ix Imperatives of Strategic Execution [11]

1. ix Imperatives of Strategic Execution [11] iI

2. 7Ps are the substance of the firm’s Value Proposition Philosophy Products Positioning Purpose People Partners Processes 7Ps Framework Business Model

3. WHY PURPOSE MATTERS • As humans we operate on two levels the one being the landscape of Consciousness and the landscape of Action…

4. PURPOSE • Why do we exist? • Who do we serve? • What value do we deliver to our stakeholders? • How do we do it? • Why should do they want us to survive and grow? • Whose interests are most important? • Why would society be worse off without us? • What could our future contribution be? • What must we do to increase our value? • What is our ambition?

5. PHILOSOPHIES • What beliefs guide us? (Consider the following issues.) • Strategy • The process (concepts, models, theories) we use? • Our business model? • Who we involve in creating strategy? • Sharing information? • How we define “success”? • How we decide what’s best? • Our performance measures? • How we make trade-offs or sacrifices? • The way we implement our strategy?

6. What is Business Excellence • We do not get the same answers for the two questions you • ask business leaders: • What does excellence mean to you? • Do you think you’ve achieved it? • Their definition evolves as they learn and as circumstances • change • Business Excellence is: • A journey, not a destination • An enduring pursuit and require enduring approach • Lifelong pursuit for most who attain it • Requires on going balance between strategy and execution

7. What is Business Excellence Strategy Execution Business Excellence • Requires getting there while • overcoming an unending • number of surprises • More difficult to achieve than • Strategy and impossible • without Strategy • Choose promises to make • to Stakeholders • Roadmap for delivering • those promises

8. Business Excellence Model Strong Weak Strategy Weak Strong Growth Wave Fire-Fighting III I Balanced & Predictable Profit Wave IV II Execution

9. Blue Ocean Strategy How to create uncontested market space and make the competition irrelevant

10. Two worlds …

11. Two worlds …

12. The rising Imperative of Creating Blue Oceans • supply exceeds demand • globalization • accelerated commoditization of products and services • increasing price wars • shrinking profit margins • brands are becoming more similar • select based on price • ...

13. BOS Logic: The Core Principles Reconstruct Market Boundaries … overcome believes. Reach beyond existing Demand … go for uncontested space. VI COST VI Get the strategic sequence right … value [innovation] first. VALUE

14. BOS Logic: Reconstruct market boundaries Head-to-Head Competition Boundaries of Competition Creating New Market Space

15. BOS Logic: Get the Strategic Sequence right Buyer utility Is there exceptional buyer utility in your business idea? No  Rethink YES Price Is your price easily accessible to the mass of buyers? No  Rethink YES Cost Can you attain your cost target to profit at your strategic price? No  Rethink YES Adoption What are the adoption hurdles in actualizing your business idea? Are you addressing them up front? No  Rethink YES A commercially viable Blue Ocean Strategy

16. Enterprise Performance Management

17. Management Excellence: The Next Competitive Edge Smart – Deep Insight Agile – Decisive Action Aligned – Across the Enterprise Competitive Advantage MANAGEMENT EXCELLENCE Cost – Lean and Mean Quality – Six Sigma, TQM Speed – Real-time, JIT OPERATIONAL EXCELLENCE Time

18. TheBALANCED SCORECARD

19. What Is a Balanced Scorecard? A Measurement System? A Management System? A Management Philosophy?

20. Translating Vision and Strategy: Four Perspectives FINANCIAL “To succeed financially, how should we appear to our shareholders?” Measures Targets Initiatives Objectives CUSTOMER INTERNAL BUSINESS PROCESS “To achieve our vision, how should we appear to our customers?” “To satisfy our shareholders and customers, what business processes must we excel at?” Measures Targets Initiatives Measures Targets Initiatives Objectives Objectives Vision and Strategy LEARNING AND GROWTH “To achieve our vision, how will we sustain our ability to change and improve?” Measures Targets Initiatives Objectives

21. Customers Processes People The Balanced Scorecard Focuses on Factors that Create Long-Term Value • Traditional financial reports look backward • Reflect only the past: spending incurred and revenues earned • Do not measure creation or destruction of future economic value • The Balanced Scorecard identifies the factors that create long-term economic value in an organization, for example: • Customer Focus: satisfy, retain and acquire customers in targeted segments • Business Processes: deliver the value proposition to targeted customers • innovative products and services • high-quality, flexible, and responsive operating processes • excellent post-sales support • Organizational Learning & Growth: • develop skilled, motivated employees; • provide access to strategic information • align individuals and teams to business unit objectives .

