Orientación y valores del modelo de negocio

Case study: RTZ

RTZ is a big, international mining conglomerate, organized like a bureaucracy. It allows for a considerable degree of decentralization but product and market deci-sions, capital spending, pricing and the appointment of key personnel are all made centrally. This relationship with the various business units is potentially fraught.

Questions arise such as how the partial efforts of managers in the centre, concerned with many businesses, could add value to the focused efforts of managers in sub-units who concentrate on one alone.

In RTZ, businesses move ahead through periodic, major capital projects. The investment required to bring a new mine into production is massive and the decision to proceed may affect the success of the business for decades. Value is provided strategically through a capital project submissions procedure that acts as the focus for planning. The company has particular expertise in computer-based modelling and conceptual mine planning. Project submissions are worked up within the operating companies in collaboration with the centre. Information services in the centre provide expertise in areas such as mine planning, strategic and commercial evaluations, financial analysis and planning, and macroeconomic modelling. RTZ has been at the forefront of analytical techniques for capital expen-diture evaluation since the 1960s when it started working with DCF analysis, and it now specializes in weighted risk rates. Creativity is focused on financing packages and funds are made available to units on an internally competitive basis. The trick is to fund all ‘good’ projects. Integration and value are therefore added through information services. The modelling they provide for business units cannot be matched elsewhere.

Maintaining integration through the provision of functions or services that cannot be matched elsewhere is no easy task, especially if this is based on information alone. Information services are relatively easy to duplicate. Clearly a corporate staff incurs overheads of its own and is further removed from the customer interface than any of its subsidiary business units. Hence there is a danger that individual units will regard the centre as out of touch or interfering. Service provision must go well beyond the supply of market research or financial management better than a specialist organization. If this were all, then value added could be maximized by outsourcing. Strategic planning is therefore an obvious area where the centre may make a binding contribution. As a part of the enterprise disinterested in the politics of individual business units, the centre is better placed to make decisions which will maximize the position of the enterprise as a whole.

Case study: Shell Oil

Shell Oil, an Anglo-Dutch company, is one of the world’s largest corporations with operating units around the world. It employs over 10,000 managers of over 70 different nationalities between some 100 operating companies. It trades in the tech-nically complex area of oil, gas and chemicals in a business that requires periodic, substantial investments which invariably commit the organization in the medium to long term. It therefore needs excellent information services to provide technical support and some means of maintaining a coherent internal culture. Not only are its own managers influenced by their indigenous culture, but commercial conditions in different countries provide challenges of their own.

Perhaps unsurprisingly, Shell has been described as the largest consensus-seeking organization in the world. There is a great deal of decentralization and local control. This internationalization may have been fostered by the company’s roots with the need to design a management structure split across two European coun-tries at the time of writing in 2005. (This situation may have been resolved by recent reorganization at Shell.) However, the culture is also formalized in the form of agreed principles which are imposed strategically on business units through a Statement of General Business Principles. These principles aim to provide a code of conduct designed to act as consistent reference point for the standards of behaviour which the company expects of its managers, wherever they are based.

Information services stem from a relatively small central office of some 700 people, spread between London and the Hague, which provides high-quality technical expertise that can be brought to bear throughout the world. The balance between centralization and decentralization is reviewed on a situational basis. In the case of exploration where decisions about future investment require careful analysis of large data sets or, in the case of chemicals, where competition is research based on a global scale, there is much central involvement. Mission critical intelligence is therefore concentrated. So-called downstream operations such as marketing and refining are more decentralized. Thus the centre is better able to assess markets, technologies and products than any of its units. Strategically, Shell also creates value through its corporate ability to maintain good relationships with local governments, communities and partners throughout the world. This is coupled with an ability to reinforce local managers with international experts. Its particular form of matrix structure thus allows it to redeploy functional specialists and key personnel when needed.

The downside of these centrally provided services seems to be that they can expe-rience difficulty in moving away from what might be regarded as their core business.

