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Slide 1: Building an Adaptive Enterprise through Customer Focus A New Business Framework and Approach October 27, 1999
Slide 2: Contents I. II. III. IV. V. VI. The Sears Story Business Imperatives in the Connected Society The New Business Paradigm Gap Analysis Actions and Implementation Plan Key Success Factors 2
Slide 3: The Sears Transformation Story Provides a Valuable Lesson for Samsung ears du & In stry I nd ustr y Se a r s Se a r s? S Sears 1886 Birth 1945 Growth Leadership 1982 1992 1997 Transformation 2000 Continuous Renewal • Despite huge success, continue to renew and adapt to changing environment, e.g., the connected economy • Continue to finetune its customer focus • Continue to refine its value proposition and go-to-market strategies Inflection Point • Became too inward-focused, self-absorbed • Began diversifiying • Centralized and bureaucratic policies • Ignoring new breed of competitors • Results: Losing market share, financial performance declining, shareholder losing confidence • Founded in 1886, it essentially starting the retail concept of large department stores with a full line of merchandise and catalog business • Core competencies: its adaptive ability to understand and serve changing consumer needs • Grew rapidly reaching $1B in sales in 1945 and $41B by 1985 • Became the dominant U.S. department store • Created “brand power” • Brought in a new CEO • Embarked on a turnaround program : - focus on core business - customer focus - greater local market focus - improved cost structure and productivity - organizational and cultural renewal 3
Slide 4: Sears Defined the American Retail Industry Retailer • First broad scope retailer offering products not readily available to the general public • Set the “Gold standard” of retailing in US, offering unheard of money-back guarantees and free trial offers • Grew rapidly reaching $1B in sales in 1945 ($9B in 1998 dollars) and $41B by 1985 ($63B in 1998 dollars) • One in five Americans shopped at Sears regularly • Employees were extremely loyal, and were rewarded with the best profit-sharing programs in the country • Created the catalog industry in US • Undercut profit margin of the “general store” to save money for consumers • Created “Brand Power” -- Sears became a household name standing for high quality at a fair price • Sears developed popular private label brand names including Kenmore appliances, Craftsman Tools and Diehard batteries Catalog Brand “Sears is the paragon of retailers. It is number one, in the United States, and number two, three, four and five” - Fortune Magazine, 1960s Source: Company web site, Hoovers, HBR Sears, Roebuck and Co. Stanford Business School Case, 1997, EY Analysis 4
Slide 5: Success Has Made Sears Complacent, However, and it Grew Out of Touch with the Changing Retail Marketplacedecision making Customer-distant • Headquarters controlled stores, yet did not work closely enough with them to understand their environment • Bulletins were written about every process--employees were not allowed to make any decisions Distracted • Owned a conglomerate of unrelated companies including Allstate Insurance, Dean Witter Investments, Coldwell Banker Real Estate & Discover Credit Card Ignored true competition • Sears was stuck in the past -- they did not catch on to emerging retailing trends • Did not see Wal*Mart & K-Mart entering into their retail space • Considered only JC Penney & Montgomery Wards as its competitors Misjudged target customers • Thought its target customers were male • Targeted advertising and promotions towards men Ineffective performance management • Employee compensation did not align with corporate objectives Confused positioning • Unfocused response to new competition left Sears with an undefined strategy -- it was not a discounter (e.g., Wal*Mart) or a high end department store (e.g., Nordstrom) • “We didn’t know if we wanted to be a discounter, a department store, a specialty store or a mass merchant” - Arthur Martinez, CEO Source: Home Furnishings Network, 9/30/96, EY Analysis 5
Slide 6: Consequently, by the Early 90’s, Sears Had Lost Its Historically Dominant Position Profit ($ Billions) $3 $2 $1 $0 ($1 ) ($2 ) ($3 ) Sears Wal-mart K-mart JC Penney DaytonHudson Revenue ($ Billions) CAGR 89-92 23% 43% -1% -2% $6 0 Wal-mart Indexed Stock Price CAGR 89-92 29% -0.4% CAGR 89-92 Wal-Mart 42% 3 $5 0 $4 0 $3 0 $2 0 $1 0 Sears 2 K-mart 4% S&P Retail 16%* Index JC Penney DaytonHudson 3% 10% 1 12% 6% 6% JC Penney 2% K-mart Sears D-H N/A $0 1 989 1 990 1 991 1 992 ($4 ) 1 989 1 990 1 991 1 992 0 1 989 1 990 1 991 1 992 *S&P Retail Index CAGR from 1990-1992 Source: Dow Jones, Bloomberg In 1992, Sears Hired a New CEO, Arthur Martinez, To Turn Around the Company 6
Slide 7: • Hired a new CEO • Stabilized operations to stop losses 1992 Revenues declined 9% to $52b, net loss of $3.9 B Sears moved from downtown Chicago to suburban Hoffman Estates Hired new CEO Recruited new Senior Executive Committee Began 100 days evaluation period Turnaround (1992) Closed catalog business Reorganized around its appliance, home & automotive business Closed 113 department stores & reduced workforce by 50,000 people Identified target customer as a middle aged female 1993 Hired new employees from outside Sears & the industry Began selling off non-retail businesses Began new marketing campaign, “The Softer Side of Sears,” which was targeted at women Executives’ “Phoenix Team” created Committed to remodel stores & gain additional selling floor space Solidified mission & vision statements Transformation (1993-1997) 1994 1995 1996 1997 Launch second revolution Created Total Performance Indicator (TPI’s) to measure achievement of market focus strategy Formed Sears University to educate executives on business practices Began 360° reviewing process of all managers Began “Learning Map” program to train all associates about the need and reason for transformation Simplified policy & reduced bureaucracy by introducing “Freedom & Obligations” TPI measures became part of top 200 associates’ compensation Began goal sharing program Granted incentives to all store-line managers Integrated TPI measures into part of all manager’s above store level compensation Began “Holistic Retailing” strategy to meet the needs of homeowners through a variety of retail & service formats Subsegmented market to target more specific ethnic customer segments (e.g., Hispanics) Increased number of full line mall stores Developed neighborhood furniture & hardware stores Started e-Commerce through sears.com Source: Harvard Business Review, Sears Roebuck & Co. Turnaround, 1998, Company Web Site, EY Analysis Under Martinez, Sears Embarked on a Three-Phased Transformation Process • Refocused on core business • Created a new corporate vision • Determined target customer and designed value proposition • Launched new ad campaigns • Instituted a new performance measurement system • Implemented comprehensive corporate wide change management programs Growth (Ongoing) • Continue to refine value proposition and go-to-market strategies • Continue to improve transformation programs • Began a new renewal process incorporating new environment-ecommerce 7
