Part V - A Toolbox for Businesses, ?Where do I start to adapt my Business Model? First steps to move forward.

Author: Ramon Salvador Fernandez Orozco, President & Chief Executive Officer - Fercon Group. ASNT Level III  RT UT PT MT VT LT. eMail: [email protected] Twitter: @RamonFernandez

This is the fifth part of series of ten articles derived from a White Paper we recently developed to guide some of our key customers to prepare their Industry 4.0 and NDE 4.0 transition strategies. The positive feedback we have received encouraged us to share it here to contribute with the on-going reflection processes of many professionals around the world at times of personal and professional re-invention.

A TOOLBOX FOR BUSINESSES

The conceptual frameworks presented in the previous four articles of this series (Part I - An Initial Approach), (Part II - Industry 4.0 as a Label), (Part III - Beyond Industry 4.0, Megatrends and Industry 5.0) and (Part IV - The human and social dimension of Industry 4.0) constitute the groundwork to support the processes and tools that we will describe in the following three parts of this series.

Along the years the processes and tools that we are about to explore have proved us being of value through their hands-on use and our clients have learned, applied and even adapted them to become, what they say in their own words, “crucial elements within their business toolbox” that are on hand whenever and wherever they are necessary.

The Building Block diagram of Figure 9 compiles our most frequently requested areas of intervention from our clients who: 1) participate in business acceleration programs, 2) perceives the need to review and redefine their Functional, Business, Corporate Networks, 3) Requires adjustments or even a redefinition of their business models or 4) Require crisis support derived from disruptive changes in their business environment. 

These building blocks constitute key elements in constructing tailor-made interventions specific for the situation and needs of an organization based on the results of a diagnosis process and constant research to perfect and expand the elements available in this virtual business toolbox 

Figure 9: Building Blocks Diagram of Intervention areas most frequently requested for intervention, Assembly blocks diagram created by the author as a guide for integrating a business improvement/re-definition virtual toolbox.

Diagnosis elements to support strategic decision processes based in facts and figures

Regularly when a diagnosis of an organization, a facility or a process is conducted, particularly when NDE operations are involved, the fundamental and most common approach is to conduct it with a validation of compliance approach based in the specific requirements of: 1) Applicable mandatory codes such ASME BPVC or any iteration of AWS Structural Building Codes, 2) Applicable management system certification standards such as ISO9001 for quality or ISO/IEC 27001 for information security, 3) Specific supplementary mandatory standards to processes, systems, equipment or collaborator’s skills, 4) Specific supplementary applicable voluntary-adoption standards, 5) Other applicable legislation or regulation, and 6) Contractual requirements established in Project Specifications and Engineering Drawings. 

Transcending the compliance approach to implement effective solutions that transform or re-define business models requires different diagnosis instruments with a strategic approach that are focused in profoundly understanding the alignment and interconnection of the business model constituents, the intimate interconnection of an organization with its external and internal environments and how strategic decisions are effectively implemented to produce the tangible business results but also invaluable intangible of learning processes that sharpen the focus of the environment analysis, improve the accuracy of the strategic approach and perfect the implementation of the strategy to consolidate business results, increase reaction capacity, adds flexibility for change  and reduce uncertainty.

Here is the importance of this structural approach that provide cohesion, alignment and support to the technical, human and strategic portion of any solution, this is where the fourth layer of the model in Figure 1 surges (See Part I - An Initial Approach).

Strategy (re)formulation and implementation processes

The strategic management process in Figure 10, paired with the use of excellence models, constitute the backbone of strategy (re)formulation and implementation efforts and provide the scaffolding to guide interventions where a validation or revision of strategy is at the core of profound change processes. As is evident in the diagram, strategic analysis and strategic choice are at the core of the strategic management process, and those choices impact in cascade the long and short terms objectives, the functional tactics, organizational policies and even the organizational structure, leadership and culture.

