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Org Value Creation


Value Creation Copyright 2008 Alex Coman
Value Creation
Profit, People, Planet
Arena:
Business, Regulator, Information
Supply chain
Focus:
Pareto,
Ease/Value
Vision/Megatrends:
Leadership = Vision+ Ability to execute
Political, Economic, Social,
Technological
Creative destruction:
Groupthink,
Analysis Paralysis
Polarity (internal conflict)
SWOT: good model; No tools
Opportunities:
Ansoff = Generator
Innovation funnel = Investment
Forecasting = Value assessment


Threats:
Sources/Destination
Stress test
Prevent/Mitigate
Strengths/Weaknesses:
Event Factor Analysis
Root Causes/Core competences
Scorecard
Control cycle = P4A:
Process
6 Performance measures
Pareto
Problems=Ishikawa Fishbone
Action
Learning Curve






Note Hyperlink to slides
Alex@Coman.org Tel:(972)3-510-1768 -2- WWW.Coman.Org Value Creation
Value Creation Copyright 2008 Alex Coman
Horizontal
Value Chain:
Integration:
Vertical
Control
Information
Relationships:
Business
Monopoly/ Regulatory Agency
Entities:
Market
Firm/Coalition
Drugs
Teva
Farmer
Dairy
Distributor
Retailer
Consumer
Low
High
FDA
Syntax
Vocabulary
Structure
Concise:
Link Markets rather than Firms
Business implies information flow.
Titles on significant arrows.
Pertinent entities only.
Web
ARENA Canonical Form
Up
Back
Push
Down
Forward
Pull
Alex@Coman.org Tel:(972)3-510-1768 -3- WWW.Coman.Org Value Creation
Value Creation Copyright 2008 Alex Coman
Distributors
Care Corporate Arena - Health
Drug Manufacturers
Innovative Generic
GSK
Teva
FDA Ministry of Health GMP
CTS
Lemon
Health Management Org.
Clalit
Vitamed
Macabi
Physicians
Public
Prescription
List
Pharmacies
Macabi
Prescription Drugs
Over the Counter
ShorTab
Advertising
IMS
SuperPharm
Web
Product
Specialists
Glaxo IL
Teva
Ivax
Disease
Management
American
Hospital
Supplies
Tele
medicine
Shahal
eMed
EDI
Admin
Alex@Coman.org Tel:(972)3-510-1768 -4- WWW.Coman.Org Value Creation
Value Creation Copyright 2008 Alex Coman
Textile Arena
Garment Manufacturers
Far
East
Labels
Victorias
Secret
Customers
Retailers
Fabric
GAP
GAP
Far
East
CK
Macys
Benetton
Benetton
Benetton
Walmart
Inditex79
23 Robot
cut & Die #3
>40%
Zara
467Stores
Zara 75
400 Small
Shops
>50%
Delta
Delta
H&M
900
suppliers
H&M
Inner
Secret
Tefron
HiTex
St.Michael
M&S
Solog
25-35years
Anti Gap
Older&
Wealthier
College Crowd
Trendy Urban
Late Teens
Cost Conscious
Girls 12+Up
Cheap cool
Alex@Coman.org Tel:(972)3-510-1768 -5- WWW.Coman.Org Value Creation
Value Creation Copyright 2008 Alex Coman
shoring - Virtual Firm: off
South Korea:
Spinning
Five Tai sewing
workshops
Shipper
Distributor
Japanese plant in
Guangdong China:
zippers
Customer
European fashion
designer
Orders thousands
of garments
(Virtual Firm)
Agility: Value Net
Li&Fung: 3,600 employees in 37 countries: Logistics
Li&Fung
Alex@Coman.org Tel:(972)3-510-1768 -6- WWW.Coman.Org Value Creation
Value Creation Copyright 2008 Alex Coman
Pareto
S
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Income Group
80%
100%
B
30% of
population
10% of
resources
C
50% of population
10% of resources
20%
90%
30% 50%
100%
A
Significant
few:
20% of
population
80% of
resources
B
C
Classify
Differentiate
Alex@Coman.org Tel:(972)3-510-1768 -7- WWW.Coman.Org Value Creation
Value Creation Copyright 2008 Alex Coman
Pareto
0
20%
40%
60%
80%
100%
1
4
5
15%
25%
50%
4
15%
25%
50%
5
S
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Income Group
20%
40%
60%
80%
100%
Distribution of US federal Income-tax revenue by income group
Alex@Coman.org Tel:(972)3-510-1768 -8- WWW.Coman.Org Value Creation
Value Creation Copyright 2008 Alex Coman
Focus: 25% / 25%
Value
Expected
High
80%
Oyster
4%
Pearl 16%
4%Effort=64%Value
Low
White
Elephant
64%E=
4%V
Quick Wins
64%
Difficult
80%
Easy
Ease to Implement
Alex@Coman.org Tel:(972)3-510-1768 -9- WWW.Coman.Org Value Creation
Value Creation Copyright 2008 Alex Coman
Ansoff
Ansoff
Product Line
Old New
M
A
R
K
E
T
New
Market Development: Diversification: (3/4 failure)
Old
Market Penetration
Product Development:
The Firm
Old Market
Old
Firm
Old Market
Old
The Firm
Old
Market
Old
New
Market
Old
New
Firm
New
Market
New
Firm
Old
Market
Old
Firm
Breadth
Market Development Product Development
Depth
Vertical
Depth Depth Boutique
Penetration Diversification
Alex@Coman.org Tel:(972)3-510-1768 -10- WWW.Coman.Org Value Creation
Value Creation Copyright 2008 Alex Coman
BritVic
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Value Creation Copyright 2008 Alex Coman
Reckitt Benckiser
Alex@Coman.org Tel:(972)3-510-1768 -12- WWW.Coman.Org Value Creation
Value Creation Copyright 2008 Alex Coman
Governance

