Aligning Strategy Operational Direction

Aligning Strategy &
Operational Direction
By
Michael R. Wood
www.gantthead.com SME
Aligning Strategy & Operational Direction
About Michael R. Wood

Subject Matter Expert on Process Improvement for
www.gantthead.com
Creator of the Helix (Enterprise Alignment & Improvement)
Methodology
CIO for 9 years in the Casino Gaming & Hospitality Industry
Founder of The Natural Intelligence Group, a strategy, process
improvement, and technology consulting company
CPA (Partner in 2 CPA firms)
Adjunct Professor in Pepperdine's Management MBA program
Associate Professor at California Lutheran University
Served on the boards of numerous professional organizations
Dec 4, 2016
Copyright Michael R. Wood - 2008
Topics to be Presented
Conditioning the Organization for Change
Discovering Enterprise Requirements
Developing Operationally-Actionable Objectives
Developing Focused Urgency, Momentum and Commitment
Viewing the Organization as a Series of Value-added
Delivery Systems
Driving Alignment Throughout the Enterprise
Models and Techniques that Drive the Process
Dec 4, 2016
Goal of this Session

To introduce a proven approach for
turning
Strategic Objectives
into
Operational Reality
Dec 4, 2016

Principle:
Unconditioned Change Creates

Resistance and Chaos
Dec 4, 2016

Conditioning for Change Requires:
Context
Collaboration
Concentration
Dec 4, 2016
Creating Context
Context provides the WHY of change
Context is the Vision and Objectives

that motivates progress
Creating Context is Managements Job
Dec 4, 2016
Collaboration
Collaboration Fosters Buy-in
Management must create an

environment where people can freely
exchange ideas in context to the Vision
and related Objectives.
Dec 4, 2016
Concentration
Concentration = Undistracted Focus
Through undistracted focus, things get done!
Dec 4, 2016
Dedication to a single objective is

the fastest way to achieve it
Discovery is a collaborative process

that allows organizations to learn the
What and How of improving
operations in CONTEXT to its Vision
and Business Objectives.
Dec 4, 2016
10
Allowing organizations and its people to

discover needs before defining solutions is a
critical step missed by most strategic planning
and business process improvement efforts.
Dec 4, 2016
11
Discovery means to define the GAP

between an organizations current state
and its desired future state (vision).
Dec 4, 2016
12
Vision and Objectives must be:

Measurable
Actionable
Time Constrained
if they are ever to be OPERATIONALIZED
Dec 4, 2016
13
Operationalizing means to integrate

Objectives into pragmatic, OUTCOME
driven processes.
Dec 4, 2016
14
Therefore:
Discovery must be done in context to the

processes an organization uses to achieve
results (aka Value-added Delivery Systems
Value Streams, etc.).
Dec 4, 2016
15
Developing Operationally-Actionable
Objectives
Operationally-Actionable Objectives
describe clear and quantifiable
outcomes.
Their achievement can be observed as a

natural by-product of an organizations
Value-added Delivery Systems.
Dec 4, 2016
16
Objectives
Typical Objective
Actionable Objective
To provide top
To provide top quality
quality service to our
service to our
customers
customers by:
No Measures
Not translatable into

action
Keeping defective
returns below 10 per day
Shipping product the

same day its ordered
Dec 4, 2016
17
Objectives
Typical Objective
To improve our product
mix to more closely align
with emerging market
demand
Dec 4, 2016
Actionable Objective
To respond to our
customers desire for cars
that get 30 M.P.G. by
developing a line of midsized cars that meet or
exceed their expectation
by the year 2010
18
Objectives
Operationally-Actionable Objectives can

be specifically related to Value-added
Delivery Systems and their related work
tasks.
They set the bar, create the vision and

the challenge.
Dec 4, 2016
19
Objectives - 8 Point Test
What operational area does
the objective relate to?
How will the improvement

manifest itself in operations?
What improvement will the

objective achieve?
How will the improvement be

measured?
How does the improvement
What Value-added Delivery
add value to stakeholders?
Systems are affected by the

objective?
How would these

stakeholders discern this
added value?
Dec 4, 2016
Which workgroups will be

involved in achieving the
objective?
20
Developing Focused Urgency, Momentum

and Commitment
Focused Urgency requires single minded dedication

to a well defined outcome
Momentum is achieved by Managements continuous

and unwavering commitment to achieving its Vision
Commitment requires engaging of the workforce in a

