technology including proprietary technology andexpertise in its application of know-how; resources for

innovation (research facilities, technical and scientific

employees)

The training and expertise of people determine the skills

available to the company; the adaptability of employees

determine the strategic flexibility; the commitment and loyalty

of employees determines the company’s ability to maintain

competitive advantageReputation with customers through the ownership of brands,

established relationships with customers, the association with

a company’s products with quality, reliability, etc.; the

reputation of the company with the suppliers of components,

finance, labor services and other inputs

Assessment of execution capacity Organizational capacity assessment Usage


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A number of key factors will indicate the client’s organizational execution capacity

• Debt/equity ratio

• Ratio of net cash to capital expenditure

• Credit rating

• Resale values of fixed assets

• Age of capital equipment

• Scale of plants

• Alternative uses of fixed assets

• Number and significance of patents

• Revenue from patent licenses

• R&D staff as a percentage of total employment

• Educational, technical, professional qualifications of employees

• Pay rates relative to industry standards

Source: Grant, R.M. (1996); Contemporary Strategy Analysis

Resources Key indicators

• Brand recognition

• Price premium over competing brands• Percentage of repeat buying

• Objective measures of product performance

• Level and consistency of company performance

Financial

Physical

Technological

Human

Reputation

Assessment of execution capacity Organizational capacity assessment Example


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Determine the organizational structure of the company to identify the management

levels and skill base that is available

General Manager

Purchasing Operations Finance

...

.........

...

...

...

...

...

...

...

...


Is the organizational design and skill base optimal to implement the strategy

Understand the

decision mechanism

of the company – Who are the key

decision makers?

– Who has the

power?

Head of

Region A

Head of

Region B

Head of

Region C

Head of

Region D



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Mapping of the management’s capabilities

Managerial experience and skill levels determine the management

team’s capacity to undertake strategic change

1 = Poor

10 = Very good

Curriculum Vitae

• Leadership capabilities

• Technical skills

• Experience inimplementing change

• Flexibility and mobility

• Commitment to change

• Operational skills

• Linguistic abilities

Middle management Mr. X

6

2

7

6

8

1

1

3

4

10

9

1

6

5

Mr. Y Mr. Z

1

2

3

4

10

8

6

Note: A.T. Kearney executive search may be able to provide insights on key success factors in different countries


To which extent are

the individuals in the

management groupready and capable to

undertake change?



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Middle management’s capabilities map

Map the capabilities for all management levels on defined dimensions

Current managerial capability available

Expected capability requirements


Knowledge of

company product range

Ability to run staff

on project basis

Willingness

to make and

accept

mistakes

Ability to appraise staff using

customer based measures

Ability to flexibly

deploy staff

Knowledge

of customer

business

issues

To what extent are the

individuals in the

middle management

group ready and

capable to undertake

changes?

Dimensions will differ

depending on the level

of management



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The management group has not properly followed through previous

strategies

The organization’s track record for the execution of previous strategies should

impact future strategic recommendations


Minutes of

the Board

meeting of

…

Not

implemented

Major

changes

Minor

changes

Implemented Decisions

madeDate

As original

By analyzing the

historical decision-

making process of the

client, a picture of

change willingness

can be depicted



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Analysis of past success and failure

Identify the client’s relevant project management experience in executing new

strategies

New strategy

periods

Major changes

suggested in the

strategic plan

Breakthroughs

achieved

Problems during

implementation


Understand

management’s attitude

toward previous

change programs.

Understand their

reasons for success and

failure

Use strategic era

analysis as an input

Understand change

management programs

that have been

implemented

Understand

breakthroughs

Define concrete

problems encountered

during implementation



37/60



An actual engagement showed that the client had not considered the consequences

of its objectives

As a consequence of the “client’s” objective, the organization will lack

managers in the future Number of managers

50

100

• Is this realistic?

• Is the human

resource

department ready

to pursue such a

task?

