1 - D. Nightingale - ? 2002 Massachusetts Institute of Technology
Value and Enterprise
Stakeholders
Prof. Deborah Nightingale
September 16, 2002
2 - D. Nightingale - ? 2002 Massachusetts Institute of Technology
Learning Objectives
? Value creation framework
? Enterprise stakeholders
? Stakeholder value metrics
3 - D. Nightingale - ? 2002 Massachusetts Institute of Technology
Creating Value
Value
Proposition
Find
Stakeholder
Value
Develop and
Agree to the
Approach
Execute
on the
Promise
Dynamic
and
Iterative
Value
Identification
Value
Delivery
* Source: Murman et al., Lean Enterprise Value, Palgrave 2002
“How various
stakeholders find
particular worth, utility,
benefit, or reward in
exchange for their
respective
contributions to the
enterprise.”*
4 - D. Nightingale - ? 2002 Massachusetts Institute of Technology
Find stakeholder value
Identifying Value
? Identify stakeholders
? What part of the program or process adds value
for each stakeholder?
? Determine each stakeholder value
? What kinds of exchanges are required to
provide this value?
? Establish stakeholder expectations and contributions
5 - D. Nightingale - ? 2002 Massachusetts Institute of Technology
Creating a Value Proposition
Develop and agree to the approach
? Align stakeholders around the program value
stream
? Structure the enterprise value stream
? Each stakeholder will contribute their efforts or
resources to the value stream in those ways from
which they can derive value
? Establish clear communication of balanced
expectations with all stakeholders
6 - D. Nightingale - ? 2002 Massachusetts Institute of Technology
Deliver Value to All Stakeholders
? Add value at each step along the value steam
in accordance with the value proposition
? Execute the value stream using lean principles
? Gather information and data to continue to
improve enterprise processes
Execute on the promise
7 - D. Nightingale - ? 2002 Massachusetts Institute of Technology
Value Creation is Dynamic and Iterative
? Real world is not static
? Changes in stakeholder values
? Changes in who are the stakeholders
8 - D. Nightingale - ? 2002 Massachusetts Institute of Technology
A Value Creation Framework
Value
Identification
Value
Proposition
Value
Delivery
Value Phases
Program
Corporate
Government
National
International
Enterprises
Most lean principles
and practices have
been focused here
Opportunities
9 - D. Nightingale - ? 2002 Massachusetts Institute of Technology
Corporate
Leadership
Employees
Multi-
Program
Enterprise
Business Unit
Customers/
End Users
Shareholders
UnionsSociety
Partners
Suppliers
Enterprise Stakeholders
10 - D. Nightingale - ? 2002 Massachusetts Institute of Technology
Customer View
? Value as we define it is delivered in a timely fashion, even
in anticipation of our needs
? Our satisfaction appears to be the focus of all our
supplier’s activities
? We are invited to get involved early in the design process
? Our supplier understands our need for low life-cycle cost
and superb quality
OUTCOMES:
?More customers
?Greater market share
11 - D. Nightingale - ? 2002 Massachusetts Institute of Technology
Workforce View
? I am proud to be an employee and feel my skills are valued
as a resource for the company
? I enjoy coming to work everyday and understand how my
work adds value for customers
? Continuous and cross-functional training helps empower
me to make decisions and create a leaner enterprise
? I can get the necessary information for decision making
when I need it and how I need it
? I am rewarded both as an individual and as a team member
for my contributions
OUTCOMES:
?Better worker retention
?Fewer sick/absent days
?More innovation
?Greater productivity
12 - D. Nightingale - ? 2002 Massachusetts Institute of Technology
Senior Leadership View
? Balance needs of all stakeholders and encourage value
creation throughout the enterprise
? Create a shared vision of the enterprise with value
defined for all stakeholders
? Establish a process-based enterprise using integrated
teams that are aligned with customer value streams
? Strategic goals and enterprise metrics are created and
understood by all levels of the organization
? Organizational learning is encouraged and best-
practice/lessons learned information disseminated
OUTCOMES:
?Long-term corporate leadership
?Better executive compensation
13 - D. Nightingale - ? 2002 Massachusetts Institute of Technology
Union View
? Feel like full strategic partners in the enterprise
? Understand market forces can cause “tough” decisions, but
want to be in on the decisions in shaping the future
? Positive contributor to the enterprise by enabling work, NOT
by withholding labor
? Feel a sense of pride in the work they help do and the
products they help provide
? Work for long-run success of the enterprise, not simply
short-term job quotas
OUTCOMES:
?Better salaries for employees
?Long-term job stability
?Fewer union conflicts
?HR duties shared with union
14 - D. Nightingale - ? 2002 Massachusetts Institute of Technology
Corporate / Stockholder View
? Delighted with increased profitability from enhanced
