A NEW MODEL FOR OBTAINING SUSTAINABLE COMPETITIVE ADVANTAGE. Prof. Paul Watson1, MBA, MSc, PhD, MCIOB,VPBEng, FBEng, CertEd, ILTM Mr Nicholas Chileshe2, MSc (Eng), MSc (Mgt), MCIOB, MBEng, PgCertEd, MILTH, MCIM Sheffield Hallam University School of Environment & Development, City Campus, Howard Street, Sheffield S1 1WB, UK
& Dr. Dmitry Maslow3 MBA, PhD Ivanovo State Power University, Economics and Management Faculty, Rabfakovskaya Str 34, Ivanovo 153023, Russia
ABSTRACT For organisations to attain and/or maintain a sustainable competitive advantage they require a competitive orientated management system. The system should address key concepts such as leadership, personnel and development. However, the system also has to fully address the needs of stakeholders. This paper provides a ‘Management Functional Assessment Model’ specifically designed to address the critical issue of ‘competitive advantage’. The model is based upon previous works including that of Deming, Baldrige and the European Foundation for Quality Management. However, it is original and when deployed provides the link between organisational activities within a framework of corporate profitability and stakeholder satisfaction. The paper further explores the model’s constituent parts and relates them to the process of gathering data on organisational requirements focussed upon attaining/maintaining a competitive advantage. The key concept of ‘RADAR’ which forms part of the European Foundation for Quality Management Excellence (EFQM) is embedded within the model. Key Words : Competitive Advantage, Total Quality Management (TQM), Organisational Excellence, European Foundation for Quality Management EFQM.EM, RADAR
Introduction The model presentation has been drawn from research undertaken in both UK and Russia. Managers have difficulties in being able to fully appreciate through internal and external self assessment and efficient and effective they are performing in corporate terms. Thus the presented model has been developed based upon previous work such as the Malcolm Baldrige National Quality Award (MBNQA), South African Excellence Foundation (SAEF); South African Excellence Model (SACEM) (Dlungwana et al, 2002), and the European Foundation for Quality Management Excellence Model. However, the MFAM Model has incorporated a blend of the key functions of Management linked to self assessment and hence a drive for continued improvement. Therefore the model provides a means for Organisations to measure and monitor corporate performance set against standard criteria. This will enable them to seek corporate improvement. Knowing where one stands on the corporate excellence ladder and what has to be addressed to improve is very important for construction enterprises. A literature review revealed that successful businesses whether in the manufacturing or construction industries are engaged in making and taking opportunities. Hardy (1983:30) states that the development of a competitive advantage automatically creates an opportunity, 1
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and so the reasoning may be modified to 'Successful businesses are engaged in the creation and exploitation of competitive advantages'. Competitive Advantage The model presented is a ‘Functional Assessment Model’. However, the functional assessment model forms part of ‘competitive-orientated management’. This is a system of management designed to gain and sustain a competitive corporate advantage by way of continued internal and external self assessment and an improvement driven agenda. The concept of competitive-orientated management may be represented as a tetrahedron (as in Figure 1). It is based upon three principles of competitive achievement, leadership, personnel and development. The emphasis should be placed on the attainment of a ‘Sustainable Competitive Advantage’.
Sustainable organisation and competitiveness
Personnel
Leadership
Development Management System
Figure 1: Competitive-Orientated Management Core Concept According to Day Wensley (1988), the essence of competitive advantage is the conversion of superior of superior skills and resources into positional advantages, which in turn create positive outcomes. A competitive advantage is sustained only if it continues to exist after efforts to duplicate that advantage have ceased. Chileshe and Watson (1997, 2000); Watson and Chileshe (1998) explored the linkages between TQM and Competitive advantage and found that organisations implementing TQM had improved their efficiency and effectiveness. Other sources of competitive advantage could be through benchmarking best practice (Shakantu and Talukhaba, 2002), organizational learning (Jashapara, 2003), or construction organisations can form alliances (Ngowi, 2001) so as to pool their resources together and compete favourbly. The following sub section now examines and discusses the constituent parts of the tetrahedron Leadership The role of senior management is critical to the success of any change process and leadership has to be demonstrated. All employees have to be given the time and skills to make a useful contribution towards the drive for a sustainable competitive advantage.
