What makes a game?Players, strategies, pay-offs and common knowledge are what makes a game. Players have common knowledge of the structure of the game and they make rational decisions about strategies which lead to their best expected pay off. Each player chooses a strategy, these strategies interact and game play off to its conclusion.
Game Theory is the study of strategic interaction among rational players.
Let me simplify the above paragraphs. Your boss (Player 1) has asked you (player 2) to complete a report by the end of the week. But you both know that this is an impossible task (common knowledge). Your boss and you both know that the report is not due until the end of month (common knowledge). But your boss is mitigating risk by advancing the report submission deadline and is adopting a tough line against you (your boss’s strategy). You recognize that any rational suggestion to postpone the deadline for the report will fall on deaf ears and therefore you agree to submit draft by the end of the week. But you produce a report that is a half baked with fudged figures downloaded from google to keep your boss happy (your strategy). You know your boss is an idiot to expect a good quality report this early and your boss knows you are a cheat to produce a report this early to him, but you both do not discuss about it (common knowledge). J
Practical application of The Game Theory (TGT) includes negotiation management, conflict management, threat making, making threats credible, co-opetition, brinkmanship etc. Von Neumann a mathematician par excellence and a poker enthusiast was one of the early pioneers of TGT. He tried to apply TGT to the game of poker and wondered if he could capture something that is quintessentially fundamental to human nature as bluffing in to a mathematical model.
Let me give you some definitions. A player is somebody who is a decision maker in the game usually having a stake in the game and in the outcome of the game. A strategy is a specification of decision for each possible situation in which the player finds him/herself in to. Payoff is the reward or penalty that the players experiences as a result of their strategies interacting with each other. Common Knowledge is multiple-multi layered awareness of the rules of the game.
Most decisions that humans make are ex-post rationality i.e. people look backward to see how earlier situation could have been done better than they are to look forward to look forward to examine the current situation in current light. Awareness of TGT could help avoid the ex-post rationality trap. An excellent example that captures ex-post rationality is Max Bazerman’s ‘Winner’s Curse’ auctions. See: http://ingrimayne.com/econ/Efficiency/NastyAuction.html
What winner’s curse tells us is: at first people start off with the desire to win and win big, then they rationalize their expectations to just winning, then they re-rationalize to loosing small and finally by the time they become aware of their flawed rationality they turn in to big losers. That is, most people unwillingly put themselves in a ‘war of attrition’. In economics we call them depleting return on investment.
But Game Theory is no panacea. It has its own limitation and the first and foremost decision is ‘how we define rationality’. There are many others which I will discuss in my next few articles. Then there are many different types of games – games of incomplete information or pursuit-evasion games.Here signaling and signal jamming are critical i.e. how you make yourself believable. In my upcoming articles I will discuss many interesting ideas including what TGT has to say about threats, promises and commitments.
First of all I would like to express my apology for staying away from IIdeaz for so long. As I have mentioned in my previous article X demerged and lot of things changed after that. It all feels like an epoch ago. But my journey through business landscape continues, and I will always be the curious ‘Alice’ in the wonderland of business.
I, from this article onwards, will blog about ideaz that are of general business interest to me. Ofcourse; I will complete my narration about my voyage with X in future articles.
Let’s start with Game Theory. What is Game Theory? Game Theory is a study of strategic interactive decision making among rational individuals. Sounds gibberish? Let’s understand ‘Why Game Theory?’ may be that could help. Why Game Theory, because it is one of many good ideas that have found ready application in many fields such as economics, computer science, biology, etc. But also because it gives you the secret of success!!! Well I might be exaggerating a little here but it probably gives you some fundamental elements that helps build success, no matter what your definition of success is!
Many of us ask the question ‘what does it take to succeed?’ and grapple around in the dark hoping to find an answer. When I say that success is a byproduct of one’s decisions I am not very far from the truth [so I hope]. But decisions are a consequence of choices that are available to us for any given situation. This statement is true, but only half true! For any give situation, decisions made are a consequence of choices available to oneself and also to others. This seemingly inconsistent and counter intuitive idea plays itself off at all times even without conscience recognition of it. Game Theory is a collection of many such absurd ideas but strongly backed by mathematical explanations and logic. As I attempt to understand this marvel of human discovery which has elevated eight game theorists to the honor of Noble Prize, I will think out loud and share my understanding in this blog.
