Management and Industrial Strategy תיתיישעתו תילוהינ ... · © KPA Ltd., 2008 Management and Industrial Strategy תיתיישעתו תילוהינ היגטרטסא

© KPA Ltd., 2008

ManagementManagementand Industrial Strategyand Industrial Strategy

אסטרטגיה ניהולית ותעשייתיתאסטרטגיה ניהולית ותעשייתית

רון קנ ת ' פרופ

ר יוס י רענן "ד

Professor Ron Kenett - [email protected]. Yossi Raanan - [email protected]

Part IPart I

www.kpa.co.il/strategycourse

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מטרת הקורס

הבנת חשיבות אסטרטגיה ניהולית ותעשייתית •

:בסביבה עתירת טכנולוגיה להשגת

כ ושר תחר ו ת–

התאמ ה לס ביב ה מ שת נה –

י צ יא ה מ מש בר–

כנ יס ה לש ו ו קי ם ח דש י ם –

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מבנה הקורס

אין: תנאי קדם

:שיטת הלימוד

פרונטליותהרצאות •

ביצוע פרויקט במסגרת צוות•

:הרכב הציון

) מצגת20%, עבודה40%(% 60 –עבודת גמר •

)נדרש ציון עובר לשקלול (% 40 –מבחן סיום •

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1 -נושאי הקורס

:מבוא ותוי ות התפתחות תפיסות ניהוליו ת ומ י צוב הטכנולוגיה בתעשייה תוך ניתוח משמע

). סולם האיכות( ומהפכת המידע התעשיית יתהמהפכה

, שש סיגמה, ניהול איכות: מבוא לאסטרטגיו ת הניהוליו ת העיקריו ת המיושמות בתעשי יה. מערכו ת תוכנה תעשיית י ות ומ יכ ון ארגוני, י יצ ור גמישותמערכות

:אסטרטגיה עסקית ושי ו וק יתאופציו ת , בוז אלן, ליטל. דארטור, מקינזי, BCG: מודלים לניתוח אסטרטגי כגון

. ריאליות

: אסטרטגית שרותהתמיכה הטכנולוגית הנדרשת במערך . מערך השירות ותפקידו במחזור חיי המוצר

/ שירות מבוזר : האסטרטגיות הניהוליות העיקרי ות בשירות יםהצגת. השירות.מוקדי שרות, מרוכז

:אסטרטגית משאבי אנ ושהערכת , מודלים למיפו י משאבי אנוש, סקרי עמדות ע ובדים, מודלים למיפו י א רגוני

. תהליךממוקדת עובדים

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2 -נושאי הקורס

:אסטרטגית התפעול והאיכו ת.שש סיגמה. ניהול זמין ושיטו ת יי צור ארגוניות יפניות

מוצרי בתעשי ות -י יצ ור ברשתות ו עקרונות הניהול הרב , מערכות י יצ ור גמישות. מיכ ו ןעתירו ת

:פ ונ יהול סיכ ו ני ם" אסטרטגית מוCMMI ,פרויקט , ניהול סיכוניםMUSING.

:אסטרטגית מערכות מ ידע ותק שורת. תקשורת לסוגיה והשפעותיה על ההיערכות התעשיי תי ת והשירותית. ITאסטרטגית

: ניהול השינ ויEKD ו BESTמתודול וגית

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Definitions

• Mission : What business are we in ייעוד

• Vision : Desired future state of organization ח זון

• Values : Principles to be observed to meet vision ערכים

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Examples

The Ritz-Carlton Hotel Company:In 1983, W.B. Johnson Properties set out to create a fist – an American hotelgroup with products and services designed to appeal to and suit the demands ofboth the prestigious travel consumer and the corporate travel and meeting planner worldwide.

Fannie Mae:Position Fannie Mae to excel in business, profits, and customer service byattracting, developing and retaining quality-focused employees who provideworld-class transaction processing services.

General Electric:Be number one or number two in every market we serve.

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Alcoa:Alcoa aspires to be the best company in the world.

Eastman Chemical:Be the best international chemical company.

Texas Instruments:To be the best defence electronics company in the world.

Aetna:We will achieve sustained, superior profitability and growth by developing anddelivering commercial property/casualty insurance products and services thatmeet the needs of small businesses.

Examples1

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British Broadcasting Corporation (BBC)

We aim to be the world’s most creative and trusted broadcaster and programme maker, seeking to satisfy all our audiences in the UK with services that inform, educate and entertain and that enrich their lives in ways that the market alone will not. We aim to beguided by our public purposes; to encourage the UK’s most innovative talents; to act independently of all interests; to aspire to the highest ethical standards; to offer the best value for money; to be accountable to our license payers; to endeavour to be the world’s leading international broadcaster; and to be the best - or to learn from the best - in everything we do.

1

1

העיתו ן של המדינה, להרגיש בבית

עית ו ן של כולם

עית ון לאנשים חושבים, לא מה שחשבת

עית ו ן העסקים של ישראל, עובד בשבילך

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Be the Best InternationalBe the Best InternationalChemical Company...Chemical Company...

Eastman Chemical CompanyEastman Chemical CompanyEastman Chemical Company

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No. 1 in Bromine and No. 1 in Bromine and Bromine CompoundsBromine Compounds

No. 1 in Soil FumigationNo. 1 in Soil Fumigation

No. 2 in Fire RetardantsNo. 2 in Fire Retardants

The Dead Sea Bromine GroupStrategic Objectives

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Our Vision

Teva is a global Israeli based pharmaceutical company. Its vision is to become one of the world's leading pharmaceutical companies, by being the undisputed leader in the global Genericsindustry and by developing a global franchise in selected Innovative products originating from Israeli science.