Slide 8: The Transformation Began With a New Vision: A Compelling Place to Shop, Work, and Invest Compelling Place to Shop Customer Sa tis th fied e sh em op plo pin ye g es ex in pe flu rie en nc ce e Lo s ea cr in s th er w m ro to e g us lin lc p ya to Passion for the customer 3 Cs and 3 Ps e People add value Performance leadership Employees rewarded for performance Employees Compelling Place to Work Financial Results Compelling Place to Invest Source: EY Analysis 8
Slide 9: The Initial Vision Was Then Translated into Specific Objectives and Measures Employees Customer Financial Results • Environment for personal growth and development • Support for ideas and innovation • Empowered and involved teams and individuals • Great merchandise at great value • Excellent customer service from the best people • Fun place to shop • Customer loyalty • Revenue growth • Superior operating income growth • Efficient asset management • Productivity gains Objectives Source: EY Analysis 9 Measures • Personal growth and development • Empowered teams • Customer needs met • Customer satisfaction • Customer retention • • • • Revenue growth Sales per square foot Inventory turnover Operating income margin • Return on assets
Slide 10: Sears Rediscovered Its Target Customer Before Management perception of target customer: • Thought target customers were male • Targeted advertising and promotions towards males Discovery • Core customer: - female - middle class (annual income of $25,000 - $60,000/yr.) - middle age (24-54 yrs. old) - head of household - mostly mothers “We had a company run by guys who thought they were in the “dirty fingernails” business of autos and hardware. There was no singular view of Sears target customer.” - Arthur Martinez, CEO “This was a big discovery. Unless we made the store more attractive to her, we weren’t going to break out of the box we were in.” - Arthur Martinez, CEO Source: HBR Sears, Roebuck and Company Turnaround, 1998; EY Analysis 10
Slide 11: Sears Then Refined Its Value Proposition to Meet the New Target Customer Value Proposition Product/Services • Added new departments such as cosmetics and jewelry for women • Expanded apparel offerings • Increased national brand products • Improved underdeveloped sections such as petites • Increased customer wallet share by offering multiple types of services and products to target customer + Image • Rolled out the “Softer Side of Sears” advertising campaign, targeting the female customer • Communicated that Sears is changing--it offers more merchandise than just appliances and hardware • Renovated fixtures and lighting to give a more classy appearance + Relationship • Redesigned stores to provide a more contemporary environment • Expanded selling floor space in stores by redesigning back rooms • Increased touch points with customers by expanding stores into neighborhoods with hardware and furniture stores Source: HBR Sears, Roebuck and Company Turnaround, 1998; EY Analysis 11
Slide 12: Believing That Employees Are an Important Part of the New Strategy, Sears Invested Heavily in Employees Employees Communicate Strategy Town Hall Meetings • Held sessions in which all employees met in small groups of around ten • Learned about the industry, Sears and why Sears needed to transform Improved Employee Selection • Developed interview selection tools to help managers hire employees with the correct skill sets • Determined new skills and attitudes needed to realize the new vision and revised new hire profiles accordingly Help Improve Performance Decision-making/Empowerment • Gave front-line employees more authority to act on their own discretion to provide more responsive service to customers Improved Training • Opened Sears University to teach courses essential for the operation of the transformation • Courses available to managers and above Decreased Bureaucracy • Decreased bureaucracy by eliminating cumbersome policies and replaced with broad guidelines called “Freedoms and Obligations” Match Compensation with Performance Stock purchases • CEO was required to invest five times his salary in Sears stock, and executive board was expected to invest three times their salary • Top 200 managers had to purchase their salary in stock Total Performance Indicators (TPIs) • Compensation based on TPIs initially rolled out to top 200 managers • Eventually all managers above store level had compensation based on TPIs • TPIs were broken down with 1/3 based on each of employee, customer & financials Goal sharing • Associates given the opportunity to earn variable incentive pay based on customer satisfaction Source: HBR Employee-Customer Profit Chain, 1998 ; HBR Sears, Roebuck and Company Turnaround, 1998; EY Analysis 12
Slide 13: To Monitor Progress, Sears Developed a Comprehensive Performance Measurement System Measuring • Defined a balanced portfolio of strategic objectives along three critical and complementary perspectives: employee, customer, and shareholder • Developed a cause-and-effect model of how those objectives influence each other • Made sure that the model included drivers of future growth (“leading indicators”) • Used that model to develop key measures (Total Performance Indicators - TPIs) so that measurement would influence behavior • Wherever possible, defined a quantitative metric for each TPI, and where possible, confirmed statistical correlations in the cause-and-effect change • Monitored progress against TPIs using individual and shared goals, and used the results to finetune the list of TPIs Rewarding • Linked performances against TPIs to compensation, using both individual and group goals and incentives. Compensation was linked to nonfinancial as well as financial performance, and the three perspectives were given equal emphasis • Cascaded compensation link from top management (Phoenix team, then top 200 execs, then down through middle management above store level, and finally to management teams in the stores as the TPIs proved themselves). Goal sharing was tried on a test-basis to cascade compensation links to the salesperson level Source: EY Analysis 13
Slide 14: Sears’ New Performance Metrics Measured Impact of Employee and Customer Satisfaction on Financial Results Employee-Customer Profit Chain Focus on Employees Focus on Customers Customer Recommendations Financial Results Legend Attitude about the job Service ----------Helpfulness • Rectangles represent survey information • Ovals represent hard data Return on assets Employee behavior Customer Impression Operating margin Revenue growth Attitude about the company Merchandise -----------Value • Shading represents measurements collected in the form of Sears total performance indicators • Solid arrows represent statistically established correlations Employee retention Example: 5 unit increase in employee attitude surveys DRIVES Customer retention 1.3 unit increase in customer impression surveys DRIVES 0.5% unit increase in revenue growth • Dotted arrows represent hypothetical relationships Source: HBR Employee-Customer Profit Chain of Sears, 1998; HBR Sears Roebuck & Co. Turnaround, 1998; EY Analysis 14
Slide 15: This Intense Effort Has Dramatically Improved Results for Employees, Customers, and Investors Total Performance Indicators Employee Scores2 70 69 68 67 66 Scores 6 5 2 JC Penney S&P Retail Index Wal-mart Market Share Share Price 1992 = 1 3 Sears Dayton Hudson 64 63 62 61 60 De c 94 M r Ju n a 95 95 Se p 95 De c 95 M r Ju n a 96 96 Se p 96 De c 96 M r Ju n a 97 97 1 K-mart 0 92 93 94 95 96 97 15
