CHAPTER 8

Gate 3 – Execution: Machinery, Methods, and

Management Skills
 The importance of execution is highlighted in the
guiding principles of the Abenson Group, as four of
their guiding principles are associated with execution.
 “A Mind That Creates. A Will That Excels. A Heart
That Cares. A Team That Wins. An Institution That
Lasts. All for the Glory of God”
 “A Mind That Creates” – preparation and marketing
 “A Will That Excels” and “A Heart That Cares” –
execution and self-leadership
 “A Team That Wins” and “An Institution That Lasts” –
preparation and execution
 “All for the Glory of God” – self-leadership.
 Machinery
 Machinery is an organization structure that can
deliver the value planned.
 It can only be articulated after the value
proposition in the offering model is defined.
 This means strategy is the key driver of structure
and value is created only if the structure is in
harmony with strategy. This also means a
change in strategy will necessitate review of its
organization design to avoid any contradictions.
 Methods
 Methods are about systems and processes
that allow the entrepreneur information and
control.
 Remember, entrepreneurs and his/her
managers must make decisions, essentially,
an allocation task, which is based on having
information, which is a monitoring task.
 Good monitoring leads to good allocating.
 Opportunity Seizing via
Operating Model
 An operating model aligned to the offering
model should be formulated, so the
entrepreneur can ensure that the value
proposition can be delivered seamlessly and
repeatedly.
 An internal alignment of the operating model
with offering choices is necessary to help the
firm execute their strategy well and hopefully,
attain competitive advantage and superior
financial returns.
 Value Chain
 Strategy must be mirrored in an organization’s activities,
behaviors, capabilities and resource allocation for
excellent execution.
 What functions or business processes have to be done
excellently to achieve sustainable competitive advantage?
(a value creation approach)
 In what value chain activities would poor execution
seriously weaken strategic success? (a problem solving
approach)
 Value chain is the strategic linkage or a series of value-
adding individual activities required to create, produce
and deliver products and services to the customers.
Example of the Value Chain of a
Manufacturing Company

Sour-
Design R&D Mfg. Mktg.
cing

Distri- Supply
Channel End
bution Chain
Users
Marketing is the Interface of the
Company with its Chosen Market
 Importance of Value Chain
 It defines the role each member plays in the flow of
materials, information and relationships with trust as a
central issue.
◦ Materials – Suppliers delivering orders is the most
fundamental part in a value chain.
◦ Information – Online e-commerce sites like
Amazon as well as logistics companies like Lalamove
have live tracking features for customers to
know status of their shipment.
◦ Relationships – Unilever Foundry in Singapore as a
co-working space that allows members to tap into
their network as well as to receive mentorship from
within the company.
 It shows the profit pool of an industry by segment in the
entire value chain.
 It identifies the potential complementors who can help
the firm create differentiation and barrier to competitive
entry.
 It identifies the complementors who can help the firm
execute strategy that no other company can do as
efficiently.
 It shows how value chain boundaries of tasks performed
can be expanded or collapsed in case of an innovation.
 It identifies potential competitors, as members in the
value chain may want to stretch their activities beyond
their normal territory as part of expanding their core to
their adjacency.
 Value Network / Ecosystem
 The value chain is an expanded supply
chain. Value network is an expanded
value chain that shows the involvement
of other stakeholders in each value
chain stage to co-create value. Value
network is also called an ecosystem.
 Resources
 Resources are about hard assets (not people-
related) and soft assets (people related) that
are difficult to imitate, and provide an
advantage to firms, especially evident in an
economic downturn, when acquisition
becomes possible.
◦ Hard assets are physical (channel,
infrastructure, technology), financial and
intangible assets (brand, IP, customer info).
◦ Soft assets are human assets like
relationships, skills and knowledge.
 Processes
 Processes transform inputs into outputs.
 Examples are new product development
process in pre-transaction, order fulfillment
during transaction, collection during post-
transaction and customer service, also in post-
transaction – all part of the entire value chain.
 Entrepreneurs, especially start-ups are focused
on having their products out in the market to
be accepted by the channel and consumers,
hardly having time to think about the details of
different processes.
 Managerial processes govern the operation of a system
such as corporate governance (norms, metrics).
◦ Retail stores like 7-Eleven use metrics like foot
count, to determine viability of a location and
inventory days, shrink rate, among others, for
efficiency.
 Operational processes are the sequence of value-adding
activities that function together that adds value to the
core process, which are manufacturing (planning),
marketing (voice telecom) and order fulfillment (E-POS).
 Support processes are procedures that support the core
process, and these are purchasing (bids), accounting
(budgets, reports), technical (training) and recruitment
(rituals).
 One basic technique is to remove each step to understand
what will really be missed and to determine whether or
not each step is absolutely required.
 Another technique in innovation is by changing one
sequence of the steps, such as advancing a subsequent
step to an earlier step and think of its implications or
possibilities.

