Cultivating Stakeholders to Fit the Need Works - Assignment Example

Cultivating Stakeholders to Fit the Need Works Basically, business in the new millennium, especially global business, is a matter of reinventing the process. By shifting emphasis from one set of stakeholder to another some of the largest global companies have leveraged good stakeholder management to grow rapidly into powerful global organizations. Three companies of note which have done this include Dell, Wal-Mart and Best Buy. These three companies have created a new organizational design and not only managed their stakeholders, but created new ones with strong vested interests in their success. Basically the benefits of good management of stakeholders boils down to this: You can use the opinions of the most powerful stakeholders to shape your projects at an early stage. Not only does this make it more likely that they will support you, their input can also improve the quality of your project Gaining support from powerful stakeholders can help you to win more resources - this makes it more likely that your projects will be successful By communicating with stakeholders early and frequently, you can ensure that they fully understand what you are doing and understand the benefits of your project - this means they can support you actively when necessary You can anticipate what peoples reaction to your project may be, and build into your plan the actions that will win peoples support. (Manktelow, Rachel 2006) While I am certain that the companies upon which I have focused have done all this, and have mapped their stakeholders properly, this paper will look more closely at the benefits of good stakeholder management as evidenced by the success of these companies and, in particular, pre-emptive shifting of emphasis from one group of stakeholders to another which will have more positive effect on the current needs. Dell Computers was on the verge of bankruptcy in 1985, when they developed a new marketing strategy called Demand Management to turn everything around. It was built around the idea of “Sell what you have” instead of selling what you plan. It was designed to match incoming demand to the actual on hand supply. This was worked out at several levels. Dell had been keeping huge inventories to allow it to build custom machines on demand. In order to do this they had to predict two months ahead, and that is a touchy thing. Any wrong guess would cost millions. So Dell decided to apply price cuts and incentive plans to get people to buy what was in stock instead of ordering components to match what was being ordered. This plan would eliminate the need for keep9ing a large inventory on hand. In addition, Dell trimmed its supplier list to less than 100 and concentrated efforts on working very closely with those in order to introduce more flexibility into the system, Dell based its choice of suppliers upon quality, service and flexibility, rather than on price and worked out deal with those suppliers that met their quality standards consistently. In this way, Dell could adjust quickly to changing market demands, and the resulting higher quality meant fewer returns would be necessary. Dell aimed all of its marketing activities at persuading people to buy what they made and had in stock, directly influencing the market, instead of being influenced by it. Dell’s strategy had been built upon direct marketing from the start, and to this day, you can only buy a Dell directly from the company. Dell’s main target group is high end repeat buyers. Dell customers want the latest and are early adopters of technology. By cultivating regular feedback from customers, Dell was able to adjust its strategy accordingly. He product life cycle was trimmed to nine months and Dell used incentives and pricing strategies to minimize the drop in sales between iterations of its products. Dell’s whole strategy was revamped and became a combination of building products to order and buying components in line with demand. Dell management closed the forecasting gap as Dell executives moved their forecasting efforts to high end products with a longer shelf life. By using constant customer feedback they approached a 70% accuracy rate. Lead times were vastly improved thus and the resulting drop in inventory improved the company’s profitability. Dell was able to build custom machines and deliver on time consistently and this won corporate business. In eliminating the need for need for holding a large inventory the company saved an enormous amount and took advantage of a parallel drop in component prices. The company further capitalized on the resulting float created by selling via credit card and paying its suppliers on a schedule. As a result of this daring change in strategy, Dell has succeeded in capturing a significant share of the North American market. Flexibility has been the key component to the turnaround. From an on line interview with Dell’s senior manager of Internet marketing, Deborah de Freitas said., “Dell repeatedly reevaluates its online ad strategy, because what works one day might not work three weeks from now” (1) All of this fell together because Dell was able to manage the various stakeholders at the time. When this all began, the various stakeholders were somewhat fewer, including the employees, Mr. Dell’s family, shippers, financial institutions and suppliers. By shifting its emphasis from the financial stakeholders to the suppliers, Dell was able to develop a winning strategy in cooperation with those suppliers who could see and appreciate the