The objective of market analysis is to determine the attractiveness of a particular market for X’s current and future operations. Attractiveness of the market or the profit potential, viz. ability of the market to provide long term ROI will be a key input for the product-market (Service-market in this case) investment strategy. It should be kept in mind that although participating in an attractive market can increases a firm’s chance to profit but a firm’s profit making ability is also a function of its inherent strengths and weaknesses. Market analysis also facilitates in indentifying emerging sub-markets within larger market, trends in the marketplace, dynamics of the market place and key success factors.
Market Size & Growth:
Influence of construction industry on M&E sector is immutable. Most indoor constructions will always involve mechanical & electrical works. Besides the widely held belief in the market that M&E industry is dependent on construction industry, a look at the output from the M&E industry and the correlation of change in output between two industries reveals that it is indeed closely linked to the output from the construction industry. M&E industry derives its demand from construction industry. Any changes that affect construction industry get readily passed on to M&E industry.
Change in output for construction and M&E industry. Source: Office of National Statistics, UK Government
The construction industry chart presented is representative of combination of Commercial, Industrial, Infrastructural & Residential subsectors with in construction industry.
The size of overall construction industry for the year ending 2008 was £123.5 billion. The relative market size of Mechanical & Electrical sub-sector within the construction industry has been around 10 – 14% historically. Current market size of M&E sectors is circa £ 14.3 billion that is roughly 11.5%, the total number of VAT registered companies in M&E sector is about 27,091 this is roughly 14% of trade category of construction industry. The entry barrier of for the M&E is quite low, a semi skilled field engineer with little investment in tools and a Van for mobility is in a position do deliver the service with minimal overhead costs. The sheer numbers of firms operating within M&E sector erode any competitive edge that any single firm may try to bring to the market; also given that these firms are of different sizes any differentiation strategy adopted will be hard to sustain.
Also the profitability on the firms in this industry is independent of their size, we have firms in M&E sector spread across a broad spectrum of sales growth; some firms are experiencing high growth while others are experiencing severe negative pressure. The Top 50 companies in terms of sales growth range in their annual sales figure of over £ 500 million through firm with just over a £ million in their annual sales [i](refer appendix). The companies with high turnover and deep pockets can bring economics of scale to the market place and thus put price pressure over its competitors, smaller ‘man-in-van’ operators are agile and quick to respond to customer needs at the bottom of the market value chain and therefore bring speed to market.
Apart from the size and number complexity of the M&E industry that brings in performance pressure on X one more daunting challenge that it confronts is the growth prospect of the market. Owing to sever economic downturn of 2008-9 the prospect of growth in the construction industry and in turn M&E market has dwindled. The future projection for the construction industry looks bleak, this in turn is sure to make its effects felt on M&E sector. A declining market means increased price pressure and higher competition to hold on to your share of diminishing pie. The chart below illustrates the point.
UK Construction Industry output. Source: MBD analysis
Dan porter’s characterization of hostile market in which there is fall in demand for the products or services being offered and in which there is severe competitive expansion can be clearly seen to be the case of this current M&E industry. Therefore the current M&E can be labeled as hostile. There is fall in demand caused by credit crunch leading to overcapacity of supply combined with competitive expansion. The hostile market condition of ‘Margin pressure’ can also be seen to have realized.
However everything is not as gloomy as it appears on the first look. Within this declining market there are specific sub-markets that present X opportunities to hold on to its market share and even grow, this is discussed in next few articles.
Segments & Sub-Market:
As mentioned previously although at national level the overall construction industry is declining, there are specific sub-markets that could offer hope to X. It should be remembered here that a declining market is as hard on competitors as it is on X, this could mean some of the competitors are exiting and disinvesting. X could possibly attempt to encourage its competitor to exit and become a dominant player with in its band of value-chain. Major segments of construction industry are shown below. Some of the sub-markets where X could stake its bets are illustrated after discussion on segments.
Major segments that can be categorized with in construction and M&E market are listed below:
·New work and Repair & Maintenance segment
·Geographical output segment
·Customer type segment
A key input to product-market investment strategy of ‘where to compete’ in the Strategic Market Management (SMM) context is obtained by understanding market segments. The analysis below will suggest X some of the regions it ought to consider for its sales growth and customer types it has to align its services towards are indicated below.