E
x
t
e
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n
a
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Threat
Internal
Strategic Financial
Market
Operational
Prevent Mitigate
Crisis
Value-at-Risk
Alex@Coman.org Tel:(972)3-510-1768 -13- WWW.Coman.Org Value Creation
Value Creation Copyright 2008 Alex Coman
Probability
Stress:
Exposure/
Value At Risk
Threat
Position0
Crisis
Capture
H
e
d
g
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Threat
Position1
E
n
g
a
g
e

Bar
Threat
Governance
Alex@Coman.org Tel:(972)3-510-1768 -14- WWW.Coman.Org Value Creation
Value Creation Copyright 2008 Alex Coman
Event-Factor-Review EFR
Event Factors
Outcome Description Value Strengths Weaknesses
Success
Failure
Alex@Coman.org Tel:(972)3-510-1768 -15- WWW.Coman.Org Value Creation
Value Creation Copyright 2008 Alex Coman
Event-Factor-Review
Factor Event
Weaknesses Strengths Description Outcome
Product not
differentiated
enough.
New markets
require
education.
Rapid multidisciplinary
product development.
Good engineering and
production.
Good interdisciplinary
communications.
Winning a
tier 1
customer
contract
Success

Sales to market leaders.
Technological innovation
and professionalism.
Choice people working in a
creative atmosphere.
High employee motivation.
Leading a
significant
technical
standards
committee
The firm is
losing money.
Strong sales department.
High sales growth rate.
Exceeding
sales
targets
Alex@Coman.org Tel:(972)3-510-1768 -16- WWW.Coman.Org Value Creation
Value Creation Copyright 2008 Alex Coman
Event-Factor-Review
Factor Event
Weaknesses Strengths Description Outcome
Small player in giants
playground.
Technological
leadership.
Failure to sell
to the leading
company in
the market
Failure
Product over-specification
and over-design.
No access to the end-user
Insufficient R&D strategic
gating.
High burn rate.

Losing money
over a period
of 3 years
Excessive technological
orientation.
No awareness of mergers
and acquisition (M&A)
potential.

