‘Building Value Leadership’

An integrated approach to strategy,organisational change,

management decision makingand delivery

Peter QuintanaProgramme DirectorStandard Chartered BankSeptember 2001

– Need to understand how to implement

– Need to ‘steer round’ obstacles

– Need to be able to change direction

– Need to focus on both short and long term performance

– Need to understand and manage internal and external challenges

Why an integrated approach?

….Winning is about ‘how’, not just what

Leadership

Execution

Decisioning

Cohesiveness

Organisation

Insight

Aspiration

Developing the organisational capability….

….To deliver integrated strategic change

– Gaining Insight (External/Internal)

– Performance Aspiration : The Governing Objective

– The Management Model : ‘Clear line of sight’

– Decisioning - Fact Based/Alternative Driven

– Continuous Strategy Development & Implementation

– Execution

– Leadership and Cohesiveness

Today’s agenda

Gaining Insight

– Market research on customer behaviour for 6 countries

– Forward positioning research (6 countries)

– Share of wallet calculations by customer, product, and country

– Product review and sizing by country and customer type

– Review of channel productivity and sales/service split by country

– Comprehensive branch analysis

– Internet banking workshops

– Comprehensive customer value analysis (CVA)

– Customer segmentation (internal and external)

….Which mountain do we want to climb?

External research….

Internal research….

….Where are the sources of value today?

EP by Country

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Economic Capital(US$m)

Economic Capital(US$m)

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EP by Product

Sources of ValueDrivers of Value:

Market Economics and Competitive Position

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Competitive Position

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Internal research….

….Why we create value today?

Performance Aspiration

The consumer bank aspiration….

….The ‘governing objective’

– To be the world’s leading emerging markets consumer bank as measured by shareholder value growth

– To maximise shareholder value, through a process of creating options and making choices

– A set of principles

– Understood by all managers

– Used to inform judgements

– Used as the basis for all decisions

– Not one of many equal objectives

The Management Model

Implications of insights and aspiration….

– Need to create more Value Centres and more General Managers

– Need to create processes and standards to confront tough choices

– Need to align strategy decision making with resource allocation and performance management

– Need to create clearer ‘line-of-sight’ to the sources and drivers of value

….On the existing management model

– Build the organisation around creating discrete end-to-end businesses (value-centres)

– Resource and manage them independently

– Set targets for, and monitor them independently

– Structure the rest of the organisation to support, challenge and add value to these value centres, and to manage their “blind-spots”

– Create more discrimination in resource allocation and performance management

– Create opportunities to tailor strategy to distinctive competitive environments and implement changes quicker

– Create more general manager development opportunities

More value centres and general managers…..

….Creates more visibility and accountability

• Agree explicit agendas of top issues/ opportunities to be addressed at each level (each value centre, each country, CB overall)

• Establish decision making forums at each level, and decision making timetables, to address these issues continuously throughout the year

• Address issues by choosing between alternatives

• Evaluate alternatives based on a common fact base, and on value impact

• Make decision a resource commitment and a performance commitment

• Enable resource commitments to be linked directly to strategy decisions

• Enable business to respond quicker than competitors to new performance issues/opportunities

Processes and standards to confront tough choices...

…. Improves the standard of strategy decisions

• Make strategy decisions resource commitment decisions (top down) - ”fund the strategy, not the business”

• Make strategy recommendations performance commitments (bottom up) - “commit to strategy targets, not budget targets”

• Make performance management about monitoring strategy-specific KPIs and targets for each value centre

• Prevents resource allocation “chasing” value- creating projects, rather than building value maximising strategies

• Prevents top down, standard performance ratios assessing businesses by inappropriate standards

Strategy decision making aligned….

…. With resource allocation & performance management

• Measure, report, forecast and manage EP by value centre

• Minimise management focus on “aggregations” across value centres

• Use commonly understood agendas, fact bases and decision making processes at all levels

• Enable prompt, credible challenge of value centre strategy by the centre

• Increase pace of, and centre confidence in, strategy decision making

Clear “line-of-sight”….

