5S is a standard tool that is used prior to many continuous improvement efforts that helps you get things organized and gets your associates prepared for larger scale activities. The 5S breakdown goes like this:


Japanese English Translation
Seiri Sort
Seiton Set or Stabilize (a place for everything)
Seiso Shine (clean)
Seiketsu Standardize
Shitsuke Sustain (discipline)


First you start off by sorting the work area and eliminate anything that is not needed. If it is something needed but not used often it may be relocated to a storage area. Tag items that are not needed with a red tag and have a red tag hold area where these items can be reviewed before disposing.

Secondly set everything in a proper location, or a place for everything and everything in its place. this makes things easier for associates to find when they need it. This is also a useful tool for office areas as well.

Third is a very thorough cleaning of the area. At this point only needed items should be in the area and cleaning should be easy.

Fourth create written standards on how the area should be maintained and cleaned. Clear expectations and checksheets remove any question or room for error. Make sure these are audited regularly. You have also set a new standard for all other areas to follow.

Lastly is sustain or the discipline to follow thru. This tends to be the area where most companies fail. They make progress and expect is to last without follow-up or management involvement. Human nature tends to let things go if they are not monitored closely.

A MOVE FROM THE 2S MODEL TO THE 7S MODEL........EVOLUTION











How do you go about analyzing how well your organization is positioned to achieve its intended objective? This is a question that has been asked for many years, and there are many different answers. Some approaches look at internal factors, others look at external ones, some combine these perspectives, and others look for congruence between various aspects of the organization being studied. Ultimately, the issue comes down to which factors to study.

While some models of organizational effectiveness go in and out of fashion, one that has persisted is the McKinsey 7S framework. Developed in the early 1980s by Tom Peters and Robert Waterman, two consultants working at the McKinsey & Company consulting firm, the basic premise of the model is that there are seven internal aspects of an organization that need to be aligned if it is to be successful.

The 7S model can be used in a wide variety of situations where an alignment perspective is useful, for example to help you:
Improve the performance of a company;
Examine the likely effects of future changes within a company;
Align departments and processes during a merger or acquisition; or
Determine how best to implement a proposed strategy.


The Seven Elements
The McKinsey 7S model involves seven interdependent factors which are categorized as either "hard" or "soft" elements:

HARD:-Strategy,Structure,Systems

SOFT:-Shared Values,Skills,Style,Staff

“Hard” elements are easier to define or identify and management can directly influence them: These are strategy statements; organization charts and reporting lines; and formal processes and IT systems.

“Soft” elements, on the other hand, can be more difficult to describe, and are less tangible and more influenced by culture. However, these soft elements are as important as the hard elements if the organization is going to be successful.

Strategy: the plan devised to maintain and build competitive advantage over the competition.

Structure: the way the organization is structured and who reports to whom.

Systems: the daily activities and procedures that staff members engage in to get the job done.

Shared Values: called “superordinate goals” when the model was first developed, these are the core values of the company that are evidenced in the corporate culture and the general work ethic.

Style: the style of leadership adopted.

Staff: the employees and their general capabilities.

Skills: the actual skills and competencies of the employees working for the company.

Placing Shared Values in the middle of the model emphasizes that these values are central to the development of all the other critical elements. The company’s structure, strategy, systems, style, staff and skills all stem from why the organization was originally created, and what it stands for. The original vision of the company was formed from the values of the creators. As the values change, so do all the other elements.

How to Use the Model
Now you know what the model covers, how can you use it?

The model is based on the theory that, for an organization to perform well, these seven elements need to be aligned and mutually reinforcing. So, the model can be used to help identify what needs to be realigned to improve performance, or to maintain alignment (and performance) during other types of change.

Whatever the type of change – restructuring, new processes, organizational merger, new systems, change of leadership, and so on – the model can be used to understand how the organizational elements are interrelated, and so ensure that the wider impact of changes made in one area is taken into consideration.

You can use the 7S model to help analyze the current situation (Point A), a proposed future situation (Point B) and to identify gaps and inconsistencies between them. It’s then a question of adjusting and tuning the elements of the 7S model to ensure that your organization works effectively and well once you reach the desired endpoint.

Sounds simple? Well, of course not: Changing your organization probably will not be simple at all! Whole books and methodologies are dedicated to analyzing organizational strategy, improving performance and managing change. The 7S model is a good framework to help you ask the right questions – but it won’t give you all the answers. For that you’ll need to bring together the right knowledge, skills and experience.

When it comes to asking the right questions, we’ve developed a Mind Tools checklist and a matrix to keep track of how the seven elements align with each other. Supplement these with your own questions, based on your organization’s specific circumstances and accumulated wisdom.

7S Checklist Questions

Here are some of the questions that you'll need to explore to help you understand your situation in terms of the 7S framework. Use them to analyze your current (Point A) situation first, and then repeat the exercise for your proposed situation (Point B).