Teva differentiates itself by balancing its portfolio with Generic and Innovative activities, by the strategic depth of its vertical integration, by combining local customer responsiveness with a "global edge" and by successfully managing increasing profitablegrowth and complexity.

Our success lies in the leadership of our management, the skillsand devotion of our people, the quality of our offerings and ourfocus on customers and patients.

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Core ValuesLeadership•Think globally and act locally •Create value by cross leveraging our global organization's strengths •Provide leadership in the communities we serve Always be better than the competition Strategic Discipline•See the big picture and use a long term approach •Deliver results on strategic goals •Think and act strategically on global and local basis Operational Excellence•Do more and better for less, rather than Either-Or Creativity•Reward and recognize the implementation of strategic innovation and creative thinking Openness to Change•Encourage directness and open communication channels •Be fast and flexible •Translate challenges into opportunities

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Strategic GoalsSustained Profitable GrowthApproximately 20% top-line annual growth through investments in Research and Development and acquisitions. Sales double every 4 years. Profits double more rapidly. Proactive cost containment. Industry & Market LeadershipTo become first or second in each significant market to Teva. A leader in affordable, Generic and selected Innovative pharmaceutical products. Strong "First to Market" and "Entire Basket" strategies to ensure competitive advantage. The leader in the globalizing Generics industry. GlobalizationLeverage global strengths in Generic and Innovative activities. Develop a global franchise for selected Innovative products by leveraging Israeli science. Take an active role in leading the process of globalization in the Generics industry. Local responsiveness and accountability combined with global efficiency and effectiveness.

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Strategic Planning

Vision

Strategy

Actions

OrganizationaldashboardsHow to get there?

Where to go?

Strategic Maps

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AlternativeAlternative

ScenariaScenaria

BBB

FutureFutureSitiationSitiation

““Should ModelShould Model””

CurrentCurrentSituationSituation

““Is ModelIs Model””

A

Strategic Planning1

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Establish a VisionEstablish a Vision

Translate it to Strategic Translate it to Strategic Quality ObjectivesQuality Objectives

Work to Achieve these ObjectivesWork to Achieve these Objectives

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VisionVision

Strategy

Long Range Goals

Far & WideFar & Wide

PositioningPositioning

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MarketsMarkets

CustomersCustomers

TrendsTrends

Financial ResourcesFinancial Resources

Products & ServicesProducts & Services

SWOTSWOT

CultureCulture

CompetitionCompetition

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Three Questions

What areWhat arethe customerthe customer

requestsrequests


needsneeds

WWhat ishat isOur offeringOur offering

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Focus areasWhat areWhat are

the customerthe customerrequestsrequests


needsneeds

WWhat ishat isOur offeringOur offering

WOW

Overdoing

CustomerDissatisfaction

No addedValue offering

No addedValue requests

Nonconformity

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VisionVisionVision

Short Term ViewShort Term View

Strategy

Long Term Goals

PositioningPositioning

Short Term Goals Key Indicators

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Detailed PlansDetailed Plans

VISIONVISION

Strategy

Long Term Goals

Short Term Goals

Positioning

Key Indicators

Projects listMission Statements

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מפעל ההרכ בות המוביל ביש ראלמפעל ההרכ בות המוביל ביש ראל

זמני תגובה קצרים•

משרת את החטיבות בצורה הטובה ביותר•

מוקד רווח•

מצטיין באיכות•

מרכז ידע ברמת מקצועיות גבוהה•

TURN KEYפתרונות•

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מה שה לקוחמה שה לקוח

דורשדורש

מה שה לקוחמה שה לקוח

צריךצריך

מה מה

שמסופק שמסופק

שלוש זוויות ראייה1

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מה שהלקוחמה שהלקוח

דורשדורשמה שהלקוחמה שהלקוח

צריךצריך

מה שמסופקמה שמסופק

ללקוחללקוח

ללא ללא

ערך ערך

מוסף מוסף

ללקוחללקוח

מיותרמיותר

שביעותשביעות--איאי

רצוןרצון

אי התאמה

איכות יתר

WOW

?במה להתמקד 1

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1-היקף ומאפי יני פע יל ות נ וכחית

א”כנתונ י עובדים673•

עובדים קבועים531•

תגמול ברמה פרטנית•

נתונ י תקצ י ב•- $M440 מכירות

-עבודה+חומרים•$M150

17$M -עלות •13$M -מכירות •

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2 -היקף ומאפי יני פע יל ות נ וכחית

הרכבו ת 40$ - 5עלות בין •$ מיליון11 -היקף פעילות •עלויות ישירות להרכבות •

3.3 % -כולל כאחוז ממכירות

מ”מע6 -שכבות ממוצע ’ מס•

30$ -עלות ממוצעת •

$ מיליון10 -היקף רכש •מיליון 200השמות לשנה•

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בעיות שהן הזדמנוי ות

עלות תיקון

1.5$ליחידה

תחזית יצור של

לחודשיחידות6000

Valor מערכת י”עאובחן Valor מערכת י”עאובחן

Solder MaskCoverage

CADSHORT

התאמ ה-אי

לתהליך

בקו הרכבה

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פריסת מט רות

מפעל ההרכבותמפעל ההרכבות

המוביל בישראלהמוביל בישראל

איכות/מקצועיותמחיר זמן תגובה

לקוחותחוץ

לקוחותפנים

הקהילההבעלים

1

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זמן תגובה

SET UPבסיסי מידעומחזור הקים

אמצעים

תהליכים מדידה /בקרה

פריסת מט רות1

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מחיר

ROE/ROIמודל עסקי

עלות החומרשיטות תמחור

ביצועיתהליכים


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מקצועיות

איכות

DFMTURNKEY 6 SIGMA


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ר”שהחטיבות

ר”שהעובדים

לקוחותחוץ

לקוחותפנים

נאמנותלקוחות

ר”שלקוחות


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פרקים בתכנית האס טרטגיתל ”וב ח ומצב ה ש וק בי שראל •

