“Modern Grocery Retail” & the Emerging-market consumer : A complicated courtship | McKinsey

In some “Emerging Markets”, the response to “Modern Grocery” formats has been tepid. What’s a Modern-Grocer to do ??

20 years ago, Modern Grocery Retail appeared poised to conquer every consumer market in the world. Ambitious European grocers, having blanketed their home countries with Supermarkets and Hypermarkets, began setting their sights on growth both within and beyond the continent. They held particularly high hopes for China, India, and other emerging markets, where fast-rising consumer spending seemed to presage an unprecedented demand for gleaming new stores with large assortments, wide aisles, and bright lighting.

In the 1990s, the term “modern grocery retail” was essentially a proxy for a small group of multinational grocers including Ahold, Aldi, Auchan, Carrefour, Costco, Lidl, Metro, Tesco, and Walmart…It was widely presumed that these retailers’ entry into any market would lead to the demise of the traditional trade—the family-owned grocery chains, small independent stores, and informal merchants that at the time accounted for the vast majority of grocery sales in emerging markets. The prevailing expectation was that although there would be local differences due to cultural specificities, in every country the retail landscape would eventually consist of a combination of modern formats: full-line supermarkets and hypermarkets, convenience stores, and discounters..

These assumptions have been proved wrong. Global grocery giants are struggling to grow profitably in many emerging markets… whereas, Traditional trade has proved remarkably resilient…And the market and channel structures taking shape in individual emerging economies are distinct from one another, following no obvious pattern.

Why did this happen? What, if anything, did multinational grocers do wrong? And what does it mean for the future of modern retail in emerging markets?

The Hypermarket’s shortcomings:

To understand the disparity between early expectations and the current reality, it’s useful to examine the roots of the two quintessential modern-trade formats: the supermarket and the hypermarket. The hypermarket in particular—whether in its European form (in which food anchors a massive selection of nonfood items) or its North American one (the “supercenter,” which represents the successful injection of food and grocery into a general-merchandise discount store)—was widely regarded as unbeatable. By offering tens of thousands of products in an immense building just outside or on the edge of a town or city, a hypermarket could operate at a level of productivity that other grocery formats struggled to match. Hypermarket operators passed on these efficiency gains to consumers in the form of lower prices, which served to reinforce hypermarkets’ advantage.

In their first forays into other developed markets abroad, major retailers relied heavily on the hypermarket format. When French retailers Auchan, Carrefour, and Promodès opened hypermarkets in Spain during the first years of Spanish economic reform, they quickly captured a large fraction of that country’s overall grocery sales and dictated the market structure that remains in place to this day.

Expansion across Europe was an exciting growth prospect, but even more enticing to retail leaders and investors was the growth potential of emerging markets. Over the years, that potential has become even clearer: by 2025, we expect emerging markets to account for $30 trillion in consumer spending, or nearly half of global consumption.

When multinational grocers entered emerging markets, they again relied on the grocery formats that were working so well in the developed world. But, in retrospect, it’s clear that the countries in which the hypermarket prospered had several characteristics in common: good road networks and high or fast-rising car-ownership rates, a large middle class that enjoyed decent wages and stable employment, and a high proportion of rural and suburban households with enough room at home to store groceries bought in bulk. Also, those markets had grown to maturity at a time when many women didn’t return to work after having children and therefore had time during the day to drive to and from the store. The hypermarket format draws heavily on consumers’ time, ability to travel, and storage capacity…

In Emerging Markets, retailers encountered an entirely different context. Consumers were less affluent and lived in urban areas; many didn’t own a car, couldn’t afford to travel to and from a relatively far shopping destination, had no room at home to store purchases, or all of the above..

A new respect for localism:

Further complicating matters, emerging markets weren’t just different from developed markets; emerging markets also differed from one another in nontrivial ways. That was true in the 1990s and it remains true today. Based on our research—which involved in-depth study of the retail sector in ten developing countries in Asia, Eastern Europe, and Latin America, as well as interviews with more than 20 local retail and consumer experts and analysis of channel-growth data in these markets—we’ve developed a perspective on the factors that have hampered the growth of modern trade in emerging markets.

On both the demand side (what customers want from retailers) and the supply side (the means by which retailers can deliver what customers want), different factors shape the retail ecosystem in each country. Together, these factors produce wide variability in the level of modern-trade development in countries around the world (Exhibit 1).

On the demand side, for instance, food-shopping habits have turned out to be largely localized and deeply entrenched. Emerging-market consumers tend to prepare their own meals and cook more than their peers in developed markets do, and they are accustomed to shopping at open-air market stands or small neighborhood grocery stores that offer a familiar selection of fresh food and household staples. They don’t necessarily perceive customer service at modern retailers as superior to that of the traditional trade. Customers of India’s kirana stores—small, family-owned retail shops in or near residential areas—already benefit from personal service from the store owner, free home delivery, and credit and cash rebates if they remain loyal..

On the supply side, a big factor is the informality of traditional trade: many small retail businesses rely on unpaid labor from family and friends, pay no rent because they own their storefronts, and don’t pay corporate taxes. Modern retailers cite this informality as a major challenge when competing with local retailers. A European hypermarket chain found that its considerable operating-cost advantage from better sourcing and supply-chain processes was canceled out by the fact that it was paying taxes while local competitors were not..

Another major factor affecting modern trade is public policy. India’s restrictions on foreign direct investment have limited the growth of modern retail there; in China, by contrast, city governments are assessed on the level of economic activity and foreign investment they attract, which makes them biased toward supporting modern trade. As a result, modern-trade penetration in China’s largest cities has grown significantly over the past 15 years..

A further supply-side factor in emerging markets is the fragmented supplier base, which places a natural limit on the benefits of scale. A retailer can’t source products as efficiently as it would in a mature market because it must buy from a complex network of regional and local entities. And even retailers with a national buying team won’t easily find national manufacturers who are eager to partner with them—a point we pick up on later.

Incumbent advantage is yet another powerful factor shaping retail ecosystems. Today’s market dynamics tend to become tomorrow’s market structure—so, for example, in markets in which a highly efficient wholesale system serves the traditional trade, it becomes much harder for modern grocers to gain a foothold. That said, wholesalers can also be vanguards of modernization. In Turkey, for instance, some Bizim Toptan stores have developed a substantial retail business. These wholesalers-cum-retailers illustrate the fact that ecosystems in emerging markets are partly shaped by players that can concentrate and coordinate a critical mass of what otherwise is a complex set of routes to market..

“Seven” strategic levers for success:

In parts of the world where the market structure is itself still in a formative stage, retailers need a bespoke strategy. Our research and experience suggest seven strategic levers that lead to success in emerging markets. These levers—having to do with delivering what consumers want, working effectively with other players in the ecosystem, and generating lasting productivity advantages—reflect perennial concerns for retailers everywhere, but they are especially critical in helping retailers secure a profitable future in the world’s fastest-growing economies.

The levers are by no means comprehensive. For one, they don’t touch on digital technology, which may well be just as important in emerging markets as in developed ones; indeed, rapid adoption of smartphone technology may allow emerging markets to leapfrog more mature markets and reconfigure the value chain farther upstream (for example, by giving smaller suppliers direct access to national and even global markets). Rather, we draw attention to areas that we believe require deliberate action in emerging markets-

1. Prioritize proximity.

2. Keep prices low—and make sure consumers know.

3. Obsess over productivity.

4. Make the business case to manufacturers.

5. Educate policy makers on the benefits of modern trade.

6. Consider partnering with the traditional trade.

7. Adopt a city-based strategy.

For any modern retailer, success in emerging markets isn’t guaranteed. Our research confirms the complexity and local specificity of market development and the degree to which it depends on initiatives taken not just by retailers but also by governments, manufacturers, wholesalers, and others in the local retail ecosystem. International retailers thus need to become experts at local tailoring. That said, operating in emerging markets still unquestionably requires excellence in core retailing competencies: marketing, merchandising, supply-chain management, and talent development, to name just a few…

Modern Retailers that excel in all these areas in the context of markedly different emerging-market structures will, in a sense, have conquered the world..!!

Making Brick & Mortar Stores ” matter in a multi-channel world ” | McKinsey

As the role of the brick-and-mortar store evolves, retailers will continually have to refine how they use their real estate…!!

For decades, the retail industry has followed the same straight forward formula for growth: open new stores. By replicating a proven store format in a new catchment area, retailers could reliably enlarge their customer base and count on healthy increases in sales.

But the world has changed. More than half of consumers now research their retail purchases online, making purely in-store purchase decisions the shrinking minority. In many categories, e-commerce has dramatically lessened the need for physical stores. “Virtual space”—which we define as the floor space that would be required to generate the sales volume that online retail now accounts for, at a sales density equivalent to the industry average—is expanding at a staggering rate. In this new world, what is the role of the brick-and-mortar store?

Many retailers find themselves struggling with the question and saddled with more real estate than they know what to do with. After all, their property departments are geared up for expansion and acquisition. Their finance departments have traditionally focused on reaping investment returns from stores and tend to be jittery about investing in new and unproven technologies. On the flip side, their e-commerce directors are frustrated by this lack of understanding of the pace and mind-set such companies need to become digital winners.