vision. Suppliers earned less on each sale, but they banked on Dell being able to raise sales to such a level as it would not matter, The higher volume would more than make up for the difference in profit margin. This entire plan hinged on getting enough suppliers to go along with the deal. After this, Dell was able to satisfy the financial stakeholders and stave off the destruction of the company. This entailed a whole new method of supply chain management, in essence, making the suppliers and the shippers partners in a new paradigm. As a result, Dell experience an unprecedented cycle of growth and moved completely away from the original standard operating procedure of assembling and selling the designs of other companies. By managing internal stakeholders, Dell was able to induce staff to develop new skills to fit the changing needs. Marketing managers and buyer became adroit at predicting short term needs up to ninety days and marketing personnel developed a whole new system of pushing product, including a dynamic web strategy which not only matches inventory to buyers, but harvests customer feedback in real time. Dell marketing professionals moved into an e-commerce model and new stakeholders, the ISP and marketing affiliates with links all over the web, were developed. Web marketing offers many advantages over traditional media, including mainly lower cost, higher response and dynamic feedback which delivers information on trends in real time. Dell uses partners or affiliates and pays only for actual traffic to market its products. Advertising links are shifted from low performing sites to higher performing sites almost on a moments notice. This new stakeholder group: the affiliates, works hard to optimize the traffic to Dell’s links to increase their own profit. These forms of advertising are a huge stretch from the old pay in advance of sales methods. The cost for advertising has been greatly decreased as Dell has made real stakeholders out of its advertising affiliates. Dell’s own dynamic website includes a tremendous amount of information and self help for customers, and even offers driver downloads and updates. Dell has cultivated a committed staff which developed their skills to suit the company’s needs, and they have made a highly attractive and functional website. Hyperlinks take customers to more information and, more often than not, to a purchase link quite quickly. Dell has streamlined customer support, extending the same software that its customer support staff uses to the website where customers can access it themselves. Dell has even made the customer into a primary stakeholder. Dell has now moved into doing extensive R&D itself to actually create its own branded products preloaded with branded software. A new product area includes custom servers made in dell’s three assembly factories using manufacturing "cells" to individually build each new server to specific customer requirements. Dells supply chain is totally automated, communicating with its suppliers in real time all the needed components as they are used. Dell staff even loads custom software packages according to the customer’s needs before shipment. This allows the server to be shipped to a final destination with software loaded and preconfigured to MIS department specifications. Dell calls this its DELLPlus service.” (2) Innovation and flexibility has become Dell’s banner. Jerry Gregoire, CIO of Dell, said, "I pray that our competitors are successful in their large ERP implementations - then we will drive them crazy with customer innovations using our own technology. Our competitors will find themselves vendor dependent for these innovations". (3) From an article on Dell’s Business Strategy Secrets we find the following: ‘Systems should be able to be individually tailored to suit the end users unique requirements.’ (3) Michael Dell’s very interesting book gives insight to this success story, entitled Direct From Dell. In it he covers Dells Core Philosophies Part two of the book is devoted to Michaels business philosophies. A sampling of some of these key ideas includes some handling of the various stakeholders: Hiring ahead of the curve - Michael outlines his belief in choosing people with the future in mind as well as a consideration of the challenges they will have to grow into. (This makes new employees into stakeholders right from the start.) Segmenting the CEO - Michael explains why he split his duties between himself, Mort Topfer, and Kevin Rollins in order to divide and conquer Dells wide spanning responsibilities through the Office of the CEO.(Michael Dell turned his best people into primary stakeholders) Building a company of owners - Michael covers his passion for engendering a sense of personal investment in each employee through responsibility, accountability, and shared success. (This creates a whole company of stakeholders who have much more invested than the ordinary employee.) Staying allergic to hierarchy - Michael outlines his distrust of overly rigid business processes as well as his encouragement of communication across all business lines and levels. (Communication among the stakeholders is a key to effective stakeholder management. It keeps everyone in the loop to the degree required by their function and interest.) Mobilizing people around a single business goal - Michael highlights his use of metrics throughout the company to measure progress, to identify issues, and to tie compensation to the health of the business. (Making all of his people into stakeholders has been the central strategy for