הטכ נ ול וג י ה הנ וכ ח ית ו ה עת י ד ית •

הסכ מ י ש ותפ ו ת /דר יש ו ת לק ו ח•

משאב י אנ ו ש•

א יכ ות •

רכש •

השק ע ות •

ל וג יסט י ק ה •

מ ערכ ות מ י ד ע •

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Deploying the vision

VisionVision

Key Strategies

StrategicGoals

Projects

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מפעל ההרכבותמפעל ההרכבות

המוביל בישראלהמוביל בישראל

זמן תגובה

עלות מכר

פרויקט ים

מחיר

א יכ ו ת/מקצוע י ות

OTD = 100%

מרכז יד ע

סדרות ק טנות

TURN KEY

רכש

פריסת מטרו ת1

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Projects What When Who Where Why How

Deploying the vision1

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REACTION TO CHANGEREACTION TO CHANGEREACTION TO CHANGE

Time

Energy

Stunned Paralysis

Status Quo

Denial

Anger, rage

Bargaining

Depression

Testing

Acceptance

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Models for Strategic Planning Models for Strategic Planning

.1993דצמבר , ניהול, "תכנון אסטרטגי לאיכות ככוח מניע", קנת רון) 1

בחינת חלופות אסטרטגיות על בסיס מדדים " , דרור-עתי זיו ואורי קן, קנת רון) 2. 2000ירושלים , הכנס הבינלאומי של האיגוד הישראלי לאיכות, פיננסיים

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Background

• Portfolio management and the prioritization of new product projects has become critical management task in the past decade.

• An estimated 50 percent of a firm's sales today come from new products introduced to the market within the previous five years.

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Definitions - 1

Business Strategy – Specifies the goals, direction and areas of focus for the business unit.

Business Unit (BU) – This is the smallest unit in the company for which portfolio management is undertaken. Usually a BU (or SBU – strategic business unit) has its own goals, strategy, and resources. For example, a BU is likely to have its own R&D budget. For smaller firms, the BU may be the entire company.

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New Product Strategy – This is a component of or (flows from) the business strategy. It specifies goals, direction, and areas of focus (that is areas in which product development efforts will focus). It may even specify desired levels of R&D and new product spending in specific arenas of focus (for example, how much to spend on certain markets or product categories).

Definitions - 22

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Portfolio management for new products - Portfolio management for new products is a dynamic decision process wherein the list of active new products and R&D projects is constantly revised. In this process, new projects are evaluated, selected, and prioritized. Existing projects may be accelerated, killed, or de-prioritized and resources are allocated and reallocated to the active projects. The portfolio decision process is characterized by uncertain and changing information, dynamic opportunities, multiple goals and strategic considerations, interdependence among projects, and multiple decision makers and locations.

Definitions - 32

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Portfolio Models – These are the specific models or tools used to select projects or review the portfolio. They include scoring models, bubble diagrams and maps charts, financial models, and strategic approaches.

Definitions - 42

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Portfolio Management Methods

• Financial or economic models• Scoring models and checklists• Probabilistic financial models• Behavioral approaches• Mathematical optimization procedures• Decision Support Systems (DSS)• Mapping Approaches

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Which Dimensions to Consider?Sample list of possible parameters to consider. Any pair can

be the X and Y axes for a bubble plot:• Fit with business or corporate strategy (low, medium, high)• Inventive merit• Strategic importance to the business (low, medium, high)• Durability of the competitive advantage (short, medium, long-

term)• Reward based on financial expectations (modest to

excellent)• Competitive impact of technologies (base, key, pacing, and

embryonic technologies)• Probabilities of success (technical and commercial success

as percentages)

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Dimensions to Consider - 2

• R&D costs to completion (dollars)• Time to completion (years)• Capital and marketing investment required to exploit

(dollars).• Markets or market segments (market A, market B, etc.)• Product categories or product lines (product line M,

product line N, etc.)• Project types (new products; product improvements;

extensions and enhancements;Maintenance and fixes; cost reductions; and fundamental

research• Technology or platform types (technology X, technology

Y, etc.).

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Strategic Assessment variablesMarket Attractiveness

•Threats by alternative solutions•Stage in life cycle

•Level of competition after analyzing the characteristics of competition•Product differentiation

•Volatility of exchange rates/inflation/political situation•Customer brand loyalty

•Regulatory climate•Price elasticity

•Technology/Innovation importance as perceived by customers•Customer bargaining power

•Rate of technological change•Volatility of market demand

•Access to critical/special components•Market profitability

•Market barriers to entry/exit•Market growth rate

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Strategic Assessment variablesRelative Market position

• Leader in technological innovation

• Company’s service relative to competitors

• Company’s quality relative to competitors

• Company’s prices relative to competitors

• Customer loyalty to our company

• Company’s image as perceived by customers

• Market share growth

• Relative market share

• Overall competitive position

• Probability of marketing plan success

• After-sales service

• Distribution network effectiveness

• Distribution network coverage

• Relationships with regulators

• Marketing skills and strength

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Strategic Assessment variablesTechnology and Finance

• Potential Reward

• Probability of technical success

• Company’s responsiveness

• Quality of personnel

• Relative cost position

• Production efficiency

• Technology skills (production)

• Patented technology, product or process

• Technological competitive strength

• Innovation

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Strategic Model Categories:

• Marketing

• Technology

• Finance

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DB

For New Projects:- Business Plan- Assessment

For On-going Projects:Quarterly Review of Basic Assumptions

Data Analysis

Portfolio Views (Finance/Market/Tech’)