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Personnel Employers have to be motivated to engage in a corporate culture directed at stakeholder satisfaction. Senior management must not forget that employees are also stakeholders. Thus they should remember to engage in ‘consultation’ before implementation’ in corporate plans. This aspect allows staff to contribute to the decision making process. Culture is a vital aspect for consideration and a morphogenic culture should be the aim of senior management Development The development of an organisation requires the consideration of both business processes and environmental issues/aspects. Therefore environmental scanning has to be deployed in order to establish external influences and may be done by SWOT and PEST analysis. This should be linked to the RADAR concept for the techniques to be effective. Management Functional Assessment Model (MFAM) The MFAM is based upon six functions of management as follows; forecasting and planning; organising; motivation; control; co-ordination; and communication. The first five functions are encapsulated within a framework of an effective and efficient system of communication (see Fig 2). The MFAM has been designed to aid construction managers in determining the key activities to be addressed in order to improve corporate efficiency and effectiveness. Communication
5. Co-ordination
2. Organising
3. Motivation
Deploy the ‘RADAR’ concept 1. Forecasting & Planning
4. Control
Figure 2: Management Functional-Assessment Model (MFAM) incorporating the ‘RADAR concept
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Forecasting Planning This criterion is concerned with determining the shape of future strategy; its function is to answer three questions:
where is the company now in terms of its vision and mission; where does it want to be as part of its future corporate plans; how is the company to achieve set aims based upon forecasts?
The planning criterion contains five basic categories: 1.1 1.2 1.3 1.4 1.5
Setting the objectives and strategic planning process in motion. Gathering and analysing information related to both clients and the markets (all stakeholders). Detailing business-processes (who, what, where and why). Gathering and analysing information relating to competitors and benchmarking. Resources planning (5M’s).
Organising The main managerial tasks here are to organise business-processes with a concentration on maximising effectiveness and efficiency. The organising criterion contains five basic categories: 2.1 2.2 2.3 2.4 2.5
Creating an appropriate organisational structure Establishing authority and responsibility for all personnel Creating a self-learning organisational culture (morphogenic) Developing a value system based upon enhancing performance Deployment of new technology linked to corporate enhancement
Motivation It has to be noted that motivation has many aspects both intrinsic and extrinsic. The motivation criterion contains five basic categories: 3.1 3.2 3.3 3.4 3.5
Developing a co-operative culture based on stakeholder satisfaction. Ensuring staff have the skills and competences to perform set tasks. A consideration of personnel needs linked to self-actualisation. Involvement in processes, increase areas of responsibility and self-monitoring (empowerment). Results satisfaction - feedback on performance in a timely manner linked to ‘RADAR’.
Control Control is dependent upon constant feedback from each stage of business-process, checking against quality specifications and measuring against performance indicators. A correct monitoring system allows for an increase in the efficiency and effectiveness of organisational
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activity. Organisations must consider feed forward of information for effective control. This can only be fully achieved by deploying ‘RADAR’ which incorporates a plan, do, check and act cycle. The control criterion contains five basic categories: 4.1 4.2 4.3 4.4 4.5
A monitoring system for each key stage of business-processes. Measuring performance levels (with an internal and external perspective). Determining customer satisfaction levels. Determining the efficiency and effectiveness of resource utilisation linked to project and corporate aims. Conducting a comparative analysis between set targets and actual results, leading to appropriate actions (RADAR).
Co-ordination The analysis of deviations on business-processes and updating of the current plans in a holistic manner based on feedback and feed forward is a critical point in co-ordination. Again this can only be fully attained by the application of ‘RADAR’ application. The co-ordination criterion contains five basic categories: 5.1 5.2 5.3 5.4 5.5
Unity of all the other functions. Establishing effective communications. Developing a conflict solving culture linked to enhancement. Updating of deviations: revision and possible reco-ordination of resources. Information management - information has to be timely and in sufficient detail to inform corrective actions (RADAR).
Communication This is the link and the life blood of corporate activity and its effectiveness is measured within the context of the five other functions.
