Creating People Advantage 2013 : “Lifting HR Practices to Next Level” | BCG

The benefits of best-in-class people management are indisputable, yet companies struggle to translate their ambitions for their HR practices into concrete actions.

For this year’s Creating People Advantage report, The Boston Consulting Group, in partnership with the European Association for People Management (EAPM), used an empirical approach to quantify the differences between companies with high capabilities in managing people and those with low capabilities.

In this way, we identified specific practices, in TEN Broad HR Topics, that can lift companies’ people management to a higher level. The report presents these specific practices in full detail, as well as some overall trends that we observed across most people-management areas.

First, companies must align their HR strategy with the overall company strategy along the complete HR value chain. Long-term strategic workforce planning, recruiting, performance management, and employee development require a holistic approach and systematic investments. The gears that drive HR activities need to mesh effectively.

Second, companies should break down the silos and ensure that business units and regions do not act on their own. Instead, they need clear governance and a structured HR model. Steering HR activities in a consistent manner across the complete organization calls for the proficient use of HR communications, including social media.

Furthermore, companies should continually monitor their HR activities and ground their decisions in objective data. They need to build predictive models on the basis of data that give an accurate picture of workforce supply & demand and that track HR KPIs. In this way, they can develop and channel their talent effectively and adjust their recruiting and training efforts to match business needs.

Root Causes of Success : 

A key difference in this year’s report is that on the basis of empirical analyses, we sought to identify the root causes of people management success among highly capable companies across all ten of the survey’s HR topics. In this discussion, the topics are arranged by order of the identified need to act.

Within each topic, we asked survey respondents who reported very high or very low current capabilities for their company—which also correlated with a high versus low return on effort invested—to provide more specific answers about sub-components of that topic. (For details about the methodology) The results—shown graphically for each topic in the following section—establish a clear demarcation between highly capable and low-capability companies and highlight the activities that most clearly differentiate these groups. These activities represent the most effective drivers of success: the processes and functions that HR leaders should focus on to trigger meaningful improvements in people management performance and to increase their return on efforts invested. Exhibit 4, gives an overview of the most promising drivers of high capability in each of the examined sections.

exhibit

For each of the TEN HR and people-management topics, we provide detailed descriptions of the key differentiators between highly capable and low-capability companies.

Talent Management and Leadership : 

Talent management and leadership activities are used to identify highly capable employees and develop them for more senior positions of greater responsibility. It is a key means by which companies improve retention and fill their leadership pipeline. This topic showed the highest need to act and also the lowest return on effort invested. In our examination of highly capable companies, we identified the actions that companies should take in order to increase their capabilities and the return on effort invested in this area. (See Exhibit 5.)

exhibit

Break down the silos. When asked whether their talent-identification processes were transparent, efficient, and enterprise-wide, respondents of highly capable companies showed an average degree of agreement of 74 percent, compared with just 23 percent among low-capability companies.1 Highly capable companies succeed in breaking down the silos of business units and locations, thereby enriching their talent and leadership pipelines. In this way, talented employees are not proprietary assets for individual managers; rather, these employees support the organization as a whole. In addition, everyone should have a fair shot at rising to leadership roles, and the evaluation and decision processes should be perceived as transparent and unbiased.

Plan your talent for the long term and invest. About 60 to 80 percent of a company’s leaders are typically promoted from within, and, in general, it takes 10 to 12 years for talent to rise to top-leadership positions. Because of this long development process, it is key to strategically plan talent and leadership needs on a long-term basis instead of simply reacting to ad hoc short-term trends. Highly capable companies have predictive models in place for planning for their talent needs at least five years into the future—by business unit, expertise, and location. This allows them to manage their talent proactively and, for example, to modulate the career pace of certain employees to prevent temporary oversupplies or talent gaps. Société Générale’s approach makes clear that planning for the long term also implies maintaining talent development programs in times of crisis.

Make talent, not war. Best-practice companies analyze the experiences that a future leader requires in order to succeed, and they systematically develop their talent by offering the right trainings, opportunities, and programs. By motivating talented employees to migrate to strategic, high-growth zones (for example, through rotation and international-mobility programs), companies can proactively develop their talent according to their needs instead of being forced to buy talent.

Walk the talk through consistent leadership criteria. Highly capable companies have clearly defined leadership criteria that pervade the HR value chain. By systematically applying their leadership criteria in all selection, promotion, and reward processes, these companies give transparent guidance to their employees and make sure that the talent that best fits the company’s strategy makes it to the top.

HR Analytics: Strategic Workforce Planning and Reporting :

We define HR analytics as those activities that companies use to forecast workforce supply and demand and to track and report HR and workforce KPIs. Implicit in this activity is the analysis of data to make predictions, as well as the monitoring and improving of HR and people management processes.

This topic showed the second-most-urgent need to act, as well as a low return on effort invested. In digging deeper into the results, we identified the key actions that companies should take in order to increase their capabilities in HR analytics.

Engagement, Behavior, and Culture Management :

Engagement, behavior, and culture management includes the degree to which the organization can establish company-specific norms and behaviors for employees, engage and retain them, and give them the sense that they are contributing to something meaningful.

With high ratings of future importance and only moderate current capabilities, this topic also shows a high need to act. We identified several key activities for companies that want to improve their capabilities in engagement, behavior, and culture management and to increase their return on effort invested.

Be proactive in shaping your culture. Best-in-class companies realize that the right corporate culture does not simply grow organically. Instead of waiting to see whether employees’ behaviors might destroy value, they invest significantly in developing their culture. Although many leaders think that shaping the culture is mainly a communication effort, success requires actively changing the environment in order to embed cultural shifts and make behaviors stick. In many cases, this is a big investment and can mean transforming processes that have a strong impact on the company’s culture, such as budgetary oversight and control, strategic planning, capital expenditure controls, and performance and career management. And generally, it is the leaders themselves who must change their behavior. For example, a leader who wants to foster an entrepreneurial culture must not micromanage his employees.

