Strategy Implementation

Transcription

1 Strategy Implementation Hilti Case Study: Strategic Management in Practice 19/11/15 1

2 Position of the Hilti Case Study in the congruence model of Nadler and Tushman Input Environment Transformation Process Informal Output Organization Resources History Strategy Work Formal Group Individual People Strategy Development Strategy Implementation Ongoing Strategy Renewal Crisis Management and Strategy 19/11/15 2

3 Strategy Implementation Review Eight Steps Establishing a Sense of Urgency Forming a Powerful Guiding Coalition Creating a Vision Communicating the Vision Empowering Others to Act on the Vision Planning for and Creating Short-term Wins Consolidating Improvements and Producing More Change Institutionalizing New Approaches Key Learnings 19/11/15 3

4 Implementation is the most important and most difficult step in strategic management Preparation Diagnosis Fact Base Strategic Options Vision, Mission, Strategic Initiatives Implementation Setting out the scope Defining the team Selecting the partner Analysis Customers Competitors Own position Trends Market Technology Assessment Selection Balance with own profile Strength / weaknesses Gaps / loopholes Step One Step Two Step Three etc. 19/11/15 4

5 Champion 3C: Operationalization of strategic initiatives Customer Competency Concentration Product Leadership Market Reach Operational Excellence Strengthen product leadership Review of business unit strategies Prune margin killers Focus on innovation and differentiation Increasing R&D investments Focus on breakthrough innovations Reduce new product development cycle time Decentralized development of local C3C strategies at market organization level Customer segmentation by size Creation of new channels Focus on product line profitability improvements Improve supply chain processes Make vs. buy shift Stock reduction Enhance services Reduction of repair cycle time Design to service Culture & People Culture & People Joint development and global rollout of Champion 3C Global company culture training 19/11/15 5

6 Strategy implementation is about engaging people 19/11/15 6

7 Approach of strategy implementation depends on the phase in which the company finds itself Good Anticipatory Reactive Strategic Performance Crisis Poor Time Readiness for change Capability Low High Mixed Mixed High Low Commitment Low Mixed High 19/11/15 7

8 Strategy Implementation Review Eight Steps Establishing a Sense of Urgency Forming a Powerful Guiding Coalition Creating a Vision Communicating the Vision Empowering Others to Act on the Vision Planning for and Creating Short-term Wins Consolidating Improvements and Producing More Change Institutionalizing New Approaches Key Learnings 19/11/15 8

9 Change must start at the very top: involving top management is key We grow in non-core products with low margin. Our margin will deteriorate! Our product mix will worsen! We have little growth in innovative core products. Increasing prices will not be sustainable! We mostly grow through the addition of new countries. 19/11/15 9

10 Strategy Implementation Review Eight Steps Establishing a Sense of Urgency Forming a Powerful Guiding Coalition Creating a Vision Communicating the Vision Empowering Others to Act on the Vision Planning for and Creating Short-term Wins Consolidating Improvements and Producing More Change Institutionalizing New Approaches Key Learnings 19/11/15 10

11 The guiding coalition is the team that guides the strategy development process Preparation Diagnosis Fact Base Strategic Options Vision, Mission, Strategic Initiatives Setting out the scope Defining the team Selecting the partner Analysis Customers Competitors Own position Trends Market Technology Assessment Selection Balance with own profile Strength / weaknesses Gaps / loopholes 19/11/15 11

12 Diversity, visibility, standing, and positive change attitude is key for a guiding coalition Type Mix Guiding Coalition Geographic Dimension (people from triad) Functional Dimension (business units and market organizations) Corporate Functions (e.g., finance, HR) Executive Board (all of them) From big and small market organizations From big and small business units Long-time employees and new employees with strong reputations People open to change 15-to-16 people 19/11/15 12

13 Strategy Implementation Review Eight Steps Establishing a Sense of Urgency Forming a Powerful Guiding Coalition Creating a Vision Communicating the Vision Empowering Others to Act on the Vision Planning for and Creating Short-term Wins Consolidating Improvements and Producing More Change Institutionalizing New Approaches Key Learnings 19/11/15 13

14 The fact-based strategy development process creates the new vision for Hilti Preparation Diagnosis Fact Base Strategic Options Vision, Mission, Strategic Initiatives Setting out the scope Defining the team Selecting the partner Analysis Customers Competitors Own position Trends Market Technology Assessment Selection Balance with own profile Strength / weaknesses Gaps / loopholes 19/11/15 14

15 The hedgehog principle is key to creating a core purpose statement What we are deeply passionate about We passionately create enthusiastic customers and build a better future (customers, employees, partner / environment, shareholder). What we can be best in the world at What drives our economic engine Based on a deep knowledge of customer needs, we bring valueadding solutions to the market. Profit per employee. Source: Collins, J., From Good to Great. Harper Business Press 19/11/15 15

