Articulating the problem
After the forth rollover, my team were disappointed at the result. Despite high amount of sales revenue, shareholders value (SHV) has significantly fell off more than 50%.
What was wrong and what decisions should we make to recover the outcome?
Analysis of the problem
During the meeting, we discussed and calculated the amount of capacity we need for the next rollover and carefully reviewed the previous results. The big picture we drew throughout Mikes Bikes at the start of the simulation is very different from what we are facing now. Is our strategy wrong? Do we have to change our strategies and business model? What steps should we take to survive in this competitive and challenging bikes business? Why and when did we lose our big picture? We probably lost our big picture while ago but did not realize till now. My team and I conscientiously looked at the report and financial statements. The main issue raised that we are spending more than what we are earning. Somehow big money is leaking and used inefficiently. But where? We hired too many workers in previous year and unnecessarily expanded capacity. Although we had highest quality amongst other firms, we were spending a lot on quality maintenance and other relating machines. Expenditure in advertising and public relations were also huge. Moreover we spent large amount of money on advertising and PR when launching a number of new bikes last year. In order to sell more bikes, advertising and PR are essential. However, the key point is our firm is selling 8 different bikes and we are spending on advertising and PR for each of them. We thought the revenue will increase greatly and recover the expenditure. This clearly did not happen and therefore SHV gone down substantially.
Regard to the reading, Baghai, Smit, and Viguerie found that granularity becomes exceptionally crucial in business downturn because it improves strategies such as cutting costs. How should I manage the firm in more granular way? Our firm is in a need for consequential changes in assign resources, redistribute workers, and evaluate results. Firstly, I think it is important to cut a huge amount of cost in operation and product parts especially advertising and quality management machines. Baghai et al. (2009) observed that “greater granularity is about infusing existing structures and processes with better information and then refining them on the basis of that information” (p.96). In future meetings, we need to gather the information together and discuss each part in depth to prevent further waste of money.
Action to take
During the meeting, my team discussed about new strategies and the way of cutting costs effectively. We found out the way we can cut the costs while maintaining high quality. We also made significant changes on advertising, PR, and operation sector. As we concerned about the problem and managed to overcome with new strategies, we are slowly becoming a ‘real team’ by learning how to work together efficiently.
Baghai, M., Smit, S., & Viguerie, P. (2009). Is your growth strategy flying blind? Harvard Business Review, 87(5), 86---96.