Measure how much value your culture is creating. Highly capable companies have measurement tools in place that gauge the impact of culture initiatives and their influence on employee behavior. Leaders should implement systematic and recurring surveys with a very long reach (such as engagement and culture surveys) to assess how changes to the culture affect the bottom line and to identify negative trends. With the emergence of Web-based surveys, it is much easier to do this today than it was in the past.

Use a clearly defined management cascade. Best-in-class companies use a management cascade process to improve engagement and steer their culture in the desired direction. Although senior managers need to be on-board and supportive of culture initiatives, they are too far removed from front-line workers to succeed in delineating specific steps. It is crucial that management use the right mix of communications channels, which should include leader-led face-to-face discussions through organized management cascades (extending down at least four or five management levels). Furthermore, when they undergo cultural-change processes, many successful companies use a co-design, or “middle out,” approach to make sure that middle managers really care about the organization rather than that they are simply conveying the change. The middle managers can also adapt initiatives to local peculiarities.

Performance Management and Rewards : 

Performance management and rewards includes the assessment of how employees work, along with the effectiveness of incentives to improve performance. This involves activities such as monitoring employees’ performance, providing constructive and timely feedback, and using a compensation model that links rewards to key behaviors that the company seeks to foster.

Although this topic received high ratings of future importance, the return on effort invested is very low. We identified the key aspects that companies should focus on in order to advance from good to great performance management.

Look beyond financial performance. Our results show that competitive monetary and non-monetary offers have relatively little effect in differentiating highly capable and low-capability companies. This result is in line with earlier BCG findings showing that employees generally look far beyond a mere compensation package and benefits. In our experience, employees are willing to forego a significant component of their salary if other aspects of the work experience are positive. Besides money and benefits, the “total offer” is being assessed according to the work environment, the job’s development opportunities, and the employer’s reputation.

HR Communications and Social Media : 

HR communications and social media includes activities aimed at consuming, sharing, and creating information and knowledge from within the HR department. Implicit in this category is the use of different communication channels, including digital media.

On average, companies’ current capabilities in HR communications and social media were lower than for any of the other HR areas we analyzed. As Exhibit 9 shows, highly capable companies in this area focus on several activities. With the increase in digitalization and the entry of Generation Y into the job market, these activities should be high priorities for companies—especially as our analysis of return on effort invested shows that such investments seem to pay off.

Training and People Development : 

The training and people development topic includes all activities aimed at helping employees improve their performance and learn new skills that will prepare them for new roles within the company. This area comprises a broad range of programs, such as formal classroom training, job rotations, and tuition reimbursement for self-directed learning.

Companies devote the most effort to training and people development, and this area shows the highest average capabilities. With the third-lowest return on effort among all ten HR topics, however, there is a lot of room for improvement,

Use training as a way of engaging employees in the company’s strategic agenda.Highly capable companies use learning and development activities to generate strategic insights. Some companies have approached the challenge by forming corporate universities. While in the past, corporate universities were used primarily to deliver specific training to employees, many today serve as strategy platforms and actively support the development and execution of the company’s strategy.

Diversity and Generation Management : 

Diversity and generation management includes managing employee differences in gender and age as well as, for example, social, cultural, and religious disparities. Globalization and demographic shifts have increased the relevance of this topic in HR, and that trend is likely to continue for the foreseeable future.

The surprisingly low rating of the future importance of diversity and generation management—in fact the lowest of all ten HR topics—shows that many companies do not grasp a core aspect of diversity. Such measures are not about being “nice” or complying with regulations. Instead, they are tools for generating better business results and will be even more important as the workforce ages and Europe’s talent supply decreases. The high return on invested effort that we identified in our analysis should motivate companies to intensify their comparatively weak efforts.

Tap the senior talent pool. Best-in-class companies do not just attract and develop young talent: they also systematically invest in building senior employees’ capabilities. The extremely high rate of early retirement in Europe—in some countries more than one out of two employees retire before the statutory age—shows that most companies are neglecting the potentially high value of senior employees. Because they have critical expertise, they are a valuable resource. This is especially important given current demographic shifts: people are living longer, and the talent shortage is growing. Companies that foster lifelong learning and take steps to attract, develop, and motivate senior talent will turn this demographic change into a competitive advantage.

Recruiting: Branding, Hiring, and Onboarding:

Recruiting includes the complete process of people sourcing—from employer branding to recruiting strategy, recruiting process, onboarding, and retention. As our results show, on average, companies rate their capability comparatively high in recruiting.

Labor Costs, Flexibility, and Restructuring : 

Labor costs, flexibility, and restructuring includes the company’s ability to react to a changing business environment. Our results indicate that companies do not see a high need to act on their capabilities in labor costs, flexibility, and restructuring. However, given heightened economic volatility, organizations often have to scale up and down in dramatic fashion, adapting the workforce size and capability set much more rapidly than in the past.

Mastering the “Building Blocks of Strategy”| McKinsey

“Increase your likelihood of developing effective strategies through an approach that’s thorough, action-oriented, and comfortable with debate and ambiguity “. 

Left unchecked, market forces continually conspire to deplete profits. Powerful business strategies can counteract those tendencies, but good strategy is difficult to formulate.

Indeed, the latest McKinsey research finds that a very small number of companies create most economic profit. The research also shows that a significant number of good companies outperform even in so-called “bad industries”, where the average economic profit is less than the market average.

How do they do it ? In other words, where do powerful strategies come from ? Sometimes it’s luck, OR good timing, OR a stroke of inspiration. In our experience, it’s also possible to load the dice in favor of developing good strategies by focusing on the core building blocks that often get overlooked. One is the need to gain agreement—before creating strategy—on the essential decisions and the criteria for making them. Another is to ensure that the company is prepared and willing to act on a strategy once it is adopted. Too much of what passes for strategy development, we find, consists of hurried efforts that skip one or more of the essentials. The resulting strategies are often flawed from the start.

