Friday, April 12, 2013

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.