I will not get in to details of each segment in this article but in next few articles I will throw enough light on the dynamics that are shaping M&E sector.
Let’s try to look at the analysis framework in more detail:
External Analysis:
The external analysis looks at factors and elements that can influence a firm’s fate and are external to an organisation. There are four key factors that are important for external analysis, they are:
1.Customer Analysis: This involves identifying organisation’s customer segments and each segment’s motivations and unmet needs. Segment identification defines alternative product markets and thus structures the strategic investment decision. Analysis of customer motivations provides information needed to decide which customer value proposition to purse. Understanding unmet needs of customers can be critical in dislodging entrenched competitors
2.Competitor Analysis: Competitors are classified in to two types current and potential. When there are many competitors it is helpful to combine those with similar characteristics like size, resource, and brand equity & distribution depth. Key elements that are worth exploring about competitors are their performance (sales, sales growth and profitability), Image – How is competitor positioned and perceived?, Objectives – commitment to pursue competition and strengths to pursue competition, Cost structure – Does competitor have cost advantage?, Culture – Who runs the show? and finally competitors strengths & Weaknesses
3.Market/Sub-market analysis: The objective of here is to determine the attractiveness of the market and sub-markets. On average, will competitors earn attractive profits or will they lose money? To understand the dynamics of market it is important to analyze following elements: Size – What is the current market and sub-market size and their future potential if new customers are attracted to the market. Growth prospects – Asses growth trend and product-life cycle stage for the industry and its sub-market. Emerging submarkets – Evolution of key submarket is a key market dynamic. Market profitability – Number & vigor of existing competitors along with Porter’s five forces. Cost structure and distribution channel of the market and sub-market.
4.Environment Analysis: Standard PESTLE framework helps in understanding and evaluating the environment. The elements of PESTLE being Political environment, Economic environment, Social environment, Technological relevance, Legal and Environmental effects.
Internal Analysis:
Internal analysis aims to provide a detailed understanding of strategically important aspects of organisation. The major aspects of internal analysis include:
·Performance Analysis: Profitability and sales provide an evaluation of past strategies and indication of the current market viability of a product line. Profitability measure, Return on Asset, is compared to cost of capital to determine if business is adding value to bottom line. Sales figure indicate trends that show shift in customer base that have long term implications. Other financial analysis like NPV provides a base for future investment options. Other non financial analysis includes customer satisfaction, product/service quality, Brand associations, new product activity and product portfolio analysis.
·Determinants of strategic options: Some non quantifiable attributes also play important role in understanding factors that will influence strategic options. Strategy review gives an insight in to where is the organisation currently vis-à-vis its competitors and markets. Strategic problems give an insight in to understanding challenges that the business is currently confronting and helps in prioritizing resource allocation. Organisational capabilities and constrains helps implement a strategy and limits the scope of strategy.
Strategic Analysis output:
The strategic alternatives that’s made available through the process of external and internal analysis is synthesized to churn out certain key outputs. These include identifying external threats for the business, opportunities available, trends in the market, and external uncertainties. It also helps identify internal strength and weakness, problem areas and constrains and internal uncertainties.
Strategy Identification and Selection:
This helps in selecting the product/service market in which the firm will operate and deciding how much investment is allocated to each, determine customer value proposition, identify assets and competencies and develop functional areas strategies.
Criteria for Strategy selection
·Consider possible future scenarios and develop matrix of response
·Ability to generation of attractive ROI
·Ability to pursue sustainable competitive advantage
·Be consistent with organisational vision and objectives
·Be feasible
·Consider interrelationship with other firm strategies
Data Collection:
Data is a source of information and information helps make decisions. Understanding broad market and industry direction was possible by relying on quantitative methods. I had to use qualitative data collection technique of face-to-face interviews to understand the unmet needs of customers which are hard to quantify.
Similarly I have gathered data from variety of sources, spreading the source of data and information is very important to maintain the reliability of data. Even the credibility of data is not compromised since all my qualitative data come from trustworthy sources. Below is the list of sources for my data, I have included the detailed references of my data sources in appendix.