Strategy:

What is our strategy?
How to we intend to achieve our objectives?
How do we deal with competitive pressure?
How are changes in customer demands dealt with?
How is strategy adjusted for environmental issues?


Structure:

How is the company/team divided?
What is the hierarchy?
How do the various departments coordinate activities?
How do the team members organize and align themselves?
Is decision making and controlling centralized or decentralized? Is this as it should be, given what we're doing?
Where are the lines of communication? Explicit and implicit?


Systems:

What are the main systems that run the organization? Consider financial and HR systems as well as communications and document storage.
Where are the controls and how are they monitored and evaluated?
What internal rules and processes does the team use to keep on track?
Shared Values:
What are the core values?
What is the corporate/team culture?
How strong are the values?
What are the fundamental values that the company/team was built on?



Style:

How participative is the management/leadership style?
How effective is that leadership?
Do employees/team members tend to be competitive or cooperative?
Are there real teams functioning within the organization or are they just nominal groups?


Staff:

What positions or specializations are represented within the team?
What positions need to be filled?
Are there gaps in required competencies?


Skills:

What are the strongest skills represented within the company/team?
Are there any skills gaps?
What is the company/team known for doing well?
Do the current employees/team members have the ability to do the job?
How are skills monitored and assessed?


UNDER GIVEN IS AN EXAMPLE OF HOW THE 7S WORKSHEET WILL LOOK....

The BCG matrix (aka B.C.G. analysis, BCG-matrix, Boston Box, Boston Matrix, Boston Consulting Group analysis) is a chart that had been created by Bruce Henderson for the Boston Consulting Group in 1970 to help corporations with analyzing their business units or product lines. This helps the company allocate resources and is used as an analytical tool in brand marketing, product management, strategic management, and portfolio analysis.

Cash cows are units with high market share in a slow-growing industry. These units typically generate cash in excess of the amount of cash needed to maintain the business. They are regarded as staid and boring, in a "mature" market, and every corporation would be thrilled to own as many as possible. They are to be "milked" continuously with as little investment as possible, since such investment would be wasted in an industry with low growth.


Dogs, or more charitably called pets, are units with low market share in a mature, slow-growing industry. These units typically "break even", generating barely enough cash to maintain the business's market share. Though owning a break-even unit provides the social benefit of providing jobs and possible synergies that assist other business units, from an accounting point of view such a unit is worthless, not generating cash for the company. They depress a profitable company's return on assets ratio, used by many investors to judge how well a company is being managed. Dogs, it is thought, should be sold off.


Question marks (also known as problem child) are growing rapidly and thus consume large amounts of cash, but because they have low market shares they do not generate much cash. The result is a large net cash consumption. A question mark has the potential to gain market share and become a star, and eventually a cash cow when the market growth slows. If the question mark does not succeed in becoming the market leader, then after perhaps years of cash consumption it will degenerate into a dog when the market growth declines. Question marks must be analyzed carefully in order to determine whether they are worth the investment required to grow market share.


Stars are units with a high market share in a fast-growing industry. The hope is that stars become the next cash cows. Sustaining the business unit's market leadership may require extra cash, but this is worthwhile if that's what it takes for the unit to remain a leader. When growth slows, stars become cash cows if they have been able to maintain their category leadership, or they move from brief stardom to dogdom.

As a particular industry matures and its growth slows, all business units become either cash cows or dogs. The natural cycle for most business units is that they start as question marks, then turn into stars. Eventually the market stops growing thus the business unit becomes a cash cow. At the end of the cycle the cash cow turns into a dog.


The overall goal of this ranking was to help corporate analysts decide which of their business units to fund, and how much; and which units to sell. Managers were supposed to gain perspective from this analysis that allowed them to plan with confidence to use money generated by the cash cows to fund the stars and, possibly, the question marks. As the BCG stated in 1970:


Only a diversified company with a balanced portfolio can use its strengths to truly capitalize on its growth opportunities. The balanced portfolio has:
stars whose high share and high growth assure the future;
cash cows that supply funds for that future growth; and
question marks to be converted into stars with the added funds

Introduction

With the opening up of the insurance sector and with so many players entering the Indian insurance industry, it is required by the insurance companies to come up with innovative products, create more consumer awareness about their products and offer them at a competitive price. New entrants in the insurance sector had no difficulty in matching their products with the customers' needs and offering them at a price acceptable to the customer.

But, insurance not being an off the shelf product and one which requiring personal counseling and persuasion, distribution posed a major challenge for the insurance companies. Further insurable population of over 1 billion spread all over the country has made the traditional channels of the insurance companies costlier. Also due to heavy competition, insurers do not enjoy the flexibility of incurring heavy distribution expenses and passing them to the customer in the form of high prices.

With these developments and increased pressures in combating competition, companies are forced to come up with innovative techniques to market their products and services. At this juncture, banking sector with it's far and wide reach, was thought of as a potential distribution channel, useful for the insurance companies. This union of the two sectors is what is known as Bancassurance.