22. The Four Perspectives Apply to Mission Driven As Well As Profit Driven Organizations Profit Driven Mission Driven Answering these questions is the first step to develop a Balanced Scorecard • What must we do to satisfy our shareholders? • What do our customers expect from us? • What internal processes must we excel at to satisfy our shareholder and customer? • How must our people learn and develop skills to respond to these and future challenges? Financial Perspective Customer Perspective Internal Perspective Learning & Growth Perspective • What must we do to satisfy our financial contributors? • What are our fiscal obligations? • Who is our customer? • What do our customers expect from us? • What internal processes must we excel at to satisfy our fiscal obligations, our customers and the requirements of our mission? • How must our people learn and develop skills to respond to these and future challenges?

23. The Balanced Scorecard Framework Is Readily Adapted to Non-Profit and Government Organizations The Mission The Mission, rather than the financial / shareholder objectives, drives the organization’s strategy "If we succeed, how will we look to our financial donors?” ”To achieve our vision, how must we look to our customers?” “To satisfy our customers, financial donors and mission, what business processes must we excel at?" “To achieve our vision, how must our people learn, communicate, and work together?”

24. Coporate-level Linkage Model Customer Perspective Reduce Crime Increase Perception of Safety Strengthen Neighborhoods Improve Service Quality Availability of Safe, Convenient Transportation Maintain Competitive Tax Rates Promote Economic Opportunity Financial Accountability Perspective Expand Non-City Funding Maximize Benefit/Cost Grow Tax Base Maintain AAA Rating Internal Process Perspective Promote Community Based Problem Solving Secure Funding/Service Partners Improve Productivity Streamline Customer Interactions Increase Infrastructure Capacity Promote Business Mix Increase Positive Contacts Learning and Growth Perspective Enhance Knowledge Management Capabilities Close Skills Gap Achieve Positive Employee Climate

25. Scorecard Design & Rollout Mobilize change through executive leadership Integrate improvement programmes with scorecard Translate the strategy to operational terms BALANCED S T R A T E G Y SCORECARD Change people, make strategy everyone’s everyday job Align the organization to create synergies

26. STRATEGY MAP Improve Returns Increase discount per liter Broaden product mix Increase Market Share Increase sales Decrease Cost per Liter sold Financial Increase Satisfied Customers Increase Customer Satisfaction Through Superior Execution Diversify Customer profile -Change Customer profile Customer Increase opera- ting capacity Increase Delivery capacity Top Management Visits More Personal Contact Minimise Problems Develop New Customers Provide News Updates Internal Processes Increase Employee Productivity Develop product, industry and basic business skills Align Personal Goals Increase staff satisfaction Learning & Growth

27. PERFORMANCE MANAGEMENT: ALIGNMENT Performance management takes place at three different levels: - Organisational Level - Departmental Level - Individual Level The cascading process is used to align the organisation’s objectives with the individual performance requirements. This ensures that every individual and business unit has a direct impact on the success of the organisation. Dept scorecard Alignment matrix

28. LINK BETWEEN BSC AND STRATEGY BSC helps organisations become performance driven by: 1. Providing a visual representation of their strategy through strategy maps 2. Cascading high-level scorecards down to customized scorecards in business units, shared services and corporate staff units 3. Communicating scorecards to all employees 4. Making strategy a continual process by providing a new reporting and feedback framework

29. Board & Shareholder Vision/Mandates Strengths/ Weaknesses Opportunities Threats Strategic Direction Themes Corporate Scorecard Strategic Objectives Strategy Map Cause & Effect Relationships Departmental Scorecards & Maps Projects Performance Management Individual Scorecards – KPA’s & KPI’s Role profiles & Initiatives Development plans Career management Training, mentoring, coaching ESTABLISHING LINE OF SIGHT Line of Sight Line of Sight

30. Director/EXCO mandates Director/EXCO mandates Director/EXCO mandates Director/EXCO mandates Vision STRATEGIC OBJECTIVES strategic plan influenced by key challenges influenced by key challenges Objective(KPAs) KPIs Business plans budget Dept KPAs and KPIs projects INDIVIDUAL KPAS AND KPIS LINE OF SIGHT

31. CORPORATE GOVERNANCE • 31

32. 10.2.1 Governance Framework - “Apply or Explain” King III follows an “apply or explain” approach. Where entities have applied the Code and best-practice recommendation in the Report, a positive statement to this effect should be made to stakeholders. In situations where the boards of directors (the “board”) or those charged with governance decide not to apply a specific principle and/or recommendation, this should be explained fully to the entity’s stakeholders.