To position themselves for success in a multi-channel world, retailers would do well to take a disciplined approach that begins with a reassessment of the role of the physical store. We recommend a FIVE-step approach we call STORE : starting with a clear vision for the future role of the store, tailoring categories and formats accordingly, optimizing the store portfolio using forward-looking analytics, reinventing the in-store shopping experience, and executing systematically across channels…

The incredible shrinking footprint: 

The effects of online migration in the retail industry are evident in every category. In the United States, apparel retailer Gap closed more than 250 stores in 2013; department-store chain Sears closed almost 200. Walmart’s new stores are about a third smaller than they were five years ago…!!

Online retail has affected more than just physical floor space. Amazon, for one, has put intense pressure on retailers’ top and bottom lines by having key items priced 13 to 20 percent lower than average, an assortment 17 times larger than the average retailer’s, and a cost base that is 3 to 4 percent lower than brick-and-mortar competitors’, all while achieving the highest customer-satisfaction scores in the industry. The combined effects of Amazon and other online retailers have rapidly hurt traditional retailers’ return on invested capital, as fewer sales flow through existing physical assets.

Many retailers’ instinctive response to these headwinds has been to close under-performing stores and to look for operational efficiencies, but these moves only buy time—they can’t fully close the performance gap…“Shrinking to greatness” is not the answer.

A framework for change: 

Shifting from a store-focused approach to a multi-channel mind-set requires retailers to change their traditional frames of reference and ways of working. As consumers increasingly shop across channels, terms like “convenience” and “efficiency” take on new meanings. Customer expectations are rising: for instance, customers now expect price consistency across channels, the ability to buy online and pick up or return in store, and a range of payment options. Price transparency puts pressure on retailers to develop ultra-efficient operating models. The wealth of online information available to consumers raises the bar for in-store service and expertise.

But let’s be clear: the brick-and-mortar store is not dead; it just plays a different role now. In fact, in a multi-channel world, physical stores can provide a competitive advantage… Some multi-channel retailers have seen growth in their online sales and penetration among consumers who live near their stores. In several sectors, “click and collect” is proving a popular and increasingly efficient means of serving the customer. More than 50 percent of Walmart’s online sales and around 40 percent of Best Buy’s already are picked up in stores. Best Buy’s store-within-a-store partnerships with Microsoft, Samsung, and other suppliers capitalize on manufacturers’ need to show off their products in a physical retail environment. Former online pure plays such as Oak Furniture Land and sofa.com have opened physical stores that now generate as much as 60 percent of sales.

Some retailers are now reshaping their store networks in response. One approach is to lead with a handful of flagship stores—which essentially become a marketing and service channel for the online business—supported by numerous smaller outlets that offer convenience and a curated product offering.

In light of rapidly evolving technology and consumer behavior, we believe retailers that take a forward-looking view and heed the following five imperatives can position themselves for multi-channel success.

Start by Redefining the role of the store:

The first question that retailers should ask themselves at the beginning of their store-network transformation journey is, “What role will my brick-and-mortar stores play in a multichannel world?” To answer the question, retailers must find out what their customers truly care about. They need to know which aspects of a store matter most to customers and what purpose a store serves for them:

  • Convenience and proximity.
  • Efficiency
  • Inspiration
  • Instant gratification.
  • Discovery of a solution, information, or service.
  • Entertainment and social interaction.
  • Experiencing brands and products.

 

Economic considerations are important as well. For each of the purposes above, retailers should ask, “How can stores do this profitably?” There may be more than one answer and therefore more than one winning store format. In any case, the agreed-upon role (or roles) of the store should dictate every decision about the store operating model: location, assortment, staffing, supplier funding, employee training, and so on.

Tailor categories and formats accordingly:

Customer priorities and store economics should next become critical inputs into ongoing category reviews, to ensure that assortments and space allocations are continually optimized for a multichannel world.

Format decisions should also be driven by customer needs and priorities. Some retailers are adapting their store formats to the tastes and preferences of certain customer segments. Macy’s, for example, has embarked on a major effort to court millennials: it has launched more than a dozen segment-specific brands and created “destination zones” for millennials in its stores.

Optimize the portfolio using forward-looking analytics:

The next step is to re-evaluate the store portfolio through a multichannel lens. Leading retailers regularly analyze correlations between sales performance and catchment data to identify promising locations for new stores and to figure out the winning formula for top-performing stores; they examine factors such as population density, income, competitor presence, and average tenure of the sales staff. This is a valuable exercise, but in a fast-changing business environment, it’s not enough. Retailers must look ahead: they must extrapolate the impact of macro and industry-wide trends on the store network’s economics and operating model. And they must understand the impact that channels have on one another. One retailer that already had 100 unprofitable stores in its network found that another 100 would be in the red within three years given competitor trends and the shift to e-commerce.

The most forward-thinking retailers use analytical tools and techniques to reshape their entire store networks. They use financial and geospatial modeling to highlight not only where stores should be opened but also which should be closed, resized, or reformatted.

Re-invent the in-store shopping experience:

Creating the store of the future will mean overhauling the in-store customer journey, in part by using new technology to make the shopping experience as seamless and easy as possible. Some retailers simply copy the in-store moves of multichannel champions such as Apple and Burberry or equip sales staff with iPads to give their stores an updated, high-tech look. But cosmetic changes alone won’t result in lasting impact. A multichannel mind-set must be embedded in the store design and in employees’ new ways of working.

Retailers should prioritize the basics: again, focusing on what matters most to their customers and enabling multichannel shopping (for instance, by establishing fast-pickup counters for online orders) while being ruthless about taking costs out of the things that customers don’t care about.

Execute systematically across channels:

Change of this scale is not easy and affects many functions across the organization. Some retailers make the mistake of developing a store-network transformation plan that extends past 2020, by which time parts of the plan will probably be obsolete, or else they embark on a massive change program that will take so long to roll out that it will be out of date before it is halfway done. Retailers are typically better served by developing a detailed plan for the next 12 months and a high-level road map for the next three years.

Pace and flexibility are critical. “Gold plating” an entire store takes too long and tends to be expensive. Retailers should instead test new ideas quickly, and they should pilot individual aspects of store design to figure out specifically what is working and what isn’t.

Of course, capabilities and organizational design, both at headquarters and in individual stores, must evolve as the network evolves. Retailers should ask themselves: Does the organizational structure support the new network size and role? What would it take to shift the mind-sets of the property team away from a focus on opening new stores and toward making better use of existing space, introducing and refreshing store concepts quickly, and even scaling back on real estate? the store of the future should allow shoppers to move seamlessly across channels…Store staff should be well trained and comfortable in directing customers to the right products, both offline and online.

The logistics and store teams should work hand in glove with the online team to ensure that orders are fulfilled efficiently and to get products to consumers quickly….!!

The “State of Strategy Today” : Good strategy is worth doing well | A.T. Kearney

In a study performed, we found a strong correlation between a company’s total shareholder returns (TSR) and its planning horizon…Those with longer horizons saw stronger returns than those with shorter…!!

We were not surprised then when our latest strategy study found a similar correlation. Only this time, the comparisons are between successful and unsuccessful strategies. Of companies with longer strategy cycles—five years or more—85 percent see beneficial results. For companies whose strategy cycles are less than five years, 53 percent are successful. Interestingly, there is little difference between companies that take an ad-hoc approach to strategy (46 percent) and those with planned strategy cycles of less than five years (47 percent)…

This last point is reassuring, as it suggests that a properly executed strategy is worth pursuing. Just 6 percent of companies have strategy cycles of more than 5 years. It can be argued that strategy cycles are more important in today’s competitive environment or, as one study participant says, “To succeed today, we need to innovate, and innovation requires strategy and commitment. So it makes sense that committing to a strategy over time results in success over time”…

Strategy is more difficult now..When working on consulting engagements, our clients sometimes complain that it’s much harder now to craft powerful and easy-to-communicate strategies. “Strategy formulation and deployment is a complex, moving target,” explains one CEO. Another blames the difficulties on what she calls “an ever-changing business environment that requires spending more resources on strategy.” Our study findings reflect the same frustrations: 62 percent of business executives say strategy has become more complicated over the past decade, and 74 percent say complexity forces them to spend more time and effort on strategy formulation. Yet, despite these increased efforts, 46 percent of strategies fail to meet expectations..

Interestingly, C-suite executives are much more optimistic about the effectiveness of their companies’ strategies than those in management…Indeed, 81 percent of executives believe their strategies are meeting or exceeding expectations, while 48 percent of those at the management level are less optimistic (see figure 3). Further, this C-Suite misconception is even greater for companies that are lagging their peers as almost 100 percent of executives believe their strategies are working just fine, while management is much more skeptical..