It’s also easy, though, to go too far in the other direction and make the creation of strategy a rigid, box-checking exercise. Appealing as a formula-driven approach might be, it ignores the truth that strategy creation is a journey—and an inherently messy one at that. Proprietary insights are hard to come by. Shaping keen insights into good strategies requires deep interpersonal engagement and debate from senior executives, as well as the ability to deal with ambiguity in charged and often stressful circumstances. When would-be strategists overlook these dynamics, they cover the essentials in name only. Consequently, they miss opportunities and threats, or create great paper strategies that remain unfinished in practice.

In this article, we’ll outline a middle path—an end-to-end way of thinking that views the creation of strategy as a journey, not a project. This method, developed through our work with some 900 global companies over the past five years, can help senior executives approach strategy in a rigorous and complete way. We’ll also describe some principles that strategists should keep in mind as they use the method to ensure that their strategic-planning processes embody the spirit of debate and engagement, which, in turn, yields inspiration. By better understanding both the method and how to get the most out of it, companies can boost the odds that the strategies they create will beat the market.

Do justice to strategy’s building blocks : 

Most companies we’re familiar with demonstrate a variety of good habits when they create strategies, and they get many things right. But what they miss can be critical. Consider these examples :

  • a technology company that prided itself on analytical rigor but never accurately diagnosed how difficult it would be for a targeted customer group to provide reasonable returns 
  • a beer company that rightly focused on industry structure in its core business but made a losing bet on a related business—wine—after failing to forecast declining returns stemming from structural shifts there 
  • a telecommunications company’s strategy team, which recognized the importance of involving senior managers but ended up alienating them by holding a series of time-consuming workshops that focused on alignment around strategic choices, though the full set of choices hadn’t yet been identified 

These problems don’t have to happen. We find that companies do better when they ground all their strategy-development efforts and processes in an understanding of the building blocks of strategy. These straightforward modes of activity (exhibit) track the progression of a strategy from its roots as an idea through its emergence as an operational reality.

Exhibit :

The building blocks of strategy help companies make strategic choices and carry them through to operational reality.

One central building block is deep insight into the starting position of the company : where and why it creates—or destroys—value (diagnose). Executives also need a point of view on how the future may unfold (forecast). By combining insights into a company’s starting position with a perspective on the future, the company can develop and explore alternative ways to win (search) and ultimately decide which alternative to pursue (choose). With the strategy selected, the company needs to create an action plan and reallocate resources to deliver it (commit). 

These FIVE core building blocks are book-ended by two others. One is an initial block (frame) to ensure that the team properly identifies and agrees to both the questions asked and the decisions made as the strategy is developed. The final block (evolve) is dedicated to the constant monitoring and refreshing of the strategy as conditions change and new information becomes available.

To some extent, the building blocks simply represent a thorough list of activities that all good strategists perform. And while all are important and should be included in the creation of strategy, slavishly following this or any other framework won’t bring success. Depending on the situation, some blocks will be more critical than others and therefore require more attention (see sidebar, “Re-create, recommit, and refresh”).

That’s why taking some time to frame issues at the outset is so important. When strategists do so, they are better able to identify the real choices and constraints facing their organizations and to see which building blocks are likely to matter most given the situation at hand. Unfortunately, many executives feel that taking the time to frame strategy choices thoughtfully and to decide where to focus strategy-development efforts is a luxury they don’t have.

We’ve seen evidence of this pressure firsthand and in the responses to an executive survey we’ve been conducting as part of an ongoing research project. Fully two-thirds of the 200 executives we’ve surveyed so far report that they feel rushed to provide outputs in their strategic-planning processes. This pressure is understandable in today’s always-on, fast-changing environment, but it can be hazardous to a company’s strategic health. That’s especially true in the all-too-common situations when it’s not immediately obvious what factors will determine the success or failure of a change to strategy.

A financial-services institution in the Asia–Pacific region, for example, was investigating a growth opportunity involving the creation of an online business. Changing the company’s focus in this way would be a big undertaking, but the upside potential was large. Moreover, the members of the strategy team could already see that demonstrating the channel’s significant potential to the top team would be straightforward. Before doing that, however, they stepped back to spend some time thinking through the idea’s broader strategic context—framing, in other words.

When they did, they saw a serious risk of cannibalization for one of the company’s existing businesses. The new venture would also require substantial funding over the next three to five years before it contributed financially. This had important implications, and the team’s members needed to convince themselves that the risk was worth taking. Moreover, if the company made the move, would it stick with the effort when the time came to provide funding for people and technology ?

Instead of steaming ahead with analytical work to prove the potential, the team recognized that it would be critical to invest a disproportionate amount of time and effort to the commit building block. The strategy team did this, in part, by developing a powerful multimedia concept prototype to capture the imaginations of the top team and the executives representing key support functions. The team’s focus on gaining commitment was prescient; the prototype and the communication around it helped convince the leaders that the concept was so compelling for consumers that if the company didn’t cannibalize its existing business, a competitor would probably come up with the idea. The effort also helped motivate the leaders of the finance and IT functions to support the new offer. The company launched it in record time, to promising early results in both customer acquisition and levels of customer engagement.

In retrospect, the team credits the conversations and debates held during this framing period as necessary to identify and resolve the potential stumbling blocks related to the organization’s strategic direction. Although messy at times, this activity helped build an organizational commitment to the strategy and its importance to the company.

Myth-bust your story : 

A focus on strategic building blocks also can help companies develop penetrating insights. While “insight” conjures up visions of research, data crunching, and “aha” moments, real strategic insight also rests on a seemingly mundane and easy-to-overlook factor: a thorough understanding of how and why a company, its competitors, and others in the industry value chain make money. Absent dumb luck, a strategy that doesn’t tap directly into such an understanding will under-perform.