1.Government database: Office of National statistics, UK & UK Dept for Business, Innovation & Skills (BIS)
2.Industry Associations: Electrical Contractors Association, UK & Heating and Ventilating Contractors association
4.University Libraries: Access to journals and magazines.
5.On-line Surveys: Self Designed
6.Face-to-Face interviews
7.Company websites
Secondary Data:
Secondary data is data that a researcher extracts from other data gatherers who have already compiled them. Given the requirement to understand the Industry trends and projections and the limitations imposed by time and resources most of the competitor and Industry data in this report is collected from secondary sources. Sources include: Government database: Office of National statistics, UK & UK Dept for Business, Innovation & Skills (BIS) and Market Intelligence Reports: Keynote Publications, Mintel Reports, Hewes Associates and ONS, Experian.
Advantages of secondary data collection include, apart from saving time and resource, it provides large and high quality data which is often impossible for individual researcher to collect. They also help avoid duplication of efforts. Secondary data can also form the basis for subsequent primary data collection based on insights thrown by secondary data.
Disadvantages of using secondary data include opaqueness of data gathering methods, opaqueness of designing the data gathering methods, obscurity of intent of the data gathered, and relevance of data and time expiry of data.
Primary Data:
Data that is collected by the researcher from the source of interest is categorized as primary data. There was a strong need to gather sensitive customer information. The information gathered was critical in understanding the current level of service perception on the part of customer and also it was essential to understand the potential future opportunities for business.
I designed the online surveys and also carried out some face-to-face and telephonic interviews to extract the relevant data. Online surveys were designed to understand the order qualifying criteria for X’s services and Face-to-Face interviews were carried out to understand order winning criteria that will differentiate X’s service offerings from its competitor’s service offerings.
Some of the draw backs in primary data collection include - Flaw in design of data extracting mechanism can result in skewed results. The process of collecting data is laborious and time consuming. Data collected are raw and incorrect interpretation could lead to incorrect conclusions.
What came first - Chicken or the Egg? Do you formulate a simple business strategy first or do you carry out market analysis first? Remember you are not standing still when you are making your decisions; conditions are as dynamic and complex as ever.
In my previous article, Business Strategy, I brought out four different options that are available for any business to choose from. In this article I will bring out the analysis framework which helped generate strategic options for X and which helped X choose between four alternate business strategies.
The choices made by individuals and arrived at through available mechanism is a function of environmental conditions they operate in and decision making systems that are in place. At X some tough decisions had to be made in some very tough conditions, conditions that would stare you in the eyes without batting an eye and would say “You shall not survive me”. A thorough analysis was the need of the hour at X, one that will help throw options to mitigate short-term cash-flow issues while deciding on the course of long term strategy.
The analysis framework is shown below:
The above framework has been drawn from Aaker & McLoughlin.
Picking up from where I left let’s try to dissect the strategic consideration framework/model that I had developed for X. Let me give you the most optimum business strategy that translates itself in to infinite wealth for your business or for that matter any businesses but of course in a perfect world :-). Peter Drucker suggests that purpose of business is to create customer and I have stretched my imagination by assuming customers will eventually translate in to wealth for the business.
Primary purpose of business strategy is to develop a competitive advantage that provides customers with superior value (benefits relative to costs) compared to competitive offerings.
The four dimensions that define business strategy that will lead to strategic advantage are:
·Product-Market investment strategy (Answers where to compete?)
·Customer Value proposition (Answers how to compete?)
·Assets & competencies (Answers how to compete?)
·Functional strategies & programs (Answers how to compete?)
Product-Market Investment Strategy:
The scope of the business and the dynamics within that scope represent a very basic strategic dimension. The scope of business is defined by the products(used interchangeably with ‘services’) it offers and chooses not to offer, by market it does and does not seek to serve, by the competitors it chooses to compete with or to avoid by its level of vertical integration. While business dynamics consider service or product level tactical entry or exit plan and repositioning of these, financial and non financial resources are allocated based on these product-market investment decisions.