What is Bancassurance?

Bancassurance is the distribution of insurance products through the bank's distribution channel. It is a phenomenon wherein insurance products are offered through the distribution channels of the banking services along with a complete range of banking and investment products and services. To put it simply, Bancassurance, tries to exploit synergies between both the insurance companies and banks.

Bancassurance if taken in right spirit and implemented properly can be win-win situation for the all the participants' viz., banks, insurers and the customer.

Advantages to banks

• Productivity of the employees increases.
• By providing customers with both the services under one roof, they can improve overall customer satisfaction resulting in higher customer retention levels.
• Increase in return on assets by building fee income through the sale of insurance products.
• Can leverage on face-to-face contacts and awareness about the financial conditions of customers to sell insurance products.
• Banks can cross sell insurance products Eg: Term insurance products with loans.

Advantages to insurers

• Insurers can exploit the banks' wide network of branches for distribution of products. The penetration of banks' branches into the rural areas can be utilized to sell products in those areas.
• Customer database like customers' financial standing, spending habits, investment and purchase capability can be used to customize products and sell accordingly.
• Since banks have already established relationship with customers, conversion ratio of leads to sales is likely to be high. Further service aspect can also be tackled easily.

Advantages to consumers

• Comprehensive financial advisory services under one roof. i.e., insurance services along with other financial services such as banking, mutual funds, personal loans etc.
• Enhanced convenience on the part of the insured
• Easy access for claims, as banks are a regular go.
• Innovative and better product ranges








Issues to be tackled

Given the roles and diverse skills brought by the banks and insurers to a Bancassurance tie up, it is expected that road to a successful alliance would not be an easy task. Some of the issues that are to be addressed are:

1. The tie-ups need to develop innovative products and services rather than depend on the traditional methods. The kinds of products the banks would be allowed to sell are another major issue. For instance, a complex unit-linked life insurance product is better sold through brokers or agents, while a standard term product or simple products like auto insurance, home loan and accident insurance cover can be handled by bank branches
2. There needs to be clarity on the operational activities of the bancassurance i.e., who will do the branding, will the insurance company prefer to place a person at the bank branch, or will the bank branch train and put up one of its own people, remuneration of these people.
3. Even though the banks are in personal contact with their clients, a high degree of pro-active marketing and skill is required to sell the insurance products. This can be addressed through proper training.
4. There are hazards of direct competition to conventional banking products. Bank personnel may become resistant to sell insurance products since they might think they would become redundant if savings were diverted from banks to their insurance subsidiaries.


Conclusion

With huge untapped market, insurance sector is likely to witness a lot of activity - be it product innovation or distribution channel mix. Bancassurance, the emerging distribution channel for the insurers, will have a large impact on Indian financial services industry. Traditional methods of distributing financial services would be challenged and innovative, customized products would emerge.

Banks will bring in customer database, leverage their name recognition and reputation at both local and regional levels, make use of the personal contact with their clients, which a new entrant cannot, as they are new to the industry.

In customer point of view, a plethora of products would be available to him. More customized products would come into existence and that too all within a hands reach.

Finally Success of the bancassurance would mostly depend on how well insurers and banks understand each other's businesses and seize the opportunities presented, weeding out differences that are likely to crop up.

Cyber insurance is fast becoming a necessity for companies. For the Insurers it promises to open up a new avenue of growth. Only time will tell if cyber insurance turns out to be manna from heaven, but all the big players have lined up to claim their shares…..

Even as pundits started talking about the saturation of the Insurance industry in the aftermath of the 9/11 attacks, a new vista appears to be opening up for the industry. As yet largely untapped and unmeasured, it seems to be just what the doctor ordered for rejuvenating a sector considered by many to be in the stagnation phase of its product life cycle by promising a very lucrative growth phase. Like all growth phases, it is uncertain and ridden with risk. The early adopters are there, waiting for the product and just like all growth markets the sky is the limit for pricing. Yes, we are talking about cyber insurance, a new segment with the potential to put the insurance industry back on the growth path.

Why cyber insurance

Let's face it - what is the most dreaded thing today? Fire? Well, the insurers take care of that, don't they? Death of the director, maybe… Nope the insurers are there again with their key person insurance. Loss of data, right? Well we all have excellent disaster recovery plans - and the back up sits in such idyllic locations as Alaska, so no problem there either! Traditional insurance covers just about everything a Brick and Mortar Company can face today.

But what if someone defaces your site with inflammatory messages leaving everybody visiting your site doubting your credibility? What if someone steals your cyber money? If someone introduces a virus into your system and all your partner companies' systems go kaput, who answers? Talking of which, who do you think is responsible should a partner's system inadvertently infect your site with a virus? When someone steals your customer information, are you responsible for the breach (especially in the wake of stringent legislation like HIPAA..)?

