Strategic Planning Concepts & Principles (cont...)

FOCUS; FOCUSED STRATEGY
One of the fundamental principles of strategy, a focused strategy begins with a company choosing a particular market segment with unusual or distinctive needs; then dedicating everything to serving this target segment. Despite temptation, a focused strategy forgoes the opportunity to serve other segments, or offer other products or services. Strategy, therefore, involves making tough choices and trade-offs among products, services and market segments.

Smaller companies in particular must focus on a small number of BUSINESS SEGMENTS where they can be the largest or best. Even most large companies could raise their profits and market value by a tighter focus on the things they do best and most profitably.

JUST-IN-TIME (JIT)
Valuable system developed first in Japan for production management aimed at minimising stock by having materials and work-in-progress delivered to the right place at the right time. As well as lowering costs, JIT can have other major benefits: the systematic identification of operational problems; higher levels of customer service and speeding up the time to market; higher quality standards by being "RIGHT FIRST TIME"; and higher standards of COMPETENCE in the production function generally.

Properly conceived, JIT should be seen as a synchronising way of life: jobs must be completed quickly, but even more important is that they be completed just in time to fit in with the next step in the dance.

KEY PERFORMANCE INDICATORS (KPI's); MEASURES
Those key/critical "measures" or "yardsticks" that will tell whether an org/unit/person is achieving their primary goals or objectives e.g. ROI, market share, productivity, lead time, quality, customer satisfaction, etc.

KEY/CRITICAL SUCCESS FACTORS / PERFORMANCE DRIVERS
Those factors that contribute most to (drive) goal achievement; those few key areas of activity that absolutely have to happen right for an organisation/unit to achieve its goals.

They are the reasons why some companies are more successful than others in particular products or industries. Should be based on an in-depth understanding of why consumers buy the products/services concerned.

KNOWLEDGE MANAGEMENT (also see "Data Warehouse")
An integrated approach to identifying, capturing, managing, and sharing organisational information assets including documents, databases, and other repositories, as well as expertise of individuals.

KNOWLEDGE WORKER; INTELLECTUAL CAPITAL
People in jobs where specialist knowledge and expertise, analytical and problem-solving skills, general thinking and creative skills, are all important for the success of a business. This competence is referred to as "intellectual capital".

Like physical assets, intellectual capital is emerging as the most critical asset of the information age we are currently in.

LEADING AND LAGGING INDICATORS
A Leading Indicator is an early (real-time) signal that something is about to happen. Noah's dove was a leading indicator that the flood was over. Market share gains can be a leading indicator of higher profits.

Lagging Indicators are (historical) measurements about past performance, i.e. when it is too late to do something about it, e.g. ROI.

LEAD TIME (also see "Time-Based Competition")
Lead time measures the time required for a company to meet its customers' needs. For existing products, lead time can be measured from the time the company receives an order to the time it actually delivers the product or service to the customer. For new products, lead-time represents the time to market, or how long it takes to bring a new product from the product definition stage to the start of shipments.

LEARNING ORGANISATION
Term first used by Chris Argyris to mean a company that learns as it goes along, adjusting its way of doing business very responsively, continuously improving.

In his book The Fifth Discipline, Peter Senge defined it as "an organisation where people continually expand their capacity to create the results they truly desire, where new and expansive patterns of thinking are nurtured, where collective aspiration is set free and where people are continually learning how to learn together."

MAKE OR BUY DECISION (also see "Contracting Out")
The decision on whether to make components or any other part of the product or service in-house, or whether to use outside suppliers.

Charles Coates, an expert on manufacturing strategy, believes that a key condition of competitive advantage is that companies focus only on those activities that are critical to its proposition and where it has distinctive COMPETENCIES, and outsource all other components and activities. The reason outsourcing is so valuable is that the COSTS OF COMPLEXITY are crippling for a company engaged in many activities. In some cases this complexity is not avoidable, but in most it is, via outsourcing.

The make/buy policy should follow two rules:
1) Divide all components into "critical" and "non-critical". Critical components are those that are key to the company's competitive advantage, where it can undertake them to a quality standard and cost that is second to none. All critical components must be made in-house.
2) Outsource all non-critical components where suppliers have an advantage through greater focus and lower cost.

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