Agility to the rescue – maybe It is commonly accepted that today’s business environments are fast changing and dynamic, and much more so than just a few decades ago. These tumultuous conditions have caused some executives to question whether strategy is even possible anymore. Isn’t a strategy outdated before it can be implemented? Aren’t we better off to focus on agility in order to capitalize on emerging trends faster than peers? These are some of the questions we heard. We put this thinking to the test with surprising results: More than 80 percent of global executives consider agility as important, or more important, than strategy when it comes to securing a company’s future success. And only a slim 19 percent believe a strategy-induced competitive advantage is still possible (see figure 4). In the minds of business leaders, it appears that strategy is failing…

figure4

However, a deeper dive into the survey data finds that “agility as a substitute for strategy” notion is flawed. We wonder if it isn’t simply a self-fulfilling prophesy :  Those who believe agility is the foundation for success have failing strategies, while those who believe strategy is a source of competitive advantage, have exceptionally successful strategies. The more interesting question, which begs further investigation, is in which direction the causality flows: Do companies have trouble formulating and deploying strategies and so turn to agility? Or, does a focus on agility as the answer to today’s challenges lead to the demise of strategy? Does a string of successful strategies mean strategy is the answer to all that ails an organization ??

What’s to blame for strategy failure?

Judging by the responses of our study participants, strategy failure is an emotional topic. One participant puts it this way : “In large organizations, strategy formulation is too complex and too top-down, leaving the rest of the organization to play catch up. And before they can do so, the next strategy is being rolled out.” Another says: “Strategic planning often takes place in an ivory tower by individuals who haven’t a clue what happens at the implementation level.” These and other comments suggest that the interface—the handover—between strategy formulation and deployment is to blame for failed strategies. Our findings confirm this. When asked to identify the trigger of a failed strategy, 7 percent of executives point to formulation, 6 percent point to deployment, and 86 percent say it is a mix of the two (see figure 5)..

figure5

Strategy formulation: What goes wrong?

If there is ever a need for knowledge, experience, and preparation, it is during strategy formulation. When asked about their strategy formulation failures, most executives complain that it is an insufficiently inspired, unrealistic, impractical, and detached process :

  • Lack of understanding of future trends (88%)
  • Little understanding of internal capabilities (87%)
  • Too much top-down approach (84%)
  • Not enough logical thinking (84%)

One interesting finding is the conflicting perspectives about the role data analysis plays in a failed strategy formulation process. Some blame “too much data analyses” while others say there is “not enough data analyses.” The reasons for the different views depends on the participants’ backgrounds. For example, many in the too-much-data group have firsthand experience in data analyses of the “boiling the ocean” type—in which substantial efforts yield few real insights. The other group is accustomed to formulating strategy using strategy statements that are not backed by sound financial justification or based on quantifiable competitive opportunities..

Several study participants consider secrecy an issue…“The C-suite is afraid competitors will learn our strategy and so do not involve middle-level managers as much as they should in developing the strategy,” explains a manager. “Clearly, keeping our organization as much in the dark as our competitors about our strategy is not a fast lane to success”..

Strategy deployment: What goes wrong?

Many of the reasons for failed strategy formulation are also attributed to failed deployments. For example, a strategy might be too ambitious and broad for the organization, too narrow to cope with the full breadth of changing market conditions, or deployed from an impractical top-down perspective. “Strategy deployment is now our greatest challenge,” explains a CEO. “Market conditions require a more aggressive strategy, but execution has not changed.”

Not surprisingly, reasons for failed deployments have more to do with the handover between strategy formulation and deployment:

  • Lack of internal understanding of the strategy (90%)
  • Lack of internal capabilities to execute the strategy (90%)
  • Lack of ownership (86%)

This makes for bewildered, disenfranchised, overwhelmed, and under-supported deployments. As one manager admits, “We underestimate the combined effects of overlapping initiatives on the same group of people”..

Gauging the future –

Study participants largely agree that a better understanding of future trends is a prerequisite for sound strategy formulation: “Our strategies fail at the development stage because we do not accurately determine where the market is heading in the next three to five years.”

Not surprisingly, over the last decade many companies have increased use of future-focused tools such as fore-sighting, trend analyses, and scenario planning (see figure 6)..

Organizational inclusiveness –

Involving the organization in strategy formulation resolves the handover issue between formulation and deployment. “Strategy that doesn’t make it out of the boardroom isn’t really strategy,” admits an executive. “Attempting to make it purely process-driven overlooks the importance of the ‘goodwill’ factor—the people who actually deploy the strategy because they buy into it, and not just because it is their job to deliver it.” Our findings break down this thinking into a number of distinct points. At the base, is the conviction that involving more people with firsthand experience in dealing with markets, customers, competitors, processes, and suppliers makes for better and more practical strategies.

“Bringing in a general workforce opinion helps management make more informed decisions,” says a manager. “All levels of the organization can contribute to strategy formulation and implementation. Middle management and the workforce provide practical input.” Organizational involvement is also essential for making strategies sufficiently ambitious. As one executive says, “The most important area for innovation in achieving goals and targets are the skills and knowledge of staff. Without these, the top-down approach is doomed to mediocrity.”

Our findings back up these observations : Two thirds of companies that pursue meaningful organizational inclusion in strategy formulation have successful strategies. Yet, involving the workforce doesn’t just make strategies better and more practical, it also lays the groundwork for engaging the right people in strategy deployment: “We involve our people at all levels in strategy development and find that innovation and diversity of ideas are pluses, both in adopting change and in people acting as change agents. An engaged individual is more resourceful than one who is simply employed.”

Organizational involvement is not a panacea. It provides innovation and practicality and, while it does not really affect speed, it does make things more complex (see figure 7). As one CEO says: “Consultation can be a bit of a pain and slow down a good planning operation, but the results following the consultation can make the extra time well worth it”..

figure7

Strategy needs to be led- 

not just decided on Despite the virtues of organizationally inclusive strategy formulation, the complexity that accompanies it can be an issue. For this reason, inclusive strategy requires top-down leadership, with top management establishing the ideas, ground rules, organizational teams, and direction that are critical for middle and lower management. Strategy, at its best, becomes less of a decision and more of a direction to inspire the organization to follow—not once, but on an ongoing basis.

As one CEO says : “Strategy & Leadership go hand-in-hand, you can’t have one without the other”…!!

The “Four Pillars” of “Blue Ocean Leadership” | INSEAD

To unleash employees’ untapped talent and energy, leaders need a strong repertoire of actions, not just better awareness and empathy…!!

Most leadership programmes are generally designed to hone the cognitive and behavioural skills of leaders with the implicit assumption that this would ultimately translate into high performance. Leaders are accordingly called on to develop traits like self-awareness, self-regulation, and empathy, for example, all of which require deep self-reflection and introspection to assimilate into a person’s being.

While cultivating such values are important, when we asked people to look back on these programmes, most reported not seeing a marked change in leadership caliber..

As one executive put it, “Without years of dedicated efforts, how can you transform a person’s character or behavioural traits? And can you really measure and assess if leaders are embracing and internalising these personal traits and styles? In theory yes, but in reality it’s hard at best.” In the end, millions of dollars were often spent, excitement was initially generated, but real leadership change did not set in..

Pillar One: Focus on acts and activities.

Blue ocean leadership, in contrast, is action-based, just as strategy is. It focuses on what acts and activities leaders need to do to provide a leap in motivation and business results driven by people, not on who they need to be. It’s the difference between being asked to be motivating versus being asked to provide those you lead with real-time feedback and best practice lessons that internally motivate and guide those you lead to up their game while feeling valued. The summation of these acts and activities is the leadership equivalent of a company’s strategic profile only here the aim is the development of a compelling leadership profile grounded in actions that are easy to observe, measure, and are directly linked to performance. This difference in emphasis has an important consequence for the time and resources needed to bring about a change for high performance. It is markedly easier to change a person’s acts and activities, than their values, qualities, or behaviours.

Of course, changing a leader’s activities is not a complete solution, and having the right values, behaviours, and qualities is important. But changing acts and activities is something that any individual can do, given the right feedback and guidance..

Pillar Two: Connect leadership to market realities by engaging people who confront them.

We observed that the leadership approaches employed by organisations are often generic and detached from what firms stand for in the eyes of customers and the market results employees are expected to achieve. At one insurance company, for example, call center personnel were tasked with fulfilling customer claims rapidly, while their frontline leaders maintained a hands-off approach to getting the claims department to cut checks rapidly.  Call center personnel rightly felt set up to fail, hugely demotivated, and let down by their leaders.

Blue ocean leadership, in contrast, focuses on what makes effective leaders, not in a vacuum but in light of the market realities their organisations confront and their direct reports must deliver on. Blue ocean leadership does not subscribe to a generic approach of common leadership acts and activities much as strategy does not subscribe to the same strategic profile across organisations. Instead people who face market realities are asked for their direct input regarding what acts and activities their leaders do that hold them back and what they need from their leaders but aren’t currently receiving to be their best and effectively serve customers and key stakeholders. When people are asked to help define the leadership acts and activities that will make them thrive and are connected to the market realities against which they need to perform, people get the type of leadership they and their organisation need and are highly motivated to share their energy and perform to the best of their abilities. As one employee put it, “I am under constant pressure to produce market results. I need the decisions and actions of my boss to support me to succeed in achieving market results. Currently there is a disconnect here.”

Pillar Three: Distribute leadership across different management levels.

