Part II A General Heuristic Decision-Making Procedure
7.3 Problem Analysis
7.3.3 Determining the Problem Causes in the Case of a
A sustainable solution to threat problems requires measures that eliminate the causes of the problem or at least reduce their negative impact on corporate objectives. Actors who act without knowing the causes of a problem do “symptom therapy”. For instance, it is wrong to reduce own prices right away as an answer to competitors’ aggressive pricing. Before reducing prices, it should be evaluated if higher prices really lead to a lower market share.
The problem causes are determined with the help of backward-moving problem indication. The discovered problem is the starting point and the framework – if one exists – serves as a guideline. The procedure for “backward moving” is the following: On the basis of the discovered problem, all possible causes are listed.
Then, as many as possible of these causes are excluded. The remaining causes are divided into possible sub-causes, and once again, the actor attempts to eliminate as many of these sub-causes as possible. This procedure is repeated until the actor can say with enough precision what led to the threat problem.
Inset 7.1 introduces three approaches for backward-moving problem indication.
They are often applied in practice.
The determination of problem causes is very important in order to solve a threat problem. It is therefore worthwhile to complete the task thoroughly and not just superficially. However, this can generate considerable costs. For example, in order to determine the image of a service provider as an employer (see Fig. 7.4) in a reliable way, an empirical survey is necessary. This takes time and generates costs.
However, without such a study, one cannot say why so few suitable candidates apply for skilled jobs. Accordingly, the information necessary to soundly derive measures for improvement will also be lacking.
Offer to acquire a manufacturer of photovoltaic systems as discovered opportunity problem Possibilities to exploit the opportunityPos itive and negative synergies betweenacquisi- tion candidate and own company Ability to integrate the acquisition candidate
Management, culture, organiza- tion and people of the acquisition candidate
Price and acquisition- modalities Market for photovoltaic systems
Market attractiveness in countries D, F, E and I Market growth Subsidies, especially feed-in tariffs
Current and potential competitors Competitive intensity and margin development
Competitive position of the acquisition candidate in D, F, E and I Competitive advan- tages anddis- advantages of the acquisition candi- date in supply and marketing Acquisition candidate Competitive advantages and disadvantages in key resources and competencies Fig.7.4Frameworkfortheacquisitionofamanufacturerofphotovoltaicsystems
7.3 Problem Analysis 67
Inset 7.1: Approaches for Backward-Moving Problem Indication
The Du Pont scheme in the first figure is used when the actor is confronted with an insufficient return on investment. It divides the return on investment into components. For example, a deterioration of return on investment com- pared to the previous year can be attributed to lower capital turnover and in turn to a higher working capital in relation to sales. It is the result of a sharp increase of the raw material stocks and creates higher capital costs. Despite its specific application scope, the Du Pont scheme is often used in practice.
However, the scheme only covers the “financial surface” and thus only allows a rough identification of the causes. An in-depth analysis is therefore required in order to determine the causes behind the critical indicators.
In contrast to the Du Pont scheme, the deductive tree (see Hungenberg 1999, pp. 25) is a generally applicable procedure for backward-moving problem indication. The procedure splits the discovered problem into sub-areas. The actor can assign the problem to one or a few sub-areas and thus exclude many other sub-areas at the same time.
When constructing deductive trees, the following rules should be respected (see Hungenberg1999, pp. 22):
• Statements at the same level cannot overlap but must exclude each other logically (¼exclusiveness).
• Statements at one level must be accounted for completely by the statements at the next-lower level (¼exhaustiveness).
For example, if the identified problem is the sharp increase in staff turnover in the research department of a pharmaceutical manufacturer, the deductive tree might resemble the one in the second figure. As the example shows, with the help of a deductive tree, the discovered problem can be traced back, at least to some extent. Of course, the realization that the increase in turnover rates is mainly due to the departure of university graduates and university of applied sciences graduates does not represent a final problem diagnosis. The reason why so many qualified researchers leave the company must now be investigated with the help of a survey.
The Ishikawa or fishbone diagram (see Joiner1995) is presented differ- ently than the deductive tree, but it is based on the same basic idea and on the same two rules. The third figure shows the Ishikawa diagram of a retail chain.
It was constructed to identify the reasons for long waiting times at the cash register complained of by many customers. Based on the diagram with all of the possible causes, the main reasons now can be determined using backward- moving problem indication. As the example shows, it is possible to change the working times of the staff according to rush hours. With this measure, the problem can be solved without any important additional costs.
(continued)
Return on investment (ROI) 6.94% / 8.07% Investment 18,710 / 16,240 Sales 8,300 / 8,016
Return on sales (ROS) 15.66% / 16.34%
Profit 1,300 / 1,310 Capital turnover 0.443 / 0.494
Sales 8,300 / 8,016 x
: :
- + Product inventories 2,050 / 2,000
Liquid assets 1,000 / 1,000
Interests and other costs 1,150 / 1,016 Raw material inventories 3,500 / 1,200
Accounts receivable 2,680 / 2,560 Depreciation 950 / 950
Salaries 2,990 / 2,900
Raw material costs 1,910 / 1,840 Sales 8,300 / 8,016 Costs 7,000 / 6,706 Permanent investment 9,480 / 9,480
Working capital 9,230 / 6,760
+ + 1st Figure = result of the current year in % or 1,000 CHF 2ndFigure = result of the previousyear in % or 1,000 CHF = backward-moving problem indication DuPontschemetodetermineproblemcauses
Inset7.1(continued)
7.3 Problem Analysis 69
Inset 7.1 (continued)
Turnover rate
Dismissal Retirement
Internal promotion
Employees giving notice
Laboratory staff Academic staff
Other staff Team leaders
Grads of univ.
of applied sciences
= Example of backward-moving problem indication
Deductive tree to determine the causes of high staff turnover in a research department
Waiting times at the register too long
Staff
Credit cards Foreign currency
Gift certificate
Insufficient number of registers
Defected Too little cash Products
Payment modality
Infrastructure Missing bar code Unreadable bar code Fresh products not weighted Working times
Insufficient training Insufficient number
= Example of backward-moving problem indication
Ishikawa diagram for long waiting times at the register (adapted from Joiner1995, pp. 5 ff.)
7.3.4 Confirming the Opportunity in the case of an Opportunity