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Table 1 Marking criteria for MFAM Complete the score card based on organisational performance following the scoring criteria in Tables 2 & 3. Criteria
1. Forecasting/ Planning
Assessment category
1.1 Setting the objective and strategic planning process in motion 1.2 Gathering and analysing information related to clients and markets 1.3 Detailing business-processes 1.4 Gathering and analysing information related to competitors and benchmarking 1.5 Resources planning Criterion total
2. Organising
4. Control
4 4 4 4 4
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2.1 Creating the correct organisational structure 2.2 Establishing authority and the responsibility for all personnel 2.3 Creating a self-learning organisational culture 2.4 Developing a value system based on enhancing performance 2.5 Deployment of new technology linked to corporate enhancement Criterion total
3. Motivation
Max
4 4 4 4 4 20
3.1 Developing a co-operative culture based upon stakeholder satisfaction 3.2 Ensuring staff have the skills, resources and competences to perform set tasks 3.3 A consideration of personal needs linked to self-actualisation 3.4 Engagement in processes, increase areas of responsibility and self monitoring 3.5 Results satisfaction - feedback on performance in a timely manner
4 4 4 4 4
Criterion total
20
4.1 4.2 4.3 4.4 4.5
4 4 4 4 4
A monitoring system for each key stage of business-process Measuring performance levels Determining customer satisfaction levels Determine the efficiency and effectiveness of resource utilisation Conduct a comparative analysis between set targets and actual results, leading to appropriate actions
20 Criterion total
5. Coordinating
5.1 5.2 5.3 5.4
Unity of all other functions Establishing effective internal communications Developing a conflict solving system Updating of deviations: revision and possible reco-ordination of other resources 5.5 Ensure effective Information management
4 4 4 4 4 20
Criterion total Possible Total management score
100
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Score
Table 2 Summary of Results for MFAM Scoring The total management estimation helps to define a level of Management Maturity Level
Total Score
I
(0~20)
Assessment
II
(21~40)
III
(41~60)
IV
(61~80)
V
(81~100)
No methodology or system, management purposes are not defined. For further development it is necessary to reconsider core business principles. Management has the potential for development. Managers should develop their leadership skills, define organisational purposes clearly and develop a strategy based on TQM principles. Management systems are in evidence. It is necessary to pay attention to the optimisation of business processes and improvement of quality at each stage. Perfecting a control system and taking into account the importance of stakeholders. Constant quality checks within the management system take place. Utilisation of external benchmarking in order to improve corporate performance. The maximum outcomes in all areas of corporate activity are reached; the management system is benchmarked and monitored in a drive for continuous improvement. (RADAR)
In scoring 0 - 4 the following criteria as shown in Table 3, should be deployed. Table 3 Scoring criteria Score Criteria for Scoring 0 No activity demonstrated 1 Activity not consistently utilised 2 Activity utilised but dependent upon the situation 3 The activity is deployed permanently and systematically The activity is deployed permanently and systematically, monitored and 4 reviewed via benchmarking for improvement The presentation of the analysis can be more easily communicated to all staff via the application of a communication MFAM pentagonal profile as depicted in Figure 3. The scores can be plotted upon the profile and a corporate profile established. This process will also demonstrate where organisational effort should be placed. As an example, Figure 4 contains some fictional data plotted on the profile.
7
20 points
15 co-ordination organising
10 motivation 20 points
20 points 5 15
15 10
10 5
5
forecast/ planning
5
5 control
10
10
15 15
Prof P Watson 20 points
20 points
Figure 3: Communication MFAM Pentagonal Profile
One must remember that action taken in one area will impact upon others. In other words the criteria are not mutually exclusive. Each time the MFAM is implemented and corrective actions taken, a new profile can be developed in order to benchmark the effectiveness of actions taken to improve corporate performance and hence address the competitive advantage issue. This activity becomes part of the ‘RADAR’ approach (to be described fully in the next section of this paper).
8
20 points
15 co-ordination 20 points motivation organising
20 points
15 10
forecast/ planning
8
8
control
Prof P Watson
20 points
20 points Corporate Profile
Figure 4: Fictitious company plotted on the pentagonal profile The profile depicted in Figure 4 above highlights that the company has issues related to Forecasting/ planning, control and motivation these are areas that require appropriate action. The advantage of this approach is in the implementation of benchmarking, each time the MFA model is deployed it is set within the context of ‘RADAR’ and hence internal and external benchmarking is inherent.
RADAR Control is concerned with the efficient and effective utilisation of resources in the attainment of previously determined objectives, contained within a specific plan, the plan being the method to be deployed in order to achieve the pre-determined objectives. Control is exercised by the feedback and feed forward of information on actual performance when compared with the pre-determined plan; therefore planning and control are very closely linked. Control is concerned with the establishment of deviations from planned activities/objectives and initiating effective and efficient corrective actions. These assessments may also establish areas of best practice to be disseminated throughout the organisation. In order to have efficient and effective control the Deming Control Cycle should be employed as depicted in Figure 5, The Deming Plan, Do, Check, Action (PDCA) cycle. Two issues are of vital importance. First ‘Cycle Time’ - how long does it take for information to circulate
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around the loop? Secondly, the quality of the information in the loop. information circulating regularly leads to efficient and effective control.