Slide 16: Despite Success, Sears Continues to Renew itself to Adapt to the Changing Environment, e.g., Connected Economy Entered into e-Commerce • Launched Sears.com • Focusing on appliances first, then will expand into hardware & tools, lawn & garden, and consumer electronics • Sears aims to be the definitive online source for the homeowner Reorganized Executive Office • Created a chief executive office composed of current CEO Martinez and two finance/merchandise specialists • Will allow Martinez to focus on full line store needs and reduce the number of people reporting to him Increased Store Sovereignty • Shifting more control of stores from headquarters to the local stores, so they can better react to their customers’ individual needs Altered Store Environment • Hired one of the country’s top fashion photographers to create displays and specialty shops within the department stores Source: Context Magazine The Cyberside of Sears, Sept/Oct 1999, Chicago Tribune 9/19/99, Crain’s Chicago Business 9/6/99, Dow Jones, EY Analysis 16
Slide 17: The Sears Story: Redefinition of Core Business Vision Strategy Performance Management Performance Management Communication Communication Customer Value Propositions Go-to-Market Strategy Employee Training & Empowerment Processes Knowledge Management 17
Slide 18: Key Success Factors Leadership Brand Power Long-Term Perspective Customer Focus SEARS Complete Internal Alignment Around Strategy Measurement System Tireless Execution 18
Slide 19: Contents I. II. III. IV. V. VI. The Sears Story Business Imperatives in the Connected Society The New Business Paradigm Gap Analysis Actions and Implementation Plan Key Success Factors 19
Slide 20: XXX Has Achieved Market Leadership in Consumer Electronics Worldwide Birth Expansion Leadership Revenue & Profit Growth Market Cap Growth Global Market Share Leadership Fortune magazine ranks XXX as the #5? consumer electronics company in the world 20
Slide 21: This Success Was Driven Primarily by Superior Operational Excellence Based on the“Make-and-Sell” Approach Profits Through Product Sales Volume & Cost Cutting Make Product R&D Design Product Procure Make Price Sell Sell Product Advertise/ Distribute Service Promote Market • Organized to produce large quantities of products efficiently and sell them to customers whose needs could be assumed, predicted, and controlled • Characterized by replaceable parts and economies of scale • Focus on products and processes • Emphasis on planning and control 21
Slide 22: Fundamental Changes Occurring in the Marketplace Are Requiring Samsung to Redefine its Basis for Competition eCommerce Convergence Internet Globalization New Business Model Renewal Digital Value Virtual Open Community Standard ? Value Growth Leadership Active Inertia Decline Birth Time Example: GE Inflection Pt Business Model 80-81 Market Share Leadership 86/87 Productivity 91/92 Services and Solutions 99/00 Digital 22
Slide 23: The Connected Society Marks the Transition To a New Era of Human History Industrial Revolution (Age of Civilization) Transportation Revolution (Age of National Scale Transportation) Information Processing Revolution (Data Processing Age) Connected Society Revolution (Networked Society Age) 1750 1860 1950 2000 Defining Application “We are in for a revolution” STEAM ENGINE TRANSNATIONAL RAILROAD INTEGRATED CIRCUIT INTERNET AND DIGITAL COMMUNICATION Social Implication URBANIZED AND INDUSTRIAL SOCIETY REGIONAL SPECIALIZATION AND INTER-REGIONAL TRAVEL KNOWLEDGE WORKER-BASED ECONOMY GLOBALLY CONNECTED SOCIETY AND ECONOMY Evolution of Business LINEARITY & LIFE CYCLEs BLURRING ACCELERATION AND COMPRESSION SYNCHRONICITY Source: E&Y The Leadership ConnectionTM Interviews 23
Slide 24: The Connected Economy Is Characterized by Three Key Forces n Co c ne Spee d tio Products n Services Customer Intangibles Source: Blur, 1998 24
Slide 25: These Three Forces Are Destroying Old Solutions. . . • Markets and industries will be defined in terms of CUSTOMERS rather than products • Market power will shift from suppliers toward CUSTOMERS • More reliance will be placed on flexible, customized marketing and INTANGIBLE elements of the value proposition • Product life cycles will shorten • The need to choose between a high volume/low cost strategy and a niche/differentiation strategy will disappear • Maximizing the number of transactions with the same loyal customer by offering a diverse array of products and services will become increasingly important • The most productive business strategies will be cooperative, not competitive • Organizations will rely more on decision teams and parallel information processing and less on individual decision-making and sequential information processing 25
Slide 26: . . . Leading to Six Rules for Success in the Connected Society. 1 2 3 4 5 6 Focus on desired customers Focus on competencies Leverage partnerships Identify differentiators Create hybrid models Be flexible and agile Source: E&Y Analysis 26
Slide 27: The New Organizational Premise is “Sense-andRespond.” MAKE-AND-SELL Assumption: Predictable change Goal: Become an Efficient Enterprise SENSE-AND-RESPOND Assumption: Unpredictable change Goal: Become an Adaptive Enterprise Mission and Policy Context - purpose and bounds - adptative structure Command and Control management system A Closed System Structure functional hierarchy A da Strategy - objective - plan ptin g An Open System Coordination of Capabilities - commitment management External Signals Internal Feedback Source: Hackel, Stephen, Adaptive Enterprises, Boston:Havard Business School Press, 1999. 27
Slide 28: Transitioning to a Sense-and-Respond Organization Requires a Fundamental Shift Make-and-Sell Continuum Sense-and-Respond Business as an efficient mechanism for making and selling offers to defined market segments with predictable needs Embedded in products Mass Production Efficiency and predictability Profit margins on products and economies of scale Functional and sequential activity Functionally managed and optimized Host-centric: hierarachical top-down command and control mgmt system Share of products and services Strategy as plan Mindset behind Strategic Intent Business as an adaptive system for responding to unanticipated requests in unpredictable environments Embedded in people and processes Modular customization Invested in capailities and system Return on investmens and economies of scope Networked and paralleled activity and teams Enterprise management of essential information Network-centric: shadowing the dynamic network of people and teams Share of customer spending Strategy as adaptive business design Know-How Process Organizational Priority Profit Focus Operational Concept and Governance Mechanism Information Architecture Information Technology Architecture Market Leader Criteria Articulation of Strategy Source: Hackel, Stephen, Adaptive Enterprises, Boston:Havard Business School Press, 1999. 28
Slide 29: Contents I. II. III. IV. V. VI. The Sears Story Business Imperatives in the Connected Society The New Business Paradigm Gap Analysis Actions and Implementation Plan Key Success Factors 29