16 Creating an inspiring and easy-to-understand core purpose is most important Guiding coalition brings first draft of purpose statement into organization Does it appeal to the employees? Do they feel energized? Incorporate feedback and revise core purpose statement 19/11/15 16

17 Strategy Implementation Review Eight Steps Establishing a Sense of Urgency Forming a Powerful Guiding Coalition Creating a Vision Communicating the Vision Empowering Others to Act on the Vision Planning for and Creating Short-term Wins Consolidating Improvements and Producing More Change Institutionalizing New Approaches Key Learnings 19/11/15 17

18 The new vision/strategy must be communicated differently at different levels I. Executive Board The board of directors needs to understand and approve the new vision/strategy The new vision/strategy as key topic in BoD meetings and BoD training II. Top Management International conference of the top 150 managers of Hilti held in the USA, Hong Kong, and Zurich Provide intensive information before new strategy was finalized Show rough framework of the new strategy Get feedback for the new strategy Create involvement of top management for the new strategy III. 14,000 Employees Training module for the new strategy What does customer orientation mean for marketing, sales, R&D, finance, HR? What does concentration mean for marketing, sales, R&D, finance, HR? What does competence mean for marketing, sales, R&D, finance, HR? 19/11/15 18

19 Good communication increases the understanding and implementation of the new strategy Customer Which customers does Hilti address We want to be our customers best partner. Their requirements drive our actions. Not every customer is a Hilti customer. We at Hilti address the needs of professionals in the construction market. We create enthusiastic customers by building great, long-term relationships. offering great, differentiated products and services. In order to do this, we need to understand our clients uniqueness way of thinking tasks, work environment and processes needs and expectations. Not all customers are alike! 3 examples of customers What are their tasks? What are their concerns? What do they expect from Hilti products? What do they expect from Hilti services? Group 1 19/11/15 19

20 Strategy Implementation Review Eight Steps Establishing a Sense of Urgency Forming a Powerful Guiding Coalition Creating a Vision Communicating the Vision Empowering Others to Act on the Vision Planning for and Creating Short-term Wins Consolidating Improvements and Producing More Change Institutionalizing New Approaches Key Learnings 19/11/15 20

21 Combine centralized and decentralized elements with strong coordination and iteration Decentralized Participative approach Higher level of ownership by the units Takes local or other specific circumstances into account Utilizes the creativity of the local management team Personal development Real change: Spread of the strategic thoughts and actions approach Directive approach Faster roll out Centralized Tougher decisions possible More consistent strategy and measures Simpler, better control of strategic initiatives Risk of pseudo-change Right choice depends on urgency, organization and culture 19/11/15 21

22 Because you cannot do everything at once you need to follow a roll-out plan Corporate Business Unit Vision/Strategy Innovation IT Anchor Installation Research, Supply, Communication Bomo DX Diamond Screws After Market (AMS) Positioning People SFS Wood Chemical LDT Market Organization F, HNA, Korea, China Japan GB, E, A, NL/B HKG, SGP FIN, HUN Portugal S/DK Greece ARG, COL, VEN Chile MEX BRA Peru CR/SR EIR D, I, CH Australia Poland 19/11/15 22

23 Involving the executive board in the individual pilot organizations has clear advantages Showing personal commitment that the new vision/strategy is important Near to the action ; even a CEO can still learn a lot Getting to know top executives and their ways of problem solving 19/11/15 23

24 Strategy Implementation Review Eight Steps Establishing a Sense of Urgency Forming a Powerful Guiding Coalition Creating a Vision Communicating the Vision Empowering Others to Act on the Vision Planning for and Creating Short-term Wins Consolidating Improvements and Producing More Change Institutionalizing New Approaches Key Learnings 19/11/15 24

25 Pick low-hanging fruit to show that the new strategy leads to success 10x 10x Salesmen monthly sales target Carton plein: Bonus for sales in specific products Changing the product mix towards profit per employee 19/11/15 25

26 Select good and strong people that can create short-term wins in a change process Market Organization Germany Bad example Mediocre sales management selected for pilot cases in Hamburg and Düsseldorf 19/11/15 26

27 Strategy implementation involves removing significant barriers to change People Barriers Top management must take out blocking managers Bad example: General manager market organization Germany. We waited too long to take action. System Barriers Evaluation, rewards, compensation systems 19/11/15 27

28 Top management must disseminate information about success and small failures Removing Information Barriers Strategy newsletters for management and employees on the progress of the implementation of Champion 3C Avoiding the not-invented-heresyndrome 19/11/15 28