33. 10.2.2 Integrated Reporting King II had a chapter dedicated to integrated sustainability reporting. The concept of reporting on economic, social and environment performance (the so-called “triple bottom line”) is thus not new. However, there is growing global and local attention to sustainability issues. King III requires the statutory financial information and sustainability information to be integrated in the “integrated report”.

34. 10.2.3 Combined Assurance Management, internal assurance providers such as internal audit and external assurance providers (such as external audit) are role-players in providing assurance to the board over risks in an enterprise. King III tasks the audit committee with the responsibility of monitoring the appropriateness of the company’s combined assurance model and ensuring that significant risks facing the company are adequately addressed.

35. 10.3 New Concepts Introduced in King III • IT Governance • Shareholders Approval of Remuneration Policies • Directors’ Performance Evaluation • Business Rescue • Alternative Dispute Resolution (ADR) • Fundamental and Affected Transactions

36. APPROACH TO ETHICAL LEADERSHIP WE EXPECT OF OURSELVES…. TO DO THE RIGHT THING ALL THE TIME EVEN IF NO ONE IS WATCHING

37. Ethical leadership – The key to understanding King III

39. Ethics vocabulary Ethics Values-based conduct Discretionary decisions grounded in values Values Standards/norms for good, right and fair conduct Examples: respect, integrity, responsibility, accountability, fairness Compliance Rule-based conduct (following laws, regulations, rules) Ethics codified Ethical dilemma Values clash Ethical reasoning Using values-based reasoning to solve ethical dilemmas 39

40. Making an ethical decision An “Ethics Quick Test” Is it legal? Do my organisation’s Code of Ethics/Conduct and other policies allow it? Do my professional standards allow it? What would my ethical role model do? How would it look on the front page of tomorrow’s newspaper? How does it make me feel? Would I be comfortable sharing my decision with my closest family? Does it pass the Golden Rule test? 40

41. Ethics in all human activities Religion Personal relations Education Animals and natural environment Organisations ETHICS Science Sport Professions — Law, medicine, accountancy, etc Politics Art 41

42. Ethics in all aspects of business Business ethics – The application of ethical values to organisational behaviour Boardroom strategies and control HR, IT, technical Product development Sales and marketing Accounting practices Relationships with agents, suppliers and customers (stakeholder relations) 42

43. King III – “Stakeholder triple context approach” to corporate governance QUESTION 1 To whom is the board responsible? QUESTION 2 For what is the board responsible? • All stakeholders • Stakeholder (vs shareholder) • model of corporate governance • Triple context performance • and reporting • Economic • Social • Natural environment 43

44. Relationship ethics/governancein King III • “Ethics of governance” • Ethics is the reason for corporate governance and the King reports • Every aspect of corporate governance is grounded in ethical values • Board responsibilities • Risk management • Internal audit • Sustainability 44 • “Governance of ethics” • A company’s ethics performance needs to be actively governed and managed • By means of a ethics programme

46. Principle 1.1: • “The board should provide effective leadership based on an ethical foundation.”

47. Ethical leadership • “Ethics of governance” • Corporate governance requires that the company is run ethically through effective ethical leadership • Strategic direction – Board sets tone at the top • Control – Board delegates operational aspects of ethics management • “License to operate” • Company earns approval from all its stakeholders

48. Ethical leadership • Ethical leaders • Set the tone at the top • Make ethics explicit • Legitimise ethics discourse • Are ethical role models • Encourage ethical conduct in others • Hold others accountable for the ethics of their conduct

49. “Ethics of governance”— Ethical values (“RAFT”) 1. Responsibility • Board responsibility for company’s assets 2. Accountability • Board able to justify its decisions 3. Fairness • Board considers interests of all stakeholders fairly 4. Transparency • Board discloses information in manner that allows for meaningful analysis of the company’s actions

50. “Ethics of governance” — Ethical duties of directors/leaders 1. Conscience Intellectual honesty; avoids conflict of interest; independence of mind 2. Care Devotes serious attention to affairs of company; acquires all relevant information needed for effective control and direction 3. Competence Has knowledge and skills; develops competence 4. Commitment Diligent in performing duties 5. Courage Courage to take risks associated with directing a successful sustainable enterprise and to act with integrity 50