operating margins and sales
? Understand that the delivery of value to the customer is
the core business objective
? Enterprise integration enables globalization and market
growth
? Financial community values the increased operating
efficiencies and the company shares these financial gains
with the other stakeholders
? Resources freed up in the lean transformation are tasked
with innovating and creating growth opportunities
OUTCOMES:
?Higher ROI
?Long term growth
15 - D. Nightingale - ? 2002 Massachusetts Institute of Technology
Supplier / Partner View
? Fully integrated in design, development, and production
of the product
? Productions schedules are aligned and open to all in the
value chain
? Supplier is assisted by his customer to achieve Lean
and is appraised of potential business opportunities
? Delivers products just in time to point of use
? Openly share ideas on product and process
improvement that will benefit the entire enterprise
? Equitable sharing of profits throughout the enterprise
OUTCOMES:
?Greater sales
?Less overhead and stock
?Reduced demand amplification
16 - D. Nightingale - ? 2002 Massachusetts Institute of Technology
Societal View
? Pleased to have this organization in their community
? The organization provides jobs and participates in the
improvement of the community
? The environment is considered important to the organization
? The local society is willing to provide infrastructure support to
sustain the organization
? Partnership between organization and society makes the
community a desirable place to live
OUTCOMES:
?Long term partnership
?Improves local economy
?Increased local societal well-being
17 - D. Nightingale - ? 2002 Massachusetts Institute of Technology
Lean
Enterprise
Satisfied
Stakeholders
Strategic
outcomes
Lean Enterprise Value For All Stakeholders
Delivers Results
18 - D. Nightingale - ? 2002 Massachusetts Institute of Technology
Stakeholder Values/Contributions
Corporation Sustainability of Growth in Growth in Expansion into Innovation in
the Enterprise Market Share Profits New Markets Products
Shareholders Share Price in Growth in Financial Management of Information on Goodwill of
the Market Profits Ratios Corporation Corporate Affairs Corporation
Employees Sustainability of Share in Job Sec- Quality of Work Information Good
the Enterprise Profits urity Environment Sharing Management
Customers Responsiveness Quality in Value in Innovation in Quality in Overall On-Time
to Concerns Products Products Products Service/Support Deliveries
Suppliers Sustainability of Growth in Fair Pri- On-Time Accts. Early Design Information
the Enterprise Market Share cing Receivable Involvement Sharing
Society/Commu- Expansion in Em- Job Security Tax Pay- Quality of Work Externalities Corporate
nity/Government ployment Opport. ments Environment Citizenship
STAKE HOLDERS' INTERESTS IN AN ENTERPRISE
19 - D. Nightingale - ? 2002 Massachusetts Institute of Technology
Stakeholder Values/Contributions
Corporation Capital/ Direction Legal Management Inter-Functional
Facilities and Strategy Entity Expertise Integration
Shareholders Financial Fore- Capital Feedback
casting/Analysis on Value
Employees Labour/Service/ Ideas/ Corporate
Expertise Innovations Culture
Customers Money Drive and Feedback Design
Competition Specifications
Suppliers Products (Parts/ Design Ideas/ Brand Recogni-
Raw Materials) Input Innovat. tion
Society/Commu- Manpower Quality of Services Policies
nity/Government Life
STAKE HOLDERS' CONTRIBUTIONS TO AN ENTERPRISE
20 - D. Nightingale - ? 2002 Massachusetts Institute of Technology
Customer Value
CUSTOMER**
SATISFACTION
Product /
Service
Quality
Relationship
with
Corporation
Cost of
Ownership
Cycle
Time
Function to Requirements
Reliability
Availability Product Performance
Defects
Failure Rate, MTBF
Responsiveness
Early Involvement
Quality of Support
Open Communications
Trust
Risk Sharing
Benefit Sharing
Viability of Enterprise
Product Development Cost
Acquisition Cost
Operating Cost
Support Cost
Retirement Cost
Retention of Resale Value
Order Lead Time
Product Development Time
Maintenance/Repair/Overhaul Time
On-Time Delivery
Just in Time Capability
** Includes Acquisition Community, End User, and System Beneficiary
21 - D. Nightingale - ? 2002 Massachusetts Institute of Technology
Shareholder Value
Earnings/Share
Financial Ratios
Corporate Profit Return
Share Price
Bond Interest Rate
Corporate Debt
Corporate Equity Risk
Bond Rating
Share Rating
Barriers to Entry
Market Share Market
Competitors Position
Substitutes
Branding
R&D Investment Growth SHAREHOLDER
New Product Successes Potential SATISFACTION
Track Record
Vision Expression Executive
Respect (internal and external) Leadership
Perception of Ability to Perform
Information Availability
Goodwill External
Reputation Relations
Regulatory Compliance
22 - D. Nightingale - ? 2002 Massachusetts Institute of Technology
Supplier Value
Training/Assistance with Process Improvement
Market Information Supplier Certification Relationship
Demand Information Early Involvement (design, development, production) with