…. And common understanding

A new management model….

– Organised and built around two distinct types of structure:– Five value centres in each country– Common support functions designed to support delivery of VC

strategy at minimum cost– Led and overseen by three new key roles, each with clear

responsibilities– Value Centre General Managers, to develop strategy and deliver

performance within their businesses– Country Heads, to oversee and challenge day-to-day performance

delivery and resource allocation of all the VCs in their country– Global Product Heads, to guide and input to strategy development

for relevant value centres across all countries – Defined by a BVL ‘Constitution’, that

– Describes the rules, roles and processes underpinning the new organisation

– Ensures these rules, roles and processes are explicitly agreed and commonly understood

….Clear line of sight to the sources of value

The new management model is implemented….

– CB’s performance aspiration is delegated down to specific EP goals for each Value Centre

– Value Centres, Country Heads, and CB overall establish agendas of top issues and opportunities (‘delivery’ and ‘breakthrough’)

– Decisions throughout the business are made to 4 common standards

– Over time, performance management processes (e.g. forecasting, budgeting) transition towards “rolling” processes

– Ultimately, senior management pay is linked to delivery against EP goals

….With simple processes

Decisioning

– Management time is prioritised by focussing on an agenda of the highest priority issues and opportunities

– Choices are made by evaluating alternatives

– An alternative is always chosen based on the governing objective - To maximise value

– Decisions are a two-way commitment - a “bottom up” commitment to performance delivery and a “top down” commitment to the allocation of resources

Standards for decision making….

….Throughout the business

Continuous Strategy Development

– Look internally & externally–segment

profitability–sources and

drivers of value–market and

competitor economics

–VC and competitor strategies

– Forecast future sources and drivers of growth

– Determine value of “base case” business model

– Identify and prioritise strategic opportunities/ issues on the basis of value-at-stake, urgency and actionability

– Prepare– Brainstorm– Consolidate &

Confirm

– Assessment of impact on strategic position

– Valuation of alternatives

– Risk and feasibility assessment

– Selection of alternative

– Articulate end-game

– Define roll-out plan, key milestones & accountabilities

– Define required support

– Identify appropriate KPI’s

– Monitor performance

– Refresh factbase in response to internal and external ‘triggers’

– Identify new strategic opportunities/ issues

– Prioritize opportunities on the basis of value-at-stake, urgency and actionability

FactbaseDevelopment

(Source & Drivers

of Value)

Agenda of TopIssues and

Opportunities

AlternativesGeneration

AlternativesEvaluation

Action PlanDevelopment & Performance Management

Refreshingthe Factbase and Agenda

A continuous process of strategy development….

….In each Value Centre

– Where we currently create value– How should we segment the market to maximise insights

generated?– How can we refine our existing customer segmentation?– Should we develop steady-state profitability by product?

– Why we currently create value– How can we improve our understanding of our

performance relative to competitors?– Should we refine our competitor set?– What additional insights would these new competitors

add?– How can we improve our understanding of market

profitability? – Should we alter the market boundaries?

Using and refining the factbase….

….To generate new insights

Top Issues/Opportunities Accountability TimetableEP-at-Stake

(US$M)

A current or future condition that appears to be consistent with maximising the value of the business (e.g., profitable growth of segment A)

Likely EP impact of resolution of issue/ opportunity(e.g., $25-$30 MM)

Creates focus for addressing the issue by making explicit who is accountable for leading the resolution of the issue (e.g., Head of Sales)

Ensure sufficient pace in addressing the issue by making the milestones and decision points clear in advance(e.g., June 2001)

The agenda stems from analysis and creative thought….

….About how and where we might add value

Execution

– Prioritise investment by contribution to the business

– Select the ‘right’ set of projects

– Set a baseline so we can measure business benefits

Excellence in execution….

….Requires flexibility

but

– Be able to change as the outside world changes

EP at stake

Delivery of benefits

Readiness for change

Solution delivery

Flexibility ….