The difficulty, as professor Phil Rosenzweig of the International Institute for Management Development has explained so well, is that a company’s performance—good or bad—creates strong impressions that powerfully shape the way people perceive strategies, leaders, cultures, and organizational effectiveness. A commodity company, for instance, might falsely attribute its strong performance to the efficiency of its operations. Yet despite its efficiency, the economics of those operations could be swamped by market-structure changes that have significant pricing implications or by unexpectedly volatile demand.

One way senior executives can address the challenge, we find, is explicitly questioning received corporate wisdom—much as the popular US television showMythBusters does when it takes apparent axioms, urban legends, and popular assumptions and (in entertaining fashion) tries to prove or disprove them. In the creation of strategy, this approach means dispassionately identifying the elements that contribute to performance, while discounting any factor contaminated by perceptions of the company’s supposed greatness. It also requires a curiosity that’s woefully lacking in some strategic-planning processes. Nearly eight in ten executives we surveyed, for example, say that the processes of their companies are more geared to confirming existing hypotheses than to testing new ones.

To see how these dynamics play out in practice, consider the experience of a global retailer that was revisiting its strategy after the previous one had delivered five years of strong earnings. The positive results, most in the company believed, reflected good execution and the success of a recent initiative to refresh the store format. Still, the leader of the business felt there could be more to the story and worried that continuing along the same path might not produce the same results in the future. To determine what was actually driving performance, the leader met with the company’s strategy team, as well as other executives.

This was time well spent. The resulting discussions sparked important insights—revealing, for example, that while overall performance was good, there were problems under the surface. On the positive side, the company was steadily improving its margins and winning customers from a higher-cost competitor. Nonetheless, the solid network growth at the top-line level appeared to be masking a worrisome decline in the productivity of older stores. The big drag on performance, the team discovered, was the loss of mainstream customers to a cheaper competitor, which careful analysis showed to have an unassailable advantage on cost. Increasing promotional activity had so far seemed to stem the march of this aggressive rival, but the retailer was running out of steam and hitting practical limits. Significant changes would be necessary.

Let them grapple : 

This realization was the product of more than just number crunching. The thoughtful argument and debate surrounding the analysis from day one played a vital part in generating the insights. In our experience, many companies forget this truth when they create strategy. Instead, they put too much emphasis on preparing documents and completing analyses and not enough on stimulating the productive debates that lead to better decisions.

Getting executives to grapple with the issues can be a messy process, and the debates may be quite personal. After all, formulating good strategies typically involves revisiting fundamental and deeply held beliefs about a company’s past and future, and people tend not to shift their views without a fight. But without the necessary fights, and without the use of carefully designed decision-making techniques, companies may end up with rubber-stamped strategies whose flaws are exposed during implementation—or afterward, by competitors.

When companies find ways to get executives grappling—throughout the strategy-development process—with the choices that matter, they make better, less biased decisions. They also improve the likelihood that the relevant stakeholders will be on board when the time comes to make and act on choices.

To exemplify our point, let’s look again at the retailer’s strategy team as it engaged with the company’s broader leadership group to share its observations. Most strategy teams interact with decision makers by presenting management with a summary report and recommendations. But this team understood that senior managers needed time to debate the issues themselves and reach their own conclusions—and that such collective discussions would improve the resulting strategy.

Because the senior managers had a very hands-on attitude, the strategy team designed a series of weekly meetings called think tanks to let them work through a profit-deconstruction exercise illuminating the company’s past. In each session, the analysis was tabled after a certain point, and the management team’s members took turns drawing out conclusions or identifying further questions that needed answering. The strategy team was prohibited from bringing any conclusions of the analysis to these meetings, much to its discomfort. This ensured that company leaders were invested in the decision-making process and could challenge the strategy team with new ideas.

Through a series of small-group meetings, the leadership team (with analytical help from the strategy team) debated the reasons for the company’s past success and how to continue it. By unpacking these complex dynamics together, the leadership team arrived at an accurate, sharp diagnosis: the company needed to restore mainstream shoppers’ trust in its prices. The result was a simple, focused strategy for delivering “value” products and reinforcing that market position with customers. Furthermore, because the management team was deeply involved in the diagnosis, its members had a strong incentive to drive implementation.

Don’t leave the strategy unfinished : 

In conversations with senior executives, we occasionally hear some version of this saying: “I’d rather have a good strategy and great execution than vice versa.” We believe that this attitude reflects confusion about what great strategy is. Such a strategy creates a path for action and is inherently incomplete without it. Yet many companies fail to get the conditions for successful implementation right, and fully two-thirds of the executives in our survey admit that their companies struggle with the issue.

It’s a crucial struggle. No strategy, however brilliant, can be implemented successfully unless the people who have the most important jobs know what they need to do differently, understand how and why they should do it, and have the necessary resources. An added challenge, of course, is that strategic choices often involve big changes over long, three- to five-year time frames.

Finishing a strategy, therefore, requires creating tangible, proximate goals that connect to the longer-term strategy. It’s easy to create a high-level list of next steps and things to do differently on Monday morning. It’s much harder to roll back the future and connect it to the present so that people understand what they need to do differently and actually do it.

When companies fail to set proximate goals, the results can be disappointing. An Asian telecommunications company, for example, had landed on an intriguing and counter-intuitive strategy involving two big shifts: it wanted to move its target customer base from big business to the mid-market and to standardize its products rather than provide customized service to large clients. Making the changes work, however, would require salespeople to start saying no to new business from large and complex clients so that the company could redirect its efforts to mid-market customers. The short-term pain (lower revenues and higher costs) would ultimately lead the company to a market-beating position.

The management team understood and encouraged the shift and was ready to act. But the strategy team did not do enough to prepare the organization for the moves, instead spending its time on detailed initiative-planning exercises. Absent any effort to translate the company’s strategic desires into proximate goals for its employees, those employees balked at the changes.