ACTION
High quality
PLAN
Possible change of plan based on the diagnosis
Policy development
CHECK DO Policy deployment
Auditing Diagnosing Reporting
Figure 5 : The Deming Plan, Do, Check, Action (PDCA) Cycle (McCabe 1998, p.33)
The Deming Control Cycle has been incorporated into the EFQM Excellence Model within its RADAR development (see Figure 6: The Criteria Underpinning the RADAR Concept).
The Models highlighted in this paper are equally of particular importance as they could be extended to the South African Constructional related organisations to asses their levels of Comptitive Advantage. As suggested by Bennett and Smith (2002), there is a generally positive association of competitive advantage with profitability, therefore through continous application of the MFAM and RADAR approach, South African Constructional related Organisations can draw on the competitive advantages of the leadership, development and sustainable organisations skills as illustrated in Figure 1: Competitive-Oriented Management Core-Concept.
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Determine the Results required
Assess and Review approaches and their deployment
Plan and develop the Approach
Deploy approaches (European Foundation for Quality Management, 1999) EFQM Figure 6: The Criteria Underpinning the RADAR Concept
RADAR logic explained The RADAR logic states that an organisation needs to: determine the Results the organisation is aiming for as part of its policy and strategy making processes. These include the performance of the organisation, both financially and operationally, and the perception of its stakeholders; plan and develop an integrated set of sound Approaches to deliver the required results; Both the ‘Results’ and ‘Approaches’ elements related to the Plan stage of Deming’s control cycle, see Figure 7. Matching of Plan, Do, Check and Act Cycle with RADAR Deploy the approaches in a systematic way to ensure full implementation. deployment is the ‘Act’ stage of Deming’s Cycle.
The
Assess and Review the approaches followed based on monitoring and analysis of the results achieved utilising ongoing learning activities. Based on this assessment, companies should identify, prioritise, plan and implement improvements where needed. (European Foundation for Quality Management, 1999).
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‘Assess’ and ‘Review’ cover the ‘check’ and ‘act’ components of Deming’s Cycle.
Plan Results and Approach
Do Act Review
Deploy
Check Assessment
Figure 7: Matching of Plan, Do, Check and Act Cycle with RADAR The basic premise of both BS EN ISO 9001:2000 and the European Foundation for Quality Excellence Model is the concept of control as depicted in Figure 5. One must remember it is not possible to have retrospective effective corrective actions. Therefore, the timeliness of data is a key component of the control function.
Linking RADAR and the Management Functional Assessment Model (MFAM) Figure 2: The Management Functional Assessment Model incorporating RADAR encapsulates the facility for organisations to fully engage in a drive for continuous improvement. The link between MFAM and RADAR is better demonstrated in Figure 8, where it is evident that the RADAR concept can be used in conjunction with the MFAM. Thus, every time the MFAM is implemented and the scoring process applied RADAR is embodied within the model. In this way forecasts and plans linked to deployment strategies are evaluated and appropriate actions determined via assessment and review. Only by employing this approach can the full benefits of MFAM deployment be attained.
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Results and Approach Forecast & Plan
Review
Communication
Deploy Motivation Organisation
Co-ordination
Assessment Control
Figure 8: MFAM Linked to RADAR Table 4: Deployment of MFAM Issues and Advantages Key Deployment Issues
Resulting Benefits
Process improvements
Attaining an organisation’s objectives
Benchmarking Key Performance Indicators (KPI’s)
Development of clear, concise action plans resulting in a focused policy and strategy
Clarity and unity of purpose so the organisation’s people can excel and continuously improve
Integration of improvement initiatives into normal operational activities
Interrelated activities and systematically managed with a holistic approach to decision making
Development of group/team dynamics
People development and involvement. Shared values and a culture of trust, thus encouraging empowerment in line with a post-modernist company
Embed RADAR
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A clear understanding of how to deliver value to clients and hence gain a sustainable competitive advantage via operations Enabling the mission and vision statements to be accomplished by building on the strengths of the company Ability to gauge what the organisation is achieving in relation to its planned performance (Plan, Do, Check, Act)