….Means management of risk

Performance Management

Programme Management (Benefits and Change)

Project Management

Investment

Management

– Strategies drive performance commitments– “Performance contract” specifies strategy, current and multi-year

performance commitments, and resource commitments– Strategic milestones and targets define performance and timing

metrics

– Monitor changes to external environment– Provide line of sight into the underlying economics, to support good

growth and rationalise bad growth– Identify emerging strategic issues

– Identify and prioritize issues and variances– Initiate and ensure timely completion of actions to resolve material

variances – Track performance against approved strategy

– Provide input to management reward plans within agreed parameters

EP at stake risk mitigation….

….Commitment, monitoring, action, reward

….Reacting to changes within an ‘open’ life cycle

Initiation Operations

Planning

Impl

emen

t

benefitsbenefits

benefits

Planning

Review

Review

1

2

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4

5

1. Initial concept agreedby business unit

2. Business Plan approved,initial funding in place

3. Additional funding approved at milestoneevents

Benefits delivery risk mitigation….

Define the Change

Assess the Climate

Identify Change

Approach

Generate Sponsorship

Develop Target

Readiness

Integrate Planning

Motivation Planning

Build Agent Capacity Create

Cultural Fit

Communication Planning

….Managing the human elements

Readiness to change risk mitigation….

Tools & Tactics

….Focus on time, cost and quality

Solution delivery risk mitigation….

– The Group Project Management Guide

– Assessing project risk– Project approvals– Roles and responsibilities– Managing projects by a number of

processes

– The Project Management Library

– Templates– Best practice examples– Advice and guidance– Tools & techniques

Group projectmanagement guide V2.0

The projectmanagement library

First release - April 1999

• Regular, formal forum for resource approval (and re-approval), and for performance review of major projects and programmes

• Creates more discrimination in resource allocation and performance management

• Allows time for review and collective discussion of proposal before decision taken

• Provides opportunity for challenge

• Provides for a formal capital investment performance review

….Continuous (re-)alignment with strategy

Regular evaluation of investment decisions….

Leadership and Cohesiveness

Leading change top-down….

‘Significant change only occurs when it is driven from the top’

‘There is no point going forward unless the CEO is on board’

‘Nothing will happen without senior management buy-in’

….Or management driven change?

or

‘Little significant change can occur if it is driven only from the top’

Key for large-scale change….

– Leadership must be cultivated at all levels– people with accountability for results and authority to undertake

changes– informal networkers through whom new ideas and innovative

practices spread across the organisation– executive leaders

– Leaders must foster leadership in others

…. ‘Leaders of leaders’

MindsetBehaviours

– Role is to set standards, not provide answers

– People need help in raising their awareness and in focusing on the right things

– People need encouragement to take responsibility

– I can manage performance better by managing the people than by managing the problem

– I will discourage my people from upward delegating their problems to me (or anybody else)

– Focuses on the person not the problem

– Uses questions to raise awareness and responsibility

– Uses broken records to set standards

– Focuses on process more than content

– Encourages reports to make judgement calls

– Is curious about alternatives

– Insists on facts before making decisions

– Views teams as a source of advantage

– Provides coaching, training and developmental resources to improve performance

Encouraging new behaviours and mindset….

….Plus enthusiasm, energy and hope!

Team Culture….

….Expressed, Modelled and Reinforced

– Challenge is encouraged, but must be public

– Problems must not be ‘personalised’

– Focus on the problem, not the person

– Use facts to make decisions, not opinions

Cohesiveness….

….Means fighting for each other’s ‘inch’

“Either we heal together now, as a team...Or we die as individuals.”

Al Pacino, from Any Given Sunday

1. FORMULATEBuilding insights into the

sources and drivers of value creation

2. OPERATIONALISE & BUILDDeveloping distinctive

business models focused onprofitable growth

4. IMPLEMENTValue leadership to

continuously challenge, improve and renew the business model

3. DEPLOY & ALIGNExecuting superior decision

making for allocating resources;

Integrated Strategic Change….

….An organisational capability