Figure 10: The Strategic Management Process as proposed by Pearce and Robinson [39].

There are several variations available of this process in academic literature with slight modifications in the initials steps and the integration or omission of some elements in the description of this process but along the years we have decanted to use the variation proposed by Pearce and Robinson because it has proved simple to be understood and communicated but, what is most important, effective when paired with the use of excellence models to guide strategy reformulation and implementation processes.

Supplementary models such Mintzberg’s analysis of how intended strategy is transformed from formulation to implementation,  Porter’s seminal article on Generic Strategies which always provides a much needed clarification for many organizations to help them identify their strategic positioning or Kaplan and Norton’s Strategy Map to guide organizations form the tangible results of financial performance to the  intangible assets of the corporate culture in the learning and growth perspective, through the customer value and internal processes perspectives are included in the Virtual Business Toolbox that we will share in the tenth part of this series.

The idea behind this Virtual Business Toolbox is to compile a series references to academic articles, links to support organizations and software tools that we often share with our clients to guide them in their transformation efforts and that may constitute substantial elements of your virtual business toolbox.  

What is happening around us? 

Although the macrotrends listed in Figure 5 and the forecasts listed in Figure 6 (See both Figures in Part III - Beyond Industry 4.0, Megatrends and Industry 5.0) may provide valuable insights and elements of perspective to have a sense of direction of where business environment may evolve, is fundamental to create a detailed map of the business external environment to support strategic decision making processes. Along the years we have consolidated an external environment assessment tool that we would like to share, which constituents are described in Figure 11.

In the PESTEL+I model the basic dimensions of the PEST analysis (Political, Economic, Sociocultural and Technological) are supplemented by three additional dimensions (Environmental, Legal/Normative and Innovation) that are evaluated under four perspectives: 1) The Risk-Assessment perspective that connects directly with risk analysis processes within the company and which analyzes the probability of occurrence of an element against the severity of its impact to prioritize them, 2) The SWOT (Strengths, Weaknesses, Opportunities and Threats) Perspective that connects the element directly with the strategy definition processes and identifies it as either an opportunity or a threat, 3) The geographical perspective that identifies whether the impact of the element in its geographic scope that ranges from local to global/international, and 4) The time perspective that connects the element directly with the planning and operational cycles of the organization. 

Figure 11: An adjusted PESTEL+I Model, consolidated by the author 

Table 2 shows a practical example of how the adjusted PESTEL+I Model described in Figure 11 may be used to analyze the external environment of an organization. In this case the adjusted PESTEL+I Model was used to perform the external analysis of the business environment of an NDE testing services company by using, as a starting point, the Megatreds Block Diagram included in Figure 5 (See Part III - Beyond Industry 4.0, Megatrends and Industry 5.0) to evaluate the potential impact and scope of each megatrend in the business model of the company towards the future. The colored arrows in Figure 11 connect with arrows in Table 2 to match the Risk, SWOT, Geographical and Time perspectives described in the Model.

Table 2: A practical example of external environment analysis through the use of the adjusted PESTEL+I Model of Figure 11, developed by the author

This first exercise matching megatrends with the adjusted PESTEL+I Model allowed us to familiarize the executive team of the organization with this analysis tool and develop skills in using its seven dimensions and four perspectives allowed us to expand the initial exercise to include all the elements that were referenced not only by the company's collaborators but also by the feedback of key stakeholders members which provided an stronger external analysis foundation for their strategy definition and implementation processes.

Now, roll-up your sleeves:

1) Let's start with the basics: We can say that a company’s mission statement in general should describe its present business purpose providing an answer to several fundamental questions about how it differentiates from its competitors. Please have in hand the Mission Statement of your organization to answer the following questions:.

