31st International Conference of the TOC Practitioners Alliance - TOCPA www.tocpractice.com
9 March, 2017 – Helsinki, Finland
Using Thinking Processes for Deciding on Market Strategies Oded Cohen Israel, Estonia TOC Strategic Solutions 9th March, 2017
Oded Cohen Oded has over 38 years of experience in developing, teaching and implementing TOC methodology, solutions and implementation processes working directly with Dr. Goldratt all over the world. Among the countries to which Oded brings his expertise are the USA, Canada, Japan, India, China, the UK, Poland, Russia, Ukraine, Colombia, Chile, Peru, Turkey and many others. Oded has authored multiple TOC articles and contributed to numerous TOC books. Oded in the is the author of Ever Improve – A Guide to Managing Production the TOC Way, published in June 2010. Oded co-authored the book Deming & Goldratt: The Theory of Constraints and the System of Profound Knowledge – The Decalogue. Together with Jelena Fedurko Oded has co-authored the book Theory of Constraints Fundamentals. Oded is International Director of TOC Strategic Solutions Ltd and Founder and Co-President of TOCPA.
[email protected]
www.toc-strategicsolutions.com www.tocpractice.com KukonAskel
31st
International Conference of the TOC Practitioners Alliance - TOCPA
Determining Market Strategies Traditionally, While deciding on market strategies managers operate within the framework of the combinations of existing/new products and existing/new markets. The most popular approach is Ansoff Matrix TOC Thinking Processes can be nicely integrated by using: • the U-Shape • the Decisive Competitive Edge • the Build-Capitalize-Sustain approach • Change Design and Implementation path (S&T Tree) www.tocpractice.com KukonAskel
31st International Conference of the TOC Practitioners Alliance - TOCPA
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Traditional Way Managing Market Strategy Ansoff Matrix
Source: http://ansoffmatrix.com/ www.tocpractice.com KukonAskel
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Integrating TOC with Ansoff Matrix TOC 5 steps of focusing provide concepts and sequence The Primary Constraint of the growth of the company is - MARKET • Exploit – Market Penetration • Elevate 1 – Market Development • Elevate 2 – Product Development • Elevate 3 - Product/Market Diversification • While avoiding creating internal Constraints
Matrix Source: http://ansoffmatrix.com/
TOC provides contents for each one of the quadrats: • TOC Solutions, • TP • Parts from the standard S&T www.tocpractice.com KukonAskel
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Integrating TOC with Ansoff Matrix Start with developing a decisive competitive Edge
Before starting developing market strategies TOC suggests to lay the foundations to enable the growth of the company. The foundations are recorded at level one of every standard S&T tree Tactic Build a decisive competitive edge and the capabilities to capitalize on it, on big enough markets without exhausting the Company's resources and without taking real risks.
The Supporting Logic - Parallel assumptions Realizing a jump in profitability while increasing sales exponentially year after year - turns a company into an Ever Flourishing Company. For the Company to achieve the jump, its Throughput* must grow (and continue to grow) much faster than Operating Expense. Exhausting the Company's resources and/or taking too high risks severely endangers the chance of achieving the jump in profitability Continuously growing Throughput in a competitive market requires a "competitive edge" and the capability to exploit it. www.tocpractice.com KukonAskel
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Integrating TOC with Ansoff Matrix Following the Standard S&T Trees, we can track the pattern suggested by TOC
1
Start with developing a decisive competitive Edge
2 Exploit the Existing Market
Develop New Products/ Offerings
3/4 Expand the offering to New Markets
3/4
5 Develop New Products/ Offerings Matrix Source: http://ansoffmatrix.com/
www.tocpractice.com KukonAskel
31st International Conference of the TOC Practitioners Alliance - TOCPA
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Integrating TOC with Ansoff Matrix – Build Phase Start with developing a decisive competitive Edge
1 Building Decisive Competitive Edge through: 1. Operational Excellence followed by 2. Developing a Market Offer(s) (“Mafia Offers”)
Operational Excellence can be achieved through high performance and outstanding reliability of the logistical systems. TOC Offers standard solutions: MTO,MTA, DTA and CCPM Operational Excellence is a necessary conditions but on its own cannot guarantee growth. In most cases there is a need to top it up with an outstanding offer to the market. This offer is built using the full U-Shape of the TOC Thinking Processes. www.tocpractice.com KukonAskel
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Terms and Conditions For Marketing Initiatives TOC tools and knowledge are based on logic. Therefore, it is highly recommended to use clear and precise terms setting directives and delegating them to the troops
Terms used by TOC: Strategy: the objective expected to be achieved by the initiative Tactic: the set of actions that will be taken to achieve the strategy It is also suggested to explicitly record and share the conditions and the assumptions that have been made while developing the market initiatives. These are: the Necessary Assumptions, the Parallel Assumptions and Sufficiency Assumptions (of the S&T Tree) www.tocpractice.com KukonAskel
31st International Conference of the TOC Practitioners Alliance - TOCPA
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Market Penetration - Capitalize Operational Excellence that is achieved by the logistical solutions enables management to develop and use special offers for further penetration into the existing market Strategy of this phase: Sales generated by special offers are increasingly growing. Tactic of this phase: The Company aligns its marketing and sales approach to fully take advantage of the special offers. (The sales and marketing core team makes sure a pre-launch will be done properly and promptly; only when excellent logistical performance is demonstrated is the green light given to mass roll-out the offer). www.tocpractice.com KukonAskel
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Market Penetration What is next? ? ?