The Ecommerce world thus poses a range of risks - fraud, theft, espionage and a million other such things.

It's clear, the more technology advances and increases the quality of life, the more will the cyber crime brains help keep the economy from becoming hyper efficient.

A recent CSI/ FBI survey*** of 223 companies that were able to estimate their financial losses due to cyber crime, revealed the figure to be a whopping $460 million. Theft of proprietary information accounted for 37% of the estimated loss while fraud set the companies back by about 25%.

The risk is undoubtedly there and the need for insurance imminent. The question we need to ask is whether there something we can do about it. The answer seems to be cyber insurance.

The hour has produced the product, but it's still as naïve and immature as a newborn baby. But at least, it's begun and a good start is half done. So let's leap into the brave new world of cyber insurance and how the future looks. Before we do so however, we need to understand the evolving relationship between the Internet and the Insurance industry.

The Insurance-Internet compatibility puzzle

Insurance and the Internet were expected to hit off like vanilla ice-cream and the neighbor's five year old kid. Didn't work though - while consumers took to online Financial services with gusto, for some reason they avoided online insurance. The reasons prescribed for this lukewarm response to online insurance purchase are manifold.
• - A META group study determined that only 24% of the insurance companies had aggregator site presence and even these companies "do not know what, if any, benefits, are being gained from it for lead generation/sales or brand recognition, because there are no measurement criteria being applied." The report goes on to predict that the banks and financial services will benefit from this reluctance on the part of Insurance companies to recognize and participate in the e-world.
• - A Booz Allen Hamilton study in 1999, pointed out three reasons for online Insurance faring badly. To quote, "First is product complexity and regulation. Second, insurance companies continue to struggle with the cost and complexity of Internet-based sales capabilities and do not expect cost reduction from building these capabilities. Third, these companies are still very dependent on, or influenced by, agents/brokers and are therefore reluctant to offer online sales capabilities.


Whether it was an attitude or an aptitude problem, the Internet and the Insurance industry were as oil and water. Even as the "experts" began talking about the "traditional" mindset of the industry, a disturbing trend began burgeoning in the fathomless depths of the e-world - that of cyber crime.

Suddenly, people realized that they had practically no weapon to protect themselves from cyber-crime. And the insurers began - albeit cautiously - recognizing that a market, staggering in its vastness was here for them to exploit.

Major Players and Products in market

AIG, Chubb, Marsh and a host of others have already entered the fray with a host of policies covering different types and levels of cyber risk. While third party insurance is more commonly offered, first party products have also begun to appear.

Recent reports from studies by reputed bodies indicate that Ecommerce Insurance would generate $2.5 Billion in premium by 2005. In anticipation of this boom, the players have started offering products that cover all the key risks specific to the new economy.

A presentation from AIG summarizes the risks which are most relevant today* - Web Content based liability (libel, slander, copyright and trademark infringement), Professional Errors and Omissions Liability such as in the rendering or failing to render professional services for others for a fee and Network Security Liability & Loss. All these risks can now be covered, albeit in a limited way.

Trends and Issues

While the industry is now getting a good handle on the key risks that need to be insured, the science of quantifying cyber risks is still in its infancy.Traditionally, the actuaries had a lot of historical data, which helped them predict the incidence of risks to a nicety. Errors in estimation were few and far in between. The definition of the fine print in the policies was rather water tight too - both the insurers and the companies knew what was being offered and what wasn't (sure there were quite a few disputed claims - but then now we are stepping into the lawyer market!).

With cyber insurance, none of this is true. Historical data is scarce, and what little is there is not cast in stone either. Estimations of damage due to virus attacks vary dramatically. The perceptions of possible future risks are equally volatile. Companies and the insurers have no real answers.

The result is that we have rather expensive guesstimates - in 2001, the average annual cyber policy premium was $45,000 with a $10 million liability limit**. One other issue is the rather low liability limit. While liability coverage of over $100 million may interest a corporate behemoth, cyber insurance today offers a very low liability coverage ($10M to $25M).

Endpoint

Taxes, death and the Internet are here to stay, no doubt about that. The question though is how cyber insurance will grow over the years.It is clear that lack of enough data and the resulting uncertainty is proving to be a bit of a dampener. The smaller companies are content with lower coverage but at low premiums while the corporate types may be willing to part with sizeable premiums but need large coverage. The insurance companies today are able to provide only limited coverage at rather exorbitant prices.

The solution seems to be in the hands of the IT consultants. These people understand technology better than most and need to be in a position to evaluate future risks to survive in the industry. Thus, they are perhaps best equipped to help the insurance companies predict the risks and define premiums.

Perhaps comprehensive technological audits in view of a company's current technological infrastructure and future Ecommerce needs are the key to success, perhaps not. One thing is however clear - a "brave new world" is unfolding. There will be successes and failures, but the biggest victors will be those who get their hands dirty first. And given the insurance industry's propensity for taking advantage of opportunities in managing risks optimally, it looks like cyber crime is one fish that isn't going to get away lightly!

