Performance Optimization

Performance optimization sounds good in speaking however this is the most crucial exercise for every CEO. Performance optimization means you have to explore new corporate strategies that will optimize organization performance and achieve the planned growth. You cannot explore new corporate strategy unless you know what the core competencies of your company are. This concept of core competences was originally developed and introduced by Gary Hamel and C.K. Prahalad. Core competencies are nothing but the critical success factors that has been unique and valued the most by the clients/ users. They are the key components that drive performance optimization and new strategies are always built on such identified core competences that have helped the company reach to the competitive position in market place.

Why this is important? 

Sometimes exceptional performance and wins are results of unexpected market conditions. e. g. restrictions imposed by US Government on H1B Visa have forced some companies; shift their focus to other countries / markets and these markets were not much exposed by others and higher growth was achieved by getting high volume of new projects/business. Crosswise the companies, who have been depending more on US market / projects have gone down on their business growth plans.

Keeping aside the organic growth and irrespective of good or bad market conditions, some companies have always optimized their performance since they knew their core competencies, they knew what has been most valued by their US clients and have built their strategies based on it.

Visionary companies will always have structured process for core competency mapping so they can proactively identify future opportunities and start working on the “opportunity essentials”. Business is all about identifying what goes right for you and efficiently capitalizing on it. They are sources of competitive advantage and help you visualize future business opportunities.

What is Core Competency?

Best way to describe is; Core competencies are set of skills that enable your organization to provide a particular benefit to customers. This is not specific to products or services. They should be contributing to the development of a range of products and services which their buyers / users have endorsed as unique. For example iPhone - customer benefit is most user friendly touch screen and core competence is super excellent hand phone.

Core competencies of your company:

Some competencies are needed by every single company in order to operate and carry out their business. They normally outline the “standard level of competency” necessary to sustain business operations. They cannot be called “Core Competencies” since they are not unique or exceptional and most companies in the same domain might be following the same practice.

Well integrated capabilities and experience of individual skills that has set your company apart from the competitor are identified as “core competencies”. They are the key business drivers that have benefited the company in terms of optimizing performance in market place. This is something that will differ from company to company depending upon their core business areas. Some examples:

• They should be making a significant contribution to customer perceived value.
• They are the significant contributor to the financial health of the company.
• They are exceptional or their performance has been proved significantly superior to its competitor product or service.
• They are unique and capable of being applied to new products and services.

It is not necessary that each and every organizations possess core competencies. Very small companies that provide standard services that are already in high demand may not need core competencies and small piece of pie from the market demand will be more than sufficient for their success.

How to identify core business competencies?

It is always crucial to identify and understand core business competencies of the company.

• Question is how to identify such competences?
• To what time such identified competencies will remain effective?
• What will be the expected life cycle for each competency?

This of course is not a one time job and not a straight forward job in today’s dynamic market conditions. Senior management of the company needs to define the process of how to identify competences that are valued by their clients. Not just that but they needs to be shared especially with the executives and employees who usually interact with the clients.

Reason is that your clients will not tell this to you when you ask for their feedback. Again asking for their feedback, or sending feedback form followed with request reminders, is something like “not respecting their time”. ‘Good service’ or ‘reliable delivery” kind of feedback cannot be considered as core competencies or critical success factors since they are too generic and no point in asking for such feedback from your client.

Critical success factors are always surrounded with the complex set of activities performed while dealing with the client. Identifying and understanding organization capabilities and the associated activities performed while interacting with the client are likely to portray competences. “Activity mapping” is the first step of the process.

Company will have to first develop log of the organizational competencies. We can always categorize competencies into 3 areas. # Core Functional/Technical competencies # Core Non-Technical competencies and # Core management/leadership competencies. Next step will be conducting core competency tests to determine the competencies that are core.

Activity Mapping

First step before undertaking the analysis, prepare an activity map that can display how different activities of the company are interlinked with each other.

• List all activities performed by all actors (activity owners) involved in the process
• Most companies will have CRM, ERP or some project management tools already in existence that can be used for activity mapping
• Start identifying the benefit from each competency. Some Examples:

                    Client benefit in procuring offshore/on-site services for software development from your company.

                    User benefit while using your services or products

                    The benefit from knowledge and experience in controlling costs is a reduction in opex expenses.

Identify competencies that meet all of the below mentioned criteria:

• They should be making a significant contribution to customer perceived value
• They are the significant contributor to the financial health of the company
• They are exceptional or their performance has been proved significantly superior to its competitor product or service.
• They are unique and capable of being applied to new products and services

They are your company’s core competencies. Once identified, you should institutionalize through processes and procedures this activity of mapping core competencies with pre-determined intervals.