The investment pattern will determine the future direction of the firm. Some broad level choices that are available are:
·invest to grow in existing market
·invest to maintain existing position
·milk the business by minimizing investment
·recover as many assets as possible by liquidating or divesting the business
The Customer Value Proposition:
Customer value proposition is the perceived functional, emotional, social or self expressive benefit that is provided by the organization’s offering/s. Therefore value positioning of a service or product should correlate to one or more customer value proposition listed. And this combination should be sustainable for the offering firm without exerting undue pressure over resources while at the same time should differentiate itself enough from its competition. Customer value proposition (CVP) can involve some or combination elements such as good value, excellence in service, best overall quality, product or service line breath (one stop shop), global branding, etc.
Competencies and Assets:
Strategic competencies are referred to those intangibles that have evolved organically within a firm or have been acquired and are hard to imitate by its competitors. Strategic competencies are based on knowledge that an organisation wields and an organization’s ability to capture knowledge from its talent pool. As such processes are considered as competencies as they are but knowledge product and can be included with in the category of organisation’s ability to manage knowledge.
Strategic assets are those resource elements that can be leveraged to gain competitive advantage while it also contributes in developing a firm’s competencies. Strategic assets include both tangible elements such as financial capabilities, installed customer base, etc and intangible elements such as brand name.
Competencies and assets together give an organisation its competitive advantage, careful planning in developing the two and there effective utilization should lead to synergies which in turn will lead to significant, enduring and sustainable advantage that will result over time.
Here it is important to point to the fact that strong asset or competencies are hard to build and even harder to quantify in absolute terms as sufficient enough; how much is enough will always remain a relative dysphemism. Competitive myopia translates in to yesterday’s hard won competitive advantage that provides customer delight in to today’s order winners and tomorrow order qualifiers. The ability of an organisation’s asset and competencies to support a strategy will in part depend on their power relative to those of its competitors. Competencies and assets provide sustainable competitive advantage (SCA).
Functional strategies:
Set of assets and competencies should mandate some strategy imperatives, in the form of a supportive set of functional strategies. These strategies are implemented through a host of short-term tactics. Some of the functional strategies are list below:
·Distribution strategy
·Brand-building strategy
·Communication strategy
·Segmentation strategy
·IT strategy
·Quality strategy
·Customer relationship strategy
Some introspective questions that drive functional strategies include: What conditions needs to be manufactured internally and externally in order to drive the agreed value proposition to end customer? What changes are required to manufacture these conditions? Are the assets and competencies in place to carry out these changes? Do these assets and competencies need to be created, strengthened, supported or changed? How do we do this?
Strategic Options
Since we do not live in a perfect world we are forced to choose between options available. Strategic options is a point of synthesis and distillation for the four dimensions of business strategy discussed above viz. Product-market investment strategy, the customer value proposition, competencies and assets and functional strategies. The over whelming complexity in the form of alternatives or choices that these four dimensions produced is narrowed down to specific few; a firm’s strengths and weaknesses combined with the opportunities and threats presented to it from the external environment will ultimately decide the business strategy. Therefore a strategic option is a particular value proposition for a specific product/service market with supporting assets and competencies and functional strategies.
Conceptualizing and labeling strategic options help crystallize and describe alternative business strategies. This in turn helps describe the selected business strategy and get the required approval from internal stakeholders (employees) and external stakeholders (partners, financers, customers, etc).
The following depiction gives you a bird’s eye view of strategic considerations that were made in the process of developing marketing strategy for X.
The short-to-mid term consideration was to put in place business and growth strategy for X’s individual companies to generate cash. The short-to-mid term strategies will un-tie precious resources X so desperately needs and give it a relative comfort of time to decide what its long term objective should be.
The methodology seen above is a simplistic depiction of how marketing strategy recommendations were arrived at for X. In my next few articles I will dwell in to more details on how I prioritized what the short term marketing strategy should be and how I integrated these with long term considerations by combining patterns that I saw emanating from customer data, Industry data, Competitor data etc.
After a barrage of concluding questions in my previous article of Stage III you might wonder how will I answer these questions and where will I start?
The start is here and now. In Stage III Article-2 I had discussed about the Rummler and Brache, a great tool to capture Sourcing and Procurement ‘AS-IS”.
The martix above captures essence of Rummler and Brache’s frame work. The bi-directional arrow heads that you see should be considered a spectrum, including those that are diagonally aligned. It is important to treat these arrow heads and the areas they cover as spectrum due to lack of clear demarcation in the responsibilities that one sees in real world organisations.
