Achieve and improve profitability through Value Hunt workshops
Operational efficiency has many tools that are part of a “top-down” approach, i.e., they generally calculate the real return on investment once the project is completed.
If these tools are necessary for the implementation of a system of excellence, a so-called “bottom-up” approach can be considered. This involves defining the desired return on investment by diagnosing the company’s value chain and deducing the projects to be carried out to achieve this objective.
The Value Hunt workshops propose to carry out this diagnosis to isolate the main profitability levers of the company and to define the action plan that will allow the optimization of these levers.
What are the 6 benefits to expect from a Value Hunt workshop?
· Bottom-up” approach to define the expected return on investment (ROI) and to deduce the optimization projects to be carried out to achieve it
· Introduction of the “voice of the customer” concept
· Fast earning dynamics, visible from the first year
· Diagnosis of the main profitability levers of the organization
· An approach that allows to act on both internal and external levers of the company
· Selects the most profitable projects through value chain analysis
What is a Value Hunt workshop?
A Value Hunt workshop is an intensive initiative, aimed at a sustainable increase in the profitability and/or value creation of the company.
Starting with a diagnosis of the company’s value chain, the objective is to determine which products and expenses, internal or external, have the greatest impact on the result. Once these levers have been determined, they will be analyzed to define their real potential for optimization, and a quantified objective will be set. Finally, brainstorming sessions will be used to define and select the projects to be carried out to reach this objective.
How do these workshops fit into an operational efficiency system?
Many of the levers of operational excellence are “top-down” approaches. These approaches are necessary because they lay the foundation for an efficient organization, even if the real results will only be visible after the fact. But standardizing, optimizing costs and processes, and establishing a continuous improvement dynamic is bound to have a positive impact on the long-term result.
Value Hunt workshops propose the opposite approach, which we call “bottom-up”: define the return on investment (ROI) that you expect and deduce the optimization projects to be carried out to achieve it. These approaches are an ideal complement to traditional operational efficiency approaches, since they allow:
· to define the main profitability levers of the company on which it will be necessary to act in priority
· to commit to an expected result, and therefore to ensure the relevance or not of the projects undertaken from the start
· To innovate by going further than a cost-cutting or marketing operation aimed at increasing sales, by putting the customer at the center of the reflection
· generate tangible results from the first year, and thus give credibility to the optimization initiative
These workshops fit perfectly into an operational efficiency system. Combining “top-down” and “bottom-up” approaches makes it possible to build a complete and effective strategy.
What can a Value Hunt workshop lead to?
Studies have shown that reducing payroll or overhead costs can reduce costs and increase profitability, but ultimately has a limited impact over time. Indeed, reducing headcount during a crisis can lead to short-term gains, but risks creating a lack of useful and competent resources during the recovery. Similarly, overhead costs cannot be reduced indefinitely.
Thus, increasing profitability and value in the long term often requires initiatives that affect the company’s revenues or external costs. Also, the actors concerned are more customers and suppliers than employees.
Depending on the sources of income or expenses, maximizing profitability can take different forms:
· Internal revenues are derived from internal sales; optimization can be done on analytical rebilling with projects such as “Shared Services Organization”.
· External revenues come from sales to customers: optimizations can be made by adapting the pricing policy, the product range or by improving the quality of service and customer satisfaction, in particular through Lean or Six Sigma projects
· Internal costs are due to personnel, infrastructure, or processes. Optimization projects can therefore be varied: HR incentive plans, cost-cutting, Shared Services, Lean, Six Sigma…
· External expenses come from suppliers: optimizing them can be done by redesigning your purchasing policy, implementing e-procurement tools, redesigning supplier accounting processes, dematerializing invoices, etc.
It is important to ensure that the project carried out allows for action to be taken on the company’s main profit drivers.
What are the differences between a Value Hunt workshop and strategic planning?
A strategic plan sets the direction for the company over three or even five years. In contrast, the strategic planning processes of large companies are often highly formalized, with tight deadlines and far in advance of the implementation date. As a result, these plans are very often internally focused, and forget the fundamental questions:
· How to create competitive added value?
· Do my products fit with the market?
· Is my business model adapted and sustainable?
· What are the likely developments in the market?
· What is my value chain?
· Are my processes optimized?
A Value Hunt workshop focuses on the present but aims to answer these questions and provide pragmatic solutions that will have visible results on P&L in the first year.
A Value Hunt workshop allows the company’s strategy to be challenged. It allows the company to address issues not covered by the strategic plan and to deal with a particular area by aiming for short-term results rather than a multi-year vision. These workshops are therefore the ideal complement to the strategic planning exercise.
What are the key success factors?
A successful workshop requires creativity, persistence, an ability to change, and management sponsorship.
It must be an offensive tool, allowing for quick results, and allowing for the challenge of the strategy put in place by the company.
How does a Value Hunt workshop work?
A Value Hunt workshop is based on a 2-to-8-week diagnosis depending on the size of the organization and the level of formalization at the beginning. Following the diagnosis and the identification of the projects to be launched to reach the ROI objective, an implementation phase is launched. The involvement of the business teams, the Finance Department and the General Management are key elements.
1. DIAGNOSIS OF THE VALUE CHAIN
• Mapping of the value chain into macro- and sub-processes according to the expected level of detail
• Identification and quantification of internal and external revenues and expenses for each stage of the value chain
• Evaluation and quantification of the contribution to the result of each step of the value chain
2. ANALYSIS OF PROFIT LEVERS
• Selection and prioritization of the levers to be optimized and definition of the roadmap
• Evaluation of the optimization potential of each of the significant products and expenses identified (approximation of the ROI)
• Identification of the main profit levers in the value chain (significant income and expenses)
3. DEFINITION OF THE ROADMAP
• Definition of the project plan, schedule, workload and change management strategy
• Framing of the project, study of the gaps between the target and the existing situation and mobilization of the stakeholders
• Calculation and validation of the final expected ROI, implementation of project monitoring and performance indicators (KPIs)
4. IMPLEMENTATION OF THE OPTIMIZATION PROJECT
• Specifications, analysis of the existing process and definition of the target process
• Implementation of the target process, development of any new tools
• Tests and production of the target organization
5. CONTROL OF THE RESULTS OBTAINED
• Validation of the achievement of the expected ROI, monitoring of performance indicators
• Assessment of the optimization and appropriation of the new organization by employees and customers
- Business as Usual
Initially published on arnaudrioche.net