Structured Collaboration that results in defining
ways to achieve actionable business objectives
Dec 4, 2016
21

and Commitment
Successful organizations have learned how to

rally knowledge workers around a common
cause that continuously moves it towards its
strategic objectives.
Dec 4, 2016
22

and Commitment
To rally knowledge workers, management

must allow them to contribute to how
businesses processes need to be changed in
order to achieve the organizations objectives.
Dec 4, 2016
23
Viewing the Organization as a Series of

Value-added Delivery Systems
VADS View
SELLING
Stove Pipe View

CEO
COLLECTING
Sales &
Marketing
Finance
Accts
Rec.
BUYING
Dec 4, 2016
Wharehouse
Accounting
SHIPPING
PAYING
Advertising
Accts
Pay.
TV
Shipping
Receiving
Sales
Print
Order
Process
Direct
Mktg
24
Viewing the Organization as a Series of

Value-added Delivery Systems
The Key is to use objectives to drive changes in the
way value is delivered to stakeholders.
Process of Driving Objectives to the VADS Level

Develop
objectives
in context to the
operation
Dec 4, 2016
Identify VADS
that are affected
by the objective
Identify the
process groups that
participate in the
VADS affected
Organize cross functional

teams to identify & define
process improvements
needed to achieve the
objective
25
Driving Alignment Throughout the

Enterprise
When the organization's strategic

objectives are manifest in the outcomes its
operations produce you have ALIGNMENT.
Dec 4, 2016
26
Driving Alignment Throughout the

Enterprise
Stakeholder Needs
Strategic Direction
Business Objectives
Value Added Delivery

Systems & Process Groups
Information Being Shared /

Moved
Process group Actions
Process Sequence
VADS Object
Transformation
Process Failure &

VADS Impediments
Value Added
Dec 4, 2016
27
Models and Techniques that Drive the

Process
Change Analysis
Workflow Models
Level 1
Level 2
Object Transformation & Stimulus

Trigger Analysis
Failure Analysis
Dec 4, 2016
28

Process - Change Analysis
Defines existing, objective limiting,

situations and goal driven changes for
achieving that objective.
The first step in building commitment

and momentum for positive change
Dec 4, 2016
29

Process - Change Analysis
Change Analysis
Current Situation
1
Preliminary Goal
It takes too long to process sales orders

through Credit.
Dec 4, 2016
Too Long = more than 45 minutes from

the time the Credit Manager receives the
order from the order desk until the time
the order is released to the warehouse
for shipping.
This is bad because it means that orders
received after 2 p.m. cannot be shipped
until the next business day. This results
in poor customer service.
The ability to process work orders directly to

the warehouse where the customers available
credit line is greater than the order amount
and his outstanding balance is current.
This would require a change to our order
processing system.
Specifically, it would require the system
to automatically check the order for
credit-related data and route it to the
appropriate location (credit department or
warehouse).
30

Process - Level 1 Workflow Model
Depicts a Value-added Delivery System in

terms of how people and workgroups
communicate in order to complete an end-toend process cycle
Identifies critical objects and the

transformations that occur in order to achieve
successful completion
Dec 4, 2016
31
Models and Techniques that Drive the Process - Level 1 Workflow Model
L e v e l 1 W o r k flo w
V A D S N a m e : S a le s O r d e r s o n A c c o u n t
R e fe re n c e : W F L 1 -S O A
A s s u m p t io n : S a le s O r d e r s o n A c c o u n t w h e n t h e C u s t o m e r 's C r e d it lim it is G o o d , I n v e n t o r y is A v a ila b le a n d C u s t o m e r P a y s o n T im e .
M odel
- C u s t o m e r C a lls in O r d e r
S te p s
C u s to m e r
S a le s O r d e r D e s k
S a le s O r d e r
S y s te m
B illin g
11
C u s t o m e r c a lls a n o r d e r in t o t h e
S a le s O r d e r D e s k .
2.
S a le s O r d e r D e s k e n te r s th e o r d e r
in t o th e S a le s O r d e r S y s t e m .
3.
S a le s O r d e r S y s te m p r in ts a
R o u g h O r d e r a t t h e S a le s O r d e r
D esk.
4.
S a le s O r d e r D e s k fo r w a r d s th e
R o u g h O r d e r t o t h e C r e d it
D e p a r t m e n t f o r a p p r o v a l.
5.
C r e d it D e p a r t m e n t r e v ie w s
C u s t o m e r 's C r e d it s t a t u s in t h e
S a le s O r d e r S y s te m a n d a p p r o v e s
th e o rd e r
6.
C r e d it D e p a r t m e n t f o r w a r d s t h e
A p p ro v e d O r d e r to th e
W a re h o u s e .
7.
W a r e h o u s e s h ip s t h e o r d e r a n d
f o r w a r d s t h e o r d e r t o B illin g .
8.
B illin g f in a liz e s t h e S h ip p e d O r d e r
in S a le s O r d e r S y s t e m a n d p r in t s
in v o ic e .
9.
B illin g m a ils I n v o ic e t o C u s t o m e r .
5
C o p y o f I n v o ic e
to P ro d u c t
A n a ly s is G r o u p
Order for Approval
- Shipped Order -
10
1.
10.
C u s t o m e r r e m it s p a y m e n t t o
B illin g .
11.
B illin g p o s t s C u s t o m e r 's p a y m e n t
in S a le s O r d e r S y s t e m .
6
W a re h o u s e
Dec 4, 2016
- A p p ro v e d O rd e r -
C r e d it D e p a r tm e n t
32