Sales managers, for example, not only viewed saying no to larger customers as a short-term loss for the business but also were simply not as excited about pursuing mid-market customers with simpler needs. They understood the strategy intellectually and believed the analysis, but their skills, incentives, and ways of working and even thinking had not changed. Without such changes, they couldn’t connect the necessary steps to a longer-term goal and naturally reverted to their old ways, creating a backlash that inevitably undermined the strategy. Only afterward did the team recognize the kinds of activities that might have helped—for example, changing the salespeople’s goals, resetting the overall budget to acknowledge the transition from one customer segment to another, and using the reallocated funding to generate a new product-development road map.

Creating strategy in today’s environment of complexity, ever-changing priorities, and conflicting agendas is a daunting task. Yet when senior executives invest the time and effort to develop a more thorough, thoughtful approach to strategy, they not only increase the odds of building a winning business but also often enjoy a positive spin-off: the gifts of simplicity and focus, as well as the conviction to get things done. 

“Sales Discounts”: Discounting the Price is Discounting the Value |by: Geoffrey James | SalesForce

Sad to say, many salespeople get in the habit of using discounts to close deals. There are several reasons that this usually isn’t a good idea.

  • First, the sales discount reduces your profit on the sale.
  • Second, a discount implies that the best price wasn’t offered first.
  • A discount “cheapens” the price / value of whatever you’re selling in the mind of the customer.

It’s much more effective to think of list pricing as something that you defend, rather than discount, according to Robert Nadeau of the Industry Performance Group. He recommends the following process : 

1. Identify What’s Different : 

In order to justify paying a higher price for your offering, your customer will need to see either you, your offering and/or your company as different (and, specifically, better) than the competition.  There are SIX basic types of “differentiators” : 

  1. Feature. A characteristic or capability that your offering has and other products lack.
  2. Brand. An emotion uniquely tied to your company or offering.
  3. Convenience. Your offering is easier for the prospect to purchase and support than the competitor’s.
  4. Quality. Your offering is higher of quality (lasts longer, works better, etc.) than the competitor’s product.
  5. Commitment. You’re personally more committed to the customer relationship than the competition.
  6. Integration. Your offering works better with products that the prospect has purchased in the past.

The more differentiators that you can identify and articulate, the easier it is to defend your price. 

2. Create a Financial Case: 

Now that you know what’s different about your offering, tie each differentiator to one or more of the following FIVE types of financial benefits:

  1. Increased revenues. How will your offering help the prospect improve their revenue ? How much more product could they sell ? How much are those extra sales worth to them ?
  2. Decreased costs. How will your offering help reduce the prospect’s costs ? How much will they save in labor costs ? How much will they save in overhead ?
  3. Improved quality (of their own product). How will your offering help improve the quality of the prospect’s offering ? How much will they save in reworks, scrap, overtime, corrective action costs, and so forth ?
  4. Faster delivery (of their own product). How will your offering improve the prospect’s ability to deliver their own offering ? How much will they save in canceled orders, expediting costs, air freight charges, and so forth ?
  5. Lower risk. How will your offering reduce their exposure ? How much will they save in penalties, legal fees, and litigation ?

The bigger the financial impact of the problem and solution, the less relevant your price becomes.  And tying those benefits to your differentiators gradually pushes the other choices (specifically, the lower-priced competitors) entirely off the table.

3. Get Consensus on Financial Impact : 

Work with the prospect to get agreement on specific negative financial impacts of the problem that your offering solves.  Make sure the decision makers agree with the cost analysis.  The bigger the negative impact, the better the value.

Then work with the prospect to define all the ways that the problem that your solution addresses impacts their revenue and profit. Include direct costs, lost opportunity costs, personnel costs–whatever applies.

For example, if you can service your product at the customer’s site within one hour and the low-cost competitors can only get provide within 24 hours, determine how much it would cost the customer to be without support for 23 hours.

Approaching a sales situation in this way gradually forces the competition out of the picture because it builds a financial case around what’s unique about you and your product.  As you build the financial case, the prospect becomes convinced that only your product makes financial sense.

How “B2B companies” talk past their customers ? | McKinsey

” New research shows there’s a surprising gap between the Brand Messages that Suppliers offer to Customers and what their Customers really want to know? “. 

Although the digital-marketing revolution’s clearest ramifications and earliest impact may have come in the consumer arena, it’s also roiling the world of business-to-business (B2B) brand building. Business customers, like consumers, engage with companies through search, online communities, and Web-based video, so these are potentially powerful tools for delivering B2B brand messages and amplifying their impact. Our research suggests a potential stumbling block, though: a marked apparent divergence between the core messages companies communicate about their brands and the characteristics their customers value most.

In our research, we examined publicly available documents of Fortune 500 and DAX 30 companies to develop a list of 13 themes and topic areas that companies use to position their brands. These were broad ranging, from the extremely practical (low prices) to the more elevated (corporate social responsibility). We then selected the top 90 global B2B companies by market capitalization across six surveyed sectors. We reviewed the public documents of the companies to verify how many of their brand messages were clearly linked to the 13 themes that emerged from the broader sample (3 of them didn’t appear among the 90 companies). Then we assessed the degree to which the companies aligned their brand messages with the remaining 10 themes.

To discover how customers viewed these same themes, we surveyed more than 700 global executives across the six sectors, asking how important each theme was to the way they evaluated the brand strengths of their primary and secondary suppliers. We used multiple regression analysis to determine the extent to which a theme influenced the correlation.

The results were revealing (exhibit). Themes such as social responsibility, sustainability, and global reach, which many B2B companies cast in a leading role for brand imaging, appeared to have a minimal influence on buyers’ perceptions of brand strength. The inverse was true, as well: two of the most important themes for customer perceptions of brand strength—effective supply-chain management and specialist market knowledge—were among those least mentioned by B2B suppliers. Honest and open dialogue, which customers considered most important, was one of the three themes not emphasized at all by the 90 companies in our sample. In addition to these disconnects, our analysis showed a surprising similarity among the brand themes that leading B2B companies emphasized, suggesting a tendency to follow the herd rather than create strongly differentiated brand messages. Here are three questions whose answers may point to opportunities for improvement.