Conclusion The model (MFA) recognises that sustainable excellence in all aspects of performance is based on the management functions of forecasting/planning, organising, co-ordinating, motivating, control and communication. The application of the MFAM will address the key deployment issues shown in Table 4 and empower the resulting benefits. Excellence is dependent upon balancing and satisfying the needs of all relevant stakeholders (this includes people employed, customers, suppliers and society in general, as well as those with financial interests in the organisation). The customer is the final judge of product and service quality and customer loyalty, retention and market share gain are best optimised through a clear focus on the needs of current and potential stakeholders. The behaviour of an organisation’s leaders creates a clarity and unity of purpose within the organisation and an environment in which the organisation and its people can excel. A truly empowered organisation employs both a top down and bottom up approach in managing its activities within the context of aiming to fully satisfy all stakeholders. Organisations perform more effectively and efficiently when all interrelated activities are understood and systematically managed and decisions concerning current operations and planned improvements are made using reliable information that includes stakeholder perceptions. Thus the application of RADAR is essential if a truly holistic control mechanism is to be attained. The full potential of an organisation’s people is best released through shared values and a culture of trust and empowerment, which encourages the involvement of everyone. This necessitates a holistic approach to people and their operational systems and organisational structure. Organisational performance is maximised when it is based on the management and sharing of knowledge within a culture of continuous learning, innovation and improvement. An organisation works more effectively when it has mutually beneficial relationships built on trust, the sharing of knowledge and integration with its partners. Adopting an ethical approach and exceeding the expectations and regulations of the community at large best serve the long-term interests of any organisation. Corporate excellence is measured by an organisation’s ability to both achieve and sustain outstanding results for its stakeholders, thus MFAM linked to RADAR has been developed. At this time the model has been developed and is purely theoretical. However, as stated in the introduction the Model has been produced as a result of a joint research project between the UK and Russia. Dr Maslow through his contribution is to pilot the model and if necessary refinements shall be made and a further updated model published. References Bennett, R.J. and Smith, C. (2002), Competitive conditions, competitive advantage and the locations of SMEs, Journal of Small Business and Enterprise Development, 9(1), 73-86. Chileshe, N. and Watson, P. (1997) TQM: A Competitive Weapon for the UK Construction Industry? 'In: Stephenson, P. (Ed.) 13th Annual ARCOM Conference, 15-17 September 1997, King's College, Cambridge, Association of Researchers in Construction Management Vol. 1, 258-269. Chileshe, N and Watson, P.A. (2000) Investigating The Rationale For Pursuing Total Quality Management (TQM) As a Valid Competitive Strategy For SME's In proceedings of the 2nd Southern African Conference on Sustainable Development in the Built Environment, 23-25 Aug, Pretoria, South Africa Day, G.S. and Wensley, R. (1988) Assessing advantage: a framework for diagosing a competitive superiority, Marketing Strategy, 127-158.
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Deming, W.E. (1986), Out of Crisis, MIT, Cambridge, MA Dlungwana, S., Nxumalo, X.H., Noyana, C., Rwelamila, P.D. and Van Huysten, S. (2002) Development and Implementation of The South African Construction Excellence Model (SACEM) In: Ahmed, S.M, Ahmad, I., Tang, S.L. and Azhar, S. (Eds.) First International Conference on Construction in the 21st Century "Challenges and Opportunities in Management and Technology" (CITC-I), 25-26 April 2002, Florida International University, Miami, USA. European Foundation for Quality Management (1999) Radar and the EFQM Excellence Model, EFQM Press Releases & Announcements, [on line] last accessed on 12 June 2000 at URL:www.efqm.org/ Hardy, L. (1983) Successful Business Strategy-How to win the market place, Kogan Page. Jashapara, A. (2003) Cognition, culture and competition: an empirical test of the learning organization, The Learning Organization, 10(1), 31-50. McCabe, S. 1998, Quality Improvement Techniques in Construction, Longman, Edinburgh Gate. Ngowi, A.B. (2001) The competition aspect of construction alliances, Logistics Information Management,14(4), 242-249. SAEF, (2004), http://www.saef.co.za Shakantu, W. and Talukhaba, A. (2002) Benchmarking Best Practice to Achieve a Competitive Advantage in the South African Construction Industry. In: Ahmed, S.M, Ahmad, I., Tang, S.L. and Azhar, S. (Eds.) First International Conference on Construction in the 21st Century "Challenges and Opportunities in Management and Technology" (CITC-I), 25-26 April 2002, Florida International University, Miami, USA. Watson, P. and Chileshe, N. (1998) Aspects of Total Quality Management (TQM) Implementation within a Construction Operational Environment. In: Haupt, T.C., Smith, G. and Ebohon, O.J. (Eds) Total Quality Management in Construction: Towards Zero Defects, pp. 94-101
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