Based on its growth

ambitions, the company

must double its

management resources

within 2 years

1997 1999E


Show the

development required

to make the changes

Indicate “story”

behind slide

Pose questions

that create a

reality check

Assessment of execution capacity Organizational capacity assessment Methodology


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Methodology for performing an organizational capacity analysis

Outputs

• Strengths and

weaknesses of the

organizational

structure

• Determination of

measures required to

raise the

organizational

capabilities up to the

level necessary to

implement the

strategy

Inputs

• 7S

• Strategic era

analysis

• Strategic planning

framework

• Client

data/interviews


• Analyst reports

• Annual reports

• SEC filings*

• Trade journals

• Press clippings

• Customer surveys

• Clarify the formal and

informal organizational

routines

• Assess organizational

capabilities:

– Staff

– Systems

– Skills

– Shared values

– Style

– Structure

• Map current resources

and capabilities against

those that will be needed

to implement the strategy

• Determine the strengths

and weaknesses of both

the organizational

structure and the skills

possessed by the

organization

• Define the most critical gaps

and determine the measures

necessary to close them (e.g.

make versus buy decisions)

1 2 3

Analyze the

organizational

structure

Assess the

strengths and

weaknesses

Evaluate the

critical gaps to

be closed

* Reports filed by publicly held companies with the Securities and Exchange Commission: e.g., 10K, 10Q


Assessment of execution capacity Organizational capacity assessment Conclusion


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Conclusion


Key points

Weaknesses

References

Strengths

• Should be performed concurrently with all other analyses of the industry, client, and competitor

companies to relate strategic thinking to company capabilities• The purpose of the analysis is to understand the company’s capacity or degrees of freedom to execute

strategies• Draws heavily upon the analyses taught in Module III• The 7S analysis in Module III provides insights on organizational strengths

• Helps the team develop strategies that are implementable and executable from an organizational perspective

• If resources and capabilities are incorrectly assessed – Otherwise sound and logical strategy may be rendered useless – Performance measurement systems may be adversely affected

C f M d l IV


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Introduction





I f ti t h l l i i ti l h th th i i iti ti

Assessment of execution capacity Information technology capacity assessment Description


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Information technology analysis is essential whether the company is initiating a

strategic change or only evaluating the implementation of its existing strategy

Information technology execution capacity is defined by the

extent to which the client’s information technology system

provides a basis for executing strategy. Accordingly, it

concerns the degree to which the information technology

resources and capabilities can be a lever for implementing

change. This entails not only understanding the client’s

present capabilities, but also evaluating new technologies

available on the market and their potential to support new

strategic options.

Definition


I f ti t h l ti it i th thi d di i f th t



42/60


Information technology execution capacity is the third dimension of the assessment

Note: A.T. Kearney‘s Strategic Information Technology Practice (and Jupiter) can in many instances be helpful to determine key areas of focus


100%

100%100%


Operations

Organization

Key questions

• How can information technology help the company in

implementing the strategy?

• Can new technical solutions allow for strategic options

previously not open to us?

• Does the client have sufficient degrees of strategic

freedom to execute the required information technology

changes?

– What are the IT resources and capabilities available to

the company?

– How does the client’s present IT system reflect the

current needs of the organization?

– To what extent can the present IT system undertake

change?

– Are the necessary systems and skills in place?

• What alternatives exist to improve the company’sinformation technology execution capacity?

In addition to considering a company’s IT potential we must rethink the



43/60


In addition to considering a company’s IT potential we must rethink the

relationship between strategy and technology, and thereby ask how IT can impact

strategy

In our new thinking we

must also ask:

“How will IT impact our

business strategy?”

Traditionally we have

been asking:

“How will IT support

our business strategy?”

Strategy

Technology


This entails helping clients to understand and exploit new technologies in order to



44/60


This entails helping clients to understand and exploit new technologies in order to

develop new business capabilities that will create competitive advantage

New Technologies and

Key ConceptsEliminating Barriers

Understanding the

new Business Context

Developing new

Business Capabilities• Digitalization

- Virtualization

• Network Connectivity

- Interactive reach

• Form (Ticketless travel)

• Time (E-mail)

• Place (Video conferencing)


The company’s IT capability should be analyzed by leveraging SITP skills and



45/60


The company s IT capability should be analyzed by leveraging SITP skills and

employing the Jupiter the framework in our work. Jupiter has aligned its

competencies and deliverables along 5 phases

How does IT

impact my business strategy

Foresight

Insight

I need insightinto my IT

challenge &opportunity

Plan

I understand thechallenge, but Ineed a plan and

an approach

Implementation

I have an IT plan, but I wantimplementation

leadership

Hindsight

I haveimplemented but, I wantassurance


The SITP core competencies are teams of people who are particularly skilled



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The SITP core competencies are teams of people who are particularly skilled