29 Changing compensation schemes in a way to focus what is important for the new strategy More Focus on Profitability, Less on Sales Country manager, old compensation: 50% fixed + 50% sales achievement Country manager, new compensation: 50% fixed + 20% ROS + 15% sales + 15% # of managers developed for the total group 19/11/15 29

30 Strategy Implementation Review Eight Steps Establishing a Sense of Urgency Forming a Powerful Guiding Coalition Creating a Vision Communicating the Vision Empowering Others to Act on the Vision Planning for and Creating Short-term Wins Consolidating Improvements and Producing More Change Institutionalizing New Approaches Key Learnings 19/11/15 30

31 Strategy rollout in the market organizations: Stay the course! Do not implement the new strategy everywhere at the same time Focus on 2-to-3 cities to implement a country strategy well and move on from there Bad example: Nantes (France) All new sales elements and sales channels implemented successfully with support from top management Short term: great success Long term: back to zero as focus and attention of top management moves too fast to other cities 19/11/15 31

32 What gets measured gets done: KPIs drive the implementation of the strategy bill. ATS Act. abs Plan abs Sales development Sales 8.0% 6.0% 4.0% 2.0% 0.0% perfect order act. 91.0% 90.0% 89.0% 88.0% 87.0% 86.0% 85.0% 84.0% 83.0% Perfect Customer Perfect Bonding orders Order indicator (CBI) empl. satisfaction indicator (RCI) favorable: A: 59% / HILTI tot.: 100% CAGR Product NS CAGR line Pl development 50% 0% -50% DX Screw BOMO Anch. Dia Chem. Inst. Wood Pos. Product line 40% CAGR % Families/Buying Cust Act. % NS Plan % NS MOCI %NS / MOCI Mid/large customers prod. families/buying cust. act. mid-market/large Strategic Performance MO Austria bill. ATS Key accounts Families/Buying Cust. prod. families/buying cust. act. key bill. ATS % net sales 180 bill. ATS Productivity -20 Act. % NS Plan % NS Producti Trade development % 0% Act. (2-6) 110 Plan (2-6) 130 Act. (2-6) 130 Plan (2-6) 00 focus trade CS MO % Plan HC MO % Plan TS MO % Plan Multi channel sales 13 bill. ATS MCS-full potential 19/11/15 32

33 Place strategy implementation at top of the meeting agenda For several years, strategy implementation was the first and main point on the agenda of the executive board meeting Promote managers that have success and fully support the new Champion 3C strategy 19/11/15 33

34 Strategy Implementation Review Eight Steps Establishing a Sense of Urgency Forming a Powerful Guiding Coalition Creating a Vision Communicating the Vision Empowering Others to Act on the Vision Planning for and Creating Short-term Wins Consolidating Improvements and Producing More Change Institutionalizing New Approaches Key Learnings 19/11/15 34

35 Strategic management process with top management workshops Topic Setting Outcome C1 Workshop Competition: OEMs, distributors Buying behavior of customers Market trends Big BUs and big MOs / Group 2-day workshop in February Executive board plus other top management Approx. 18 participants Which organizations on/ off track? What key challenges for the group? Position on strategic performance curve? C2 Workshop Review revised strategies of BUs and MOs that failed in the C1 workshop 1-day workshop in June Approval of revised strategy C3 Workshop Review innovation management Portfolio of technology / new product development projects 1-day workshop in October Decision on R&D portfolio / investment allocation 19/11/15 35

36 Strategy Implementation Review Eight Steps Establishing a Sense of Urgency Forming a Powerful Guiding Coalition Creating a Vision Communicating the Vision Empowering Others to Act on the Vision Planning for and Creating Short-term Wins Consolidating Improvements and Producing More Change Institutionalizing New Approaches Key Learnings 19/11/15 36

37 Strategy implementation is about engaging people Following the eight steps to successfully manage a change is key Discipline, commitment, walk the talk by top management is key for the implementation Focus on low-hanging fruit to convince the organization through rapid successes 19/11/15 37

38 Champion 3C has been a big success overall Sales Profit Profitability Net Sales (million CHF) OPP (million CHF) OPP/Sales (%) 4,118 ~ % x1.8 +4ppt 2,200 x2.9 6% /11/15 38

39 Profit and sales are two years ahead of plan Sales Profit Net Sales (million CHF) 4,162 Profit (million CHF) CAGR: +9% 4,000 4,000 CAGR: +18% ,705 3, ,400 3,356 CAGR: +5% 3, CAGR: +13% 3,068 2,982 2,962 3,056 3,192 Actual Plan Actual Plan /11/15 39