Exhibit :

The themes that many B2B companies consider important for Brand Imaging appear to have minimal influence on Buyers’ perceptions of Brand Strength.

Are you telling the same story as your competitors ? 

Given the prevalence of similar messages, this is an important checkpoint for many companies. For example, if both you and your rivals claim that your (and their) products derive from renewable sources, this probably won’t move the needle when customers consider your brand. Contrast that with IBM’s Smarter Planet branding effort, which tells a story emphasizing the company’s special capabilities in the digital economy and guides not just external communications but also product development and other forms of employee engagement.

Does your sales force say it is facing headwinds ?

Even in the digital era, our surveys show that personal interactions with sales reps remain the most influential factor—across touch points—for B2B customers. That makes sales people a great source of information about the degree to which customers see your products as differentiated or worth a premium. Have an honest dialogue with your sales staff. If you hear about consistent push-back on pricing or an inability to articulate a compelling argument for the value of your products, you’ve got a problem. It could be your product or service, of course. But it also may involve disconnects between what your customers value and the messages you send them in your broader (digital and more traditional) Marketing Activities.

Use your sales force to inform these strategies. Leading companies make extensive use of front-line interaction and market research to stay in tune with customer needs and perceptions. For example, Hilti, a maker of professional construction tools, has its salespeople do double duty as distributors and hands-on market researchers at customer construction sites.

Do you deliver your brand in a consistent way ?

Especially at a time when opportunities to deliver brand messages are proliferating as never before, consistency is crucial. If anything, today’s increasingly fragmented environment calls for a more disciplined communication of values and messages across a wider range of channels, including some quite traditional ones, for a longer period of time. DHL’s re-branding effort after its acquisition by Deutsche Post is one example. More than a hundred planes, tens of thousands of trucks, and countless uniforms were repainted or replaced to boost brand visibility. Internal company-wide training was designed to turn employees into brand ambassadors, and a set of binding rules for corporate identity and design govern all campaigns and materials.

Don’t mistake consistency for inertia, though: changes in the market environment should influence brand-messaging priorities. To stay abreast of market shifts, American Express, for example, created Open Forum, a virtual platform that helps small-business owners connect with the company and with one another. Amex acts as an adviser, helping its small- and midsize enterprise customers understand the constant variations in the retail marketplace—and learning, in the process, how it can best differentiate its own offerings. Consistently gathering information such as this and evolving in response are valuable ways of closing any gaps that may be opening up between your brand messaging and your customers’ needs.

“Burger King to enter India” with PE firm Everstone Capital | ET Retail

 

Burger King, one of the world’s top fast-food companies, will soon enter India through a franchising partnership with a company that will be headed by the present CEO of its UK operations and majority-owned by private equity firm Everstone Capital, a rare instance of a PE fund partnering with a fast-food chain.

In a departure from its usual global practice, the US chain will also hold a minority stake in the Indian franchisee, said a person familiar with the development. The India venture will be spearheaded by the chief executive of Burger King in the UK.

Varman, who has been associated with the burger chain for more than a decade, recently spent a few weeks with the Everstone brass.

Franchise Agreement may be Signed Soon…Varman spent time with Everstone’s founder Sameer Sain and partner Jaspal Sabharwal in India, studying the local market and meeting potential vendors.

Two persons with direct knowledge of the development said Burger King and Everstone are expected to sign the franchising agreement shortly. A Mumbai-based real estate developer will also pick up a minority stake in the franchisee company. “Everstone (and its partners) plans to invest $100 million to set up 500 outlets in the country over the next 7-10 years,” one of the persons said, asking not to be named.

India will be among very few markets where the Miami-headquartered burger chain will also own a stake in the local venture. “Unlike most such deals where only the franchisee invests in the business, Burger King will invest in the venture and hold a minority equity. The deal is more like a partnership, though the operations will be run entirely by Everstone Capital,” the second official said.

Burger King, which is famous for its signature Whopper sandwich, will be among the last big global food chains to enter India. Its arrival, ironically, will happen at a time its global rival McDonald’s is involved in a bitter legal battle with one of its franchise partners in the country.

The ownership of Burger King has changed several times since it opened its first outlet in 1954, and it is currently owned by Brazilian private equity firm 3G Capital, which bought it for $3.3 billion in 2010. One of the world’s top hamburger chains, along with McDonald’s and Wendy’s, the company again went public on the New York Stock Exchange last year, but 3G remains the largest shareholder with a 71% stake.

Since its takeover, 3G Capital has re-franchised stores and raised the percentage of its total franchisee outlets from 90% to almost 99%. At present, 13,000 outlets are franchisee-operated.

Everstone owns a controlling stake in Pan India Food Solutions, which operates a host of restaurants, including Noodle Bar, Copper Chimney, Spaghetti Kitchen and the local franchisee of US-based Coffee Bean & Tea Leaf.

Samir Kuckreja, president of the National Restaurant Association of India, says Everstone’s experience in earlier food ventures would come handy in its new partnership. “Now, they have to hire the right management, position it well, and get the menu right in India to be successful with Burger King,” he says.

Sir.Alex Ferguson’s “7 Leadership Secrets” for success |by: Steve Tappin | LinkedIn

His Autobiography is released today, so what lessons can we draw from this sporting icon ? 

When Manchester United boss Sir Alex – the most successful manager of a British soccer team in decades – announced his retirement back in May, it generated more than 1.4 million Twitter mentions within the first hour. This ranked as more significant than the death of Margaret Thatcher, if slightly less so than the announcement of the new Pope.

So here are Sir Alex’s 7 Leadership lessons : 

1) Face Tough Reality And Sort Problems Out Head-On :

The son of a Glasgow shipbuilder, Ferguson’s grit was forged during 17 relatively unspectacular years as a player in Scottish football. He reflected: “The adversity gave me a sense of determination that has shaped my life. I made up my mind that I would never give in.”