Updated Business Plan

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Market Oriented Portfolios• The market attractiveness competitive

position matrix• The ADL Model

Technology Oriented Portfolios• The Technology Portfolio• Booz Innovation Model

Finance Oriented Portfolios• The Risk-Reward Model• The Real Options Model

Table of ContentTable of Content2

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Market Oriented Portfolios

- The market attractiveness competitive position matrix

- The ADL Model

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0

33

67

100

03367100 Relative Market Position

Mar

ket A

ttrac

tiven

ess

A

B

C

D

100

100 0

0

Winner (1) Winner (2)

Winner (3)

Profit Producers

Average Businesses

Question Marks

Loser (1)

Loser (3)Loser (2)

The market attractiveness competitive position matrix

Note: The circles in the diagram indicate relative sales

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Market Attractiveness variables:•Relative market share•Market share growth•Company’s image as perceived by customers•Customer loyalty to our company•Company’s prices relative to competitors•Company’s quality relative to competitors•Company’s service relative to competitors•Leadering technological innovation•Marketing skills and strength•Relationships with regulators•Distribution network coverage•Distribution network effectiveness•After-sales service•Technological competitive strength•Patented technology, product or process•Technology skills (production)•Production efficiency•Relative cost position •Quality of personnel

Relative market dominance variables:

• Market growth rate• Market profitability• Volatility of market demand• Customer bargaining power• Price elasticity• Customer brand loyalty• Product differentiation• Market barriers to entry/exit• Access to critical/special components• Rate of technological change• Regulatory climate• Volatility of exchange rates/inflation/political

situation• Level of competition after analyzing the

characteristics of competition• Threats by alternative solutions


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• The model focuses on future profits.• The Y axis represents the industry

attractiveness.• The X axis represents the business strength-

comprises of market position and competitive strength.

• The DPM and BCG models that are not presented, are very similar to this model


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PRO TECT PO SITIO N

Aim to lead the Area

Invest

Look for Growth

B UILD SELECTIVELY

Identify Potential Segm ent

Growth, Invest

Stabilize and Preserve your Market Position

PRO TECT AND REFO CS

Preserve Cash Flow

Invest only in essential Investm ents

INVEST TO B UILD

Value Potential Segm ent

Identify W eakness

Built Com petitive Advantage

SELECTIVITY / M ANAG E

Potential Segment

Growth, Focus and

Make Selective Investments

M ANAG E FO R EARNING S

Harvest, M ilking

M inim ize Investments

Consider Leaving the Range

B UILD SELECTIVELYFocus and Specialize in

Niches

Consider Acquisition and M erger

LIM ITED EXPANSIO N OR H ARVEST

Focus and Specialize in Niches

Consider leaving the Range

DIVEST

Follow the M arket Leader

Preserve Cash Flow

Consider leaving the Range

Low

High

LowHighRelative Market Dominance

Mar

ket a

ttrac

tiven

ess

The BCG model

STARSTAR

COWCOW

??

DOGDOG

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Low

High

LowHighRelative Market Dominance

Mar

ket a

ttrac

tiven

ess

The BCG model

WINNER (1) WINNER (2) QUESTION MARKS

WINNER (3) AVERAGEBUSINESSES

LOSER (1)

PROFITPRODUCERS

LOSER (2) LOSER (3)

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The BCG model

Relative Market Dominance

Mar

ket a

ttrac

tiven

ess

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The ADL Model

1

2

3

4

5

020406080100 Relative Market Position

Life

-cyc

le

A

B

C

D

100 0

Aging

Embry'

Growth

Nature

Natural development

Selective development

Prove Viability development

Quit

Note: The circles in the diagram indicate relative sales

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Life-cycle stage variable:• Life-cycle stage

Business-strength variables:• Market growth rate• Market profitability• Volatility of market demand• Customer bargaining power• Price elasticity• Customer brand loyalty• Product differentiation• Market barriers to entry/exit• Access to critical/special components• Rate of technological change• Regulatory climate• Volatility of exchange rates/inflation/political

situation• Level of competition after analyzing the

characteristics of competition• Threats by alternative solutions

The ADL Model

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• The planning focus is RONA (Return On Net Assets).• The concept is a balanced corporate portfolio: Positive

cash flow, the SBUs average weighted RONA meets corporate goals.

• The X axis represents relative market dominance. • The Y axis represents stages in life-cycle: embryonic,

growth, mature and aging.• The planning of strategies is performed in consecutive

steps: SBU’s area in the matrix, SBU’s cell in the matrix and generic strategy – an operational planning

The ADL Model

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The ADL Model

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Technology Oriented Portfolios

- The Technology Portfolio- Booz Innovation Model

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The Technology Portfolio

competitive model-’Compared to Market attract

0

2

4

6

0246 Technology Position

Tec

hnol

ogy

Impo

rtan

ce

A

B

C

D

High Low

Low

High

0

33

67

100

03367100Relative Market Dominance

Mar

ket A

ttrac

tiven

ess

100

100 00

Winner (1) Winner (2)

Winner (3)

Profit Producers

Average Businesses

Question Marks

Loser ( 1)

Loser ( 3)Loser ( 2)

2

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Technology importance variable:

• Technology/Innovation importance as perceived by customers

Technology position variables:

• Technological competitive strength

2

73© KPA Ltd., 2008

• This framework examines the relationship between the traditional portfolio planning matrix (represented earlier by Market attract’-competitive model) and the technology portfolio matrix.

• The two diagrams enable to investigate the match (or mismatch) of a firm’s business and technology portfolios and its resulting technology investment priorities.


2

74© KPA Ltd., 2008

Booz-Innovation Model

Note: The circles in the diagram indicate relative R&D budget

0

2

4

6

0 2 4 6Newness to the market

New

ness

to th

e fir

m ABCD

HighLow

Low

HighNew to company

New to world

Product improvementAdd to existing

lines

Cost reductions

Repositionings

2

75© KPA Ltd., 2008

• This framework is useful way to interlink different formats of innovation.