 Processes can be improved with productivity tools

whenever available. Entrepreneurs must involve their
team for inputs, must listen and be open-minded with
feedback because team members who are more intimate
or directly interacting with customers.
Processes for 9 Ways to Create Value
9 Ways to Create Value What is the Offer? Some Critical Processes

Better Superior products or R&D, Distribution

services
Faster Speed or capability to IT, Logistics, Service
move quickly Empowerment
Cheaper Lower prices with same or Low-Cost Sourcing and
better value Distribution,
Standardization
Closer Good relationship with IT, Customer Service,
customers, including Service Empowerment
localization.
Larger (or smaller) Wider choices, including Sourcing, Distribution
bundled choices with
alliance partners

(If smaller, more

convenient)
Easier Flexible service or total Flexibility, Service
solution provider Engagement
Rarer Exclusivity, or being the Negotiation, Relationship
only choice in the area
Prestige Reputation from favorable Advance Technology,
and aspirational perception Branding, Design
Different New category or Innovation, Creativity
Innovation, including
targeting underserved or
unserved market (the
innovation need not to be
superior and can even be
inferior compared to what’s
available)
 Capabilities
 While the offering model answers where
the firm will win, the operating model
completes the picture by answering how
the firm will win, identifying capabilities
needed to create an advantage.
 Capabilities can be identified by the
entrepreneur in both the offering model
and the operating model depending on
where a person is assigned.
Key Operating Variables Critical to
Support Wealth Conversion
 New firms need talents with customer
acquisition skill and challenger experience,
while the more established firms with high
market penetration need talents with
retention and defense marketing
experience.
 Capability building can be initiated by
recruiting experienced talent with relevant
skills needed by the firm.
 Complementors
 Companies need other people to help
them deliver the value proposition.
Other times, companies may want to do
something fast but lacks the capabilities
to do so.
 Other times, outsourcing some
functions appears to make more
financial sense.
 Configuration and Cost
 Entrepreneurs are always reconfiguring how
to grow revenues, increase differentiation,
improve cash position while reducing cost.
 The reconfiguration of the business model
of low-cost carriers (LCC), better known as
budget airlines, to reduce cost and support
their low price model is interesting. This has
resulted to many LCCs attaining double-digit
profit versus single-digit for traditional
airlines.
 How Budget Airlines Reconfigured
Their Operating Model to be Profitable
 The use of friendly online page and revenue
model
 The use of standard fleet
 The use of direct point-to-point travel instead
hub-and-spoke networks for short-haul travel
 The No-frills offer
 The pursuit of operational efficiency
 Management Skills
 Execution can be built via building
infrastructure to increase capabilities,
which are composed of coordination,
commitment and competencies.
 Management Skill is the ability to carry
out a firm’s plans.
 Management Skills
Management Skills What is required? Knowledge in

People Sharing meaningfulness • Motivating

and pride in their work • Planning
while accomplishing • Problem-solving
required tasks. • Decision making
• Inspiring
Rewards Attaining a sense of
• Communicating
identity with financial
• Delegating
blessings while
accomplishing required
tasks.
Leadership Having a sincere sense of
mission and purpose while
practicing good
governance.
 Key Questions for Execution
Infrastructure
3 Ms of Execution Infrastructure Key Questions
Machinery (Organization Structure) How do we organize ourselves to
deliver value?
Methods (System / Process) Do we have the information and
control needed?
Management Skills
• People Do we have the right people, the right
number, the right skills and with the
right understanding?
• Rewards Are desired behaviors understood and
rewarded?
• Leadership How do we provide guidance and align
everyone to attain common goals?
 Some Problems in Poor Execution
3 Ms of
Coordination Commitment Competencies
Execution
Machinery Diverse views Change too Plans are bad
(Organization intimidating
Structure)
Methods Not tied strategy for Not designing Cost of
(System / accountability processes & rewards implementation not
Process) for team to work considered
together
Management
Skills
• People No follow thru No plan ownership Not linked to
capability building
• Rewards Vague deadline Incentive problem Lack of training for
new skills required
• Leadership Clear objectives but Weak leadership Unclear tasks with no
accountability and job descriptions
responsibility not
understood
 Mansmith Execution Framework
3 Ms of Key
Coordination Commitment Competencies
Execution Questions

Machinery How do we Job description Multi-skilling Culture

(Organization organize defined
Structure) ourselves to
deliver
value?