A common mistake is that managers tend to jump to step 4 – Elevate, before actually completing step 2 - Exploit
Usually, Step 4 demands investments and takes time. Skipping step 2 can leave some opportunities in the market to the competition. The pressure to move to step 4 tend to come from the sales people who are under pressure to bring more sales but experience difficulty to achieve set targets. Before deciding on heavy investments in new markets and/or new products it is recommended to take two actions: • Review the sales process and manage it the TOC Way • Analyze the UDEs of the existing market and develop offers www.tocpractice.com KukonAskel
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Low Performance Measurements
High Performance Measurements
UDE
DE
UDE
UDE
UDE
DE
DE
UDE
DE
UDE
DE DE NBRs
D
D’
B
C A
www.tocpractice.com KukonAskel
TOC Injections
PIVOT TOC
Future Reality
Current Reality
Developing a Market Offer Using the U-shape
TOC direction of solution
31st International Conference of the TOC Practitioners Alliance - TOCPA
Market Penetration What is next? ? ?
With the special offers it is likely that the company will experience growth in its bottom line results.
When the rate of growth starts to slow down it is the time to consider the expansion into new markets and/or to new products The decision depends on the structure of the company and the way it operates: • The company may have a R&D department, • The company may be exporting already Management needs to examine every new initiative in the market using TOC T-I-OE, checking Delta NP and that the ROI for the initiative is acceptable to the Board of Directors. www.tocpractice.com KukonAskel
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Market Development Having a market offer that is backed by the operational excellence allows the expansion into new markets. TOC Suggests:
Strategy: Sales people know which prospects to pursue with the
market offer Tactic: Target markets are defined according to conditions that are easily checked, and Relate to a non-negligible number of prospects. The conditions prioritize prospects according to: • The degree to which subject of the offer is a significant need; • The estimate of the ratio efforts/returns; and • The degree of business risks. www.tocpractice.com KukonAskel
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Product Development New Product Development (NPD) is a must for nearly every company. Life cycle of products are continuously shrinking and the market expects to be delighted and surprised with new products There are two major sources for this direction: 1. Vision and innovation 2. Market research and analysis TOC Suggests: • Subject any NPD initiative to T-I-OE decision process • Conduct NPD as a project • Manage the project using CCPM for planning , execution control and POOGI www.tocpractice.com KukonAskel
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Product/Market Diversification A systematic growth of the company along the lines suggested above provides the company with a great deal of new opportunities for diversification While growing the company gains: • Financial stability • Cash reserves • Internal capabilities • Systematic abilities to handle challenges Hence – the company can embark on any direction management or the owners want. TOC suggests – do not take anything for granted. Check carefully any initiative and manage it properly! www.tocpractice.com KukonAskel
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Conclusion
TOC can be integrated into each one of the quadrats of the Ansoff Matrix! The contribution of TOC is with: • Providing contents and ideas for each type of the market strategies • Providing the logical structure and checks that the strategies have clear tactics to achieve them and that all the necessary conditions are made explicit. • Providing the tools for checking and supporting the financial considerations for choosing any Marketing Initiative.
In general, this is another example of how TOC can be amalgamated into any other managerial method; TOC Thinking Processes and can be added to the arsenal of tools any manger! www.tocpractice.com KukonAskel
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