• There is a generic typology of strategy on the basis of the speed of response to changes in product-market environment.

Booz-Innovation Model

2

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Finance Oriented Portfolios

- The Risk-Reward Model- The Real Options Model

2

77© KPA Ltd., 2008

The Risk-Reward Model

Note: The circles in the diagram indicate relative Investments.

0

2

4

6

0.0 2.0 4.0 6.0Risk

Pot

entia

l Rew

ard

A

B

C

D

HighLow

Low

High Excellent Investment

(Possibly)Good-Excellent

Investment

Good Investment Acceptable-Good Investment

Acceptable Investment

Good-Excellent Investment

Mod'

Moderate

2

78© KPA Ltd., 2008


Potential Reward variable:

• Potential Reward

Risk variables:• Probability of marketing

plan success• Probability of technical

success

2

79© KPA Ltd., 2008

• Focuses conclusively on profitability.

• The model aims to increase productivity of investments.

• Risk is built-in in the model in comparison to the rest of models, where we could add risk as third dimension.


2

80© KPA Ltd., 2008

The Real Options Model

0

1

2

3

4

0 1 2

Value-to-cost

Vo

latil

ity

0 1

Invest never

Probably never

Probably laterMaybe later

Maybe now

Invest nowlower

higher

A

B

C

2

81© KPA Ltd., 2008

• The model suggests monitoring the options and looking for ways to influence the variables that determine option value and outcomes.

• The option space helps to determine whether to invest or not, when to invest and what to do on the meantime.

• The X axis represents the net present value and time value of the ability to defer the investment.

• The Y axis represents how much things can change before an investment decision must finally be made.

• Option space gives us 6 possible actions that reflect the likelihood of the project ending successfully in the future.

• In a dynamic approach there is a possibility to nest options.

The Real Options Model

2

82© KPA Ltd., 2008

1. Strategic Management of Technology and Innovation, Burgelman, Maidique, Wheelwright, IRWIN, 2nd edition, 1998.

2. “Strategy as a Portofolio of Real Options”, Luehrman, Harvard Business Review, 1998.

3. Corporate Strategy, Segev, THOMPSON PUBLISHING, 1995.

4. Competitive Advantage, Porter, Free Press, 1985.5. Third Generation R&D, Roussel, Saad, Erickson, Harvard

Business School Press6. “Choosing between Strategic Alternatives using Financial

Indices”, Kenett, Ziv(in Hebrew), Kesher Haeihut, 40-41, pp. 10-13, March 2002.

7. Strategic Management, Wheeler, Hunger, Addison-Wesley 6th edition, 1998

ReferencesReferences2

© KPA Ltd., 2008

Project/Portfolio Management

2

84© KPA Ltd., 2008

Opportunities funnel

Evaluate & Decide

No-go

Allocate full resources

Initial project phases

Close information gapsdecrease risks

Validate assumptions

Create, update & validate full BP

Review: Evaluate & DecideNo-go

Full scale R&D

Allocate (limited) resources

SBU GM

Dimensions:marketing, technologyfinancial

Idea Idea Idea Idea

Short B.plan(Concept Dv. Proposal)

Business plan template

review template:-R&D status & position-R&D dvlp. Timeline-Business decisions template

Quarterly review

Prepare concept development proposal

COO/CTO/CFO

Requirement DefinitionQFD process

Update corporate

2

85© KPA Ltd., 2008

M&AType: toolkit/processStatus:first impl.Who: QM/HR/Fridar

R&D Portfolio/Project Management Process

MRD (Marketing Req. Definition)

Project/Portfolio Info:Business Data (A1-A3)R&D Status (B) etc.

Quarterly Business

ReviewChallenge the project’s basic assumptions (Market and Technological)

use as baseline for review, update after review

Business Decisions e.g. : *Alliances*Go/No Go/Stop *Resource Allocation (refinement).*Change Direction *New markets. *Update Portfolio.

Project Business PlanBased on standard tool

ProjectApproval

AnnualBudgetAllocation

Corporate PortfolioPlan

QFD

R&D dashboard

MRD template

B.Plan template

Strategic planStrategic AlliancesBudget process

Key indicators:corporate+SBU

Business Data

MRD review

Action Items sys

Int/Ext R&D tradeoffs Int/Ext R&D lifecycle

2

86© KPA Ltd., 2008

Portfolio/Project measurementsWhat is the goal?

Simple Standard Measurements for planning, reviewing, assessing and supporting decision making on R&D critical decision s on both individual projects and portfolio level. (e.g. resource alloca tion, marketing decisions etc.)

Who will it serve?

R&D managers, Product managers, Executive management.

How will it work?Simple analysis through standard questionnaire and Excel-style template of the

business plan. Presentation in quarterly reports and reviews.What is the scope?

A. Business Measurements:

1. Market Portfolio (Market position, Market Attractiveness)2. Technology Portfolio (Technology Position, Technology Potential)

3. Project Evaluation (Financial Attractiveness vs Probability of success).

B. Status of the project

2

87© KPA Ltd., 2008

Scope A 1: Market Portfolio

∗ Purpose : Information on own market position and on market attractiveness from company’s point of view.

∗ Market position : Company’s current position in the world market. Regionally differing positions are to be specified.

∗ Market Attractiveness : Future attractiveness (over 2 years) of the market from company point of view.

2

88© KPA Ltd., 2008

0

25

50

75

100

0 25 50 75 100

Hig

hL

ow

AB

C

Unfavorable Favorable

Market

Attractiveness

Market position

Key Question

Attractive business?