Slide 30: The Primary Business Objective for Samsung Is to Increase the Ultimate Value of the Company Market Value Multiple ($) Full Potential Financial Performance Non-financial Performance Typical Time 30
Slide 31: The Challenge is to Determine How to Manage Company Resources to Create Maximum Financial Outcomes Full Potential Market Value Multiple ($) Financial Performance Non-Financial Typical = Earnings Revenues x Revenues Invested Capital x Market Value Earnings Time (Profit Margin) (Capital Efficiency) (Growth / Reliability) 31
Slide 32: Increasingly, Investors Take Non-Financial Measures into Account When Valuing Companies Non-Financial Metrics Investors Value Most Full Potential Market Value Multiple ($) 1. Execution of corporate strategy How well does management: • leverage its skills and experience? • gain employee commitment? • stay aligned with shareholder interests? 2. Quality of strategy • Does management have a vision for the future? • Can it make tough decisions and quickly seize opportunities? • How well does it allocate resources? Financial Non-financial Typical 3. Ability to innovate • Is the company a trendsetter or a follower? • What is in the R&D pipeline? • How readily does the company adapt to changing technologies and markets? 4. Ability to attract talented people • Is the company able to hire and retain the very best people? • Does it reward them? • Is it training the talent it will need tomorrow? 5. Market share • Is the company capturing the value of the current market? • Is it well-positioned to expand that value in the future? 6. Quality of executive compensation • Is executive pay tied to strategic goals? • How well is it gauged to the creation of shareholder value? 7. Quality of major processes 8. Research leadership • How well does management understand the link between creating knowledge and using it? Time Key Findings from Market Studies • Nearly 40% (50% for high tech firms) of the market valuation of the average company was missing from its balance sheet (1996 Study) • Non-financial criteria constitute on average 35% of the investor’s decisions • The more non-financial measures analysts use, the more accurate are their earnings forecasts 32
Slide 33: Non-Financial Data Have a Direct Impact on Valuation A one unit improvement in the perception of quality of management could represent a 13.2% price premium on share value % Increase in P/E Ratio given a one-unit change in…. Non-Financial Criteria Quality of Management 2.4% 9.6% 0.0% Computer Industry 7.6% 13.2% Pharmaceuticals 2.6% 4.9% 0.9% 3.9% 0.0% 2.5% 0.0% 3.0% 0.5% 2.8% 0.6% 2.9% 5.3% 7.3% 0.3% 3.1% Food Industry 1.4% 2.5% 1.4% 2.7% 0.0% 1.5% 0.0% 1.3% 0.3% 1.3% 0.4% 1.2% 0.9% 1.8% 0.0% 1.2% 15% 0% Oil and Gas 4.2% 8.8% Quality of Products and Services Level of Customer Satisfaction Strength of Corporate Culture Quality of Investor Communications Effectiveness of Executive Compensation Policies 5.8% 7.2% 0.0% 1.3% 0.0% 4.8% 0.0% 2.1% 0.8% 1.8% 0.9% 2.5% 0.0% 6.1% 0.9% 4.6% 1.1% 4.4% Effectiveness of New Product Development Strength of Market Position 3.2% 3.1% 1.6% 4.1% 7.3% 9.3% 7.1% 15% 0% 0% 15% 0% 15% Influence On Price Short Term Long Term Source: Ernst & Young’s Measures That Matter, 1997 33
Slide 34: Therefore, a Compelling New Business Paradigm Should Focus on Measures That Matter, both Financial and Non-Financial Stock Price Value Invested Allocation of Time and Money Operating Model Management Philosophy/ Point of View AB ? PRICE Constituency Behaviors Customer • Buy • Price • Etc. F ED C C VEM E S I TIME/MONEY ? Value Returned Investor • Buy • Hold • Etc. TIME Supplier • Cost • Stocking • Etc. Employee • Productivity • Wage • Etc. Value Invested SYSTEMS KNOWLEDGE CAUSAL MODEL Cutomer Focus 1 • Calibrate Stock Value Gap 2 • Model Profile Constituency/ Behaviors that Matter 3 4 5 • Transition Enterprise to a Customer Focus Point of View • Create Causal Model/ • Redesign Enterprise VE Optimization Processes/ Overall Capability Architecture 34
Slide 35: The New Business Paradigm Development Proceeds with the Following Five Steps 1 Company Vision 2 • Who are we and what do we do? Business Strategy 3 • Where should we go? Value Propositions • What are our “promises” to: – customers – employees – partners – investors 4 Strategic Operation Model 5 • How will we get there? – Business Structure – Business System – Organization Structure Portfolio of Initiatives • How will we deliver it? 35
Slide 36: This Effort Addresses Four of the Five Components Where should we go? Business Strategy • A definition: The intentional choice of where, how, and when to compete… • …resulting in significant (or largely irreversible) commitments of resources — capital or human • Effective strategy considers marketplace and internal issues, is fact-based, and owned by those responsible for implementation What are our “promises”? Value Propositions • Develop comprehensive offering for target customers • Define compelling reasons: – for employees to work at Samsung – for partners to work with Samsung – for investors to invest in Samsung How do we get there? Operating Model Framework which defines internal business structures, processes and systems: • High level business unit structure and process structure design • Business system definition How do we deliver it? Portfolio of Initiatives • Implementation initiatives focused on improving current business process performance... • …while maintaining the benefit of a hightouch environment • …and enabled by information technology, measurement systems, and infrastructure • Organization structure 36
Slide 37: ty s ili o n ab ati ap i c C ci f e e in Sp rm to e et w r D Ho live e D Kn Yo ow GuW et C ha Ba an t ck O Id pp en o tif rtu ic ni at ty io n A Customer Driven Organization Performs Six Key Customer Processes er om ust e C lue min e Va ter m De Lifeti Fulfill Promises er om st cu ip e nsh ag io an elat Mr De fin eg str o-to ate -m gy ark e Delivery Strategy Exchange Value with Your Customers t Decide What to Give Your Customers Opportunity Design O M u tc ea o su m U nd re e s er R el Yo sta at u n w d C ith ions r us t h he ip to m er Identify Target Customers Know What Your Customers Are Worth Customer Economics t ha W w ur rs no Yo me K to us Do C Know Who Are Your Customers io av t C us eh rB e om rs Customer Strategy lop eve D erin Of f gs 37
Slide 38: Customer Driven Business Framework Customer Knowledge Management CRM Customer Strategy De ve lop me nt Ad Campaign Field Services NPD SCM Go-to-Market Strategy Vision on siti po Pro Business Strategy Offer Development Communication Pricing Channel Promotion Service & Support lue Va Product Design Salesforce Brand Strategy Customer Care Competencies Processes Op Model Organization Design Performance Metrics 38
Slide 39: What Will It Look Like When Samsung Has Transformed into a Customer Driven Organization? Product-Focused Manager Role Managerial Scope Product Manager Managed by sales region Customer-Focused Customer Portfolio Manager Managed by customer segment or portfolio of individual customers Lifetime value, product mix, customer profitability, share of wallet, customer retention •Customer’s Lifetime Value •Customer’s current product portfolio •Customer’s point in lifecycle (customer needs) •Customer’s history with company •Customer’s preferred access channel •Cost to acquire, serve and retain Measures Required Knowledge Volume, product profitability, market share, customer satisfaction •Market growth •Pricing studies •Assessment of competitive landscape •Customer satisfaction •Geographic sales breakdown •Brand perception/perception of quality Source: E&Y Analysis 39