While the market realities that organisations face today demand that there should be leaders at every level, the majority of leadership programmes we observed still remained largely focused on the top. But the key to a successful organisation is having empowered leaders at every level. It’s an illusion to expect or rely on top management on its own to deliver high performance especially as outstanding service all too often comes down to the motivation and actions of frontline leaders who are often in closest contact with the market. Executives need to push responsibility down in the organisation so that people on the frontline can deliver world-class service. Organisations need to develop effective leaders deep in their organisation by distributing leadership across different management levels, but that was often not the case.

Blue ocean leadership addresses this need by focusing on distributed leadership, not top leadership. By distributed leadership we refer to leadership distributed at the senior, middle, and frontline levels. Blue ocean leadership sees leadership as needed at all three levels to unlock the ocean of unemployed talent and energy that stretches deep into organisations. It also understands that these three levels are different enough from one another. Each requires a different leadership profile to be effective since each has a different positional power, task environment as well as focus on and interaction with the external environment. The factors that define good leadership are derived by the acts and activities leaders need to take at each level to create a leap in value for both employees and customers. In this way, blue ocean leadership, like blue ocean strategy, is about creating a nonzero-sum, win-win outcome. As we’ve heard repeatedly, “Almost everyone leads someone, not just the top. But when it comes to leadership, we focus on the top. The truth is 90% of our people don’t even have contact with them so how is their greatness supposed to transform our organisation? We need effective leaders at every level.”

Pillar Four: Pursue high impact leadership acts and activities at low cost.

Leadership practices are all too often seen and treated as something added on to people’s regular work. But with secretaries and administrative staff in most organisations already cut back to the bare minimum and the market reality intense, most leaders’ plates are already full. Finding the time to do one’s regular job is tough enough, let alone attempting to up one’s game. So a step-change in leadership strength rarely occurs. Time is just not enough.

Blue ocean leadership recognises this. It breaks the trade-off between impact and cost by focusing as much on what acts and activities leaders need to eliminate and reduce in what they do as on what they need to raise and create to unlock the ocean of unemployed talent and energy to drive high performance. In the context of leadership, high impact refers to achieving high motivation and engagement of people to drive business results while low cost refers to a lower investment of time by leaders, which is their most expensive and limited resource.

Our research has found that many of the acts and activities that take up leaders’ time actually work against them being effective and can even be resented by those below them, not appreciated by those above them, and are an energy sapper for the leaders themselves. By expressly eliminating and reducing these acts and activities, leaders’ time is freed to focus on new acts and activities that make a real impact on leading and producing business results driven by people. Without freeing up leaders’ time in this way, it is often no more than wishful thinking that leaders will have the time to up their game..

Conventional Leadership Development Appoaches Blue Ocean Leadership
Focus on the values, qualities and behavioural styles that make for good leadership under the assumption that these ultimately translate into high performance. Focus on what acts and activities leaders need to undertake to boost their teams’ motivation and business results, not on who leaders need to be.
Tend to be quite generic and are often detached from what organizations stand for in the eyes of their customers and the market results their people are expected to achieve. Connect leaders actions closely to market realities by having the people who face market realities define what leadership practices hold them back and what leadership actions would enable them to thrive and best serve customers and other key stakeholders.
Focus mostly on the executive and senior levels of organizations. Distribute leadership across all three management levels because outstanding organizational performance often comes down to the motivation and actions of middle and frontline leaders who are in closer contact with the market.
Invest extra time for leadership practices added on to people’s regular work. Pursue high impact leadership acts and activities at low cost by focusing as much on what leaders need to eliminate and reduce in what they do as on what they need to raise and create.

To put blue ocean leadership in action, we adapt the analytic tools and frameworks of blue ocean strategy to the leadership context. The result is the Leadership Canvas, the Leadership Profile and the Blue Ocean Leadership Grid all of which are grounded in acts and activities, easy to understand and communicate and that engage more people in an organization…The tools and methodology point is very important…

Without that it is very hard for research to do more than inform but practically address the challenges of leadership development for high performance…!!

“The Retail-Revival” : Succeeding with a “Store-Led Strategy” | BCG

A Store-Level Focus Can Transform Retail Chains Faster and Yield real results..!!

A bottom-up approach is entirely appropriate for retailers that find themselves struggling to make meaningful performance gains. Unlike what’s typical in many other industries, symptoms of sub-par performance in retail are readily detectible by both retail experts and customers, and those customers are able to provide immediate feedback..

Of course, #RetailTransformation is not simply a matter of “walking the store floor”…Although the physical demonstration of engagement is important, it is insufficient to effect lasting change…BCG has found that big performance gains are possible when executives are ready and willing to drive an integrated store-first change program that fits within the existing business model: that is, there are no additional capex requirements and no major changes to infrastructure…

Significant Results Within Months :

The results can be impressive. In BCG’s work with retailers worldwide, we have seen noticeable increases in store traffic that have, in just a few months, translated into a 5 percent lift in like-for-like sales and consistent profitability. Customers will almost certainly see cleaner and tidier stores with neat, well-stocked shelves, up-to-date price tags, fresher fruit and vegetables, and cheerier, more helpful employees..

Such results can be seen in a large Asian retail chain that successfully piloted and rolled out new operating practices. Guided by a store-led initiative, the chain boosted sales per square foot by more than 14 percent inside nine months, and it showed a profit for the first time in five years. We have observed comparable results in Europe and North America. One large European grocer gained a full percentage point in market share in its hotly contested market within six months..

The essence of such change initiatives lies in the deliberate, choreographed coordination of three concepts that previously had been used only selectively, in isolation, or outside the framework of a sustainable, system-wide change effort..

Anchoring the effort is the “Transformation SWAT team”—a carefully selected group whose job is to lead and embed sustainable change. Unlike typical change-management teams, these SWAT teams include high-potential middle managers who have a deep understanding of commercial and operational realities..

The second element is “stores of learning”—a small selection of representative stores that serve as centers of excellence. The goal is to rapidly pilot new operational and commercial practices, provide a visual look-and-feel trigger point to improve team culture, and to educate, inform, and excite senior store operators. The third element is fast rollout across the chain, spearheaded by the store operators themselves..

We’ll examine each of those transformation levers after a brief look at the context of retail challenges today…

Inverting the Business Pyramid :

Successful retail leaders are all “fluent in floor.” They can discuss, with authority, stockout rates in each store. They have a good sense of how customers are helped in stores. They’re likely to have ridden in a supplier’s truck, so they’ve seen how products are sorted, packed, and loaded at the distribution center—and how efficiently products are unloaded, unpacked and stocked at the stores..

That kind of store-led approach is needed to resuscitate grocery and mass-retail chains whose performance is sagging and that face tough online competition and upstart specialists. Yes, top-down approaches are entirely appropriate for macrostructure decisions—how many stores are needed in the region, say—but increasingly, executives need to be directly in touch with employees and shoppers. They need to see stockouts and untidy shelves for themselves and to understand the root causes of those problems. Put simply: it’s necessary to turn the traditional business pyramid on its end. (See Exhibit 1.) This inverted model isn’t simply about a change in operation; it involves a new cultural paradigm that motivates employees to deliver results because they want to—not because they’re told to…

exhibit

Why Store-Led Change Is the Way to Go:

Store-led change involves testing and fine-tuning a series of interventions in a selected group of trial stores with an eye toward immediate impact. Senior managers can see the potential of the interventions and be confident that they will work. After that test phase, the interventions with the most impact are rolled out rapidly, in disciplined, systematic ways, to the whole chain. Each performance gain supports the funding of the next stage in the roll-out, funding the transformation through its early stages and eliminating the need to “go back to the well” for financing.

Store-led change also means developing a cross-functional approach, improving and building capabilities for the long term. This approach enlists not only the executives from commercial and operational leadership but also the store managers, along with representatives from support functions such as finance, IT, and human resources..

The THREE Cornerstones of Store-Led Change: Let’s examine what makes this approach work well.

A transformation SWAT team must lead the necessary changes. This group’s primary responsibility is to align the business structurally with the interface to the shopper; the SWAT team’s charter makes it accountable for achieving that objective and for piloting the necessary commercial and operational processes. The team is the spark and the propulsive power behind the store-led transformation effort.

To explain what the SWAT team is and does, it helps to explain what it is not. It’s not a group of “the usual suspects” from the executive team—talented but extremely busy leaders who would have to find time to lead the change initiative as yet another in a long list of projects. Instead, the SWAT team comprises motivated, proactive managers hand-picked for the duration of the change effort. It is critical that they be drawn from many operations and functions. Unlike many conventional top-down change teams, which often splinter quickly into functional hammers seeking nails, the SWAT team assumes and retains a function-agnostic stance that better serves the stores’ needs..

The approach also means that the SWAT team members can bear down fully on the change tasks. It is the perfect crucible for learning and leadership development: top managers soon see which team members are set for stardom..

The team’s members—high-potential middle managers, together with senior managers who are, in most cases, three levels below the CEO and are proxies for each top-management role—are tasked with selecting the test stores and deciding on the duration of the tests. Then, with input from the stores, the team develops a series of operational and commercial interventions that are designed to stimulate and sustain growth in sales and profitability. The team also liaises with the retailer’s regional and central teams to make sure that they are on board and to seek specific technical input and support as required..