• Evaluate if the Mission Statement answers the following fundamental questions (Adapted from Pearce and Robinson [39]): a) Why is the firm in business?, b) What are its economic goals?, c) What is its operating philosophy in terms of quality, company image and self-concept?, d) What are its core competencies and competitive advantages?, e) What customers do and can it serve?, f) How does it view its responsibilities to stockholders, employees, communities, environment, social issues and competitors?, g) What is the size and environment of the organization? and h)Which are the key abilities of the employees?.
• ?How generic or unique in this Mission statement? (this is, ?Can this same mission statement be applicable to other company or has unique elements that differentiates it form competitors?), ?Which are those differentiating elements?, ?Does those differentiators really exist in the company or they represent aspirational elements?.
• ?How the Mission Statement may be modified to describe the present business purpose of the organization in a form easily communicable to all of the company's stakeholders?
• Try to come up with an improved Mission Statement based in all the elements above. Note: We will return later with more support elements to analyze this revised Mission through an Industry 4.0 / NDE 4,0 perspective

2) Use the adjusted PESTEL+I Model of Figure 11 and the structure of Table 2 to build an Excel file as a template to analyze some key external environment elements that from your experience are impacting your organization using the seven dimensions and four perspectives of the Model. To expand the exercise include feedback elements derived from other colleagues and from members of key stakeholders groups. ?What insights have provided you the development of this exercise?, ?What barriers you have found to develop it? , ?How it may be personalized for your specific needs?

Feedback Question:

?Which of the areas of intervention included in the Building Blocks Diagram of Figure 9 makes sense for your organization at the present time? ?Which other areas of intervention required makes sense and it is not included? (Please leave me a comment about them in the comments section.

Thank you for taking the time to read the present article and hope the insights derived from it impulse you to read other articles in this series. It they are useful, please share the articles with friends and colleagues.

I'll be glad to hear in the comments section from your experience with the insights derived from this article. Best regards!

Next Delivery: Part VI - A Toolbox for Businesses: The Strategy Formation Process or How your business strategy may be incomplete or unfocused.

Author Profile

Ramón Salvador Fernández Orozco

A Civil Engineer with a degree from the Autonomous University of Guadalajara. Dual Degree Master on Business Administration MBA with a specialization in Strategic Business Management from Regis University and technology and innovation management and research processes by ITESO.

Certified as ASNT Level III in RT, UT, MT, PT, VT and LT.

Since 1986, he has coordinated projects and programs focused on quality improvement, automation and innovation for manufacturing and construction projects in Mexico, the United States, Argentina, Chile, El Salvador, Puerto Rico, Dominican Republic, Panama, Spain and Italy. His construction experience covers over 350,000 metric tons of structures for bridges, power generation plants, industrial buildings, commercial buildings, high-rise building and off-shore platforms.

Senior Consultant for the CEGINT/ ITESO Business Accelerator Program on corporate governance, family protocol, business models, institutionalization, strategy redefinition and organizational change management processes.

Since 2004 participates as a volunteer evaluator for State, National and Iberomerican Quality Awards and Excellence Models for private and government organizations in Mexico, Argentina, Spain and Dominican Republic.

He has published papers on the development of his professional work and lectured at forums in Mexico, the United States, Chile and Brazil.

REFERENCES

(37)   De Wit, B., & Meyer, R. (2014). Strategy process, content and context: An international perspective. (5th ed.). South-Western/Thomson (Cengage Learning). ISBN: 978-1-4080-8267-6 soft. 

(38)   Hitt, M. A., Ireland, R. A., & Hoskisson, R. E. (2017). Strategic management concepts: Competitiveness and globalization (12th ed.). Mason, OH: South-Western (Cengage Learning). ISBN 978-1-305-50214-7.

(39)   Pearce, J.A. and Robinson, R.B., 2015, Strategic Management: Planning for Domestic and Global Competition, 14th ed., McGraw-Hill Irwin, New York, NY.

(40)   Neilson, GL, Martin, KL & Powers, E 2008, ‘The Secrets to Successful Strategy Execution. (cover story)’, Harvard Business Review, vol. 86, no. 6, pp. 60–70