Slide 40: What Will It Look Like When XXX Is Customer-Driven? Activities and Behaviors • Value propositions defined by key customers/segments for product/service offerings • Globally integrated and shared customer knowledge management • Metrics developed to track degree of customer focus • Customer-focused measures & targets shared by different functions in XXX value chain • Customer attraction & retention rates tracked • Share of wallet defined and tracked for key segments • Customer profitability captured & used to manage customer portfolio • Pricing & channel actions are no longer reactive, but based on CRM strategy • New product/service development includes market research, customer and field input, and cross-functional team approach Results • Price parity with leading brands for comparable products • Brand parity in terms of recognition and positive image • Increased brand equity reflected in above-average performance of XXX stock relative to peer competitors • Customer attraction & retention rates increase • Share of wallet increases for key segments • Customer profitability increases • XXX profitability, EVA, and ROA increase 40
Slide 41: Measuring Customer Focus in the New Environment Leading Indicators (Drivers): Customer Value Proposition Value to Customer = Product/Service Attributes + Time Image + Relationship Examples of attributes: (Examples of measures:) Functionality Quality Price Brand After-Sales Service (External product ratings) (Warranty) (Relative (Back claims price ratio) order rate) (Brand survey rating) (Response time, problem resolution rate) Lead To Lagging Indicators (Outcomes): Customer Response Market and/or Wallet Share (Share points) (Examples of measures:) Customer Acquisition (% new customers in target segments) Customer Profitability (Fully-costed margin in target segments) Customer Retention (# of repeat sales in target segments) Customer Satisfaction (CSI) Adapted from: The Balanced Scorecard, Kaplan & Norton, 1996 41
Slide 42: Contents I. II. III. IV. V. VI. The Sears Story Business Imperatives in the Connected Society The New Business Paradigm Gap Analysis Actions and Implementation Plan Key Success Factors 42
Slide 43: Marketing IQ Test True False Don’t Know 1. 2. 3. 4. 5, 6. Businesses in America were reasonably successful during the 1980s, enjoying real growth in sales of 2 percent or more per year. During the coming decade, marketers will earn more profits from new brands than from existing ones. A high share of market in a product category generally leads to economies of scale that result in a high level of profitability. There is little agreement among marketers about what the hot new concept “brand equity” means. A reasonable way to set the marketing budget is to take last year’s figure and adjust for inflation. Line extensions are a very risky way to introduce new products. 7. 8. 9. Focus group interviews are a serious marketing research tool that a manager can safely use to help make serious marketing decisions. Business today invest more money in finding new customers than in further developing current customers. The most profitable customers of a firm are usually its biggest customers. 10. Big companies generally make their marketing decisions after evaluating many alternatives in terms of profitability. 43
Slide 44: Marketing IQ Test (Cont’d) True False Don’t Know 11. The more appealing a new product concept is to prospective buyers, the more likely it is it will be a success. 12. Every company should strive to hold on to all of its customers. 13. Location is the most important determinant of success for a new retail business. 14. One-hundred percent customer satisfaction is not an intelligent business objectives. 15. Media planners at major advertising agencies know a great deal about the relative effectiveness of print, television, and radio advertising. 16. Because pricing is such an important component in the marketing mix, most big companies have a serious pricing strategy based on pricing research. 17. Nielsen’s television rating service--especially the new “people meter”--provides valid information about the number of people watching a particular television program. 18. Consumer and trade promotional programs tend to be more profitable than advertising. 19. Companies cannot quantify the effects of public relations programs. That's one reason why PR is a less valuable components of the marketing mix than advertising or the sales force. 20. Most marketing and advertising programs usually are measured in terms of their profitability. Total: 44
Slide 45: What is Your Marketing IQ? If you scored: 150 - 160 130 - 149 110 - 129 90 - 109 70 - 89 50 - 69 30 - 49 11 - 29 1 - 10 You are: A marketing genius A guru, a maven An up-and-coming consultant A seasoned professional A typical marketer A death-wish marketer An incompetent Dangerous to your company Guilty of malpractice 45
Slide 46: Contents I. II. III. IV. V. VI. The Sears Story Business Imperatives in the Connected Society The New Business Paradigm Gap Analysis Actions and Implementation Plan Key Success Factors 46
Slide 47: An Operating Model Is the Primary Mechanism for "Operationalizing" Business Strategy Where should we go? What are our “promises”? Value Propositions • Develop comprehensive offering for target customers • Define compelling reasons: – for employees to work at Samsung – for partners to work with Samsung – for investors to invest in Samsung Operating Model How do we get there? How do we deliver it? Business Strategy Portfolio of Initiatives 47
Slide 48: An Operating Model Is the Primary Mechanism for "Operationalizing" Business Strategy Where should we go? What are our “promises”? How do we get there? Operating Model Framework which defines internal business structures, processes and systems: • High level business unit structure and process structure design • Business system definition How do we deliver it? Business Strategy Value Propositions Portfolio of Initiatives • Organization structure 48
Slide 49: Operating Models Consist of Three Primary Components 1 Business Structure Low Cost One Operating Business Unit Sales Marketing Call Center (Service) Billing Operators Remittance Processing System Control Center Ops Generation Engineering and Construction Environmental Regulatory (Lobbying) Legal Services Human Resources Finance External Affairs Business Planning Administration Engineering Regulatory (Lobbying) Legal Services Human Resources Finance External Affairs Business Planning Administration Energy Generation Unit (Genco) Transaction Management By-Product (Ash) Management Environmental Compliance Maintenance Operations Energy Delivery Unit (Transco) Regulatory Compliance Maintenance Operations Customer Operations Unit (Disco) Sales Marketing Product Development Customer Service Differentiated Services Strategic Operating Model 2 Business System 3 Competencies C h a rt T itle Organization Structure • Identification of business unit structure, organized around customers, markets, products, geographies, etc. • Delineation of dedicated and shared services across business units • Preliminary evaluation of profit & loss responsibility, revenue responsibility, and cost centers • Articulation of “rules of engagement” — A.K.A. “How things really get done” Business Processes Knowledge Management Performance Management • Organizational Structure describes at a high level all elements of: - reporting structures - roles & responsibilities - jobs & skills • Design of an organizational structure that is aligned with the strategy and other operating model components • Clearly identified and defined business system components that support the strategy and the high level business structure Our focus 49