It’s the SWAT team’s job to validate and approve the interventions using a proven business case or strong recommendation, and to design, develop, and secure approval of a detailed rollout proposal. The team also oversees the chain-wide implications of the program and remains accountable for the successful implementation of the transformation and for its financial success..

Stores of learning allow for safe experimentation. The stores-of-learning idea is essentially an incubator model in which a select few stores are designated as centers for experimentation and learning. With this approach, the proposed change levers—or interventions—are less likely to be caught in organizational treacle. This type of activity creates short-term value and provides the required funding for the more significant structural changes that will be needed to win in the medium term..

The fundamental concept isn’t brand-new, but it is new for retailers to run individual interventions in specific stores, measure the results, and then aggregate those results back in the stores of learning. And it is novel to ask the store teams to determine the priorities for change and to involve high-potential managers in the effort. Their involvement almost always accelerates the change effort..

We have identified FOUR Main Categories of intervention that collectively make a difference:

A Winning Culture – This intervention involves listening and learning from the store teams, helping them by reducing unnecessary work, communicating clearly with recognition and rewards, clarifying accountability and expectations, and creating values that resonate with the store teams and can become part of their everyday jobs. Little things add up: the more that retailers make job duties and expectations crystal clear and consistent, the better. The more that pointless work is minimized, the better employees like it. And the more that they’re listened to—and their ideas acted upon—the more they’ll be vested in the life of “their” stores..

Customer Focussed Opeartions – This intervention focuses on sales rather than waste, improves visibility of daily and weekly performance, prioritizes product availability, emphasizes cleanliness and queue reduction, and addresses labor scheduling. There is enormous potential here: these are the factors that shoppers notice right away. For instance, one grocery chain reduced the numbers of SKUs in some categories by as much as 30 percent and saw a 20 percent lift in category sales in some cases..

The Right Range at the Right Price – Here, the emphasis is on opportunities to improve merchandising impact; upgrade the quality, freshness, and value of items in departments such as fruit and vegetables and bakery; make progress with price laddering or private-label initiatives; and strengthen and simplify promotions. Another retailer that followed a store-led approach cut its numbers of promotions by almost a third, boosting sales growth and store productivity..

A Differentiated Look and Feel – The goals are for the stores to have open and welcoming entrances, clear sightlines and obvious navigation inside the store, legible communications about value and quality, well-planned category adjacencies, and effective macrospace allocation. At one retailer, a floor-up focus enabled the transformation team to quickly improve sight lines by lowering shelf heights, using large signage to improve customer navigation, and placing categories in more logical sequences..

The stores-of-learning concept turns the whole organization—not just store operations but everything from merchandising, marketing, and supply chain to IT and HR—into a laboratory..

Rapid rollout has an immediate impact. To deliver top-line sales growth fast, the transformation project must transition rapidly from stores-of-learning pilot status to a scalable rollout across the whole chain. (See Exhibit 2.) Many of the interventions can be activated immediately, delivering quick impact on customer and team morale and yielding sales gains that range from 3 to 12 percent..

exhibit

The reason why rapid roll-out works so well is that it is led by the stores. It is common for retailers to feel that the process should be led by the organization’s center. However, we have consistently observed that a regionally dispersed model—in which stores of learning serve as “universities for change”—results in more accurate, consistent, and sustainable results precisely because it is operator led..

Some interventions are immediately scalable: with product availability, for example, simple interventions in store procedures and in accurate measurement give immediate results. In the case of one retailer, we saw a 1.5 percent improvement in shelf availability. Other interventions require more fundamental organization design changes: for instance, promotional execution and supply-chain delivery windows can yield strong returns but only after several central functions have rejiggered their operational procedures..

Roll-out has to be systematic, led by the stores’ operators and guided by a clearly communicated methodology…Two Roll-out techniques work well :

  1. Keeping the stores of learning close together so that results are seen and best practices can be shared and acted on quickly
  2. Enabling the first store of learning to support and train a carefully designated group of other stores—perhaps those served by the same distribution center or that are located in the same metropolitan area—so that the roll-out requires a very light touch from headquarters

In turn, the first groups of stores that take part in the roll-outs train the next groups of stores until the roll-out is complete. Done right, the momentum of the roll-out is palpable and energizing in itself..

Now is the time to get back to the basics of retail—one store at a time. By tapping the energy, courage, and commitment of a transformation SWAT team—first, in the selected stores of learning—and mapping and rapidly implementing rigorous roll-out strategies, retailers can look forward to the kinds of performance gains that their shareholders have been expecting all along..

If they truly understand the business from the Store-Level upward, #Retailers can more easily jump-start their transformations…

A choreographed approach, featuring the coordination of the THREE Store-led Concepts described in this article, is what is needed to deliver quick, positive impact, creating the breathing room—and generating the funding—needed to galvanize other crucial transformation initiatives….!!

The Glittering “Power of Cities” for “Luxury Growth” | McKinsey

The global economy is experiencing an unprecedented shift toward emerging-market cities. Here’s a road map of where luxury-goods companies should compete in the next decade…!!

An Economic Re-Balancing of Great Scale & Speed is occurring from the West to the East and South…In fact, we are observing one of the most significant economic transformations the world has seen: 21st-century China is urbanizing on a scale 100 times that seen in 19th-century Britain and at TEN Times the speed…This means that the shift currently making Asia—once again—the world’s economic center of gravity is 1,000 times larger than was witnessed during the Industrial Revolution..

One of the most dramatic aspects of this emerging-market economic revolution is the growing power of cities and the extreme growth concentration in a limited number of megacities. The world’s top 600 cities (measured by absolute GDP) are expected to drive nearly two-thirds of global economic growth by 2025..

Massive urbanization will continue across emerging markets, which will envelope three-quarters of these large cities. It is projected that by 2025, there will be 60 megacities—more than double the current number of urban behemoths—where GDP will exceed $250 billion, accounting for a full one-quarter of global GDP…

Out of the 25 largest growth-contributing cities, 21 are located in emerging markets, with a significant number of them in China. This represents a great leap from today’s status quo, in which only 4 of the 25 wealthiest cities are found in the developing world. Yet economic growth does not automatically mean consumption development—or luxury-market growth…Market growth in these cities is indeed conditioned by specific factors that differ from city to city. Variables such as birth rate, wealth distribution, and share of working women correspondingly affect growth in categories such as baby food, beauty products, luxury goods, and women’s fashion. To prioritize their efforts, companies will need to identify the biggest and fastest-growing cities with regard to their particular products and services..

Where Luxury Growth will come from? :

Using the McKinsey Global Institute’s Cityscope—which draws upon broad sets of economic and socio-demographic data for more than 2,600 cities around the world and combines these with deep market understanding to forecast growth at the level of individual cities—we have developed a unique road map for how luxury companies should understand and approach global-growth opportunities. Our LuxuryScope “city guide” of luxury markets organizes granular data and statistical forecasting across luxury categories. For example, several critical, market-level insights emerged from our analysis:

  • Growth is increasingly shifting toward emerging markets across all Luxury Categories

  • Luxury growth is highly concentrated in cities. The world’s top 600 cities will account for 85 percent of growth in the luxury-apparel market in 2025 versus 66 percent for luxury beauty products and only around 40 percent for consumer packaged goods. In fact, the more upscale and less “basic” products that consumers desire, the more growth will be concentrated in cities.
  • Mature cities remain critical given their absolute size
  • Growth is granular and varies by category, price point, and style. Driven by cultural fit with a brand’s value proposition and underlying growth factors by category and price point, the attractiveness of particular cities can differ significantly among luxury players. For instance, luxury women’s apparel is dominated by the traditional fashion capitals, such as Milan, New York, and Paris; spirits are strong in the Americas, while skin-care growth is concentrated in Asia. Mexico City, for instance, ranks 18th in fashion, 8th in spirits, and does not even appear in the top 20 for beauty…But within each of these categories, the attractiveness of any single brand will also vary depending upon its fit with local taste..
  • Emerging countries will drive growth, with China taking the lead.

This extreme growth concentration is great news for #LuxuryBrands and #Retailers…It will allow companies to more easily and completely focus their efforts on higher-growth areas. Analyses conducted on growth concentration by city reveal that extensive growth opportunities still exist in Europe and the United States, even in cities as large as London, Los Angeles, and Paris…The city approach to growth can also serve as a compass for companies seeking to navigate the vast sea of emerging markets, helping players to prioritize cities and focus their resources on targeted market-entry plans, whether in Belo Horizonte, Brazil, or Wuhan, China..

What Companies must do? :

Taking the city-by-city approach can help luxury companies revamp their growth strategies and gain new insights that can be used to adjust their business-development models, resource allocations, and organizational structures. How can these new business insights into potential on the city level be used to accelerate companies’ growth ?

