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Week 4

In last week's lecture, we briefly summarized the main topics of the previous session, namely the definition of a problem, a research plan, the development of process consulting solutions, and the SAFe criteria for evaluation. We then talked at length about the different phases, ergo questions, assumptions, hypotheses and solutions, why it is important to test your hypotheses and which are the main models for testing them.

Before elaborating the models in detail, I would like to point out that I think there is an enormous advantage in trying hard enough in each stage because you can avoid complications that can come into effect if you move too quickly into the solution phase. Therefore, you should invest as much time as needed in setting up assumptions, hypotheses and in testing them.

Two of the most common frameworks for the investigation of hypotheses are the McKinsey S-7 model and the Porter's Five Forces Framework. While McKinsey's S-7 model focuses on the internal factors, Porter's Five Forces Framework considers the external factors, so it is not possible to make a statement about which of the models adds more value to your tests. To put your hypotheses through their paces and get the best result, it is recommended to use both models.

As previously mentioned, the S-7 Model covers internal circumstances, which furthermore can be subdivided into hard (e.g. strategy, structure and systems) and soft elements (e.g. style, staff and skills). And all of them are based on the companies shared values. When using this framework, you need to answer the following questions in chronological order:
  • Are the shared values consistent with the company’s structure, strategy and systems? If not, then what needs to be changed?
  • How well do the hard elements support each other? Is there probably a need to change?
  • Do the soft elements support the hard elements? If not, how could this be improved?
  • Which elements do you need to adjust, and which impact have the adjustments to other elements? Do you need to re-align them.
On the other hand, as aforementioned, the FF Framework helps you in the analysis of external factors. The forces you need to consider are the threat from new entrants, the bargaining power of suppliers, the bargaining power of buyers and the threat from substitute products. All these forces influence competitive rivalry and are key factors in analysing the attractiveness of an industry, sector or new business. Even if working on these points helps you to form an opinion, I think it is even more important to develop counter-arguments or solutions for critical factors. For example, if you are concerned about suppliers' bargaining power because you are considering entering an industry with monopolistic or oligopolistic supplier structures, you should try to explore your options to circumvent them, e.g. by using the AT Kearney purchasing chessboard.

We then continued to work on the Woofies Dog Food PLC case study in our seminar. While we already did a SWOT and PESTEL analysis in the last seminar, the aim last week was to create hypotheses (or rather to work with these ideas on the worksheet) based on the underlying assumptions and then verify them with the S-7 or 5-force model. While working on the models, I found that they did not even take into account one of the most important factors for these case studies - the family. In my opinion, this is a key factor missing in the company's internal analysis via the S-7 model, when it comes to owner-managed family businesses. Of course, the model works well if your client is an international company, but you should never make the mistake of neglecting the impact, family and personality of your heirs, especially in family businesses.

Let me give you a brief example based on the case study we worked on in our seminar. It is not reprehensible, but understandable, that the current CEO and owner wants to hand over a well-managed business, but the business must also meet the needs and expectations of his sons. For example, if his sons are not willing to run an international company, expansion is certainly not the right solution. Instead, you should adapt your strategy and focus on strengthening your market position and increasing your market share in your home market. Therefore, at least for family businesses, I would like to add "family" as another component of the S-7 model that can be represented as a circle around the entire model that defines the framework conditions.

In summary, I can say that last week I was able to take some valuable approaches from business consultancy with me and it definitely made me think about the topics discussed.


Picture Source: www.images.app.goo.gl/R37F44u99Jr3FskN6 [22/10/2019, 1 pm]

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