Slide 50: Operating Model Development: Business System Competencies (Staffing, Training, Development) n Ma an ge ag Ch em Business Processes t en Knowledge Management & Information Systems Performance Management 50
Slide 51: Operating Model Development Competencies (Staffing, Training, Development) n Ma an ge ag Ch em Business Processes t en Knowledge Management & Information Systems Performance Management 51
Slide 52: Competency Modeling and Assessment Methodology T a c tic a l O rg a n iz a tio n a l De s ig n S ta g e 1 S ta g e 2 S ta g e 3 S ta g e 4 C o m pe t e n c y Mo de lin g As s e s s m e n t Gap A n a ly s is HR L in k Documentation Review/ Current State Understanding S u c c e s s io n / C a re e r P la n n in g L IN K A G E V a lida tio n S e le c t io n T ra in in g a n d De v e lo p m e n t P e rfo rm a n c e A p pra is a l C o m pe n s a t io n R e c ru it m e n t Universal Process Job/Role 52
Slide 53: Operating Model Development Competencies (Staffing, Training, Development) n Ma an ge ag Ch em Business Processes t en Knowledge Management & Information Systems Performance Management 53
Slide 54: Operating Model Development Competencies (Staffing, Training, Development) n Ma an ge ag Ch em Business Processes t en Knowledge Management & Information Systems Performance Management 54
Slide 55: Performance Management is the Vital Link Between a Company’s Ability to Define its Strategy and Implement It. Concrete initiatives to operationalize a firm’s strategy Strategy Vision Performance Management Execution Execution at all levels consistent with strategy Measurement Motives It’s not what you expect … it’s what you inspect. What you measure is what you get. If you can measure it, you can manage it. 55
Slide 56: Effective Performance Measurement Systems Capture Both Financial and Non-Financial Value Creation Market Feedback Loop: Measuring Value Financial Markets Share Price Investor Estimates of Future Cash Flows Financial Performance Measurement Non-Financial Performance Measurement Value Creation Strategic Decisions Capital Allocations Company Strategy Execution 56
Slide 57: Performance Measurement Has Become a Highly Effective Management Tool for Aligning Performance With Strategy, Especially in Rapidly Changing Industries • communicates the company’s strategic vision down through the organization • provides a management tool for decision-making • promotes accountability and follow-up • provides a mechanism for learning and feedback • promotes alignment of effort up and down the organization 57
Slide 58: The Balanced Scorecard Has Proven to be a Highly Effective Approach for Both Performance Management and Business Transformation • As of 1999, more than 50% of Fortune 1000 companies had adopted some version of the Balanced Scorecard (BSC). • The early adopters of the Scorecard in the early 1990’s have reported satisfaction with what the Scorecard accomplished for them. - About half used the Scorecard to focus and improve their pursuit of already established financial goals (“run a tighter ship”) - About half used the Scorecard to bring about a more fundamental business or cultural transformation (“turn the ship around”) - At least half of the companies viewed the Scorecard as a “resounding success,” and nearly all called their efforts generally successful. All believed the Scorecard helped employees focus on strategic priorities and the leading indicators of financial success and better manage their company’s value chain. • This compares favorably with failure rates between 65% and 80% for business transformation initiatives with a significant information systems component. Sources: Balanced Scorecard Collaborative, press release dated February 25, 1999, at www.bsccollaborative.com; Sarah Mavrinac and Michael Vitale, “Where Are They Now? Revisiting the Original “Balanced Scorecard” Firms,” Perspectives on Business Innovation (Ernst & Young Center for Business Innovation), Issue 2, p. 29., Gartner Group. 58
Slide 59: A “Good” Scorecard Tells the Story of Your Strategy Criteria for a Good Balanced Scorecard • Cause and Effect Relationships: – Every measure is a link in a chain of cause and effect linkages that represent the strategy • Linkage to Financials: – A Strategy is a set of hypotheses about cause and effect Every measure ultimately ties to financial results/EVA • Emphasis on Performance Drivers: – – Focus on factors which create long term value Establish a balance between leading and lagging indicators • Measures that create change – – Measures which communicate objectives not prescribe actions Measures which cause the organization to redefine a process or change behavior 59
Slide 60: At a Personal Level, Understand How Their Actions Impact Economic Value EVA ILL US TR AT IVE Cost Of Capital NOPAT Capital Expense Administration Expense Facilities Expensed Capital People Expense Production Expense Inputs Inventory Spoilage Rents/Occupancy Expense Warehousing Raw Materials Transportation Equipment EDI Ordering Costs Errors Bad Data Errors Clerical Errors Technical Errors Staffing Constraints Education Revenue Marketing Sales New Product Development Reporting Confidence Ability Intellectual Aptitude 60
Slide 61: The Balanced Scorecard Is the Most Comprehensive and Flexible Measurement Framework Available and Best Addresses Today’s Challenges in Performance Measurement and Management A complete Balanced Scorecard has four fundamental components: The Balanced Scorecard Framework Of Complementary Business Perspectives A Cause-&-Effect Model That Explains How The Company’s Strategic Objectives Together Create Value A Set of Key Measures, Targets, and Accountabilities To Guide Progress Toward Those Objectives Supporting Processes & Infrastructure To Implement The Scorecard As A Business Discipline Four perspectives: •Financial •Customer •Business Processes •People (Organizational Learning and Growth) The model helps ensure: •That the underlying busiess vision is shared by the management team and communicable to the organization •That the set of strategic objectives that form the basis for the Scorecard work together toward the same strategic goals •That the Scorecard’s various objectives ultimately contribute to improved financial performance For each strategic objective: •One or more Key Performance Indicators (KPIs) •A target for each KPI •One or more groups or individuals charged with achieving each target •Where relevant, designated initiatives to help achieve those targets Process examples: •Management Review •Budgeting •Performance Review •Compensation Infrastructure examples: •Decision support & reporting systems •Communication •Training 61