In the theory of firm's capital structure and financing decisions, the Pecking Order Theory or Pecking Order Model was developed by Stewart C. Myers in 1984. It states that companies prioritize their sources of financing (from internal financing to equity) according to the law of least effort, or of least resistance, preferring to raise equity as a financing means “of last resort”. Hence, internal funds are used first, and when that is depleted, debt is issued, and when it is not sensible to issue any more debt, equity is issued. This theory maintains that businesses adhere to a hierarchy of financing sources and prefer internal financing when available, and debt is preferred over equity if external financing is required.


Tests of the Pecking Order Theory have not been able to show that it is of first order importance in determining firm's capital structure; however, several authors have also been able to find that there are instances where it is a good approximation to reality.

1) Do not ever let anyone take you for granted.( if presentations are to be made together then make sure they are.....don't tolerate freeloaders.......you'll find many where ever you are)


2)Be a part of social sites and see whats happening on the other side of the fence....but.....do not do PR and bitch about your colleagues or institute or personal life for the heck of it.....you never know who is watching)


3)Do not try to be the extra smart sincere student of the group always in the limelight because of brilliant work and questions...you will find favour only with the teachers...and alienate ur classmates.......thats not so important but you will lose your surprise value during placements or in situation which matters..


4)Try not to put on too much weight...b schools make u put on weight.all those sitting around sessions...late night coffees munching and tea........body clocks go haywire ....

5)Try getting your regular 8 hours sleep no matter what...15 minute naps help....don't worry you'll be dog tired anyway....so you'll be able to get cat naps........do this or youll lose memory soon and exams will not be so much fun when u have two or tree papers per day without gaps.........


6)Don't just go with the flow...companies like people with individuality and not just jargon spouting cookie cuts.......if ur one of the crowd....its ok but try to have ur own USP.....it helps ........u need to have a differentiator..........


7)Don't smoke and drink excessively just because of peer pressure and because its so hip etc..........that combined with rich food, a sedentary lifestyle is a sure way to obesity.

8) Don't tell your mum and dad everything that happens in a b school...they wouldnt understand and will worry overmuch...


9)Start reading newspapers and journals and magazines if you are not into the habit of doing so.....its all about being well informed and street smart...the Dhirubhai's didn't go to Harvard .....


10)Never risk your career for anything and be focused at all times..........don't get depressed.....shit happens to everyone.........read that book SNAPSHOTS FROM HELL........helps.......and try not to please everone..you cant do it anyway..

:)


All the Best

Student syndrome refers to the phenomenon that many people will start to fully apply themselves to a task just at the last possible moment before a deadline. This leads to wasting any buffers built into individual task duration estimates.



The student syndrome is a form of procrastination, but with more of a plan with good intention. For example, if a student or group of students goes to a professor and asks for an extension to a deadline they will usually defend their request by noting how much better their project will be given more time to work on it; they request this with all the right intentions. In reality most students will have other tasks or events place a demand on the time they fully intended to commit to improving their paper or project. In the end they will often end up close to the same situation they started with wishing they had more time as the new delayed deadline approaches.

This same behaviour is seen in businesses; in project and task estimating, a time- or resource-buffer is applied to the task to allow for overrun or other scheduling problems. However with Student syndrome the latest possible start of tasks in which the buffer for any given task is wasted beforehand, rather than kept in reserve. Like students, many workers do not complete assignments early, but wait until the last minute before starting, often having to rush to submit their assignment minutes before the deadline. A similar phenomenon is seen every year in the United States when personal tax returns are due - Post Offices remain open until midnight on the final day as people queue to get their tax return postmarked.



CRITICAL CHAIN AND ITS CONNECTION-


With traditional project management methods, 30% of the lost time and resources are typically consumed by wasteful techniques such as bad multi-tasking, Student syndrome, In-box delays, and lack of prioritization.

In project management, the critical chain is the sequence of both precedence- and resource-dependent terminal elements that prevents a project from being completed in a shorter time, given finite resources. If resources are always available in unlimited quantities, then a project's critical chain is identical to its critical path.

Critical chain is used as an alternative to critical path analysis. The main features that distinguish the critical chain from the critical path are:

1. The use of (often implicit) resource dependencies. Implicit means that they are not included in the project network but have to be identified by looking at the resource requirements.
2. Lack of search for an optimum solution. This means that a "good enough" solution is enough because:
1. As far as is known, there is no analytical method of finding an absolute optimum (i.e. having the overall shortest critical chain).
2. The inherent uncertainty in estimates is much greater than the difference between the optimum and near-optimum ("good enough" solutions).
3. The identification and insertion of buffers:
* project buffer
* feeding buffers
* resource buffers.
4. Monitoring project progress and health by monitoring the consumption rate of the buffers rather than individual task performance to schedule.