Business Strategy

Grow / Develop

Maintain / Monitor / Hold

Harvest / Cash

Size of circle = Annual Sales

Scope A1: Market Portfolio2

89© KPA Ltd., 2008

Position�Market share� Internal use�Earning situation�Logistics�Marketing competence�Product quality�Customer structure�Product range

Attractiveness�Market Growth�Market volume�Substitution� Internal use�Entrance barriers�Earning prospects�Supplier structure�Buyer structure�Environmental situation

Scope A1: Market Portfolio2

90© KPA Ltd., 2008

Scope A 2 : Technology Portfolio

∗ Purpose : The total of all company’s technological achievements relating to a product or product group.

∗ Technology Position : Status of own technology in comparison with current and potential future competitors.

∗ Technology Potential : Development capacity of our current technology. The Potential should be achievable and of benefit to the company.

2

91© KPA Ltd., 2008

0

25

50

75

100

0 25 50 75 100

Hig

hL

ow

A

B

C

Unfavorable Favorable

Technology

Potential

Technology Position

Size of circle = Cumulative R&D expenditure to completion

Scope A2 : Technology Portfolio2

92© KPA Ltd., 2008

Market

Technology

0

33

67

100

Known to ABC

New to ABC

new to all

New to all

New to ABC

Known to ABC


93© KPA Ltd., 2008

Position / Potential� Innovation potential through R&D.�Process (improvement of existing process).�Manufacturing / Infrastructure.�Patents / Licenses.�Costs�Risks.�Competitors.


94© KPA Ltd., 2008

Scope A2 cont. : GENERALIZED TEMPLATE FOR DETERMINIG TECHNOLOGICAL COMPETITIVE STRENGTH

CharacteristicsDescription • Powerful Technological leader. • High commitment, funds, manpower, creativity • Well recognized in industry. • Sets pace and direction for technological development. • Competitors consistently seek to catch up.

Dominant

• Able to Express independent technical action, set new directions. • Technological commitment and effectiveness consistently high. • Technological accomplishments distinguish its strategic business units (SBU) lesser competitors.

Strong

• Able to sustain the technological competitiveness of the SBU it serves. • Has strengths that can be exploited to improve technological competitive position. • Not a technological leader except in developing niches.

Favorable

• In a catch up mode. • Unable to set independent course. • Can maintain competitiveness of SBU, but unable to differentiate from competitors’.

Tenable

• Declining quality of technical output versus competitors. • Short-term, fire fighting focus. • Products, processes, cost slipping relative to competitors. • Difficult but not impossible to turn around.

Weak

2

95© KPA Ltd., 2008

Scope A 3 : Project EvaluationDefinitions

∗ Purpose : To calculate and present the attractiveness Vs probability of success ( Due to Market or Technology risks).

∗ Financial Attractiveness : could be calculated through NPV, decision tree or Real options.

2

96© KPA Ltd., 2008

Prob

abili

ty o

f su

cces

s

AttractivenessSize of circle = Cumulative R&D expenditure to completion

0

50

100

Prob

abili

ty o

f su

cces

s

Ris

k

Low High

Bread & Butter

OysterWhite Elephant

Pearl

Attractiveness Vs Probability of Success

Scope A3 : Project Evaluation2

97© KPA Ltd., 2008

Scope B: Projects Status∗ Purpose : A quick glance of ongoing projects

status through a standard performance measurements dashboard.

∗ Measurements: System Development Management Dashboard (SDMD)

∗ Milestones Overview : Estimated due date of major milestone compared to last review estimation and base line.

2

98© KPA Ltd., 2008

Scope B cont.: Dashboard of project x

60%Total Due:50%Completed on Time :10%Over Due:

Quality Gates

Projects Overview

6/3/00

11/5/001/6/00

17/7/00

1/6/00

30/11/00

10/10/00

27/12/00

12/99

01/00

03/00

05/00

07/00

09/00

11/00

01/01

03/01

Card readyfor s/w

HW SWCard

Integration

NEintegration1

EML Systemintegration1

Start testing Testing SystemReady for

production

PRR

08/99 09/99 10/99 11/99

Utilization VS Accumalative Budget

$0

$200,000

$400,000

$600,000

$800,000

$1,000,000

$1,200,000

Q1/99 Q2/99 Q3/99 Q4/99

PCB LAYOUT

MECHANICAL &MECHANIC COMPONENTS

ELECTRONICCOMPONENTS & ALLOTHERS

DIRECT TRAVELING

CONSULTING KNOWHOW

Budget

Project ’s EVA measurement

0 .0 0 %

1 0 .0 0 %

2 0 .0 0 %

3 0 .0 0 %

4 0 .0 0 %

5 0 .0 0 %

6 0 .0 0 %

7 0 .0 0 %

8 0 .0 0 %

9 0 .0 0 %

1 0 0 .0 0 %

06/98

09/98

12/98

02/99

04/99

06/99

08/99

10/99

12/99

02/00

04/00

06/00

08/00

10/00

12/00

02/01

04/01

01-00 P red ic tio n (01/0 0) B as e line (10 /99)

Deviation on update ( 01/00) 10.03%

Project delay (from 12/00 to 4/01) 121 days

2

99© KPA Ltd., 2008

Scope B cont.: Software Development Management Dashboard of project x

2

100© KPA Ltd., 2008

צמיחהצמיחה יעילותיעילות

המימד הכספי

המותגהמותג

בניית תדמית

השרותהשרות

הענות לצרכים, מגוון פתרונותללקוחףעלות תועלת , איכות השרות, איכות המוצר

חווית הצריכהחווית הצריכה

החוויה ברכישה ובצריכה

עליונות במותג חדש נות ויוזמה הצטיינות בשרות

מדידה אישיתמדידה אישיתתשתיות טכנולוגיה ומידעתשתיות טכנולוגיה ומידעכישורים ויכולת ניהוליתכישורים ויכולת ניהוליתהכרה באסטרטגיההכרה באסטרטגיה