Dell.) Developing products from the customers viewpoint - Michael reviews Dells approach toward creating products based on customer input and requirements instead of pushing new inventions. (The customer becomes an important stakeholder in the viability of the company’s products and in new product development.) Targeting a customer of one - Michael explains that you have to structure your business channels to tailor your focus to unique customer needs, fears, sensitivities, and questions. (This develops closer ties with what has become a prime stakeholder for Dell, its customers.) Aligning complementary strengths for success - Michael gives a overview of the benefits of complementary partnering with suppliers for better efficiency, faster feedback, and more tightly aligned products. (It was this that fueled the original operational change that made this success possible and Dell continues to maximize the benefits.) Flipping the demand/supply equation - Michael covers the importance of flowing inventory at a real time speed through the use of real time information rather than using bulk manufacturing processes. (This made the suppliers into prime stakeholders as how they responded to demands was key to Dell’s success and the deals which they made with Dell depended upon Dell being successful, much more so than in any ordinary manufacturer/retailer/supplier relationship.) In looking at a comparison of competition strategies, Dell tends to develop partnerships, as with Xerox ("Dell and Xerox Forge Strategic Marketing Tie" 2000), making its competitors into stakeholders, rather than trying to absorb them. In this way, Dell can concentrate its energy on developing its own brand identity and take advantage of the dynamics of other companies’ developments. By using partnerships, Dell eliminates the inevitable stagnation process of mergers as two companies try to successfully blend corporate cultures. The marketing strategy which Dell employed to eliminate large wasteful inventory was a stroke of genius. It allows for a much quicker life cycle for products and a smoother, more profitable transition between cycles. Oddly enough, this strategy is not new, but was new to the innovative technology industry and it resolved one problem that plagues the computer industry, that of absorbing the cost of unsold obsolete technology. This method of developing the supply chain stakeholders to support dynamic inventory control and adjusting the marketing in tandem is one also used by two other successful companies: Wal-mart and Best Buy. They have both leveraged the cultivation of the supply chain stakeholders into a totally new paradigm for market management. They have both used slightly different methods, but the key point here is that they cultivated three main sectors of stakeholders to reorganize how they do business, creating a whole new profitable organizational model. The three stakeholder groups they concentrated on were essentially the same groups which Dell focused upon: the suppliers, employees and customers. Wal-mart went digital in a big way. The company created a totally internal IT department to create proprietary software and electronic tags to use for tracking called RFID tags. Basically Walmart has converted the supply chain into its primary stakeholder. Some of the suppliers are actually footing the bill for the tags. The merchandize is tagged at origin and at any given time, Wal-mart employees can track shipments of tagged items. However, due to the real-time ordering system at the check-out, this is seldom necessary. As items are bought, the barcode is used to reorder replacements. This order goes directly to the supplier in real time. Proctor and Gamble was the first supplier to buy into this system, but far from the last, because it works. There are numerous issues and a myriad of problems, from fickle hardware, to buggy software, but there appears to be more ups than downs: "Wal-Mart has been pushing aggressively for RFID adoption. According to a report by AMR Research that was written in late 2004, the retailer has not received whole-hearted support from its vendors. Most of the vendors feel that the costs far outweigh any potential benefits and have fulfilled the minimum basic requirements only. This has resulted in RFID-tagging of select products and the deployment is mostly of the “slap and ship” kind." In a study published in 2004, (Williams, David, July 2004) Suppliers don’t get returns and Wal-mart doesn’t need to waste resources on static inventory. The suppliers have adjusted their shipping methods to complement this system. Wal-mart has even supplied some of the technology for the trucks to be tracked. Suppliers have a large stake in Wal-mart’s electronic ordering and tracking system, because it streamlines the ordering process and allows suppliers to predict their own markets more accurately. In a Frontline interview with Nelson Lichtenstein: "On the one hand, technology has exploded, and it adopts this new, very efficient infrastructure which means that China, Arkansas, New York -- theres no difference in terms of real time and communications and ordering things." (Lichtenstein, Nelson, Frontline, 2004) "As Wal-Mart is incorporating RFID in its retailing and supply chain system, it is influencing not only its vendors but also its customers. Incorporating RFID technology will not only increase the efficiency of Wal-Mart but will also simplify its supply chain system." (RFID Gazette, Jan 2006) Wal-mart reorganized its internal organization and flattened the hierarchy to make it