CCPM aggregates the large amounts of safety time added to many subprojects in project buffers to protect due-date performance, and to avoid wasting this safety time through bad multitasking, student syndrome, Parkinson's Law and poorly synchronised integration.

Critical chain project management uses buffer management instead of earned value management to assess the performance of a project. Some project managers feel that the earned value management technique is misleading, because it does not distinguish progress on the project constraint (i.e. on the critical chain) from progress on non-constraints (i.e. on other paths). Event chain methodology can be used to determine a size of project, feeding, and resource buffers.


METHODOLOGY

Planning

A project plan is created in much the same fashion as with critical path. The plan is worked backward from a completion date with each task starting as late as possible. Two durations are entered for each task: a "best guess," or 50% probability duration, and a "safe" duration, which should have higher probability of completion (perhaps 90% or 95%, depending on the amount of risk that the organization can accept).

Resources are then assigned to each task, and the plan is resource leveled using the 50% estimates. The longest sequence of resource-leveled tasks that lead from beginning to end of the project is then identified as the critical chain. The justification for using the 50% estimates is that half of the tasks will finish early and half will finish late, so that the variance over the course of the project should be zero.

Recognizing that tasks are more likely to take more rather than less time due to Parkinson's Law, Student's Syndrome, or other reasons, "buffers" are used to establish dates for deliverables and for monitoring project schedule and financial performance. The "extra" duration of each task on the critical chain—the difference between the "safe" durations and the 50% durations—is gathered together in a buffer at the end of the project. In the same way, buffers are gathered at the end of each sequence of tasks that feed into the critical chain.

Finally, a baseline is established, which enables financial monitoring of the project.


Execution

When the plan is complete and the project ready to kick off, the project network is fixed and the buffers size is "locked" (i.e. their planned duration may not be altered during the project), because they are used to monitor project schedule and financial performance.

With no slack in the duration of individual tasks, the resources on the critical chain are exploited by ensuring that they work on the critical chain task and nothing else; bad multitasking is eliminated. An analogy is drawn in the literature with a relay race. The critical chain is the race, and the resources on the critical chain are the runners. When they are running their "leg" of the project, they should be focused on completing the assigned task as quickly as possible, with no distractions or multitasking. In some case studies, actual batons are reportedly hung by the desks of people when they are working on critical chain tasks so that others know not to interrupt. The goal, here, is to overcome the tendency to delay work or to do extra work when there seems to be time.

Because task durations have been planned at the 50% probability duration, there is pressure on the resources to complete critical chain tasks as quickly as possible, overcoming student's syndrome and Parkinson's Law.


Monitoring

Monitoring is, in some ways, the greatest advantage of the Critical Chain method. Because individual tasks will vary in duration from the 50% estimate, there is no point in trying to force every task to complete "on time;" estimates can never be perfect. Instead, we monitor the buffers that were created during the planning stage. A fever chart or similar graph can be easily created and posted to show the consumption of buffer as a function of project completion. If the rate of buffer consumption is low, the project is on target. If the rate of consumption is such that there is likely to be little or no buffer at the end of the project, then corrective actions or recovery plans must be developed to recover the loss. When the buffer consumption rate exceeds some critical value (roughly: the rate where all of the buffer may be expected to be consumed before the end of the project, resulting in late completion), then those alternative plans need to be implemented.




Theory of Constraints (TOC) is an overall management philosophy that aims to continually achieve more of the goal of a system. If that system is a for-profit business, then the goal is to make more money, both now and in future. TOC consists of two primary collections of work: 1) The five focusing steps and their application to operations; 2) The Thinking Processes and their application to project management and human behavior.

According to TOC, every organization has - at any given point in time - one key constraint which limits the system's performance relative to its goal (see Liebig's Law of the Minimum). These constraints can be broadly classified as either an internal constraint or a market constraint. In order to manage the performance of the system, the constraint must be identified and managed correctly (according to the Five Focusing Steps below). Over time the constraint may change (eg because the previous constraint was managed successfully, or because of a changing environment) and the analysis starts anew.

Fire your bad customers.

That piece of advice has become widely accepted in recent years as companies have sought to manage their relationships with customers in more sophisticated ways. The rationale for this idea is clear-cut: Low-value customers -- such as the ones who hardly spend any money on your services or products yet tie up your company's phone lines with questions and complaints -- end up costing more money than they provide. So why not jettison them and focus your customer-relationship efforts on more profitable individuals? Or, as an alternative, why not at least try to increase the worth of the low-value customers to your firm? If a firm has only valuable customers, the thinking goes, its profitability and shareholder value should increase.

It all sounds quite rational, and many corporations have jumped on the bandwagon. But a new study by two Wharton marketing professors, Jagmohan Raju and Z. John Zhang, and Wharton doctoral student Upender Subramanian, cautions that firing low-value customers may actually decrease firm profits and that trying to increase the value of these customers may be counterproductive.