Slide 62: The BSC Links Strategic Objectives to Measurements Across Four Perspectives The Balanced Scorecard translates the strategy of a firm into statements of “things the firm needs to do well to be successful.” In its standard form, the Balanced Scorecard defines success across at least four perspectives: Financial, Customer, Business Process, and People. The Strategy Financial To satisfy our shareholders, what financial objectives must we accomplish? Customer To achieve our strategy, which customer needs must we satisfy? Business Process To satisfy our customers, in which internal business processes must we excel? People To achieve our strategy, how must the people learn and innovate? Most Scorecards also seek a balance between indicators of current growth (often financial and business measures) and indicators of future growth (typically in the “customer” and “people” perspectives) *Based on the original concepts proposed by David Norton and Robert Kaplan in their 1992 Harvard Business Review article 62
Slide 63: The Balanced Scorecard Defines Strategy As a Set of Hypotheses About Cause and Effect Partial Revenue Strategy Broaden Revenue Mix Increase Customer Confidence in Our Financial Advice Improve Returns Illu str ati ve Understand Customer Segments Develop the Offering Cross-Sell the Product Line Achieve Employee Satisfaction Improve Customer Information Align Reward System Broaden Skills (Financial Planner) 63
Slide 64: This Cause and Effect Model Ensures That All Measures Ultimately Drive Financial Indicators Partial Revenue Strategy Increase Customer Confidence in Our Financial Advice Improve Returns Broaden Revenue Mix Financial    Return on Investment Revenue mix Revenue growth Customer   Understand Customer Segments  Develop the Offering Cross-Sell the Product Line  Customer satisfaction survey Customer retention Depth of relationship Share of segment Business Processes Achieve Employee Satisfaction Improve Customer Information Align Reward System  People         Broaden Skills (Financial Planner) Employee satisfaction Revenue per employee Strategic info availability Strategic job coverage Personal goals alignment Product development cycle Revenue from new products Hours with customers Cross-sell ratios 64
Slide 65: For example, a Large Beverage Company “Profitable Share Growth” Maximize Total Return to Shareholders Strategically Strategically Manage Market Manage Market Share Share Financial Meet or Exceed Meet or Exceed Long-Term Long-Term Corporate Earnings Corporate Earnings Goals Goals “Be Consumer Brand-of-Choice and Retailer Preferred Supplier” Retailer Push Enhance Profitability Enhance Profitability of Business Partners of Business Partners (Wholesaler, (Wholesaler, Retailer) Retailer) Provide Right Product/ Package at Right Place, at Right Time, at Right Price and Margin Consumer Pull Be Perceived by Be Perceived by Consumers as Having the Consumers as Having the Best Value Best Value Achieve Achieve Productivity and Productivity and Cost Advantage Cost Advantage Customer Enhance Brand Enhance Brand Equity, esp. Equity, esp. XXX Budweiser Trademark Trademark Help Partners Help Partners Manage Product Mix Manage Product Mix and Availability and Availability Partner with Partner with Retailers to Execute Retailers to Execute Win/Win/Win Win/Win/Win Activities Activities Ensure and Promote High Ensure and Promote High Product Quality and Product Quality and Freshness as aa Freshness as Competitive Advantage Competitive Advantage “Provide High Quality, Enhanced Margin” “Manage and Measure Across Value Chain” “New Ideas, Good Team Work” Strengthen use of Strengthen use of information across the information across the extended supply chain, extended supply chain, including 2nd and 3rd tier including 2nd and 3rd tier Understand Customer Understand Customer Trends to Design Targeted Trends to Design Targeted Pricing, Packaging, and Pricing, Packaging, and Advertising/Merchandising Advertising/Merchandising Maintain Best-in-Class Maintain Best-in-Class Master Scheduling and Master Scheduling and Distribution Capability Distribution Capability Maintain Consistency in Maintain Consistency in Production and Production and Procurement Processes Procurement Processes Develop Creative Develop Creative Production Innovations Production Innovations Maintain Best-in-Class Maintain Best-in-Class Innovative Marketing Innovative Marketing Capability Capability Incorporate Leading Edge Decision Support Systems into Effective Decision Making Incorporate Leading Edge Decision Support Systems into Effective Decision Making Business Process People Continue to Attract and Continue to Attract and Retain Highly-Effective Retain Highly-Effective Workforce Workforce Foster Culture of Foster Culture of Innovation and Risk Innovation and Risk Taking Taking Eliminate Silos and Eliminate Silos and Ceilings Ceilings Provide Challenging and Rewarding Work Provide Challenging and Rewarding Work Create a Work Environment of Trust, Teamwork, and Integrity Create a Work Environment of Trust, Teamwork, and Integrity 65
Slide 66: A XXX Cause-and-Effect Model Should Show How its Strategic Objectives in All Four Perspectives Illustrative XXX Cause-&-Effect Model Increase sales-to-asset ratio Maximize shareholder value Increase customer profitability Increase unit volume Increase customer acquisition & share of wallet Target key customer segments Increase customer retention & lifetime value Increase EVA Increase price relative to market leader Growth Leverage R&D to develop innovative digital products that address customer needs Customer/ Consumer Build brand equity Reduce inventory & current assets Make what you sell, don’t sell what you make Understand & respond to customer needs Business Processes Develop customer knowledge management infrastructure Organize around the customer People Create a knowledgesharing culture Measure & reward customer-focused behavior Hire & develop customer-focused employees Empower employees to make decisions closer to the customer 66
Slide 67: A Balanced Scorecard Includes Objectives, Measurements, and Targets That Promote Change Example: Perspective    Business Objectives Shareholder value Profit New revenue    Measurements % dividend growth Operating Margin Revenue from new services  Targets Top 10% of FTSE companies each year  RPI + X% annually  25% in three years    Owner/ Accountability Finance Director CEO Business Development Manager Shareholder Requirements Industry/ Customer Positioning    Differentiation Strategic alliances Customer service    Value for money Profits from alliances Customer satisfaction Number one customer rating  $Xm in five years  Number one customer rating  Marketing Director Business Development Manager  Marketing Director   Business Processes Productivity New product development  Segmentation   Revenue/work hour Product development cycle time  Number of initiatives targeted at profitable segments   Best-in-class within five years  Reduced by 50% in two years  60% within one year  Chief Operating Officer  Research and Development Manager  Marketing Director  People People policy Alliance management  Customer focus   Management span of control  Number of “learning partnerships”  % management time interfacing with customers     Treble in three years 10 in five years 20% in two years Human Resources Director  Business Development Manager  CEO  67
