Download LCM-CMM-6-Alignment - Life Cycle Initiative

UNEP/SETAC Life-Cycle
Initiative
Life Cycle Management Capability
Maturity Model (LCM-CMM)
Building Capacity for
Sustainable Value Chains
International Life Cycle Partnership
To bring science-based life cycle approaches into
practice worldwide
ALIGNING IMPROVEMENTS
WITH BUSINESS STRATEGY
WHAT IS COMPANY STRATEGY?
• Vision - why the organization exists, the market
need it will provide.
• Mission - what the organization is going to do to
achieve vision, kinds of activities.
• Strategy – how it will undertake mission to
achieve advantage over competitors by either
doing different activities or doing similar
activities differently
Source: Collis, D. J., & Rukstad, M. G. (2008). Can you say what your
strategy is? Harvard Business Review, 86(4), 82-90.
VALUE PROPOSITION
• Defines
– Benefit the company will provide
– To which market segments
– And how the company’s offering will be
uniquely superior to offerings of competitors
• What attributes does customer use to evaluate
competitive offerings?
MAKING A BUSINESS CASE
EXTERNAL DRIVERS
•Economic
–Income inequality
–Outsourcing jobs
–Trade imbalances
•Environmental
–Climate change- extreme
weather, rising sea, 90°F
days, crop damage
–Peak oil, price volatility
–Air quality- respiratory
illness, asthma
–Resource depletion- e.g. rare
earths
–Toxic chemicals
–Water scarcity, quality
–Land use
–Biodiversity & species
extinctions
•Social
–Child, forced labor
–Supply chain mgmt in
developing economies
–Socially responsible
investors
–Fair trade
IMPACT ON COMPANY
•Products / Customers
–New products & services,
brand value
–Market restrictions
–Taxes- e.g. carbon tax
•Factories/ Communities
–License to operate, ease of
permitting
–Improved process efficiency
–Employee morale,
productivity
–Taxes, fines, liabilities
•Supply Chain
–Public campaigns, supply
interruptions
–Liability for clean up
–Access to quality suppliers
•Public/ Communications
–Access to capital
–Recruitment & retention
–Reputation, brand value,
stock P/E ratio
CAPTURING VALUE
Revenue
Margin
Cost of
Sales
ROIC
Working
Capital
Invested
Capital
Fixed
Capital
BUILD SHAREOWNER VALUE
Stakeholder
Potential Sources of Shareowner Value
Investors
Access to socially responsible investor capital; potentially lower
weighted average cost of capital (WACC)
Employees
Hiring and retention of talent; Improved employee morale and
productivity
Customers
Brand loyalty and reputation; goodwill and intangible value;
collaboration in developing new products
Business partners
Access to strategic resources and capabilities
Unions
Improved labor relations and conflict resolution
Value chain associates
Cost- reduction/ value enhancing collaboration throughout the value
chain
Regulatory authorities
Validation of specific product/ service quality levels; lobbying
regulations in company’s favor; increased flexibility with regulators
Governments
Favorable fiscal and industry- specific environmental and social
policies
Local communities and
citizens
Mutual support and accommodation; “license to operate”; reasonable
treatment with respect to local taxes and service fees
Non- governmental
organizations (NGO)
Constructive collaboration with individual organizations and groups;
favorable public opinion environment; “license to operate”
PORTER’S FIVE FORCES
Potential
Entrants
Bargaining power
of suppliers
Threat of new
entrants
Industry
Suppliers
Rivalry among
existing firms
Threat of
substitute
products
Buyers
Bargaining power
of buyers
Substitutes
Michael E. Porter. "The Five Competitive Forces that Shape
Strategy", Harvard Business Review, January 2008, p.86-104
VALUE CHAIN ANALYSIS
S
U
P
P
O
R
T
A
C
T
I
V
I
T
I
E
S
Procurement
Human Resource Management
Technology Development
Procurement
Primary Activities
Framework for identifying or developing distinct competencies
Porter, Michael E. Competitive advantage: Creating and sustaining
superior performance. Simon and Schuster, 2008.
STRATEGY & SOCIETY
Firm strategy,
structure, and
rivalry
Factor
Conditions
Demand
Conditions
Related and
Supporting
Industries
Porter, M. E. & Kramer, M.R (2006). Strategy & Society: The Link Between Competitive
Advantage and Corporate Social Responsibility. Harvard Business Review, December, 7892.
COMPETING FOR THE FUTURE
CONCEPT OF
SERVED MARKET
REVENUE AND
MARGIN
STRUCTURE
What is the basic value proposition?
How have we segmented the market?
What kind of customers do we serve?
Where are our customers?
What customers and
needs are we NOT serving?
Where in business system do we make profit?
Where do margins come from?
What has determined size of margins?
What are major cost & price drivers?
CONFIGURATION
OF SKILLS AND
ASSETS
FLEXIBILITY &
ADAPTIVENESS
Could profits be extracted
at a DIFFERENT POINT in
the value chain?
What do we believe we know how to do well?
What physical infrastructure supports us?
What kind of skills predominate in our company?
What is the trajectory of our development spend?
How alert are we to new value delivery models?
How easily could investment programs be re- oriented?
How easily could the infrastructure be changed?
Which constituencies would most resist change?
Might customers’ needs be
better served by an
ALTERNATE
CONFIGURATION of skills
and assets?
What is our
VULNERABILITY to the
‘new rules of the game’?
Hamel, G. & Prahalad, C.K. (1994). Competing for the future. Harvard Business School Press. Boston, MA
MATURITY ASSESSMENT
Fix Gaps – Build Key Strengths
PROJECT ALIGNMENT
Value Proposition
Brief description identifying attributes customer uses to evaluate
alternative products that are relevant to project ( or relevant internal goals)
Key Activities
Key activities & skills for
successful
implementation of
strategy that will be
addressed by the project
Project Description
Description of activities
to implement project
with attention to how
these align with key
activities & resources
Financial Outcomes
Near term performance
objectives for the
project with attention
to how these align with
value proposition
Key Resources
Environmental Outcomes
Organizational systems
and structures
addressed by project &
critical to success
Near term non –
financial benefits of
project
EXAMPLE – Project #2
Install heat recovery on wash line
Value Proposition
Will support customer desire for reliable, cost – effective suppliers; supprt
eco- label requirements
Key Activities
Project analysis;
procedures for
collecting, quality
assurance of process
data
Key Resources
$ for capital equipment
Training for financial
analysis of projects
Project Description
Install equipment to
improve energy
efficiency, may help
reduce water
consumption
Project will also
develop outline for
formal energy mgmt.
system; develop data
systems for eco- labels
Financial Outcomes
Direct cost savings; <3
year payback
Environmental Outcomes
Reduced fuel
consumption; GHG
reductions
WORKSHEET #9 -Project Alignment
Value Proposition
Key Activities
Key Resources
Project Description
Financial Outcomes
Environmental Outcomes