The notion that firing unprofitable customers is a smart thing to do has emerged out of the broad acceptance of a practice usually referred to as Customer Relationship Management (CRM). With CRM, firms often use information technology to quantify the value of individual customers and provide better privileges, discounts or other inducements to customers identified as having high-value. In their study, Raju and Zhang have coined the term Customer Value-based Management (CVM) to describe this central component of CRM. These customer analyses have often shown that a small proportion of customers contribute to a large percentage of profits, and that many customers are unprofitable.

Financial institutions are perhaps best known for treating low-value customers differently from good ones. For instance, bad customers at Fidelity Investments are made to wait longer in queues to have their calls taken by call centers, according to examples cited in the study. But many other types of firms have embraced CRM and are giving low-value customers the cold shoulder. Continental Airlines e-mails only its high-value customers, apologizing for flight delays and compensating them with frequent-flier miles. At Harrah's, room rates range from zero to $199 per night, depending on customer value. Some firms fire customers outright. In July 2007, CNN reported that Sprint had dropped about 1,000 customers who were calling the customer-care center too frequently -- 40 to 50 times more than the average customer every month over an extended period.

In the study, "Customer Value-based Management: Competitive Implications," Zhang, Raju and Subramanian break ground by analyzing CVM in the context of a competitive environment. The researchers acknowledge that firing bad customers may make some sense in industries where there is little or no competition. If a firm treats all customers equally, the argument goes, not only does the company waste resources on attracting and retaining unprofitable customers, it also under-serves profitable customers, who may become unhappy and leave.

Targets for Poachers

However, for the overwhelming majority of companies operating in a competitive environment, firing low-value customers can be counterproductive, the researchers conclude. The key reason: Companies that rid themselves of low-value customers -- or take steps to turn low-value customers into high-value ones -- leave themselves open to successful poaching by competitors. If the competition knows that you have fired many or all of your low-value customers, they are likely to intensify their efforts to take your remaining customers away from you because they now know that all, or most, of those remaining customers are of the high-value variety.

"Over time, companies have acquired a lot of capabilities in processing customer information," Zhang says. "They have all sorts of analytics to do data mining and to figure out how to use that data. One thing companies have done is to figure out who are their profitable customers, and they have concluded that firing low-value customers is a good idea. The problem, however, is that while this idea seems to make sense, it only makes sense in situations where there is no competition, which is very unlike the real world. Our paper looks at how CVM affects companies competing with one another."

"What our analysis tells us is companies make money, in part, by confusing their competitors about their customers," Raju says. "If you make your customer base transparent by firing your low-value customers, competitors will hit you hard because you will be left with customers of one type.'

Instead of firing unprofitable customers, some companies have tried to turn them into high-value customers by giving them inducements to change their behavior, such as teaching them to spend more or to use low-cost support channels. But the Wharton researchers found that this idea is also wrongheaded. "If you make low-value customers more valuable, this can also be counter-productive because it also encourages your competitors to poach more intensely," Raju says.

So what is the proper way to manage relationships with low- and high-value customers? "Our research finds that a better approach is to improve the quality of your high-end customers at the same time that you keep your low-end customers, but you should find other, cheaper, ways to manage the low-value customers, such as encouraging them to use automated phone-response systems or the Internet or offering minimal discounts or other benefits," says Raju "You have to keep your competition confused about who your good and bad customers are."

CVM has enjoyed significant support amongst corporations, researchers and others because its logic seems so compelling. But CVM, once adopted, has often proved disappointing. Studies have shown, for instance, that the retail banking industry, while investing billions of dollars in CVM, has been unenthusiastic about the results to the bottom line, according to the Wharton paper.

"One reason why actual results differ from expected outcomes could be that, hitherto, researchers and industry experts have by and large looked at firms in isolation without considering competitive reactions," the Wharton scholars write. In their paper, the researchers provide the first theoretical analysis of CVM practices when CVM capabilities are potentially available to all firms in an industry. The researchers set up a mathematical model and applied game theory to see how two competing firms, each with the same size base of customers called 'Good' and 'Poor', would compete for customers by offering various inducements. Among other things, the model assumes that the firms have access to the same CVM technology, that the firms are equally efficient in offering inducements and that each firm can identify its customers.

Another finding: Firms in an industry may become worse off as CVM becomes more affordable. Hence, they have an incentive to self-regulate their ability to collect or use customer information. "In some cases, CVM can do damage to an industry," notes Zhang. "Say you and I are competitors. We both have good information and we continue to poach each other's customers. This is high-tech marketing warfare. If the cost of CVM increases, it's not necessarily a bad thing. It's like when armies fight each other with high-cost ammunition: When the cost increases, both sides have less of it, and fighting subsides. But if the cost of ammunition drops, the armies have more ammunition and fighting intensifies. So there's an incentive for companies to get together in industries and agree to use certain kinds of information."