Failure in
M&A
negotiations
with a
leading player
in the industry
Alex@Coman.org Tel:(972)3-510-1768 -17- WWW.Coman.Org Value Creation
Value Creation Copyright 2008 Alex Coman
Core-Competence-Tree - CCT
Owner Value was created
High Sales Growth rate Sales to Market Leaders
Strong Sales
Department
Good Engineering
And Production
Good Inter-functional
Communications
Technological Innovation
and Professionalism
Influence in
Standards
Committee
Rapid multidisciplinary
System view
Development
High employee
Motivation
Sales and Partnership with
Leading Firms
Technological
Leadership
Vision, Leadership and Managerial Ability
Choice People working in an
atmosphere of excellence
Core Competencies
Alex@Coman.org Tel:(972)3-510-1768 -18- WWW.Coman.Org Value Creation
Value Creation Copyright 2008 Alex Coman
Root Problems
Current-Reality-Tree - CRT
Firms Market Value is Insufficient
The Firm is Losing Money No Exit
New markets
Require Education
Product Not
Differentiated Enough
No access to
The end User
Low Profitability
Not enough Strategic
Gating in R&D
Product Over-Specification
and Over-Design
No Awareness to
M&A Objectives
Excessive Technology
Orientation
High Burn
Rate
Small Player
In Giants Arena
Focus on single
New Technology
Alex@Coman.org Tel:(972)3-510-1768 -19- WWW.Coman.Org Value Creation
Value Creation Copyright 2008 Alex Coman
Current-Reality-Tree
Current-Reality-Tree: CRT
Major Un-Desired Effect
8-12 Un-Desired Effects (UDE): Brainstorm
Current
Concrete
Undesired
Under our influence




Schema
Arrows pointing from cause to effect.
Effects at top, Causes at bottom.
Root Problems 3
Feedback loops.
Alex@Coman.org Tel:(972)3-510-1768 -20- WWW.Coman.Org Value Creation
Value Creation Copyright 2008 Alex Coman
Long
Development
Process
Tree - Reality - Current
High Product Cost
Low Forecast
Reliability
Lack of DFX
Planning
High mix
Low volume
Expensive
Infrastructure
Market
Conditions
Competition
Buyers
Market
Business
Measurement ($)
Information
Flow in org.
Lack of
Synchronization
Information
systems
Forgiveness
Lack of
Structured
processes
Incomplete
development
Lack of
knowledge
Marketing
policy
Lack of
commonality
No value
engineering
Outdated
technology
Low Product
Maturity
Resource
management
Org. size &
complexity
Culture
TTM Market
conditions
Sales Process
management
Alex@Coman.org Tel:(972)3-510-1768 -21- WWW.Coman.Org Value Creation
Value Creation Copyright 2008 Alex Coman
Alex@Coman.org Tel:(972)3-510-1768 -22- WWW.Coman.Org Value Creation
Value Creation Copyright 2008 Alex Coman
Process
Performance
Control Chart
Pareto
P4A: Control Cycle
W
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B
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N
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K
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C
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Action Deployment
Who What When
B
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Problems: CRT
P4A
Exploit: Strategic Gating
Utilize: Garbage
Subordinate: DBR Tactical Gating
Elevate: Offload
J
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S
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Alex@Coman.org Tel:(972)3-510-1768 -23- WWW.Coman.Org Value Creation
Value Creation Copyright 2008 Alex Coman
Value Measures

6 Value drivers
Financial:
Throughput = Sales Direct Expenses;
Operating Expenses: less people or more productivity
Competitive:
Lead Time=Time(FinishStart)=Work + Wait.
Due-Date-Performance
Functional:
Inventory: Raw materials+Work-In-Process+Finished Goods
Quality
Robust: Problems per Million
Agile: Customization
Alex@Coman.org Tel:(972)3-510-1768 -24- WWW.Coman.Org Value Creation
Value Creation Copyright 2008 Alex Coman
.1 Process:
Aircraft Turnaround
Critical Path Model
ONBLOCK
Aircraft Unloading
32 minutes
Connecting Stairs/Jetty
7 minutes
Deplaning Passengers
17 minutes
Recharge Catering
22 minutes
Cleaning Aircraft
33 minutes
Fueling Aircraft
32 minutes
Cabin Security Check
8 minutes
Boarding Passengers
38 minutes
Aircraft Loading
44 minutes
OFFBLOCK
B747
ONBLOCK
Connecting Stairs/Jetty
7 minutes
Deplaning Passengers
17 minutes
Cleaning Aircraft
33 minutes
Cabin Security Check
8 minutes
Boarding Passengers
38 minutes
OFFBLOCK
8
3
.
5
7
8
.
9
8
0
.
6
8
5
.
1
9
1
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8
8
6
.
2
8
5
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3
6
7
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9
8
2
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5
7
1
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7
7
0
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0
8
3
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6
8
4
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0
7
9
.
4
0
10
20
30
40
50
60
70
80
90
100
May
'05
Jun
'05
Jul
'05
Aug
'05
Sep
'05
Oct
'05
Nov
'05
Dec
'05
Jan
'06
Feb
'06
Mar
'06
Apr
'06
May
'06
Jun
'06
Jul
'06
Aug
'06
Frontier Performance Industry Best Industry Average Industry Worst
On Time Arrival Performance
U.S. DEPARTMENT OF TRANSPORTATION PERFORMANCE RANKINGS
FRONTIER OPERATIONAL PERFORMANCE vs. The Industry
P
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1
4