Process - Level 2 Workflow Model
Depicts a VADS cycle, its phases and

procedures.
Provides a platform for:
Mapping Goals to Process
Testing proper object transformation
Conducting Failure Analysis
and more ...
Dec 4, 2016
33
B eg. S tatus
Models and Techniques that Drive the Process Level 2 Workflow Model
Phase A
Phase B
Phase C
Phase D
A customer wanting to order product
Approved sales order ready for

shipping
Shipped sales order ready for

billing
Billed sales order pending

collection
1 The customer calls the order
1 Warehouse receives order via
desk with an order.
printer.
1 Billing receives order from

warehouse.
2 Customer sends payment to
Order Entry Process

2 Order desk identifies the
customer and verifies that their
P
R
outstanding balance is current via
O
C
the order entry screen. The system

flags the order as clearing O/S
PG1
Balance review.
E
D
billing.
2 Warehouse picks order and
updates quantities picked on
the order form.
desk verifies the inventory is

available and confirms ship dates.
PO4
4 Upon completion of the order, the
2 Billing retrieves order from the

system and enters the actual
quantities shipped.
3 Billing retrieves the customer's

invoice from the system and
posts the payment.
3 Warehouse packages and

ships order to customer.
3 For each item ordered, the order
1 Customer receives the invoice.
3 The system updates inventory,

adjusts the customer credit limit
and creates the invoice.
4 Warehouse sends shipped

order to billing.
4 The system updates the

customer's credit limit and
accounts receivable balance.
4 Billing prints the invoice and

mails to customer.
system reserves the inventory

being ordered, sets its status to
"Approved" and prints it directly to
the warehouse printer.
PG2
PG3
PO2
Approved sales order ready for shipping
E ffort
Lapsed E nd
Tim e S tatus
PG1
5 minutes
5 minutes
Dec 4, 2016
PO1
Shipped sales order ready for

billing
1 day
PO1
1 hour
Billed sales order pending

collection
Collected sales order
2 hours
45 days
10 minutes
10 minutes
34

Object Transformation & Stimulus Trigger Analysis
Object Transformation Testing ensures that

essential subject matter is properly updated
during a VADS cycle.
Stimulus Trigger Analysis ensures that

efficient cues are designed into processes so
that work is performed on a timely basis.
Dec 4, 2016
35
Summary of Secondary Object Transformation Failures

VADS NAME: Sales Orders on Account
Secondary
Object
VADS Phase
Shipped sales
order ready for
billing
Customer
3 The system updates

inventory, adjusts the
customer credit limit and
creates the invoice.
Shipped sales
order ready for
billing
Inventory
3 The system updates

inventory, adjusts the
customer credit limit and
creates the invoice.
Customer
VADS REF.: OTR-SOA

Procedure
Rule
Impact of Failure
Safeguard
The customers credit limit

should be increased for the
amount of the original
order and decreased for
the value of the invoice.
Failure to decrease the

customer's credit limit would
result in a overstatement of their
credit limit. This could lead to a
bad debt situation as future
orders are accepted
erroneously.
The inventory available for

sale should be increased
for the original quantity
reserved and decreased
for the actual quantity
shipped to the customer.
This should be done for
each item shipped.
4 The system updates the
The customers credit limit
customer's credit limit and should be increased for the
accounts receivable
value of payments
balance.
received (posted).
Failure to correctly update

inventory for the actual quantity
shipped would result in
inventory being misstated. This
could lead to over- or understocking conditions and could
affect purchasing's actions.
A procedural failure to enter the

data into the system or lost
paperwork could cause the
process to breakdown. A
safeguard should be implemented
to identify orders that have been
picked up for shipping but not
invoiced. This safeguard could
take the form of a daily status
report that lists orders that have
been in the warehouse for over
24 hours.
Same as above.
Billed sales
order pending
collection
Dec 4, 2016
Failure to increase the

customer's credit limit for
payments received could result
in a customer erroneously failing
to pass the credit check. This
could result in a lost order or
even a lost customer.
A procedural failure to enter the

payments into the system would
cause the process to breakdown.
A safeguard should be
implemented to identify orders
that have been invoiced but not
collected within the customer's
paying habit time period. This
safeguard could take the form of
a daily status report that lists
invoices that have been paid
within the customer's normal
paying habit time period.
36
Models and Techniques that Drive the Process - Proof of Correctness
Correlating Situations to Workflow

