1 © The Delos Partnership 2004 Delos Top Management Course The Business Model

2 © The Delos Partnership 2004 Delos Delta Model OVERCOMINGOBSTACLESOVERCOMINGOBSTACLES DELIVERSDELIVERS INTEGRATEDINTEGRATED ManagingThechangesManagingThechanges ROCEModelROCEModel BusinessModelBusinessModel ChangeModelChangeModel

3 © The Delos Partnership 2004 Delos Business Model DemandDemandSupplySupplyVisionVisionPrioritisationPrioritisation SupportSupport InnovationInnovation StrategyStrategy

4 © The Delos Partnership 2004 Vision The overall direction for the business Short and sweet The long-term aspiration for the business Should be communicated to everyone What is the Vision for your Organisation?

5 © The Delos Partnership 2004 Leadership drives the vision “I find the great thing in this world is not so much where we stand, as in what direction we are moving” – Oliver Wendell Holmes “Imagination is more important than knowledge, for while knowledge points at all that is, imagination points to all there will be” – Albert Einstein “Managers do things right; leaders do the right things” – Warren Bennis

6 © The Delos Partnership March 2003 With one phrase, Lt. Col. Tim Collins, commander of the 1st Battalion of the Royal Irish, summed up the task in hand for the British forces waiting to remove Saddam Hussein from Iraq. Collins was addressing his 800 men, an arm of Britain's 16 Air Assault Brigade, at Fort Blair Mayne, a Kuwaiti desert camp 20 miles south of the Iraqi border. Here is as much of his extraordinary speech as has been reported. "We go to liberate not to conquer. We will not fly our flags in their country. We are entering Iraq to free a people and the only flag which will be flown in that ancient land is their own. Show respect for them. "There are some who are alive at this moment who will not be alive shortly. Those who do not wish to go on that journey, we will not send. As for the others I expect you to rock their world. Wipe them out if that is what they choose. But if you are ferocious in battle remember to be magnanimous in victory. "Iraq is steeped in history. It is the site of the Garden of Eden, of the Great Flood and the birthplace of Abraham. Tread lightly there. You will see things that no man could pay to see and you will have to go a long way to find a more decent, generous and upright people than the Iraqis. You will be embarrassed by their hospitality even though they have nothing. Don't treat them as refugees for they are in their own country. Their children will be poor, in years to come they will know that the light of liberation in their lives was brought by you. "If there are casualties of war then remember that when they woke up and got dressed in the morning they did not plan to die this day. Allow them dignity in death. Bury them properly and mark their graves. "It is my foremost intention to bring every single one of you out alive but there may be people among us who will not see the end of this campaign. We will put them in their sleeping bags and send them back. There will be no time for sorrow. "The enemy should be in no doubt that we are his nemesis and that we are bringing about his rightful destruction. There are many regional commanders who have stains on their souls and they are stoking the fires of hell for Saddam. He and his forces will be destroyed by this coalition for what they have done. As they die they will know their deeds have brought them to this place. Show them no pity. "It is a big step to take another human life. It is not to be done lightly. I know of men who have taken life needlessly in other conflicts, I can assure you they live with the mark of Cain upon them. If someone surrenders to you then remember they have that right in international law and ensure that one day they go home to their family. "The ones who wish to fight, well, we aim to please. "If you harm the regiment or its history by over-enthusiasm in killing or in cowardice, know it is your family who will suffer. You will be shunned unless your conduct is of the highest for your deeds will follow you down through history. We will bring shame on neither our uniform or our nation. "[Regarding the use by Saddam of chemical or biological weapons] It is not a question of if, it's a question of when. We know he has already devolved the decision to lower commanders, and that means he has already taken the decision himself. If we survive the first strike we will survive the attack. "As for ourselves, let's bring everyone home and leave Iraq a better place for us having been there. "Our business now is north."

7 © The Delos Partnership 2004 Strategy The means to the end –Long-term, not short-term –Practical and realistic The creation of a unique propostion –Our strengths/weaknesses /opportunities/threats A Direction for all company activities –Operational Excellence –Customer Intimacy –Product Leadership What is the Strategy for your Organisation?

8 © The Delos Partnership 2004 Southwest Airlines Limited passenger service Lean, highly productive ground and gate crews Very low ticket prices High aircraft utilisation Short-haul, medium-sized cities and secondary airports Frequent, reliable departures No privileged seat assignments Internet booking only No meals, no frills No baggage transfers No connections with other airlines “Southwest, the low-fare airline” E-ticket Standardised fleet of 737 aircraft 15-minute gate turns High employee affinity High employee compensation Flexible union contracts Source: Competitive Strategy: Michael Porter

9 © The Delos Partnership 2004 Demand Alignment between the Demand and the Strategy A robust Marketing Strategy Control & predictability of Demand and integration with supply Strategy for capturing demand and managing risk Using CRM to differentiate us

10 © The Delos Partnership 2004 Supply Focus on Core & Cost Effective supply chain Trade-off between own manufacture and outsourcing Maintaining control and stability What level of influence is there on the Supply Chain – where can we increase Increasing agility and responsiveness

11 © The Delos Partnership 2004 Supply Strategy Minimise Operating Costs Minimise InventoryMaximiseCustomerService StrategyDrivenNotFunctionallyDriven

12 © The Delos Partnership 2004 Support Activity Level of Support Activity Value adding support Control and coordination within the Support functions? Integration of Support functions for the Business

13 © The Delos Partnership 2004 Support Activity PrimaryActivity SupportActivity Demand. Customer ManagementCustomer Management Supply IntegrationSupply IntegrationSupply. On time deliveryOn time delivery Inventory ManagementInventory Management CostsCosts Technology Development Human Resource Management Financial Management Information Technology Profit/Value