When he became manager of Manchester United in 1986, the tough reality was that the side hadn’t won the football league for 26 years – Ferguson was depressed by the players’ level of fitness and worried that they were drinking too much. However, as he would do many times in later years, Ferguson drew strength from adversity, managing to increase their discipline and improve results.

A key lesson for CEOs is not to let problems fester but to tackle them head-on. As Ferguson says :

“No one likes to get criticized. But in the dressing room, it’s necessary that you point out your players’ mistakes. I do it right after the game. I don’t wait until Monday, I do it, and it’s finished. I’m on to the next match.”

2) Only Accept Winning : 

“I’ve never played for a draw in my life,” boasts Ferguson, and with 49 trophies, 13 Premier League titles and two European Cups to his name, it shows. He has inspired by his passion, convincing players that they can push their performance on through a brick wall.

Ferguson is also passionate about his politics, leading his friend and Labour spin doctor Alistair Campbell to comment :

“If there is one lesson politics can take from sport, and someone as successful as Fergie, it is that if winning is what matters, make sure you do everything you need to do to win. That sounds obvious. But it is a mindset that combines the big vision with microscopic attention to detail.”

The temptation for Western CEOs is to get stuck in the mindset of incremental improvements, where 5% sales growth will get them through. However, as they come up against the big dreamers of increasingly professional Chinese companies, they would do well to adopt the mindset of the binary world of sport, where there are only winners and losers.

3) No-One Is Bigger Than The Team :

While he made solid transfer decisions, a big part of Ferguson’s success was the ability to spot talent and nurture from within. He turned exuberant “show ponies” – such as the 17-year-old Cristiano Ronaldo – into team players, while providing a home for talented misfits like Eric Cantona.

If you think there are big egos and strong characters in your organization, just look inside a Premier League dressing room. Ferguson’s genius has been to make everyone understand that the glory and the riches that they enjoy flow from being part of a winning team. It doesn’t matter how big a star you are. The team is always bigger. Either he was in control or the players were – as Roy Keane, Ruud van Nistelrooy, and David Beckham found out to their cost.

“Many CEOs should apply this to their top teams and deal more firmly with the big individuals who end up casting a dysfunctional shadow on team spirit and the company culture”.

4) Command Loyalty as A True Father Figure :

One of the great characters of football, Ferguson is often associated with his volatile temper. His “hairdryer” – whereby he dressed down a team member with such force and directness that it was said to dry his hair – is the stuff of legend. However, his role as a mentor and a father figure should be not be overlooked.

Ultimately, Ferguson has been more about building players up than knocking them down :

“ There is no room for criticism on the training field. For a player – and for any human being – there is nothing better than hearing ‘Well done’. Those are the two best words ever invented in sports.” Whatever the private exchanges, he always defends his team externally :

“There is no point in criticizing a player forever. And I never discuss an individual player in public. The players know that. It stays indoors.”

CEOs can learn much about loyalty and the importance of seeking external perspectives from Ferguson, who also told Alistair Campbell :

“ You know my definition of friendship – the real friend is the one who walks through the door when the others are putting on their coats to leave… I know from my position here that sometimes there can be so much noise and fury going on around you that you need people outside your own bubble who can take a slightly different perspective for you. We all need that.”

5) Work Hard & Stay Fresh :

Renowned for his work ethic and 7am training sessions, Ferguson says : “I tell players that hard work is a talent, too. They need to work harder than anyone else.”

However, Ferguson – whose outside interests span racing and military history – is an unlikely advocate of work-life balance, commenting :

” Mental and physical fitness are two sides of the same coin. You have to build rest into any program. That’s another thing that applies in all worlds, not just sport. I don’t think you can do high-pressure jobs now without being physically fit… there were times I could see [the leader] was getting tired, and I was thinking he’s probably doing too much himself, not delegating, not spreading the load.”

Only when they apply this insight can CEOs consistently perform at their best…

“Being able to analyze a situation and then decide what to do – that is such an important part of these top jobs. Reaching the right decisions under pressure.”

6) Build An Enduring Institution Of Which People Want To Be A Part :

Ferguson told the Harvard Business School that core to his success at Manchester United was building a “club” and not just building a “team” to survive :

“The first thought for 99% of new managers is to make sure they win – to survive. They bring experienced players in, often from their previous clubs. But I think it is important to build a structure for a football club, not just a football team. You need a foundation. And there is nothing better than seeing a young player make it to the first team. The idea is that the younger players are developing and meeting the standards that the older ones have set before.”

With a 27-year reign that’s eclipsed that of most CEOs and political leaders, Ferguson has excelled in managing multi-generation succession at his club. The baton has passed from the likes of Lee Sharpe and Nicky Butt, to Phil Jones on the inside and Robin van Persie from the outside. This would-be dinosaur has actually moved with the times, embracing new technology and medical advances to build a state-of-the-art training facility at Carrington. Ferguson has kept on developing his style and systems – and, professing that the modern player is somewhat more fragile – even claims to have mellowed a bit over the years.

7) Leave On A High :

Back on top of the English Premier League, Ferguson was wise enough to step away from the touchline of the beautiful game at a time of his choosing; without being given the red card. While it’s tempting to stay on and have another go and the ‘treble’ and the UEFA Champions League, the smart move is to leave space for someone else to take it on. That way his legacy has room to grow.

Many great leaders are true ‘one-offs’ and it is too simplistic to suggest that they should seek to bottle their essence to be preserved in aspic. Rather, the big challenge for them is to groom the next generation and ‘blend the essence’ so that it’s fit for their current and future organisation. Ferguson’s anointed successor, David Moyes, is said to be another Scot in the same mold but he is still going through a difficult transition.

His 27 years in the job have even inspired academic research at Ivy League institutions into Sir Alex’s leadership DNA , such as HBS’s Anita Elberse.

Note to soccer fans : As a passionate lifelong fan of Leeds United, a competing soccer team, it’s hard for me to write this post in praise of Sir Alex (easier though after Leeds’ 1-0 FA Cup Victory over Manchester United in 2010!). However, I have to respect what Sir Alex has achieved and the lessons we can draw from his leadership.