Shell was not outstandingly successful in areas such as metals, mining, consumer products, coal and nuclear power. Very often this requires business units with different cultures that do not sit well with the corporate core. This is a problem that needs thinking about since the operational analytics needed for a full marketing revolution depend on large-scale, fully integrated information services able to network multiple databases so as to have the best possible basis of advanced data mining.

Case study: ING Direct –- how strategy, structure, marketing and systems interact

Whatever you hear about the service level retail customers get from their banks, one thing is clear. Though customers switch their current accounts less often than they should, or than they think they should (based on cost and service comparisons), they vote with their feet when it comes to finding value and convenience. This underlies the success of the world’s fastest-growing pure direct bank, ING Direct.

ING Direct was designed to give consistent value to customers. This meant avoiding playing the ‘best rate table game’ – a vicious and unethical game similar to the games played by music and film companies to become ‘top of the pops’ at the right time. In savings, banks play it by being top of the table occasionally, through special offers, but not providing the best return over time. ING Direct combines good, steady value to customers, a low net interest margin and no fee income, with good profitability, by keeping operational costs very low. One key to this is account opening via internet or call centre, not branches. ING Direct’s rapid growth (and profitability in its fourth year) is achieved through simplicity. It is lean – a small head office and small management teams in every country. Controlling size encourages managers to think of the company as a small one – one that encourages them to act and take accountability. Only about 10 per cent of its people are not directly involved with managing customers – handling enquiries or processing applications.

Each new business unit aims for profit in its fourth year.

A small management team is only possible if the business is kept simple. But simple does not mean stupid! ING Direct prides itself on recruiting the best people internationally, and moving good people to get new operations going. It uses best established practice in all functions. Its internal watchword is ‘proudly stolen’, referring to how people learn from each other. For example, directors of each function meet twice a year with their colleagues from all over the world to learn what works and what doesn’t. They aren’t mandated to use the same approaches – the emphasis is on learning what works and then making their own decisions.

The company has also learnt from the successes and failures of its competitors.

Its strategy is to focus on big, mature markets, starting with an attractive savings product. This means customer acquisition costs much less than the hard sell needed by banks offering less value. Account numbers grow quickly. Average deposits are high – sensible savers look for best steady returns for their funds. Only about 10 per cent of savers switch for short-term special offer rates, but ING gets customers who know better. The mechanics of account opening may seem complex (setting up direct debits from your current account), but they work for ING customers, who include a large number of better-off, older individuals. They are not deterred by internet or telephony.

New products are not rushed. ING Direct knows what it wants to sell, but prefers to wait until customers start asking for more, as they already are asking for more in the UK. Each geographical market is entered cost-effectively and quickly, with good

preparation, using experience from entering other markets. The aim is to build brand awareness and mass presence quickly, to ensure low acquisition costs. ING Direct’s offer to customers is ease, convenience and transparency, with no tricks.

Funds are invested at low risk, to ensure low capital consumption. ING Direct has avoided the product and channel proliferation of many other direct banks – this results in no differentiation and no clear value to customers. ‘Share of wallet’ takes second place to customer value and profit. However this has not stopped it fielding a broad product line in its most advanced markets. The significant absence of a current account is not due to inability to make it profitable, but rather to being able to use its capital better elsewhere.

Its IT strategy and management are particularly interesting. Senior management is closely involved, and a clear strategy is used. IT supports a simple business model and processes. IT is business case driven, not technology push. In other words, structure follows strategy. It uses standardized components and business solutions, only from proven, best-of breed technology. It is flexible and future proof, ie designed and built to facilitate change. Strict change management disciplines are followed, and there is a strong emphasis on areas such as knowledge management, multi-vendor management, regional and global governance, security, business continuity and operational excellence.

Is all this sustainable? There will be ups and downs as conventional banks dip in and out of the market. However, for many customers – particularly the most valuable – there is no substitute for ING Direct’s low-cost, customer advocacy model. Over many years and spread over many countries, the returns look good to shareholders too.