ManagementTools2003AnExecutive’sGuideDarrellK.RigbyManagementTools2003AnExecutive’sGuideDarrellK.Rigby©Bain&Company,Inc.2003Allrightsreserved.NopartofthisbookmaybereproducedinanyformorbyanymeanswithoutpermissioninwritingfromBain&Company.ISBN:0-9656059-5-7Publishedby:Bain&Company,Inc.TwoCopleyPlace,Boston,MA021163Bain’sbusinessishelpingmakecompaniesmorevaluable.Foundedin1973ontheprinciplethatconsultantsmustmeasuretheirsuccessintermsoftheirclients’financialresults,Bainworkswithtopmanagementteamstobeattheircompetitorsandgeneratesubstantial,lastingfinancialimpact.Ourclientshavehistoricallyoutperformedthestockmarketby3:1.WhoweworkwithOurclientsaretypicallybold,ambitiousbusinessleaders.Theyhavethetalent,thewill,andtheopen-mindednessrequiredtosucceed.Theyarenotsatisfiedwiththestatusquo.WhatwedoWehelpcompaniesfindwheretomaketheirmoney,makemoreofitfaster,andsustainitsgrowthlonger.Wehelpmanagementmakethebigdecisions:onstrategy,operations,technology,mergersandacquisitions,andorganization.Whereappropriate,weworkwiththemtomakeithappen.HowwedoitWerealizethathelpinganorganizationchangerequiresmorethanjustarecommendation.Sowetrytoputourselvesinourclients’shoesandfocusonpracticalactions.Formoreinformationpleasevisit:6175722000Bain&Company,Inc.TheMonarchTower,Suite12003424PeachtreeRoad,NEAtlanta,Georgia30326USAtel:4048692727Bain&Company,Inc.SearsTower233SouthWackerDrive,Suite4400Chicago,Illinois60606USAtel:3125419500Bain&Company,Inc.5215NorthO'ConnorRoad,Suite500Irving(Dallas),Texas75039USAtel:9728692929Bain&Company,Inc.1901AvenueoftheStars,Suite2000LosAngeles,California90067USAtel:3102293000Bain&Company,Inc.3TimesSquare,25thFloorNewYork,NY10036USAtel:6465628000Bain&Company,Inc.OneEmbarcaderoCenterSanFrancisco,California94111USAtel:4156271000Bain&CompanyCanadaInc.162CumberlandStreet,Suite300Toronto,OntarioM5R3N5Canadatel:4169291888LatinAmericanandSouthAmericanOfficesBain&CompanyMexico,Inc.CorporativoReformaLaurelesPaseodelosLaureles458-301BosquesdelasLomasMéxico,D.F.05120tel:525552671700Bain&CompanyBrasilRuaIguatemi,192-21°andar01451-010SãoPauloSP,Brasiltel:551137071200EuropeanandAfricanOfficesBain&CompanyNetherlands,LLCRembrandtTower-20thfloorAmstelplein11096HAAmsterdam,TheNetherlandstel:31207107900Bain&CompanyBelgium,Inc.BlueTower-24thFloorAvenueLouise3261050Brussels,Belgiumtel:3226262626Bain&CompanySouthAfricaInc.Suite158,PostnetX31Saxonwold2132Johannesburg,RepublicofSouthAfricatel:271150590005Bain&CompanyInc.UnitedKingdom40StrandLondonWC2N5HZ,Englandtel:442079696000Bain&CompanySpain,Inc.PaseodeCastellana1109aPlanta28046Madrid,Spaintel:34915901800Bain,CuneoeAssociatiViaCrocefisson.1020122Milan,Italytel:3902582881Bain&CompanyGermany,Inc.Karlsplatz180335Munich,Germanytel:498951230BainetCompagnie,Snc21,BoulevarddelaMadeleine75001Paris,Francetel:33144557575Bain,CuneoeAssociatiPiazzaUngheria,600198Rome,Italytel:3906852501Bain&CompanyNordic,Inc.Regeringsgatan38,6thFloorS-11156Stockholm,Swedentel:4684125400Bain&CompanySwitzerland,Inc.Rotbuchstrasse468037Zurich,Switzerlandtel:4113608600PacificRimOfficesBain&CompanyChina,Inc.Suite2501,ChinaWorldTowerNo.1JianGuoMenWaiAvenueBeijing100004,P.R.Chinatel:861065053388Bain&Company(HongKong)68/F,TheCenter99QueensRoadCentralHongKong,P.R.Chinatel:85229788800Bain&CompanyKorea,Inc.ChongroTower19thFloor6Chongro2-ka,Chongro-guSeoul,110160,Koreatel:8223989300Bain&CompanySEAsia,Inc.Level50,TemasekTower8ShentonWay,Singapore068811tel:6562220123BainInternationalInc.Level35TheChifleyTower2ChifleySquareSydney,NSW2000,Australiatel:61292291600Bain&CompanyJapan,Inc.HibiyaKokusaiBuilding14thFloor2-2-3,Uchisaiwai-choChiyoda-ku,Tokyo100,Japantel:81335026401TableofContents6Preface10ActivityBasedManagement12RelatedTopics:•Activity-BasedCosting(ABC)•CustomerProfitabilityAnalysis•ProductLineProfitabilityBalancedScorecard14RelatedTopics:•ManagementbyObjectives(MBO)•MissionandVisionStatements•Pay-for-Performance•StrategicBalanceSheetBenchmarking16RelatedTopics:•BestDemonstratedPractices•CompetitorProfilesChangeManagementPrograms18RelatedTopics:•CulturalTransformation•ManagingInnovation•OrganizationalChange•ProcessRedesignContingencyPlanning20RelatedTopics:•Groupthink•RealOptionsAnalysis•ScenarioPlanning•SimulationModelsCoreCompetencies22RelatedTopics:•CoreCapabilities•KeySuccessFactorsCorporateCodesofEthics24RelatedTopics:•CorporateValuesStatements•MissionandVisionStatementsCorporateVenturing26RelatedTopics:•BusinessIncubation•CorporateEntrepreneurship•DirectInvestingCustomerRelationshipManagement28RelatedTopics:•CollaborativeCommerce•CustomerRetention•CustomerSegmentation•Loyalty-BasedManagementCustomerSegmentation30RelatedTopics:•Factor/ClusterAnalysis•MarketSegmentation•One-to-OneMarketingCustomerSurveys32RelatedTopics:•CustomerRelationshipManagement•CustomerRetention•CustomerSatisfactionMeasurementDownsizing34RelatedTopics:•OrganizationalChange•Reengineering•RightsizingE