The Right Plan:

It is well understood that having the right strategic plan is the essential starting point for any growth journey. Building this plan requires clear answers about where to go and when. Luxury-goods companies must identify growth opportunities at the city level, generating insights on where to concentrate resources to achieve the greatest impact. In addition, this approach also encourages the development of forward-looking market intelligence, a key enabler for ensuring that strategic decisions will allow companies to stay one step ahead of the competition. The city “attack plan” might look quite different from the traditional market-expansion road map. For instance, rather than discussing Asia or Europe as alternative locations—or even Spain versus France—decision makers may ask, “In what ten key cities should we establish a stronger presence? ”

Outstanding Execution to Achieve Impact:

When companies begin looking at fast-growing emerging-market cities, five key issues need to be tackled to help ensure success:

    1. Identifying the right go-to-market model for each location.
    2. Determining if there is a need for local-offer customization.
    3. Ensuring global customer service.
    4. Gauging a need for organizational changes in the longer term.
    5. Choosing how to deploy or redeploy resources.

The global paradigm shift driven by emerging-market cities is posing similar questions for Western companies for many different industries. For luxury players, cities probably matter more than for any other product category, and as retailers, most have the “luxury” of choosing, at a very granular level, where and when to open or expand a store…

In this context, Luxury Players are uniquely positioned to pioneer this new approach to accelerate their growth…!!

“Corporate Team-Building”: Exercises in “Workplace Collaboration” | by: Edward Iwata | Concordia

Team-building may be the most studied and elusive concept in the management and leadership field…Clearly it remains one of our most valuable practices. And it applies equally to companies and nonprofits, to small groups and large organizations..

#TeamWork, influences nearly all of us in our lives and careers…Think of the many scenarios that involve successful (or failed) team-building : Job-related projects and partnerships…College studies and internships…Volunteer church or school activities…Sports teams and performing arts groups..

As management consultant Patrick Lencioni writes in “The Five Dysfunctions of a Team”, #Team-building “remains the ultimate competitive advantage because it is so powerful and so rare.” If an organization and its people can work toward the same goal, it can whip any competition and rule any market or industry, according to Lencioni…

Teams have been around for centuries, since ancient humans hunted and farmed together. Team-building grew in complexity through the Industrial Age, mass manufacturing and the computer era. Globalization and competition among the United States, Japan and Germany raised team-building to an even higher level, according to Harvey Robbins and Michael Finley, co-authors of “The New Why Teams Don’t Work.”

For certain, all employees can use team-building skills, including the setting of tasks and goals, building trust and community, communicating well and tapping into diverse thinking and backgrounds.

Benefits of collaboration illustrate value of Team-Building:

Why do we rely on Teams so much ? For many reasons, according to Robbins and Finley :

  • Teams save money.
  • Teams increase productivity.
  • Teams improve communications.
  • Teams create better-quality goods and services.
  • Teams lead to improved processes.

Similarly, the best teams share concrete goals, develop trust, define their roles as team members and engage in clear communication and other team-building practices, say Charlene Solomon and Michael Schell of RW3, an online cultural training firm.

Team-building approach helps multiple industries:

Strong team-building can be found in every field and industry. In healthcare, for instance, hospitals are finding that well-run, interdisciplinary teams of healthcare professionals may reduce costs, improve the treatment of patients, shorten their average hospital stay and even reduce death rates, according to AMNHealthcare.com.

More hospitals — from Long Beach Memorial Hospital in Long Beach, Calif., to Unity Hospital in Rochester, N.Y. — are deploying teams of doctors, nurses, administrators, social workers, pharmacists and case workers who meet throughout the day to share information and assess patients.

At the Cleveland Clinic Center for Multidisciplinary Simulation in Cleveland, Ohio, doctors, nurses and administrative staff train as teams in the clinic’s simulation center. They study and review their performance in simulated medical situations, such as stroke or heart attack patients arriving in the emergency room.

In the nonprofit world, the Children’s Defense Fund in New York City became a leader in child health issues by using cooperation and team-building with government agencies, labor unions, churches, daycare centers and other partners, according to a report by Venture Philanthropy Partners and McKinsey & Company.

The fund quickly achieved its first goal: to increase the percentage of children receiving proper vaccines, as the percentage of vaccinated children in New York City rose from 52 percent in 1995 to 85 percent in 2001. Then the organization and its partners went further, persuading Congress to fund the multibillion-dollar Children’s Health Insurance Program for youth nationwide.

The team- and alliance-building strategies of the Children’s Defense Fund “allowed it to tap into the strengths of existing organizations without threatening them” and also “add value to the whole (child health) sector,” according to the McKinsey & Company report.

Global teams can outperform Local Teams:

In global business, well-run teams based around the world can significantly outperform and collaborate better than local teams, according to a study of 80 software development teams by Boston Consulting Group and business professors.

The study looked at 28 research facilities in the United States, China, Brazil, Denmark, France, Germany and other countries. The researchers found that virtual teams with strong task-related processes — mutual support, work coordination, open communication and full contributions from team members — performed more strongly than local teams.

“Managers have typically viewed dispersion as a liability rather than an opportunity,” the authors of the study point out. “But dispersion can provide substantial benefits if companies can take advantage of the diversity and varied expertise of team members at different locations. … Our research shows that virtual teams can outperform their (local) counterparts when they are set up and managed in the right way.”

What causes setbacks in Teams:

Team-building isn’t easy, of course. Unless it is encouraged and practiced widely by an organization, many employees will work only with their goals in mind, with little interest or incentive in broader teamwork throughout the workplace.

Even well-meaning teams suffer severe setbacks. In their study of 55 teams, London Business School professor Lynda Gratton and Tamara Erickson, president of the Concours Institute, found that collaboration and cooperation decreased when:

  • Teams grew larger, especially over 20 members.
  • Teams became more virtual and spread among many locations.
  • Team members had higher education levels and a greater proportion of experts with specialization.
  • Teams had a higher proportion of strangers and a greater diversity of backgrounds and experiences.

In studying successful teams, however, Gratton and Erickson found that team leaders and employees leaped past obstacles by focusing on key factors, such as:

Building and investing in “social relationships throughout the organization” :

At Royal Bank of Scotland, new corporate headquarters near Edinburgh featured an indoor atrium with shops, restaurants, biking and jogging trails, athletic facilities and green space for picnics and barbecues. The goal: to create more open communication, a free flow of ideas and a sense of community among employees.

Training in team-building skills:

It’s not enough to encourage employees to collaborate. They must be trained in the skills of collaboration, from conflict resolution to building personal trust. PricewaterhouseCoopers, for one, trains its employees worldwide in networking, coaching, communicating values, having difficult conversations and other team-building practices.

Using leaders who are task- and relationship-oriented:

The most successful teams have leaders who are skilled at setting tasks and goals, and at building relationships and a climate of trust and goodwill. In performance reviews at Marriott, managers are assessed by their growth in both types of skills.

Moving up to ” Team-Learning “:

After Team-Building 101, some leadership experts recommend Advanced Team-Building in “learning organizations.”

In his classic leadership manual “The Fifth Discipline Fieldbook,” management consultant Peter Senge calls it “team-learning,” which involves high-level dialogue and group dynamics that go beyond simple agreement to create real alignment, or new ways of thinking and working as a powerful and unified whole.

In short, team-building won’t vanish soon…And leaders and employees who use the best team-building techniques are sure to strengthen their teams, colleagues and companies…

“Hotel Brands” : the “Devil Is in the Delivery” | BCG

Two Big Trends in the Hotel / Lodging industry are colliding…Whether Hotel-Companies get caught in the Pile-up or Steer-clear of the wreckage will have a big impact on their profitability…?

One trend is the industry’s increasing use of #Franchising, as a means of achieving more “Asset Light” #BusinessModels…For the past decade or longer, #HotelCompanies, have been divesting physical properties and becoming Pure #BrandOwners, and orchestrators because this model receives higher share-price multiples from public equity markets. One key consequence is that hotel companies increasingly must rely on individual franchisees to deliver the customer service experience that they have spent millions of dollars developing and educating consumers to expect—and that substantially defines their brands..

The other trend which is, the rise of information transparency and perpetual connectivity in the digital, and increasingly mobile, age…Online opinions affect more and more #Consumers, travel decisions…Our research shows that the two most trusted channels are personal recommendations (not surprisingly, 90 percent of people rely on these) and the opinions of other consumers they find online (70 percent trust those)…Our research also indicates that the average consumer spends 42 hours online—the equivalent of a full workweek—dreaming about, researching, planning, and making reservations for a four-day leisure trip, and then sharing the experience. Dreaming and researching take up 75 percent of the 42 hours—ample time to be influenced by what others have to say. This time is having an increasing impact on how people book and where they choose to stay, and this impact is showing up in hotel companies’ average daily rates (ADRs)…

Recent research by BCG involving more than a Dozen #HotelBrands, in several-categories shows a strong correlation between companies’ ratings on travel sites and their ADRs. Perhaps even more significant, we found a strong correlation between the consistency of those ratings and hotels’ ADRs…Companies that deliver Higher #CustomerSatisfaction, have the opportunity to charge more; conversely, consumers recognize those brands with inconsistent delivery—from both their own experiences and those of others—and discount the amount they are willing to pay...Within a network of multiple #PropertyOwners, the worst offenders can drag down the best performers and undercut brand ADRs across the board…In today’s #DigitallyDriven World…generating higher ADRs means delivering on the brand promise—and delivering consistently.