Slide 68: A Properly Designed Process Will Avoid the Common Pitfalls of Most “Home Grown” Balanced Scorecards Failing to Articulate Strategic Intent     Creating Unbalanced Measurement      Industry generic, not strategic “Unintegrated’ perspectives What customer values are not defined Missing internal, operational link Too many measures Unrealistic, unrepeatable Activities instead of measures Misleading All financial Institutionalizing a Dysfunctional Process      Establishing a Rigid Management Philosophy    No executive consensus—not top down Roll out before completion Tie to incentives prematurely Too many people, too long Lose momentum Control, not communication Strategic report vs. strategic learning agenda For management only 68
Slide 69: In Sum, The Balanced Scorecard Determines: - What is strategically critical - What needs to be measured - How it is to be measured It also links the boardroom to the back office 69
Slide 70: The Balanced Scorecard’s Metrics and Supporting Processes Are Cascaded Down Through The Organization As Far As Needed, Often to the Individual Hourly Worker Cascade Level I: Corporate Design Scorecard Implement Scorecard Cascade Level II: Business Unit Design Scorecard Implement Scorecard Cascade Level n: Dept. or Team Design Scorecard Implement Scorecard Cascade Level n+1: Individual Design Scorecard Implement Scorecard 70
Slide 71: XXX Performance Management: Major Tasks to Perform Cascade Level I: Design XXX-Level Paper-Based Balanced Scorecard Implement Basic XXX-Level Paper-Based Balanced Scorecard Cascade Level II: Design GPM-Level Paper-Based Balanced Scorecard Implement Basic GPM-Level Paper-Based Balanced Scorecard Expanded Implementation Expand Process Support for Balanced Scorecard Objective: Design enterprise-wide Scorecard framework •Evaluate XXX vision & strategy •Define short list of strategic objectives •Develop cause-&effect model •Define measures •Establish targets •Develop implementation plan Implement enterprisewide Scorecard framework •Provide additional training •Integrate use of Scorecard into management review, budgeting, and planning processes for executive team •Launch “missing measures” program to develop & collect new measures •Review and refine model, measures, & targets •Link to executive compensation •Communicate Scorecard to rest of organization XXX-level Scorecard fully institutionalized XXX President Design Scorecard framework for each GPM •Apply XXX vision & strategy •Define short list of strategic objectives •Develop cause-&effect model •Define measures •Establish targets •Develop implementation plan Implement Scorecard framework for each GPM •Provide additional training •Integrate use of Scorecard into management review, budgeting, and planning processes for executive team •Launch “missing measures” program to develop & collect new measures •Review and refine model, measures, & targets •Link to executive compensation •Identify additional IT requirements Establish full support for automated scorecard & complete cascade to rest of XXX •Develop & implement executive information system to automate Scorecard mgmt. & reporting •Confirm how far to cascade the Scorecard (level & geography) •Launch communication & training program •Complete the cascade •Fine-tune measures & targets through use •Link to compensation Major Activities: Results: XXX-level Scorecard defined and launched for executive team XXX President Ownership: Scorecards defined and launched for each GPM executive team Global Product Managers XXX-level Scorecard fully institutionalized Global Product Managers Full Balanced Scorecard implementation Functional & departmental managers 71
Slide 72: Why Does The Balanced Scorecard Make Sense for XXX?  The Scorecard measures a business’s performance from customer, business process, and employee development perspectives as well as from a financial one. Until now, XXX has measured itself primarily along financial lines, and to a lesser extent by process measures. However, it now recognizes that it needs to adopt a customer-based perspective, and transform its organization’s and employee’s capabilities to better support a customer focus.  The Scorecard also tries to balance emphasis on drivers of current performance with emphasis on drivers of future growth. XXX has been very successful recently, but recognizes that it needs to shift its focus to new sources of future growth, and that this will entail changes in how it does business.  The Scorecard is one of the most effective tools available for accomplishing cultural change and business transformation. XXX realizes that shifting from a product focus to a customer focus will require a fundamental reorientation in company culture, as well as a transformation in the business processes by which XXX develops, positions, and sells its products and responds to its customers’ needs.  The Scorecard is one of the most effective means of communicating a company’s strategic vision down through the ranks of an organization so that each employee understands the strategy and understands how his or her actions should contribute to achieving that vision. For XXX to become a customer-focused organization, management will have to communicate--continually and consistently--what that will actually mean for day-to-day operations throughout the company. 72
Slide 73: Why Does The Balanced Scorecard Make Sense for XXX (continued)?  The Scorecard is holistic: it provides a balanced set of measures for an entire company or business unit, not just for a single initiative or business process. XXX will need to make changes throughout its entire organization--not just in its marketing process--to focus successfully on its customers. The Scorecard can help each part of the organization understand its role within a customer-driven business.  The Scorecard encourages sharing cross-functional objectives and measures by different groups that need to work together toward a common goal. It discourages distinct parts of an organization from “owning” one key measure and ignoring others as “belonging” to someone else. To achieve a customer-driven culture in an organization where P&L responsibility is allocated along product lines (GPMs), XXX will need a performance management framework that unites GPMs, Global Marketing, and overseas offices as a team with a common focus on the customer and a shared vision of how to meet customer needs.  The Scorecard assumes that strategic objectives will change over time or need to be fine-tuned, and provides a management review process for doing so. XXX is entering an era of increased market volatility and shortened strategic planning horizons, and will have to adjust its customer strategy as the connected economy evolves. 73
Slide 74: Operating Model Development Competencies (Staffing, Training, Development) n Ma an ge ag Ch em Business Business Processes Processes t en Knowledge Management & Information Systems Performance Management 74
Slide 75: Contents I. II. III. IV. V. VI. The Sears Story Business Imperatives in the Connected Society The New Business Paradigm Gap Analysis Actions and Implementation Plan Key Success Factors 75