M
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Rankings shown above compare major carriers with similar operations. These
carriers include: Frontier Airlines, Northwest Airlines, American Airlines, AirTran
Airways, Southwest Airlines, Delta Airlines, US Airways, Alaska Airlines, JetBlue
Airways, United Airlines, Continental Airlines & ATA Airlines.
Over the last 15 months,
Frontier has led all major
carriers in On Time
Performance 8 times.
2. Performance
Alex@Coman.org Tel:(972)3-510-1768 -26- WWW.Coman.Org Value Creation
Value Creation Copyright 2008 Alex Coman
0%
10%
20%
30%
40%
50%
60%
R
e
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a
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y

A
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c
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a
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t
/
T
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c
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A
T
C

O
p
s

W
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h
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P
a
x

O
t
h
e
r
. Pareto 3
Reactionary
Technical
Air Traffic
Control
Operations
Weather
Passengers
Other
Alex@Coman.org Tel:(972)3-510-1768 -27- WWW.Coman.Org Value Creation
Value Creation Copyright 2008 Alex Coman
. Problems 4
Ishikawa / Fishbone Analysis
Reactionary Delay
Reactionary
Delay
AIRCRAFT
ROTATION
late arrival of aircraft
from another flight or
previous sector
LOAD
CONNECTION
awaiting load from another
flight
THROUGH
CHECK-IN
ERROR
passenger and
baggage
CABIN
CREW
ROTATION
awaiting cabin crew
from another flight
CREW
ROTATION
awaiting crew from
another flight (flight deck
or entire crew)
OPERATIONS
CONTROL
re-routing, diversion,
consolidation, aircraft change
for reasons other than
technical
Alex@Coman.org Tel:(972)3-510-1768 -28- WWW.Coman.Org Value Creation
Value Creation Copyright 2008 Alex Coman
Swimming lanes
Alex@Coman.org Tel:(972)3-510-1768 -29- WWW.Coman.Org Value Creation
Value Creation Copyright 2008 Alex Coman
. Action 5
Action Deployment
Gap

Process Resource
I n s t r u m e n t S y n t h e s i s & A n a l y s i s L a b o r a t o r y
PRICE H Cost Model, p30
Final Version
25 April 2003
MAXIM Periscope Module
MAXIM Periscope Module Learning Curves
Learning Curve Next Unit Production Cost
$0
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
$3,000,000
$3,500,000
$4,000,000
17
1
3
1
9
2
5
3
1
3
7
4
3
4
9
5
5
Production Unit
MAXIM PRICE H
90% Learning Curve
85% Learning Curve
75% Learning Curve
Alex@Coman.org Tel:(972)3-510-1768 -31- WWW.Coman.org Control Cycle: P4A
Control Cycle: P4A Copyright 2006 Dr.Alex Coman Robust Design
Cost of [Lack of] Quality: X10 Law
250%:
380%
Spec
General
Planning
Coding
Acceptance
Testing
1
10
100
1000
Specifications Detailed
Design
Test Runs Operation
3
25
6
55
185
100%
Code
70%
Use
75%
Test
47%
None
240
Exposed
1
Complaint
24
Damaged
TOC: Theory Of Constraints








Gate-

Gear-

25%/25%


0

100%
-

Offload-