The following are some of the questions that I used in semi-structured interviews to capture the current state of affairs at X’s various purchasing departments.
1A. Org level goals & concerns
1.What is the role of Business Services department within X?
2.Which are the most critical functions with-in BS that will make a difference to X?
3.Why do you think these are critical?
4.What are you seeking to achieve through these functions?
5.What mechanisms or processes do you have in place to deliver these functions?
6.What problems/issues are you currently facing/ you anticipate facing when working on and with these functions?
7.How do you plan to overcome these issues?
8.How do you ensure the process goal/departmental goal is in line with business goal?
1B. Org level design & concerns (Focus on Procurement/P&P/IT) (1B)
1.What processes/mechanisms do we currently have in place that caters to organisation’s procurements/P&P/IT needs?
2.If yes, who are the current owners? Do we have a purchase department or function?
3.If no, it cannot be NO because then the business stops functioning!!! No, could be an answer that could come out of lack of knowledge.
4.How are resources allocated to each of these functions? – Man power, budget, IT, etc
5.Any specific areas of concerns? - Quality, Speed, Dependability, Flexibility, Cost?
6.Why is it an area of concern?
7.Do you see any duplication of efforts in the work flow? Why do you consider it to be so?
8.How do you detect duplication of work?
9.Do you see any miscommunication in the work flow? Why do you consider it to be so?
10.How do you detect miscommunication?
11.Where do you source your information from to make business decision?
12.Decision on demand variation in the market? – Capital goods, Outsourced service & Materials
13.Decision on supplier pricing? Of all above and IT
14.What decision making processes is in place? Who do you involve in the developing decisions?
15.When do you outsource manpower? Why do you outsource man power needs?
16.How do you approach manpower outsourcing?
17.How would you describe EINW’s relationship with your suppliers?
1C. Org level management & concerns (Focus on Procurement/P&P/IT) (1C)
1.How do you ensure accountability in your department?
2.What measures do you have in place to ensure Quality, Quantity & Timeliness? – of procured goods & services
3.How do you ensure the employee has all the information needed to carry on the task assigned?
4.How do you ensure documentation, training and employee needs are being met regularly?
2A. Process level goals & concerns
1.What is the role of your department/process/function within EINW?
2.What procurement strategy/policy do you have in place?
3.Which are the most critical functions with-in your function that you think makes a difference to EINW?
4.Why do you think these are critical?
5.What are you seeking to achieve through these functions?
6.What mechanisms or processes do you have in place to deliver these functions?
7.What problems/issues are you currently facing/ you anticipate facing when working on and with these functions?
8.How do you plan to overcome these issues?
9.How do you ensure the process goal/departmental goal is in line with business goal? Can you spell this goal out for me?
2B. Process level design & concerns [Sourcing]
1.How do you recognize and identify business need for procurement?
2.Do you differentiate between procurements for internal consumption or External Trading?
3.How do you validate need for procurement?
4.How do you budget procurement?
5.Do you carryout risk assessment before procurements? Yes – when? No – Why not?
6.How do you develop specifications for the goods/services being procured?
7.How do you source suppliers? First time purchase, repeat purchase?
8.How do you handle emergency, out of turn needs?
9.How do you ensure Value for Money (VFM) for the procurements that you make?
10.What procedure do you follow in requesting quotations?
11.How do you develop legal framework for the procurement being made?
12.Do you invite tenders? When? Why not?
13.How do you evaluate the quotations and the tenders received?
14.How do you carryout legal and financial check of the selected suppliers?
15.How do you select supplier/s?
16.Do you notify unselected supplier? How do you do it?
17.How do you complete legal formalities? Do you enter in to agreement for every purchase made or is it cash and carry?
18.Do you differentiate procurement based on value of purchase? What other criteria or classifications do you have?
19.Do you differentiate between purchase of goods and services that you make? What other criteria or classifications do you have?
20.Who is authorized to issue purchase orders?
21.How are supplier payments initiated?
22.What IT systems, services or infrastructure do you have in place to support your P&P?
2C. Process level management & concerns
23.What is the average turn-around time between supplier identification and issue of purchase order?