possible for individual stores to keep up with their own needs. Managers do not need to call corporate for every little thing, but can make most decision as impacts their own store autonomously as long as they stay within the corporate vision and guidelines. Managers have thus become more functional and are key stakeholders in Wal-mart’s success. The company has a history of promotion from within, so this gives managers an opportunity to “show their stuff”. "Its how you use that data," Langford said" (a company executive) (Murphy, Chris, 2005) It definitely gives Walmart a competitive advantage, especially when combined with something Walmart pioneered: a “logistics system known as "cross-docking" (which) ensures that goods are simply moved from one loading dock to another in forty-eight hours or less, resulting in minimal inventories and shaving between 2 percent and 3 percent off the cost of sales.”(Fahy, John, 1996) So Wal-mart is another giant which is cultivating the supply chain, employees and customers as stakeholders. The supply chain is the main link to the future development of Wal-mart as it supplies critical flexibility. Managers are taking ownership of their departments and stores as the organization cultivates their skills and utilizes their proximity to the market. The customer are being cultivated through a web-site which supplies them with necessary information, provides customer support and collects dynamic feedback. In this sense, Wal-mart has switched its focus from financial organizations and shareholders, which are all beneficiaries to suppliers, managers and customers who are drivers of the business process. Best Buy recently adopted a new business model which also moved the supply chain to the fore. The company has a history of dynamic response to change, as exemplified in its tornado sale when disaster destroyed its best store. (This has become an annual thing.) Their latest transformation is a move from product-centric to customer-centric service. The big box delivery system that made Best Buy a leading mass merchandiser has been replaced at many of the stores already in with a new dynamically responsive supply chain model. They have modified the shipping from sending everything to one large centrally located depot to sending a substantial amount to three smaller well-placed depots, putting the goods closer to the customer. Even stocking options have been switched from product to customers. Retail employees, while knowledgeable about stock now undergo training in finding out customer needs and life style and it is their mandate to make the shopping experience the best possible for the customer. They will even walk around with the customer rather than shuttling them from employee to employee according to the department. The employees are not longer paid by commission, and so work more as a team to serve the needs of the clientele. While this is a minor shift in light of the shifts made by Dell and Wal-mart, it is significan for the retailer, and simply adds one more company that is making this shift. Best Buy, like the other two, is cultivating the stakeholders which push the business bottom line: suppliers, employees and customers. In looking at how these three large corporations are moving the emphasis from one group of stakeholders to another, we can see that stakeholder management is a primary method by which we can design the future of our business. Stakeholder identification and mapping to the business process and needs will be a primary tool for mapping the future. Sources Cited Best Buy. (n.d.). Company Information. Referenced February 18, 2006 from http://www.bestbuy.com/site/olspage.jsp?id=cat12114&type=page&h=488 Business Week; November 28, 2005; “Pallavi Gogoi’ Cotrill, K. (2006, January 23). Best Buy Supply Chain transformation. Referenced February 18, 2006 from http://hbswk.hbs.edu/item.jhtml?id=5175&t=operations Dells Business Strategies Part 1, http://www.itmweb.com/f031099.htm Dells Business Strategies Part 2, http://www.itmweb.com/f070802.htm Enos, Lori : I-Marketing Interview: Dell E-Commerce Times 08/15/01 4:27 PM PT Fahy, John, Competitive Advantage in International Services: A Resource-Based View, International Studies of Management & Organization, Vol. 26, 1996 Frontline, 11/2004-Frontline interview with Nelson Lichtenstein Harvard Business School Working Knowledge: Brand Power from Wedgwood to Dell: Part One International Herald Tribune; November 26, 2005; David Pogue Kangas, Paul, Nightly Business Report; November 25, 2005; Susie Gharib Lewis, Peter, Fortune; November 28, 2005; Murphy, Chris, Real-World RFID: Wal-Mart, Gillette, And Others Share What Theyre Learning: Early pioneers reveal that big RFID payoffs can come in small, unexpected ways, InformationWeek , May 25, 2005 Paley, Martin Marketing Strategy Desktop Guide,, Thorogood, 2001 Papows, Jeff, Enterprise.com: Market Leadership in the Information Age, Perseus Books (Current Publisher: Perseus Publishing). Cambridge, MA. 1998. Page Number: iii. Page 91-92 Williams, David, The Strategic Implications of Wal-Marts RFID Mandate, Jul 29, 2004 http://hbswk.hbs.edu/item.jhtml?id=3497&t=marketing&noseek=one http://www.ecommercetimes.com/story/12804.html http://www.dell.com http://www.dell.ca http://www.hbsworkingknowledge.hbs.edu/item.jhtml?id=2174&t=marketing http://www.ihc.ucsb.edu/walmart/ - 10k - 17 Feb 2006 http://www.pbs.org/wgbh/pages/frontline/shows/walmart/interviews/lichtenstein.html http://www.rfidgazette.org/walmart/ Jan 19, 2006 http://en.wikipedia.org/wiki/Best_Buy#History Read More