למידה וצמיחה ארגונית

תהליכים פנימיים

נקודת מבט הלקוח

יעילות שרשרת האספקה

מפה אסטרט גית

2

101© KPA Ltd., 2008
















2

102© KPA Ltd., 2008
















2

103© KPA Ltd., 2008















מדד מסקר ע ובדים מדד מסקר ע ובדים

מדד שרות מ סקר ל קוחות מדד שרות מ סקר ל קוחות

מדד מנתונים פנימ יי םמדד מנתונים פנימ יי ם

מדד מסקר ערך מ ו תג מדד מסקר ערך מ ו תג

אחוז נ טי שה אחוז נ טי שה

אחוז תר ומה מלקוח אחוז תר ומה מלקוח

ר עובדי ם ר עובדי ם ""מדדי שמדדי ש

הכנ ס ה מלקוח ות חדשים הכנ ס ה מלקוח ות חדשים %%

ע ע " " עמידה בתעמידה בתר לקוחות פנים ר לקוחות פנים ""שש

יעילו ת יוזמו ת שי ווקי ות יעילו ת יוזמו ת שי ווקי ות הצלחת מוצרים חד שים הצלחת מוצרים חד שים

אחוז שימ וש במוצר חדש אחוז שימ וש במוצר חדש

זמינות א ספקות זמינות א ספקות

עלות המכר עלות המכר לע ובדלע ובד' ' יחיח

היקף הדרכו ת היקף הדרכו ת

כי סו י מדדים כי סו י מדדים כי סו י נהלים כי סו י נהלים

ת ""שש רו ש ה מ ת ר רו ש ה מ ר

לל""מה שר טמה שר טר ר ""שש

אי ר ר ""שש ע מונ אי ק ע מונ ק

ר הצרכן ר הצרכן ""שש

מדדים ארגוניים

2

104© KPA Ltd., 2008

אחוז תר ומה מלקוח אחוז תר ומה מלקוח

הכנ ס ה מלקוח ות חדשים הכנ ס ה מלקוח ות חדשים %%

מדד שרות מ סקר ל קוחות מדד שרות מ סקר ל קוחות

מדד מסקר ערך מ ו תג מדד מסקר ערך מ ו תג

אחוז נ טי שה אחוז נ טי שה

אחוז שימ וש במוצר חדש אחוז שימ וש במוצר חדש

ר מה שרות ר מה שרות ""שש

טר ר ""שש ר ש ה טמ ר ש ה לל""מ

קמונ עאי קמונ עאי ר ר ""שש

ר הצרכן ר הצרכן ""שש

מדד מנתונים פנימ יי םמדד מנתונים פנימ יי ם

הצלחת מוצרים חד שים הצלחת מוצרים חד שים

יעילו ת יוזמו ת שי ווקי ות יעילו ת יוזמו ת שי ווקי ות

זמינות א ספקות זמינות א ספקות

יחידות לעובד יחידות לעובד

עלות המכר עלות המכר

מדד מסקר ע ובדים מדד מסקר ע ובדים

ר עובדי ם ר עובדי ם ""מדדי שמדדי ש

ר לקוחות פנים ר לקוחות פנים ""שש

ע ע " " עמידה בתעמידה בת

היקף הדרכו ת היקף הדרכו ת

כי סו י נהלים כי סו י נהלים

כי סו י מדדים כי סו י מדדים

לוח מ דדים ארגוניים

2

105© KPA Ltd., 2008

• Monitor options in a projects’portfolio

• Determine whether to invest or not, when to invest and what to do in the meantime .

• Option space with six possible actions

• Possibility to nest options.

The Real Options ModelThe Real Options Model

OBJECTIVESOBJECTIVES

2

106© KPA Ltd., 2008


PARAMETERSPARAMETERS

•• A: Underlying asset value ($millions)A: Underlying asset value ($millions)•• X: Exercise price ($ millions)X: Exercise price ($ millions)•• t: Time to expiration (years)t: Time to expiration (years)•• r: Riskr: Risk --free rate of return (% per year)free rate of return (% per year)•• S^2: Variance of return on S^2: Variance of return on

investmentinvestment

2

107© KPA Ltd., 2008


ANALOGYANALOGY

A: Present value of a project’s operating assets to be acquired

>>>> Stock priceStock priceX: Expenditure required to acquire the project asse ts

>>>> Exercise priceExercise pricet: Length of time the decision may be deferred

>>>> Time to expirationTime to expirationr: Time value of money

>>>> RiskRisk --free rate of returnfree rate of return S^2: Risk of project assets

>>>> Variance of returns on stockVariance of returns on stock

2

108© KPA Ltd., 2008


MODEL DIMENSIONSMODEL DIMENSIONS

•• NPV: NaNPV: Naïïve Net Present Value = A ve Net Present Value = A -- XX

•• PV(X): Present Value = X / (1+PV(X): Present Value = X / (1+ r) ^tr) ^t

•• A / PV(X): Value to Cost RatioA / PV(X): Value to Cost Ratio

•• S[t^0.5]: Volatility per yearS[t^0.5]: Volatility per year

2

109© KPA Ltd., 2008

Region 5

probably never

Region 4

maybe later

Region 6

invest never

Region 1

invest now

Region 2

maybe now

Region 3

probably later

Value-to-cost0.0 1.0

vola

tilit

y

lower

higher

The Real Options ClassificationThe Real Options Classification2

110© KPA Ltd., 2008

The tomato garden analogyThe tomato garden analogy

Region 5

late blossoms and small green tomatoes

Region 4

less promising green tomatoes

Region 6

rotten tomatoes

Region 1

ripe tomatoes

Region 2

imperfect, but edible tomatoes

Region 3

inedible, but very promising tomatoes


vola

tilit

y

lower

higher

The Real Options ClassificationThe Real Options Classification2

111© K P A L td ., 2008

V a r ia b le F E D C B A P o r tfo lio

v a lu e

A 100 100 100 100 100 100

X 110 110 110 110 90 90

t 2 1 0 .5 0 2 0

S 30. 30. 30. 2 0. 30. 4 0.