within a certain area of expertise

Plan Implementation Foresight Insight Hindsight

IT Alignment

Digital Economy


Large Scale Program Management

Transforming the IT Organization

Enterprise Implementation

Electronic Commerce

Business Intelligence Systems

Enterprise Modeling

Key Jupiter deliverables in foresight and insight are relevant to strategy work



47/60


Key Jupiter deliverables in foresight and insight are relevant to strategy work


Information technology is a key enabler for management objectives



48/60


Information technology is a key enabler for management objectives


Strategic

• Increased sales

• Competitive advantage

• Market positioning• Partner integration/

virtual enterprise

Infrastructure • Integration

• Flexibility

• Lower IT costs

• Standardization

Information • Increased control

• Better information• Better integration

• Improved quality

Transaction • Cut costs

• Increase throughput

Organizational

changes

• Flatten organization

• Responsiveness

• Flexibility

• Performance breakthrough

• Knowledge management

• Skills management

Information technology can be used to create value throughout the value chain

Assessment of execution capacity Information technology capacity assessment Usage


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gy g


Planning modes

Inbound

logistics

Automated personnel scheduling

On-line procurement of parts

Operation Outbound

logistics

Marketing

and sales

Service

Automated

warehouse

Flexible

manufacturing

Automated

order

processing

Telemarketing

remote

terminals for

sales persons

Remote service of

equipment

Computer

scheduling of

repair trucks

CAD - electronic market research

Company

infrastructure

Human resource

management

Procurement

Technological

development

An generic value chain with example areas that can be improved via IT developments

The company’s information technology resources and capabilities play an integral



50/60


p y gy p p y g

part of the strategic planning process

• Management must assess the opportunities created by information

technology (benefits/risks and sustainability of advantage)

• Management must align business unit strategy and informationtechnology strategy

• Management must assess how technology might impact existing

competencies and methods of doing business

Strategic information

technology planning

Company resources

and capabilities

Strategic analysis Strategic choiceInformation

technology priorities


The company's IT capability should be analyzed by looking at the following



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p y p y y y g g

elements

What are the technical

standards comprisingthe company’s

information processor?

Computing


standards for the main

application system?

Applications


standards defining the

network?

Network

What are the standards

defining how data iscollected, stored and

retrieved?

Data

External technological environment

The corporate/business unit IT-organization


IT can have a major influence on the company’s ability to implement strategy



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Strategy

• Is the IT function centralized at corporate level?

– Bureaucratic?

– Efficient?

– Flexible?

– Responsive to local needs?

• Are the users responsible for directing, developing

and implementing it?

The IT function

• Does IT management respond to user challenges?

– Technical manager vs. functional executive

– Planning and control vs. strategic and political – Structure vs. conceptual and visionary

– Reactive vs. proactive external posture

– Hands-on internal style vs. hands-off

The IT management

• Is the local IT department able to support the

strategy? – Service focused?

– Multiple technologies?

– Support units?

– Change flexibility?

– Development backlog?

– Maintenance backlog?

– Communication between technological experts

and user?

The IT department

• Does the organization see IT as a key element in

building competitive advantage?

• Do a majority of employees have free access tocustomer product or financial information?

• Does the organization protect information?

The IT culture


An analysis of the company's relevant IT project management experience might



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provide interesting insights


• What major IT projects have been

implemented during the past 5 years?

• Where and why were the projects

initiated?

• Who managed the projects?

• What was the failure and/or success of

these projects?

• What were the major problems in

implementing change?

Questions

The information technology infrastructure stages of change readiness

Assessment of execution capacity Information technology capacity assessment Example


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A.T. Kearney’s “information infrastructure stages of changes readiness”

model provides a checklist to assess the company's information technology

capabilities


CapabilityStage 2

Awakening

Stage 1

Innocence

Stage 3

Commitment

Stage 4

World class

• Information

technology systems

linkages with the

business

• Stand-alone

information tech-

nology “strategy”

• Linked to work

processes

• Linked to agenda

for today’s

business

• Linked to agenda

for tomorrow’s

business

• Informationtechnology

alignment

• Around thetransaction • Around lineorganizations • Around lineorganizations and

product lines

• Around customer-driven processes

• Orientation of

information

system

• Process

transactions

• Data exists, but not

readily available

• Support period

accounting

• Fragmented

departmental

data

• Support planning

with operational

data

• Shared data

• Support process

flow, internal and

external

• Concurrent

visibility of data

• Technology base • High dependence

on mainframes and

mini-computers

• PC’s/workstations

used in significant

numbers


are interconnected


access information

globally (internal

external sources)