Methods Do we have Processes Best Practices Open

(System / the communication
Process) information
and control
needed?
Management
Skills
• People • Do we have the Job rotation Recognition Training
right people, the
right number, the
right skills and the
right
understanding?
• Rewards • Are desired Group Criteria for Developmental
behaviors incentives promotion assignment
understood and
rewarded?
• Leadership • How do we Consultative Leadership Action Plan
provide guidance style Skills
and align
everyone to attain
common goals?
 Exercise:
1. Think of a project that failed recently.
Investigate and identify barriers to
execution whether cognitive,
affective, motivational, resources or
political in nature. How could the
barriers been addressed differently?
 Caselet: FMCG Value Cain
1. Decode the value chain of the fast
moving consumer goods (FMCG) industry.
Then, make a list of questions you want
answered for each part of the value
chain. Cluster these questions for
commonalities. Interview someone from
the industry. Do second-degree probing if
the answer you got is not clear. Ask until
you have no more questions left
unanswered.
 Q&A with Red Crab Group President
Raymund Magdaluyo on Strategy and
Execution
 Raymund Magdaluyo is one of the Philippines’ most
successful restauranteurs.
 He has helped shape many seafood dining restaurant
concepts (Red Crab Alimango House, ClawDaddy,
Blackbeard’s Seafood Island, Crustasia, Johnny Kahuku
Hawaiian Shrimp House), as well as non-seafood restaurant
concepts (SumoSam and related restaurants, New Orleans,
Café Creole, Patriots, Wolfgang’s Steak House).
 He was a recipient of the Mansmith Young Market Masters
(YMMA) awards in 2008.
 He shares insights on how to start, compete and thrive in the
restaurant industry.
 Q1: You are well admired as the owner/part-owner of many
successful local-concept restaurants like Red Crab, SumoSan,
ClawDaddy – all known for their excellent food and good
customer service. What’s your thinking process in coming up
with new ideas?
 A: I have been a full-time restauranteur since 1999. On one
hand, I led a bunch of mostly seafood dining formats such as
Red Crab Alimango House, ClawDaddy, Crustasia Asian
Bistro, Blackbeard’s Seafood Island, and BluFish
Contemporary Coastal Cooking.
 I have two general business and personal objectives: First is I
want to pick a few of the concepts and start building CHAINS
out of these 2 to 3 highly scalable restaurant brands. Second,
I also want out group to expand our reach outside food and
include other areas of the hospitality business we can
develop.
 Q2: We are sure you considered many options before
choosing a final concept. How do you actually decide which
one will become your final concept as well as determine the
right price for it?

 A: For restauranteurs, aside from our usual customers, the

first market we have to satisfy are our landlords. Most of
them are mall developers and expert property managers
who have extensively researched on the community/ trade
area they want to serve. It is important to us that we know
what they want to achieve, and how we can fit in serving
their customers. We ask them what cuisines (of course, in
our case it is mostly a choice of our existing restaurant
concepts) they need or what their focus group discussions
reveal as far as dining preferences are involved.
 Q3: Competition in the restaurant business is intense. Can you
update us on how consumer choices are affected with recent
threats from competition and substitutes?

 A: Retail has indeed gone global. People around the world

are watching, eating, wearing more and more of the same
things. In the restaurant industry, the biggest competition
seems to mirror what’s happening to fashion.
 Filipinos are now bombarded by the same food brands they
see in Singapore, Hongkong, Tokyo and other big cities. Dry
goods retail giants are now investing heavily in food.
 On one hand, this is good for the Filipino “eater-outers”. This
development poses a big challenge for local and “true blade”
operators like us to continuously innovate and
position/reposition our concepts.
 Q4: The restaurant business isn’t easy. Choices are too
plentiful. Many have lost money. What makes your group
thrive?

 Our business is like running a talent management company.

In order to be resilient a healthy table needs several
concepts/talents. A chef friend mentioned how there is an
imaginary rotating plate wherein the global food trends
change by way of cycles. In short, at any given circle a good
group needs to have strong players.
 Players like us need to compete in categories where we can
really make real contribution and value. We have to connect
and provide our diners with food that they crave for. But also
we need to deliver this in a context that is unique.
 Q5: Service excellence needs good and well-trained people.
Can you enlighten us with your recruitment and screening
process?
 Service Excellence, especially in casual (and fine) dining establishments
is a lot more dynamic and variable (i.e., non-standard). There are no
cookie-cutter scripts and robotic employee manuals that tell them
exactly what to do.
 What we do is arm and empower our service staff with what I call the 6
Petals Of Enlightened Hospitality:
• Script (standard and dynamic) and service sequence
• Service standards (how to bus out, serve, open, and serve wine, etc.)
• Dining dynamics (more like knowing strategic dining positions not far
from basketball positions) – host, order taker, runner, expenditer,
backups, eye, etc.
• Offensive moves (15 to 20 time-tested small strategies to delight
customers)
• Defensive moves (15 to 20 moves addressing usual service fail points)
• Menu mastery
 Q6: From a supply standpoint, how are you coping with
increasing costs like the annual escalation clause plus
percentage of sales from malls?

 A: Investment bankers/venture capitalists who have been

watching the local restaurant industry closely frown upon
groups that locate most of their stores in malls. Malls and
similar developments will always escalate rent and give you
more competition year after year. So the pressure is both on
top and bottomlines.
 The long-term challenge is to balance choice of locations.
Getting spaces in areas where rent is low and lease terms
are more flexible is a step towards this direction.