*** And Don’t Forget To Add Some “Fergie Time” ***

One of the most revealing passages in Sir Alex’s new autobiography is when he deals with the matter of “Fergie Time”. He admits that theatrically tapping on his watch as matches reached their conclusion was a psychological ploy.

The long-held popular belief was that this tactic would intimidate referees into granting Manchester United a little extra “stoppage time” (added with injuries, player changeovers etc.) at the end of either leg of a match. It was often in these vital extra seconds that his team would successfully score the goal that needed to level up the match or clinch victory. As BBC TV soccer presenter Gabby Logan would often say during her commentaries : “ They’re playing Fergie Time !! ”

I think the lesson here is that leaders and sports players – when in really matters – are able to get fully “in the zone” and into a state of peak performance. In this moment, we seem to lose track of conventional “clock time”, and the usual physical obstacles melt away. American football player John Brodie brings this concept to life :

“Time seems to slow way down… It seems as if I had all the time in the world.. and yet I know the defensive line is coming at me just as fast as ever.”

A truly great leader can shift other people’s perceptions of reality – inspire people to do the impossible. “Fergie Time” reminds me of Steve Jobs’ famous “reality distortion field” – which famously inspired his team to create ever-smaller, faster “insanely great” products – and convince us to buy products that we didn’t even know we needed.

With Sir Alex’s retirement, have we really seen the end of “Fergie Time” ?

“Get Out of the Way !!” : Organisational Behavior |by: Henrik Bresman | INSEAD

How to set structures to Foster Innovation & Creativity, then step back ? 

It’s no secret that innovation requires senior managers with backbone and brains. Often forgotten, however, is the fact that most of the heavy lifting of innovation is done in highly collaborative team settings.

The success or failure of these teams ultimately determines the fate of the big-picture thinking coming out of the C-suite… 

With so much at stake, it seems natural for upper management to attempt to impose structure – strict protocols, procedures, and an approvals regime — on team activities at an organisational level. How else to keep teams from losing focus or, worse, going rogue ?

But managers’ seemingly sensible efforts to keep teams on track can backfire, says Henrik Bresman, INSEAD Associate Professor of Organisational Behaviour. To get the most out of their teams, according to Bresman, it’s often best to do something many leaders find frightening : ” Stop leading for a bit. Give teams autonomy over an assigned task, then get out of the way “…

Stifled by Structure : 

Organisational teams are Bresman’s research specialty, and his investigations into the subject culminated in the 2007 book X-Teams: How to Build Teams That Lead, Innovate, and Succeed (co-authored with Deborah Ancona of MIT Sloan School of Management), where he argued the most successful teams were also the most externally oriented and network-minded. “Teams need to work hard to understand others’ expectations; to know where critical information and experience reside; to take stock of how the world has changed,” Bresman wrote.

Even the most intrepid of X-teams, however, can be tripped up by its environment. That’s why Bresman, after the publication of X-Teams, became interested in how team activity is affected by a corporation’s larger structure. Specifically, his recent paper “The Structural Context of Team Learning: Effects of Organizational and Team Structure on Internal and External Learning,” co-authored with Mary Zellmer-Bruhn of Carlson School of Management at the University of Minnesota, presents findings from a study of how pharmaceutical R&D teams learn, in relation to the degree of structure imposed on the teams from above.

In an interview with INSEAD Knowledge, Bresman said he was interested in “how teams obtain and process knowledge – of course, by definition any innovation team will have to do that.”

For the study, Bresman surveyed 62 teams from licensing units across six large pharmaceutical firms. The teams were responsible for identifying and researching externally sourced molecules, with an eye towards potentially acquiring them for development. To assess these unfamiliar molecules accurately, teams had to draw on all available resources both among themselves and in their wider networks – a learning curve that made them an ideal sample pool for Bresman.

The results confirmed Bresman’s initial suspicions and built upon what previous researchers have found: On average, teams operating under more rigorous organisational constraints exhibited less learning, while teams given less structure from above learned more.

Create a Safe Space : 

Bresman says the problem with imposed structure is that it chips away at a team’s ability to tackle tasks independently. “We see basically two stylised models – one is where you have the C-suite saying, ‘here is the structure in which you’re going to work,’ and that impacts 100 teams. Because of how dynamic the environment is, it is very unlikely that that structure will be ideal for any of these 100 teams. To have something imposed on them from above is not a good idea in a fast-moving environment,” he says.

Managers would generally be better off allowing teams more or less to make their own rules, as long as it is within the context of clear strategic direction. “The intuition here is that innovation teams operate in a very fast-moving environment, and they are the ones that have the information to make the best decisions, including decisions about how to structure themselves,” Bresman says.

Self-generated structure allows for optimal learning by fostering a sense of psychological safety – a climate that is safe for interpersonal risk-taking. “Team structure underpins psychological safety, and psychological safety leads to learning. Goals are clear, and roles are clear, and processes are clear. And that makes people feel safe, because they know the rules of the game. If your structure isn’t clear, people might be reluctant to say certain things because they’re not sure it’s something they should talk about at all.”

A solid self-generated structure, Bresman suggests, allows teams to run on their own steam, without the need for too much intervention from on high. And once that happens, wise managers can comfortably step away and let the team do its work.

Substitute Structures : 

Bresman says that while combining minimal organisational interference with self-structured teams is a good rule of thumb, setting boundaries at the company level isn’t always a bad thing. The study found that in some cases more controls from above aided the learning of less structured teams. For Bresman, this suggests a “substitutability principle” when it comes to structure. Organisational teams appear to abhor a structural vacuum, and may take whatever clarity they can from the larger organisation when their internal supports are shaky.

And the opposite may also hold true: Companies in need of a shakeup can draw energy from high-performing teams within the organisation. “ Teams have the opportunity to be vehicles for strategic leadership. That’s a very important implication,” he says.