CVM vs. Targeted Pricing

The Wharton researchers stress that it is important understand that CVM is different from another concept that has taken root in many companies in recent years -- targeted pricing. With targeted pricing, firms differentiate between customers based on their willingness to pay and they charge a higher price to those who are relatively price insensitive. In this respect, a high-value customer is one who can bear a higher price. Put another way, a high-value customer is treated poorly. By contrast, under CVM a customer may be of high value due to other characteristics, such as the kinds of goods purchased, the number of times a product is returned to the seller, and the number of times the customer requests customer support. Hence, under CVM, a high-value customer would typically receive lower prices or better service than a low-value customer.

The researchers say that, in future studies, they will continue to explore CVM. They want to analyze such topics as how customer value can be more accurately measured, how it can be enhanced, and in which industries could CVM prove most valuable. In the meantime, they say their new study should help convince firms to reconsider the notion that firing bad customers is a smart decision.

"What we'd like readers to take away from our paper is that just 'cleaning up' your customer base is not good enough," Raju says. "You should focus on good customers and try to improve their quality and not just try to get rid of the bad ones. Firms should find cheaper ways to keep low-value customers because they are confusing your competition to your advantage and there's a chance someday that they will become good customers."

Is your strategy right for you? There are six criteria on which to base an answer.
These are:
1. Internal consistency.
2. Consistency with the environment.
3. Appropriateness in the light of available resources.
4. Satisfactory degree of risk.
5. Appropriate time horizon.
6. Workability.

1. Is the Strategy Internally Consistent?

Internal consistency with corporate goals.
Each policy fits into an integrated pattern.
How it relates to other policies, which the company has established and to the goals it is pursuing.

2. Is the Strategy Consistent with the Environment?

Important test of strategy is whether the chosen policies are consistent with the environment—whether they really make sense with respect to what is going on outside.
Consistency with the environment, a static and a dynamic aspect. In a static sense, it implies judging the efficacy of policies with respect to the environment as it exists now. In a dynamic sense, it means judging the efficacy of policies with respect to the environment, as it appears to be changing.
In one sense, therefore, establishing a strategy is like aiming at a moving target. You have to be concerned not only with present position but also with the speed and direction of movement.

3. Is the strategy Appropriate in View of the Available Resources?

Resources are those things that a company is or has and that help it to achieve its corporate objectives, like money, competence, and facilities; there are two basic issues which management must decide in relating strategy and resources. These are:
 What are our critical resources?
 Is the propose strategy appropriate for available resources?

Critical Resources –
that they represent action potential, and its capacity to respond to threats and opportunities that may be perceived in the environment. They are the factor limiting the achievement of corporate goals; and that which the company will exploit as the basis for its strategy. The three resources most frequently identified as critical are money, competence, and physical facilities. Let us look at the strategic significance of each.

Money: particularly valuable resource because it provides the greatest flexibility of response to events as they arise and considered the “safest” resource, in that safety may be equated with the freedom to chose from among the widest variety of future alternatives. Companies that wish to reduce their short-run risk will therefore attempt to accumulate the greatest reservoir of funds they can.

Competence:
Organizations survive because they are good at doing those things, which are necessary to keep them live. Companies may be good at marketing, other especially good at engineering; still others depend primarily on their financial sophistication. In determining a strategy, management must to determine where its strengths and weaknesses lie. It must then adopt a strategy, which makes the greatest use of its strengths.

Physical Facilities:
Physical facilities have significance primarily in relationship to overall corporate strategy. Any appraisal of a company’s physical facilities as a strategic resource must consider the relationship of the company to its environment. Facilities have no intrinsic value for their own sake. Their value to the company is either in their location relative to markets, or to sources impending competitive installations.

Achieving the Right Balance:
One of the most difficult issues in strategy determination is that of achieving a balance between strategic goals and available resources. The most common errors are either to fail to make these estimates at all or to be excessively optimistic about them.

4. Does the Strategy Involve an Acceptable Degree of Risk?
Strategy and resources, taken together, determine the degree of risk, which the company is undertaking and this is a critical managerial choice. Each company must decide for itself how much risk it wants to live with. Some qualitative factors to be used for evaluation of the degree of risk are:
 The amount of resources (on which the strategy is based) whose continued existence or value is not assured.
 The length of the time periods to which resources are committed.
 The proportion of resources committed to a single venture.
The greater these quantities, the greater the risk that is involved.

5. Does the Strategy Have an Appropriate Time Horizon?
A viable strategy reveals what goals are to be accomplished along with when the aims are to be achieved. Goals, like resources, have time-based utility.

6. Is the Strategy Workable?
It would seem that the simplest way to evaluate a corporate strategy. A better way of asking: Does it work? However, if we to answer that question, we are immediately faced with criteria. What is the evidence of a strategy “working”? Quantitative indexes on performance are a good start, but they really measure the influence of two critical factors combined; the strategy selected and the skill with which it is being execute. Faced with the failure to achieve anticipated results, both of these influences must be critically examine.