Many, if not most, hotel companies have come to grips with this #Operating-Disconnect, they understand that they are giving up direct control of brand delivery at precisely the time when consistency of that delivery has never been more important. They have taken steps to develop New #Strategies, Systems, and Processes for ensuring that their #FranchisePartners, deliver the #BrandExperience, that customers expect. (See Exhibit 2.) Those that successfully master the clear articulation of their brands and consistently execute the #BrandPromise, are rewarded—with Higher Revenues, a Bigger Pool of Potential Owner-Franchisees, and a product that achieves a premium in the marketplace...Those that do not increasingly pay the price…!!

Standards and Sticks:

With hotel networks today often spanning multiple brands, hundreds of owners, and thousands of properties, ensuring consistency of execution is a complex task. Companies undertaking brand renovation efforts face an even more daunting challenge as they must rely on owner-operators to deliver a new, different, enhanced experience, and to do so within the tight economic constraints of a highly competitive industry. Inconsistent execution can kill a brand renewal before it has a chance to prove itself.

The default approach on brand delivery for many hotel companies has been to develop a system of “brand standards” that they require franchisees and other operators to follow. These typically involve lengthy, highly detailed brand-standards manuals, providing instruction for everything from the number and content of information cards displayed in each guest room to rules for employee computer access. We regularly see manuals that run hundreds of pages and refer users to other manuals in the company’s collection for more detailed instruction on particular issues. Most make no attempt to prioritize or differentiate among standards or the impact they have on customer satisfaction. Very often, standards that directly affect what customers see and feel—cleanliness, for example—are given the same weight as specifications for things that are completely invisible to them…

This type of approach often ends up in companies resorting to sticks over carrots, punishing transgressions rather than offering incentives for good behavior. It adds stress to the relationship between franchiser and franchisee, and it can lead to corners being cut and inconsistent experiences for the customer from one property to the next. It also encourages owner-operators to put their efforts into avoiding transgressions rather than seeking to deliver the customer experience that the brand has promised. Most important, it does little to encourage better service, especially the kind of individualized service that customers tend to remember and post online about..

It Pays to Take a Better Approach:

Our experience, and that of many hotel companies, show that taking a more comprehensive approach to working with franchise partners on brand delivery can achieve a better result for travelers—and higher ADRs as a result. There are seven levers to pull; companies looking for the best execution will combine all of them..

Optimize the owner base. Each hotel company or brand has its own mix of property owners composed of large institutional franchisees with hundreds of properties or small, often family-run, operators—or a mix of both. Each requires a different style of engagement, and companies should think through how their mix of franchisees affects their brand delivery. They may want to favor one type of owner over the other, and gear the other components of brand delivery accordingly..

Define the franchisee relationship. Contracts define the relationship between franchiser and franchisee, of course, including the obligations of each party with respect to brand delivery—often in extensive detail. Companies need to approach these negotiations looking through a brand delivery lens. Smart negotiators seek to place an appropriate level of burden on the property owner to comply with brand-related requirements while leaving the company room to act as the ultimate brand steward when it needs to. Contracts today typically define undesired behavior on the part of the franchisee but much more rarely include incentives for providing better service or meeting customer satisfaction metrics. These agreements should be reviewed from the perspective of how they shape the customer experience as well as the business relationship between the franchiser and the franchisee…

Encourage owner engagement. Brand delivery is a tango: it takes two parties to do it effectively. Problems occur when companies do not appreciate the economic (or operational) impact of what they are asking their owners to do. Smart companies find the right balance between consultation and evaluation in their relationships with operators. For example, they can establish or update quality control processes that are based on customer expectations (see below) and establish clear rewards (and penalties) for operator performance…They can also build a business case that reinforces the value proposition for owners of meeting system wide service and #Customer-ExpectationMetrics…The interests of hotel companies and property owners may conflict at times, but both can find common ground over actions that lead to more satisfied guests who are willing to pay higher rates…

Build and motivate the team…Delivering on the brand promise is a function of countless day-to-day behaviors and habits within operators’ organizations. The very best strategy can fail if it is not appropriately distilled into necessary actions and capabilities. Few endeavors can have a bigger impact than working with owner-operators to help them recruit and train staff capable of delivering on the brand promise and building a team-focused organization. Many brand teams take an evaluative, rather than consultative, approach. They perform audits of compliance with the established standards, rather than helping the operator’s team provide a better product and service by, for example, defining the measures of success and putting in place processes, such as training and incentive programs, to help achieve them.

By instituting a more consultative approach, hotel companies can help their franchisees do the following :

  • Select employees on the basis of fit with the customer service culture.
  • Structure training programs to support excellent performance.
  • Encourage staff to put themselves in the customer’s shoes.
  • Pay according to performance.
  • Provide non-monetary incentives when pay is not directly linked to behavior.
  • Communicate effectively, providing employees with the information they need to do their jobs better.
  • Give employees autonomy and the authority to solve problems within certain standards.
  • Enforce standards and metrics.
  • Monitor feedback to drive continuous improvement.

Update quality control processes. Ensuring consistency across multiple properties with many owners requires updating existing processes and establishing new ones to replicate best practices and maintain focus on the critical factors that affect the customer experience. Most operators do lots of things well. The key for others is to identify best-in-class performers, analyze what makes their approach successful, and leverage this expertise by documenting processes to provide step-by-step guidelines for others. We have worked with multiple hotel chains to create a “process blueprint” that provides detailed information on best-in-class practices by department, standardizes opportunities across properties to provide similar customer experiences, reduces gaps and loopholes, serves as training material, and creates a framework for continuous improvement..

Prioritize standards. Standards do have an important place, of course. The focus should be on applying and enforcing standards when they have an impact on service and customer experience rather than developing an exhaustive, all-encompassing system that is doomed by its own weight and complexity. Again, incentives and rewards, as well as an appropriate means of correcting transgressions, are essential. Priorities are important. Research shows, for example, that customers care more about the quality of the bedding than the size of the TV. The goal should be a simple set of standards that are easy to comply with. They should give franchisees the ability to improve the experience but prevent them from cutting corners or taking shortcuts that could harm the brand…

Enforce the standards and metrics. Finally, hotel companies need to hold owner-managers accountable to documented standards and metrics that reflect the brand promise and customer experience. They need to establish a clear set of evaluation criteria to assess performance and understand where changes are needed, as well as a well-understood—and enforced—set of rewards and consequences for performance. Time limits should be set for implementing improvements or corrections. Carrots almost always work better than sticks, but both are necessary in most franchiser-franchisee relationships…

The global lodging industry is expected to approach $500 billion in revenues by 2015…Competition in established markets is intensifying, and #CustomerExpectations, are rising as companies seek to gain share and increase RevPAR (revenue per available room) through more amenities and better service…The devil, however, is in the delivery…Those companies that can work most effectively with their owner-manager partners to provide a high-quality—and consistent—brand experience will win the battle for more customers and higher rates…!!

The “Go-to-Market Revolution”: Igniting “Growth with Marketing, Sales & Pricing” | by: Rich Hutchinson | BCG

Whether you ask a company’s CEO or its investors, they’ll likely identify revenue growth as the single biggest driver of #CorporateProfit, and #ShareHolderValue..!!

Over the long term, revenue growth powers 75 % of total #ShareholderReturn (TSR) for the upper-quartile value creators of the S&P 500. Even in the short term, growth accounts for nearly a third of TSR for these out-performers—double the boost from improving Margins or #Cashflow…A growing business also Empowers Employees, Attracts Top-talent, and helps Fund Expansion, Transformation, and more Growth…!!

Growth is an imperative. But it needs to be profitable growth—and that is not a given…!!

In the recent era of uncertainty and financial constraint, many companies have focused on efficiency. They have energetically cut costs, even in the “go-to-market” commercial functions crucial to driving revenue—sales, marketing, pricing, branding, and customer insight. These companies have achieved productivity gains, but they’ve reached the point of diminishing returns. We’re learning again that we can’t cut our way to growth..

exhibit

A small set of successful companies are taking a different path…They are transforming their commercial functions and capabilities to create an engine of short-term revenue growth and long-term profit. They are doing so with little risk…These near-term victories are “ Self-Funding” the creation of #StrategicCapabilities..

These leading companies are taking advantage of what The BCG, calls the “Go-to-Market Revolution”…!!

The Go-to-Market Revolution is a wave of technological and customer-driven change that is altering the level of sophistication with which companies deploy their commercial capabilities. This new era hasn’t altered the fundamentals required for go-to-market excellence, but it is creating new possibilities. It is taking what is now possible—the current state of the art in commercial functions—to the next level.

THREE Tides of Deep-rooted Change are driving the revolution…The first is the dramatic shift, in almost every industry, of what BCG calls customer pathways—the ways customers learn and communicate about products and services on the path toward a purchase. Second, technology and advanced analytics are providing new tools for sales and pricing teams, marketers, and researchers. Third and finally, companies now navigate a globalizing world that requires most of them to compete in new markets, often against unfamiliar rivals. (See “A Revolution Driven by Three Tides of Change,” below)..