First Proof of Correctness
Situation
Goal
A. No inventory
available
No shortfalls
B. Slow
.collections
Average
38 days
Isolating
Isolatingproblems
problemsalong
along
flow
flowline,
line,helps
helpspeople
people
visualize
visualizewhere
whereproblems
problems
occur
occurand
andget
getleverage
leverage
on
change.
on change.
Dec 4, 2016
Existing WFL2
Beg
Status
P
r
o
c
e
d
u
r
e
s
End
Status
Customer wants
product
Open Order
1. ------ 1. -----2. ----A

3. ----- 2. ----4. ---3. ----Open Order
Shipped Order
Shipped Order
Billed Order
1. ------ 1. -----2. ----3. ----- 2. B----4. ---3. ----Billed Order
Paid Order
37
Models and Techniques that Drive the Process - Proof of Correctness
Correlating Goals to Conceptual Workflow

Second Proof of Correctness
Situation
Goal
A. No inventory
available
No shortfalls
B. Slow
collections
Average
38 days
Mapping
Mappinggoals
goalsto
tothe
the
proposed
workflow
proposed workflowhelps
helps
people
visualize
new
people visualize new
procedures
procedures and
andunderstand
understand
operational
impact.
operational impact.
Proposed WFL2
Beg
Status
P
r
o
c
e
d
u
r
e
s
End
Status
Customer wants
product
Open Order
Shipped Order
Billed Order
1. ------ 1. ------ 1. ------ 1. -----2. ----2. ----A

3. ----- 2. ----- 3. ----- 2.B ----4. ---4. B---3. ----3. ----Open Order
Shipped Order
Billed Order
Paid Order
Change
ChangePoints
Points are
are
Identified
Identified
Dec 4, 2016
38

Stimulus Trigger Analysis
STIMULUS TRIGGER DIAGNOSTIC FORM

VADS NAME: Sales Orders on Account
VADS Phase
A customer wanting to order
product
Approved sales order ready for
shipping
Dec 4, 2016
VADS REF.: VS-SOA

Process Group
Sales Order Desk
Warehouse
Stimulus Trigger
Action and Timing
Telephone ringing
Answer telephone within 3 rings
Beep from paging system
Pick up order and update system

with order PIN # within 30 minutes
of page
39

Process - Failure Analysis
Tests the workflow for the impact of

procedural breakdowns on the:
Current VADS cycle
Future VADS cycles
Other VADS
Dec 4, 2016
40
Failure Analysis Form

VADS NAME: ____________________
VADS REF.: FA-____
Where Failure Occurs

VADS Phase:
VADS Procedure:
Object(s) Failing to Transform:
Description of Failure
Where Failure is Realized

VADS Phase:
VADS Procedure:
Description of Failure:
Lost Value Due to Failure

Value Lost
Stakeholder
Cost
Time
Service Level
Other
Total
Resolution Concept
Description:
Implementation Cost:
Labor
Materials
Capital
Total
Labor
Materials
Capital
Total
Annual Ongoing Support Cost:
Time Needed to Implement:
Return on Investment
1st Year
Revenue Generated
Cost Savings
Total Improvement
Implementation Cost
Ongoing Cost
Total Cost
Net Improvement
Return on Investment:
Dec 4, 2016
3 Years
5 Years
41
Failure Analysis Form

VADS NAME: Sales on Account
VADS REF.: FA-SOA-C3
Where Failure Occurs

VADS Phase:
VADS Procedure:
Description of Failure
Shipped sales order ready for billing

The system updates inventory, adjusts the customer credit limit and creates the invoice.
Customer
Inventory
Failure to decrease the customer's credit limit would result in an overstatement of their credit limit. This could lead to a bad debt
situation as future orders are accepted erroneously.
Failure to correctly update inventory for the actual quantity shipped would result in inventory being misstated. This could lead to
over or under-stocking conditions and could affect purchasing's actions.
Where Failure is Realized

VADS Phase:
A - future cycles
VADS Procedure:
2 - Order desk identifies the customer and verifies that their outstanding balance is current via the order entry screen. The system
flags the order as clearing O/S Balance review.
3 - For each item ordered, the system verifies that inventory is available and confirms ship dates.