24.What is the average turn-around time between issue of purchase order and receipt of goods/service?
25.Average cost of tendering?
26.How many tenders are issued in a year? Half year? quarter? And in a month? Any seasonality patterns?
27.How many goods and material suppliers used in one year? Half year? Quarter? Month?
28.How many service suppliers used in one year? Half year? Quarter? Month?
29.How many of these suppliers were customer nominated?
30.Do you maintain separate records for capital goods, materials or services purchased?
31.How many rejections per year? – Good/services break up?
32.Average total procurement cost? – Cap good/Material? & Service?
33.Breakdown of total procurement cost? – Cap good/Material? & Service?
34.Average total acquisition cost? - Cap good/Material? & Service? [goods + Transaction]
35.Average total transaction cost?
36.Average cost per transaction?
37.Average cost per supplier?
38.Average total tenders per supplier selected?
39.Average cost per tender?
40.Average creditor period?
41.Average labor cost per tender?
42.Average labor cost per supplier?
43.Average inventory hold period? Trading goods/materials.
44.What value evaluation mechanism do you have in place for the procurements that you make?
2B. Process level design & concerns [ICT]
1.How do you recognize and identify business need for ‘a’ IT solution?
2.What ICT strategy/policy do you have in place? What is the overall objective of IT in EINW?
3.What drives ICT strategy/policy?
4.What IT systems, services & infrastructure do you have in place? Which business function/s do they support?
5.How do you validate need for IT procurement?
6.How do you budget IT procurement?
7.Do you carryout IT risk assessment before procurements? Yes – when? No – Why not?
8.How do you develop specifications for the IT goods/services being procured?
9.How do you source IT suppliers? First time purchase, repeat purchase?
10.How do you ensure Value for Money (VFM) from your ICT?
11.IF IT DEPARTMENT CARRIES OUT ITS OWN PROCUREMENT, THEN GET ANSWERS TO QUESTIONS LISTED IN THE 2B PROCUREMENT SECTION.
12.How has ICT benefited your organisation?
2C. Process level management & concerns [ICT]
1.Do you have a comprehensive and coherent IT architecture for EINW?
2.How do you evaluate/measure the effectiveness of the current IT systems?
3.How do you ensure relevance & currency of IT strategy?
4.Do you have a breakup of Systems, Services & Infra that you use? Yes, -can you provide me those?
5.How do you measure cost effectiveness of the IT system in place? (any bench marks –reuse, -vs-)
6.Current Total cost of ownership of the IT systems? – Systems, services & Infra.
7.Current measure for ROI on IT spending?
8.Any other measures of value evaluation that you have in place for IT spends?
2B. Process level design & concerns [P&P]
1.How do you recognize and identify business need for ‘a’ Project/Program solution?
2.What P&P were carried out in the last 12 months? Break up?
3.Who approves initiation of internal projects?
4.What P&P methodologies do you have in place? Why do you use them?
5.What is the overall objective of P&P function within EINW?
6.What drives P&P strategy/policy?
7.How do you budget P&P initiative?
8.Do you carryout risk assessment before P&P initiatives? Yes – when & How? No – Why not?
9.Where do you source your P&P resources from?
10.How do you ensure Value for Money (VFM) from P&P initiatives?
11.IF P&P DEPARTMENT CARRIES OUT ITS OWN PROCUREMENT, THEN GET ANSWERS TO QUESTIONS LISTED IN THE 2B PROCUREMENT SECTION.
12.How has ICT benefited P&P?
2C. Process level management & concerns [P&P]
1.Do you have a comprehensive and coherent P&P policy for EINW?
2.How do you evaluate/measure the effectiveness of the current P&P methodologies used?
3.How do you ensure relevance & currency of P&P undertaken?
4.Do you have a breakup of Systems, Services & Infra that you use? Yes, -can you provide me those?
5.How do you measure cost effectiveness of any new P&P initiative? (any bench marks –reuse, -vs-)
6.Average life time cost of project undertaken in last 2/3 years?
7.Current measure for ROI on P&P spending?
8.Any other measures of value evaluation that you have in place for P&P spends?
All good ideas have ready application. This blog aims to bring forth ideas that have seen application, for further refinement.
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