Perception clarity

In most of the companies today, people are challenged with operating without the perception clarity they really need to know. In fact they truly deserve. It is necessary for senior management to provide clarity about goals and objectives of the company to one and all.  Now a day’s companies are compelled to change their plans and road map periodically and this is something that is market driven. Today at all levels, had it been project development, production, business development, sales and marketing or HR, everyone is expected to work smarter and faster and get the “projected” growth figure on every 13 work weeks (Quarter).

I for one feel that shaping perception of all existing as well as new employees is something that can provide them clear vision and help them align their efforts and produce much better results in expected time. It sounds easy however the hard fact is that middle managers, line managers and sometimes senior managers are not able to provide vision clarity which results into wrong external communication and loss of good opportunities. Many times it is also observed that senior managers and even line managers are so busy with their own task that they unknowingly ignore this important activity. Even if they provide perception clarity on new goals, it is never done with required detailing or by providing a deeper understanding of how and why clients really connect with our company, services-products.

For new recruits, they are simply asked to read company’s rule book, go through vision and mission statement, browse company website and that’s it. Most of the mid-sized companies today neither take this internal training as important part of the induction process nor do they have mechanism that can effectively communicate what are the company strengths, weaknesses, current opportunities and current threats. It is necessary to shape their perceptions and provide the required knowledge and directions for their result effectiveness.

Talent has always been viewed as MS excel based formula for growth. If you are increasing sales by X%, you need to hire Y% resources in sales team. If you are increasing your projects by N%, you need to hire Z% more resources in development / production team. As per my recent experience and observation, majority of the companies are found, NOT TO HAVE LUXERY of keep recruiting more and more employees and achieve growth.  Current economic conditions and short product / services life cycle are also some of the reasons. That is exactly why everyone is expecting rapid growth from good mediocre and low level of resources. Simply adding resources is not an option. Companies should focus more and more on shaping up their perceptions in sync with the company road map, growth plans and also provide all the necessary enablers for performing their job in best possible manner. After that one can expect targeted results. Companies should also focus more on aligning individual skills with the work to be done as per scale and capabilities.

I for one have always believed in that “No company is great. It is the work culture of the company that makes it great”.

Thanks & Regards

BHARTESH SAGAR

Shape your perception

Yahoo will lay off about 600 employees, mostly in the company’s product group, a spokeswoman, Kim Rubey, said.  Yahoo issued a statement on Tuesday that the company would continue to hire globally to support crucial priorities. “Today’s personnel changes are part of our ongoing strategy to best position Yahoo for revenue growth and margin expansion,” said the statement.

- December 15, 2010 NYT

Once again it proves that MOP (Market operating price) is decided by market forces and competition so only option left for increasing profitability is by reducing cost and this is one more example. Price will always be key driver for decision making for the clients however cost competiveness is one factor that can decide survival cycle of the supplier organization. For a service organizations / software development companies, this is more crucial.

As mentioned in the news that Yahoo would continue to hire globally to support crucial priorities. In other words, they will invest into resources in the 3^rd world where they can get skilled labor at a lower price. This is truly ROI focused move and clearly shows that mind-set of “more for less” is everywhere with most American companies.

In today's highly competitive global economy, if a firm moves 5,000 jobs abroad, it is perhaps doing so to preserve another 50,000 jobs at home that would otherwise be lost. Outsourcing is not particularly different from the case of Boeing buying cheaper steel abroad so that it can stay competitive vis-a-vis Airbus. Force Boeing to use domestic steel only and you can be sure that the result will be more good jobs lost at Boeing than those that would be created in U.S. steel industry. - By Arvind Panagariya (the author of "India: The Emerging Giant.") published on 7 November, New York Times

Again it proves that “Outsourcing is not just a strategy of cost reduction. It is in fact, a strategic service and essential element of growth.”

During my professional career of 27 years, I have handled significant number of assignments based on marketing, sales and channel development in different markets of India. India has been system integrator driven market like all other Asian countries so component distribution and channel development has been of prime importance between 1996 and 2006.

Awareness of this problem is frequently triggered when a channel partner or a retailer indicates that they are about to drop the product. Many times they even complaint of making huge losses due to short product life cycle. Biggest challenge for Channel partners was how to deal with shrinking margins, short product life cycle and lack of awareness for the road map of product or services.

You cannot stop paradigm shift or even change the product life cycle specifically when you are part of supply chain management of it. At the same time you cannot control MOP of the product / SKU which is close to EOL (end of life). I always used to tell them “Do not fight - use it and live with it”. Only option is to keep moving, keep replacing your inventory and try improving your bottom line by smart purchase or bulk purchase.

Same principle applies to service industry and you have to find and implement means and ways of reducing your cost to increase your profit.

The effective and most economical way of growing your business is by keep adding new products and services to your line of products or services. Upgrade your sales message (your selling proposition) on regular intervals. If every six months you change your sales message and add more of perceived value, you are sure to be on your growth path. This will be the best way to stimulate your current client base and encourage new prospects who are currently not buying your product or services.

It is also important to shape the perception of the core team of your organization.

Think about it.