• User base • Technicians only • A few initiatives • Broad based users

are computer

literate

• Users are trained

to develop own

inquiry/tools

The stages of

change readiness

In order to assess

client strengthsand weaknesses,

IT capabilities

should be

evaluated with

respect to the four

stages of change

readiness

Map the IT organization



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3

The IT organization and its areas of responsibility in company X



The overview gives

a good picture of the

hierarchical

structure and activity

areas of the client

Areas of

responsibility

Description of

area

Responsible for all

financial

applications

Responsible for all

sales information

Responsible for

store-level-systems

(PCs and software)

Program/applicationManager - financial Program/applicationManager - sales Micro systemsManager OperationsManager

Responsible for

• Monitoring daily

workloads of

system

• Administration

phonemail system

• Set-up and repair

corporate PC’s

IT director

Map the client’s IT architecture



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3

Identify the client’s application base starting with its architecture



External userExternal user

Data warehouseCIS/MIS/reporting

Admini-stration ofdocument

Internaladmini-stration

Routing/switching/converting

Booking Billing

Authorizing

User interface

Provision ofdata adjustmenttransformation

Provision ofdata adjustmenttransformation

Identify the key

components of the

client’s IT structure

Understand processes, strengths

and weaknesses

Analyze the IT organization’s ability to develop applications



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3

Company X spends most of its resources on maintenance



3941

59

6159

41

MIS resources spent on

development vs. maintenancePercent

70

86 8580

70

60

1995 1996

Rated by user (functional quality)

Rated by MIS (technical quality)

Quality assessment of MIS

development applicationPercent

Look at factors

such as MISexpenditure

Understand the

performance of

the MIS

department

The users’

satisfaction with

applications is a

key indication of

MIS’s ability to

developcompetitive

solutions

19971995 1996 1997

Develop

Maintain

Assess users’ perception of the company’s IT capabilities at a high level



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3

Department Y must improve some of its IT capabilities


Key indicator

• Quality of current

applications

• Do the applications

match the requirements

• Software performance

• Availability of IT

solutions

• Responsiveness of IT

service

• Technical assistance

• Consulting of users

Very good Good Satisfactory Not good

Department XDepartment Y


Define the key

IT performance

indicators for

the client

Map the

execution

capabilities of

the client

Methodology for performing an information technology capacity assessment can be

extracted from the Jupiter framework

Assessment of execution capacity Information technology capacity assessment Methodology


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1 2 3 4

extracted from the Jupiter framework

Outputs

• Client’s IT

execution capacity

detailed by the

strength of

individual IT

resources and

capabilities

Inputs

• Technology

trends

• Client

data/interviews


• Analyst reports

• Trade journals

• A qualitative framework

that maps each major

application system

against business value on

one axis and

functional/technical

adequacy on the other

• Business value may be

based on one or more

considerations, such as:

– Support for KSF – Support for new

business direction

– Critical information

needs

– Customer satisfaction

• This describes the

current state of

information technology

within an organization,

with respect to:

– Strategy

– Organization and

management

– Policies and processes

– Systems (applications

and data) – Infrastructure

(technology and

communications)

– IT costs

• This assesses the

potential impact on the

IT organization as a

result of any change

initiative

• The following are

typically assessed:

– Management

– Structure

– People

– Workflow and procedures

Employ the

Application value

framework

Study the Current

baseline

Perform the IT

organization

change readiness

assessment

Perform the IT

portfolio

investment/value

analysis


• This provides a

qualitative assessment of

the investment and

subsequent value of the

current IT portfolio with

respect to it being able to

address the needs of the

business. The intent is to

show a causal link

between business

objectives and ITinvestment

Conclusion

Assessment of execution capacity Information technology capacity assessment Conclusion


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60Module IVA.T. KEARNEY BUSINESS UNIT STRATEGY TRAININGSource: A.T. Kearney

Key points

Weaknesses

References

Strengths

• A.T. Kearney Strategic Information Technology Practice

• Jupiter

• Should be performed concurrently with all other analyses of the industry, client, and competitorcompanies to relate strategic thinking to company capabilities

• Understand the company’s capacity or degrees of freedom to execute certain strategies

• Can be related to the technology portion of the value chain

• An identification of the current IT and capabilities resources will outline the key areas of concern

– Key IT drivers

– IT as an enabler or constraint

• If resources and capabilities are incorrectly assessed – Otherwise sound and logical strategy may be rendered useless – Performance measurement systems may be adversely affected

Documents

Formation 4