14 © The Delos Partnership 2004 Support Activity PrimaryActivity SupportActivity Demand. Customer ManagementCustomer Management Supply IntegrationSupply IntegrationSupply. On time deliveryOn time delivery Inventory ManagementInventory Management CostsCosts Technology Development Human Resource Management Financial Management Information Technology Profit/Value Successful companies proliferate competitive advantage throughout the primary & support activities

15 © The Delos Partnership 2004 Change Management Appropriate and sustainable level of change for the organisation Tools to understand and manage “Business As Usual” and “Change” Skills and resources to implement Organisation for managing change

16 © The Delos Partnership 2004 What is scope of Change ? All new activity within the Business New Markets New Markets New Products New Products New Processes New Processes Operational Improvements Operational Improvements Soft change programmes Soft change programmes

17 © The Delos Partnership 2004 Vertical Functional Organisation MD Sales Marketing Technical Operations Finance HR R&DR&D R&DR&D MKTGMKTG MKTGMKTG SALESSALES SALESSALES OPSOPS OPSOPS ACCTSACCTS ACCTSACCTS HRHR HRHR Directors Managers Supervisors/Team Leaders

18 © The Delos Partnership 2004 Changes are Cross-Functional MD Sales Marketing Technical Operations Finance HR R&DR&D R&DR&D MKTGMKTG MKTGMKTG SALESSALES SALESSALES OPSOPS OPSOPS ACCTSACCTS ACCTSACCTS HRHR HRHR Directors Managers Supervisors/Team Leaders Programme 1 Programme 2

19 © The Delos Partnership 2004 Prioritisation It is not possible to do everything Process for Prioritisation Criteria for decision making process What trade-offs need to be accepted Communication to the organisation Prioritisation process aligns the strategy and the business goals

20 © The Delos Partnership 2004 Prioritisation Confirm alignment to Strategy Review issues over Strategic planning horizon. – Integrated Business Plan – Integrated Set of Measures Agree the resource plans for: –Demand –Supply –Support –Change Programmes

21 © The Delos Partnership 2004 Problem SUPPORT FINANCIAL IMPLICATIONS CHANGES DEMAND FunctionalAgendas SUPPLY

22 © The Delos Partnership 2004 Team Solution CHANGES SUPPORT DEMAND SUPPLY BUSINESS IMPLICATIONS IntegratedPerspective

23 © The Delos Partnership 2004 Delos Business Model DemandDemandSupplySupply VisionVision PrioritisationPrioritisation SupportSupport InnovationInnovation StrategyStrategy

24 © The Delos Partnership 2004 Integration of Processes Strategic Review IEP Review Demand Plan Master Schedule Project Plan MRP/CRP/ Activities WTL/ Orders/ Tasks How OftenYearlyMonthlyWeeklyDailyHourly WhoBoard ManagersComputer Units£’sFamiliesProductsParts/ Activities Parts/ Tasks Horizon3 years2 years Focus1-3 years0-2 years0 to Cum Lead Time Part Lead Time Time buckets YearsMonthsWeeksDaysHours Detail

25 © The Delos Partnership 2004 Integrated Enterprise Planning ACTIONACTION Week 1Week 2Week 3Week 4 Innovation Review Innovation Review Customer Demand Review Customer Demand Review Supply Plan Review Supply Plan Review Priority Review Priority Review STAGE 1 STAGE 2 Senior Team Review Senior Team Review STAGE 5 STAGE 7 STAGE 4 STAGE 3 Support STAGE 6

26 © The Delos Partnership 2004 Integrated Enterprise Planning A process for joining up the planning process One set of numbers –Operational –Financial –Commercial Designed for teamwork Strategic focus Consistent performance measures All business – not just Sales and Operations Delivers the strategy by aligning the tactical and operational with the strategic –Bottom up and top down

27 © The Delos Partnership 2004 Integrated Enterprise Planning A process – not a meeting A rolling business plan – not a once a year budget Formal – not ad hoc and corridor based Provides communication – not talk Realistic – not the triumph of hope over experience Organised – not short-term firefighting Drives teamwork – not functional silos A culture – not an initiative

28 © The Delos Partnership 2004 The Delos Core Measures 1.Customer Order Delivery – the “Perfect Order” 2.Demand Forecast Accuracy 3.Lead Time Reduction - Demand, Supply and Change 4.Quality, Right First Time – Demand, Supply and Change 5.Schedule Achievement – In-house and outsourced 6.New Product Introduction 7.Velocity – all processes

29 © The Delos Partnership 2004 Customer Order Delivery – the “Perfect Order” Demand Forecast Accuracy Lead Time reduction and achievement – sales, production and suppliers Quality, Right First Time – production and suppliers Schedule Achievement – production and suppliers New Product Introduction Velocity – all activities, all functions Operational Measures Inventory turns Added value per employee Health, safety and environment Customer Satisfaction Ratings Working Capital as % of sales Return on Sales Return on Capital Employed Financial/External Measures Focus here Brings results here The Delos core measures deliver

30 © The Delos Partnership 2004 The Core Measures and Financial Effect

31 © The Delos Partnership 2004 Number 1 innovator in the market Develop exciting products for the customer New Products on Time delivered to market on time Time to market reduced from 12 months to 12 weeks VISION STRATEGY OBJECTIVES MEASURES Measures support the vision

32 © The Delos Partnership 2004 Strategies and the Core Measures

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35 © The Delos Partnership 2004 The Delos Business Model Integration of all the elements Designed to deliver the strategy through the supporting processes Integrated Enterprise Planning promotes joined up management Founded on process based teamwork Performance measures aligned to strategy deliver improved ROCE