A Revolution Driven by THREE Tides of Change :

The rich opportunities—and the perils of failing to act—emerge in the details of the three historic and concurrent tides of change driving the Go-to-Market Revolution..

1. Customer Pathways – The first tide is the rapid recent evolution of what BCG calls customer pathways. The ways consumers learn about and buy products have shifted dramatically and quickly, triggered by changes in technology, communications, and media..

2. Advanced Data and Analytics – The second driver of change could be called the go-to-market arsenal…It is the rapid and transformative evolution of “smart” data, advanced analytics and modeling, and other tools capable of increasingly sophisticated approaches in segmenting and analyzing information and reaching customers…The data revolution has transformed business sectors, from retail to financial services. For example, one vehicle company in India was able to map more than 95 percent of all its potential customers in the country—who bought what and where—in less than three months..

3. Global and Emerging Markets – The final driver of the “Go-to-Market Revolution is Globalization”, which creates two fundamental commercial challenges..First, “Globalization” has changed the competitive landscape in every market…The rise of globalization has opened labor markets and expanded offshore production, resulting in lower product costs in developed countries even as it destabilized brands and prices. Globalization is also ushering foreign competitors to the doorstep of domestic businesses. It is shortening product cycles and speeding shifts in consumer tastes. Go-to-market strategies need to adapt to these dynamic market conditions..

Second, ” Globalization in Emerging Economies” has been accompanied by rapidly expanding wealth. Consequently, emerging markets represent a huge source of growth…The challenge is this: most companies have commercial capabilities in emerging economies that are less sophisticated than those in established markets. Accurate data can be scarce, rendering marketing ROI calculations difficult. Distribution channels are a mix of modern options—such as mobile—and Old World…And the recipe for commercial success differs significantly by country… Winning in India and China may require fundamentally divergent approaches…To succeed, companies must create emerging-market commercial capabilities that are as sophisticated and promising as the growth opportunity…!!

A Self-Funding Go-to-Market Transformation :

A go-to-market transformation aggressively retools a company’s commercial functions—sales, marketing, pricing, branding, and customer insight—to exploit the new possibilities while navigating a fast-moving landscape. It adapts processes to changing customer pathways and needs, prepares the company to face new global markets and competitors, and arms its go-to-market teams with the latest and most effective technology…

Go-to-market transformation is a particularly potent lever for growth because it exploits tactical, short-term victories to fund broader commercial transformation over the medium term…For example, one company started with a sales force effectiveness program that drove more than $20 million in near-term value—an early success that energized the organization and created a financial foundation for a broader go-to-market transformation. From such beginnings, the ambitious company funded a larger set of programs, which in turn produced a step-change in both commercial capabilities and value delivery..

This transformational approach contrasts with conventional attempts to adapt through continuous improvement—a recipe for simply keeping pace with market growth. Our view is that, for most companies, the current scope of change in the commercial landscape is too disruptive for incremental change to be effective. Maximizing value requires an aggressive and dedicated response..

Commercial transformation has a confirmed record of success in generating growth for a broad range of companies worldwide. They include a global manufacturer of mobile handsets, a European gas and energy utility, a U.S.-based retail bank, retailers, postal operators, and media companies…

The resulting revenue benefits are powerful in today’s era of difficult growth, when even modest revenue growth can create substantial shareholder value. Mature companies that increased their #Topline, by just 2 percentage points or more delivered shareholder returns 40 percent higher than the market average…!!

Growth Zealot or Go-to-Market Laggard ? :

Your company can ignore the potential benefits of the Go-to-Market Revolution, but it can’t avoid the perils of failing to take part. The gap between capability leaders and laggards is growing…If you are prepared to be a zealot for growth, here is a sample sequence of actions and best practices to consider…

  • Start with vision and ambition. Does your company currently have the vision to transform your go-to-market capabilities? Do you have the ambition to increase your top line 10 or 20 percent beyond current projections in the next few years? A necessary First-step is helping your #LeadershipTeam, understand the opportunities inherent in the #Go-to-Market, Revolution..
  • Undertake a quick initial diagnostic step. Map how your customers’ purchase pathways have changed. Assess your commercial capabilities: marketing, pricing, sales, branding, and insight…Determine where you stand compared with best-in-class competitors and identify which commercial functions offer the greatest near-term opportunity : 
  • Tailor a series of programs to build capabilities and improve performance simultaneously. For example, start with a high-impact pricing initiative. Some leading companies we know have begun with a pricing program that added tens of millions of dollars to the bottom line. Simultaneously, the programs have funded development of new pricing tools and capabilities, such as sophisticated discounting, mobile technologies, and advanced analytics.
  • With initial success in place, expand your efforts rapidly. For example, launch a program that boosts marketing effectiveness—such as a brand advocacy campaign. Then launch another—such as a sales-activation initiative—to equip your sales force with a technical arsenal of twenty-first-century tools.
  • Make no mistake, you may need several waves of activity to meet your objectives in each commercial discipline. Indeed, achieving your overall profit and strategy goals will take years, not months. If it’s done right, however, the journey will be self-funded. What is more, every growth gain and each advance in capabilities can create a reinforcing cycle of improvement for the entire enterprise.
  • Crucial to Success in this Endeavor is capable “#ExecutiveLeadership”. Company leaders must be committed to guiding and supporting the transformation across all three tides of change that drive the Go-to-Market Revolution: the new and uncharted pathways your customers are taking to discover and purchase your products; the evolution of data, advanced technologies, and analytics that can re-arm your commercial teams; and the rise of emerging markets, which brings new growth and also new global competitors..

These are real challenges…For the bold, though, they present powerful paths to competitive advantage…The growth zealot must be a Leader—able to inspire Executives, Managers, and Employees ; capable of transforming the whole by reinventing its parts; and committed to forging a new commercial future for the enterprise..!!

Time to “Recognise Private-Universities’ Role” in putting “India on the Global Education Map” | by: Ashish Dhawan | The Economic Times

Private universities in India are often treated with suspicion for providing poor quality education and being most focused on making money. While this may be true in some cases, they are playing a significant role in fulfilling our country’s growing demand for quality higher education. 60 % of college-going students in the country today are enrolled in private institutions…

Rapidly increasing demand for higher education in India is part of a global trend with worldwide enrolment expected to rise from 100 million in 2000 to 260 million in 2025. Many countries are encouraging private institutions as a viable way to ensure that students are offered this opportunity. For example, Brazil recognized that the public sector cannot meet its youth’s demand and therefore encouraged and supported private education..

Currently, over 75% of Brazilian students go to private institutions and the largest higher education firm, Kroton, has over a million students…

Similarly, developed countries such as Japan and Korea have over 70% students enrolled in private universities, while developing countries such as Malaysia have over 50%. China invested in top private universities through Project 985 to build a few world-class universities, but is struggling to provide education for students at the base of the pyramid. Recognizing this gap, China has also enacted a Law for Facilitation of Private Education in 2002.

This led to the number of higher education institutions doubling and enrollment increasing five-fold over the past decade…

New Chapter:

The Indian higher education system consists of three tiers: elite public institutions, second-tier public and private institutions, and finally private institutions providing mass education. In most developing countries, elite institutions are publicly owned and heavily subsidized..

In India too, the government spends a significant amount per student for IITs and IIMs. Commercial private players often do not have the same motivation to incentivize education, and have therefore not pursued quality higher education actively.

However, with rapid economic growth, the private sector has reacted to the needs of our workforce and set up a large number of professional colleges, especially in engineering and management. The Indian School of Business, for example, created an innovative one-year MBA programme for students with work experience, relative to the traditional model at the IIMs. Recently, we have seen an emergence of philanthropic universities such as Azim Premji University and Shiv Nadar University that are offering quality education.

Private universities in higher education are also breaking conventional paradigms in education. Ashoka University offers a liberal education to students, allowing them to break down borders of arts and sciences, theory and practice, and take courses across to craft their own interdisciplinary major. Such institutions can serve as models for other institutions that focus on developing 21st century skills, critical thinking, communication and leadership.

These initiatives point to the emergence of a new breed of private institutions in India that can complement elite public institutions and establish international standards of excellence in Indian higher education.

While it is encouraging that the Union Budget 2014 committed resources to replicating apex institutions such as IITs, IIMs and AIIMS across the country, our government should look at the higher education system more holistically to increase the gross enrolment ratio (GER) and uplift quality..

Hard Taskmaster:

The government should move beyond being the primary service provider in education and play a catalyzing role in improving quality of higher education in India. It can do so by tightening licensing standards and improving quality assurance, without impinging on the autonomy of private institutes..

The government must invest in a regulatory architecture that can improve the standards of all institutions, public and private, dramatically. The National Assessment and Accreditation Council should be strengthened and the rating framework of institutes should shift focus from infrastructure and inputs to student learning outcomes..

Given the fiscal deficit our country faces and the need to rapidly increase higher education institutions to meet demand, our government should recognize that private institutions are a large part of the ecosystem and play a significant role in achieving a high GER…

We need the best of public and private efforts to make Indian higher education globally competitive..!!