Design Information Information Sharing Corporation
Production Information Technology Sharing
Product/Process Improvement Viability of Enterprise
Long Term Relationship
Corporation's Market Reputation SUPPLIER
SATISFACTION
Fair Pricing
Risk Sharing
Equitable Benefit Sharing Financial
On-Time Accounts Receivable
Growth in Market Share
23 - D. Nightingale - ? 2002 Massachusetts Institute of Technology
Employee Value
Salary
Benefits Compensation
Individual Bonus
Team
Skills are valued
Lost Time Incident Rate Safety
Environment/OSHA Work
Ergonomics Environment
Employee Empowerment Good Management Relations
Timely Communications
Two-way Communications
"Cool" place to work
EMPLOYEE
Job Security SATISFACTION
Training Career
Potential for Career Advancement
Employability
Community Relations External
Company Reputation/Personal Pride Factors
Quality of Life
24 - D. Nightingale - ? 2002 Massachusetts Institute of Technology
Societal Value
Corporate Tax on Profits
Property Tax
Income Tax of Employees Tax Revenue Financial
Local Sales Tax Charitable Contributions
Suppliers
Supporting Commerce Secondary and Tertiary Industry Economic
Job Potential Attractiveness SOCIETAL
Job Security of Industry SATISFACTION
Reduction of Emissions Voluntary Efforts
Waste Reduction Environmentally Friendly Practices Corporate
Quality of Work Environment Citizenship
Adherence to Regulations
Universities Affiliated
Professional Societies Organizations
Industry Associations
25 - D. Nightingale - ? 2002 Massachusetts Institute of Technology
Union Value
Headcount Protection
Position Protection Job Security
Compensation
Benefits
Safety Employment
Job Classifications
Seniority Rights
Sharing in Decision Making
Contribution to Long-term Corporate Success UNION
Instill Sense of Pride in Workforce Influence SATISFACTION
Strike Threat Capability
Encourage Involvement in Innovation
Union Teaming with Corporate Leadership
Political
Action
Committees
26 - D. Nightingale - ? 2002 Massachusetts Institute of Technology
Corporate Value
Revenue
Expenses Profits
Growth in profits
Other financial ratios Financial
Cash flow
Stock rating Ability to raise capital
Bond rating
Market Share
Barriers to Entry
Competition Market Position
Substitutes
Branding
New Product Development Growth Potential Sustainability
New Market Development
Continuous Improvement
Knowledge Management
Contribution to Innovation
Productivity
Turnover
Cost (Salaries & Benefits) Employees CORPORATE
Safety SATISFACTION
Sick/Absent days
Loyalty
Customer satisfaction
Loyalty Customers
Sales
Timely Accounts Receivable
High Quality Stakeholder
Low Cost Suppliers
Timely Delivery
Fewer Conflicts Unions
Infrastructure Support Society
Long Term Partnership
Political/Public
27 - D. Nightingale - ? 2002 Massachusetts Institute of Technology
High
Current
Performance
Low
Low High
Relative Importance
Stakeholder: ____________
28 - D. Nightingale - ? 2002 Massachusetts Institute of Technology
High
Current
Performance
Low
Low High
Relative Importance
Stakeholder: Customer
Major Factors Contributing to Customer Value:
?Product/Service Quality
?Relationship with Corporation
?Cost of Ownership
?Cycle Time
29 - D. Nightingale - ? 2002 Massachusetts Institute of Technology
High
Current
Performance
Low
Low High
Relative Importance
Cost Of
Ownership
Product
/Service
Quality
Relationship
with Corp.
Cycle
Time
Stakeholder: Customer
Major Factors Contributing to Customer Value:
?Product/Service Quality
?Relationship with Corporation
?Cost of Ownership
?Cycle Time
30 - D. Nightingale - ? 2002 Massachusetts Institute of Technology
High
Current
Performance
Low
Low High
Relative Importance
Stakeholder: Shareholder
Major Factors Contributing to Shareholder Value:
?Return
?Risk
?Market Position
?Growth Potential
?Executive Leadership
?External Relations
31 - D. Nightingale - ? 2002 Massachusetts Institute of Technology
High
Current
Performance
Low
Low High
Relative Importance
External
Relations
Risk
Executive
Leadership
Market
Position
Stakeholder: Shareholder
Major Factors Contributing to Shareholder Value:
?Return
?Risk
?Market Position
?Growth Potential
?Executive Leadership
?External Relations
Return
Growth
Potential
32 - D. Nightingale - ? 2002 Massachusetts Institute of Technology
High
Current
Performance
Low
Low High
Relative Importance
Stakeholder: Supplier
Major Factors Contributing to Supplier Value:
?Relationship with Corporation
?Financial
33 - D. Nightingale - ? 2002 Massachusetts Institute of Technology
High
Current
Performance
Low
Low High
Relative Importance
Relationship
with Corp.
Financial
Stakeholder: Supplier
Major Factors Contributing to Supplier Value:
?Relationship with Corporation
?Financial
34 - D. Nightingale - ? 2002 Massachusetts Institute of Technology
High
Current
Performance
Low
Low High
Relative Importance
Stakeholder: Union
Major Factors Contributing to Union Value:
?Employment
?Power
35 - D. Nightingale - ? 2002 Massachusetts Institute of Technology
High
Current
Performance
Low
Low High
Relative Importance
Employment
Power
Stakeholder: Union
Major Factors Contributing to Union Value:
?Employment
?Power