r 0 .06 0 .06 0 .06 0 .06 0 .06 0 .06

v a lu e to

co st

1 .021 0 .964 0 .936 0 .909 1 .248 1 .111

v o la tility 0 .566 0 .3 0 .141 0 0 .424 0

C a ll

v a lu e

23 .24 10 .42 3 .06 0 27 .23 10 73 .95

N a ïv e

N P V

10- 10- 10- 10- 10 10 20

R eg io n 3 4 5 6 2 1

E x ercise

O p tio n

P ro b a b ly

la ter

M a y b e

la ter

P ro b a b ly

n ev er

n ev er M a y b e

n o w

n o w

S i x B e n c h m a r k P r o j e c t sS i x B e n c h m a r k P r o j e c t s

2

1 1 2© K P A L td ., 2008


v a lu e

A 100 100 100 100 100 100

X 110 110 110 110 90 90

t 2 1 0 .5 0 2 0

S 30. 30. 30. 2 0. 30. 4 0.

r 0 .06 0 .06 0 .06 0 .06 0 .06 0 .06

v a lu e to

co st

1 .021 0 .964 0 .936 0 .909 1 .248 1 .111

v o la tility 0 .566 0 .3 0 .141 0 0 .424 0

C a ll

v a lu e

23 .24 10 .42 3 .06 0 27 .23 10 73 .95

N a ïv e

N P V

10- 10- 10- 10- 10 10 20

R eg io n 3 4 5 6 2 1

E x ercise

O p tio n

P ro b a b ly

la ter

M a y b e

la ter

P ro b a b ly

n ev er

n ev er M a y b e

n o w

n o w

S i x B e n c h m a r k P r o j e c t sS i x B e n c h m a r k P r o j e c t s

2

1 1 3© K P A L td ., 2008


v a lu e

A 100 100 100 100 100 100

X 110 110 110 110 90 90

t 2 1 0 .5 0 2 0

S 30. 30. 30. 2 0. 30. 4 0.

r 0 .06 0 .06 0 .06 0 .06 0 .06 0 .06

v a lu e to

co st

1 .021 0 .964 0 .936 0 .909 1 .248 1 .111

v o la tility 0 .566 0 .3 0 .141 0 0 .424 0

C a ll

v a lu e

23 .24 10 .42 3 .06 0 27 .23 10 73 .95

N a ïv e

N P V

10- 10- 10- 10- 10 10 20

Region 3 4 5 6 2 1 Exercise

Option Probably

later Maybe

later Probably

never never Maybe

now now

AACCDDEEFF BB

Six Benchmark ProjectsSix Benchmark Projects2

114© KPA Ltd., 2008

Region 5

probably never

Region 4

maybe later

Region 6

invest never

Region 1

invest now

Region 2

maybe now

Region 3

probably later


vola

tilit

y

lower

higher

CC AA

DD

EE

FF

BB

Six Benchmark ProjectsSix Benchmark Projects2

115© KPA Ltd., 2008

Region 5

probably never

Region 4

maybe later

Region 6

invest never

Region 1

invest now

Region 2

maybe now

Region 3

probably later


vola

tilit

y

lower

higher

The Effect of TimeThe Effect of Time

EE

FF

BB

2

116© KPA Ltd., 2008

Region 5

probably never

Region 4

maybe later

Region 6

invest never

Region 1

invest now

Region 2

maybe now

Region 3

probably later


vola

tilit

y

lower

higher

The Effect of ManagementThe Effect of Management

EE

FF

BB

2

117© KPA Ltd., 2008

• Valuing a Start-up

• Investing in a Start-up

• Managing Long Term Projects

• Investing in R&D

• Investing in Infrastructure

• Investing to Preempt Competitors

Real Options ApplicationsReal Options Applications2

118© KPA Ltd., 2008

Different types of real optionsDifferent types of real options• Option to defer• Time to build option (Staged

investment)• Option to alter operating scale• Option to abandon• Option to switch• Growth options• Multiple interacting options.

2

119© KPA Ltd., 2008

Different types of real optionsDifferent types of real options2

120© KPA Ltd., 2008

Coping with uncertaintyCoping with uncertainty2

121© KPA Ltd., 2008

Comparison of project valueComparison of project value2

122© KPA Ltd., 2008

Value of uncertaintyValue of uncertainty

2

123© KPA Ltd., 2008

הכנס , "גיבוש אסטרטגיה מאוזנת בח ברות טכנולוגיות " , קנת רון ועתי זיו) 1.2001תל אביב , הלאומי של האיגוד הישראלי לאיכות

קשר , "בחירת חלופות אסטרטגיות על בסיס מדדים פיננסיים " , קנת רון ועתי זיו) 2. 2002מרץ , 10-13' ע, 40-41, האיכות

3) The Balanced Scoreboard: Translating Strategy in to Action, Kaplan, R. and Norton, D., Harvard Business School Press, 1996.

4) Having Trouble with your Strategy? Then Map It, Kaplan, R. and Norton, D., Harvard Business Review, September 2000 .

5) Investment Opportunities as Real Options: Gettin g Started on the Numbers, Luehrman, T., Harvard Business Review, Jul y 1998.

6) Strategy as a Portfolio of Real Options, Luehrma n, T., Harvard Business Review, September 1998.

רשימ ת ספר ות

2

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Management and Industrial Strategy תיתיישעתו תילוהינ ... · © KPA Ltd., 2008 Management and Industrial Strategy תיתיישעתו תילוהינ היגטרטסא