Description of Failure:
Customer
Inventory
Due to failures in phase C of a prior VADS cycle, the customer's credit limit is misstated. Additionally the inventory does not
accurately reflect actual shipment information. This can result in a customer's order being refused because of an understated
credit limit or accepted wrongly for an overstated credit limit. Since, in this mode the inventory is also misstated, the order might be
accepted when there is insufficient product to fill the order. This type of failure can adversely impact customer service levels.
Lost Value Due to Failure

Value Lost
Cost
Stakeholder
Customer - Value of order or

even customer
Owners - Lost revenue Assumes one lost customer a
year.
Total
Time
Service Level
Other
Poor customer service

$119,700
Labor to resolve
Reduced reputation
$119,700
Resolution Concept
Description:
A procedural failure to enter the data into the system or lost paperwork could cause the process to breakdown. A safeguard
should be implemented to identify orders that have been picked up for shipping but not invoiced. This safeguard could take the
form of a daily status report that lists orders that have been in the warehouse for over 24 hours.
Labor
Materials
Capital
Total
$25,000
$25,000
Labor
Materials
Capital
Total
$10,800
$18
$10,818
Implementation Cost:
Annual Ongoing Support Cost:
Review time and paper
Time Needed to Implement:
2 months
Return on Investment
Revenue Generated (assumes 1
lost customer per year)
Total Improvement
Implementation Cost
Ongoing Cost
Total Cost
Net Improvement
Return on Investment:
Dec 4, 2016
1st Year
3 Years
5 Years
$119,700
$718,200
$1,795,500
$119,700
$718,200
$1,795,500
$25,000
$25,000
$25,000
$10,818
$32,454
$54,090
$35,818
$57,454
$79,090
$83,882
$660,746
$1,716,410
1150.04%
2170.20%
234.19%
42
In Closing
Alignment Breeds Success
It requires:
Context (actionable vision & objectives )

Collaboration (across functional areas)
Concentration (dedicated focus)
It requires an approach that is logical,

practical and comprehensive.
Dec 4, 2016
43

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Aligning Strategy &

Aligning Strategy & Operational Direction

About Michael R. Wood

Copyright Michael R. Wood - 2008

Aligning Strategy & Operational Direction

Copyright Michael R. Wood - 2008

Aligning Strategy & Operational Direction

Goal of this Session

Copyright Michael R. Wood - 2008

Aligning Strategy & Operational Direction

Conditioning the Organization for Change

Unconditioned Change Creates

Copyright Michael R. Wood - 2008

Aligning Strategy & Operational Direction

Conditioning the Organization for Change

Copyright Michael R. Wood - 2008

Aligning Strategy & Operational Direction

Conditioning the Organization for Change

Context provides the WHY of change

Context is the Vision and Objectives

Creating Context is Managements Job

Copyright Michael R. Wood - 2008

Aligning Strategy & Operational Direction

Conditioning the Organization for Change

Management must create an

Copyright Michael R. Wood - 2008

Aligning Strategy & Operational Direction

Conditioning the Organization for Change

Dedication to a single objective is

Aligning Strategy & Operational Direction

Discovering Enterprise Requirements

Discovery is a collaborative process

Copyright Michael R. Wood - 2008

Aligning Strategy & Operational Direction

Discovering Enterprise Requirements

Allowing organizations and its people to

Copyright Michael R. Wood - 2008

Aligning Strategy & Operational Direction

Discovering Enterprise Requirements

Discovery means to define the GAP

Copyright Michael R. Wood - 2008

Aligning Strategy & Operational Direction

Discovering Enterprise Requirements

Vision and Objectives must be:

Copyright Michael R. Wood - 2008

Aligning Strategy & Operational Direction

Discovering Enterprise Requirements

Operationalizing means to integrate

Copyright Michael R. Wood - 2008

Aligning Strategy & Operational Direction

Discovering Enterprise Requirements

Discovery must be done in context to the

Value Streams, etc.).

Copyright Michael R. Wood - 2008

Aligning Strategy & Operational Direction

Their achievement can be observed as a

Copyright Michael R. Wood - 2008

Aligning Strategy & Operational Direction

Not translatable into

Shipping product the

Copyright Michael R. Wood - 2008

Aligning Strategy & Operational Direction

Copyright Michael R. Wood - 2008

Aligning Strategy & Operational Direction