MANAGEMENT ACCOUNTING GUIDELINE CASE STUDY CONTENTS Background 1 Structure What is a Strategy Map? 3 Communication Strategy Review 4 Meeting Notes from WGE's Strategy Map Discussion 5 The following case is based on a real organization. The names and the content have been maodified for illustrative purposes. Background WikiGear Inc. (WG) manufactures and sells sportswear and casual apparel, mainly in Morth America. The company's sportswear lines focus on hockey, baseball, and running (mainly shirts, underwear, and socks made from moisture-wicking fabric). The company also offers a limited range of casual wear, including sweatpants, shirts, and jackets. While the primary target market is athletes, the company also markets to non-athletes. The company currently manufactures all of its gear in Winnipeg and Nebraska. WG was founded in late 2002 by MBA classmates Brad Dover and Suzanne Grecia. They had been inspired during the 2002 Winter Clympics in Salt Lake City, Utah, when the United States and Canada met in the gold-medal hockey round in both the men's and women's divisions. A national pastime in Canada, hockey's popularity in the United States had been increasing rapicly over the past decade. This increase had led to a substantial demand for hockey equipment and, as a result, new entrants had become players in the expansion market. Dover and Grecia, both hockey players, were disappointed with the quality of the hockey apparel worn underneath the protective equipment {namely, the shirt, underwear, and socks). They agreed that it was either low quality (i.e., it retained perspiration) or, in cases where the manufacturer used moisture-wicking fabric, it was overpriced. They pooled their scarce resources and launched a very limited but good-quality product line at a decent price. WG was incorporated in 2003 (each founder becoming a co-CEQ) and continued to expand its prod- uct line in subseguent years to include gloves, jJackets, hats, and shoes. Initially, WG's business model was premised on providing high-value, fast-drying, moisture-wicking sportswear for serious athletes (the \"wiki\" in the company's name means \"quick\" and is also similar to \"wicking). Although non-athletes became moderate consumers of WG apparel, for several years the company's primary focus remained on manufacturing and selling sportswear. The fitness world continued to evolve, however, and over time, North American society began to feel that being a sericus athlate was not necessarily a precursor to purchasing and wearing athletic apparel-looking athletic was in. In 2007, WG expanded into casual wear that became very popular among athletes and non-athletes alike. In 2009, Dowver and Grecia decided that they should divide their duties. Each would continue in the role of co-CEQ, but Grecia would focus on expanding the casual wear line (both the product lines and the market) and Dowver would devote additional attention to increasing market share in the sportswear line. While this division made sense, by early 2011 it had become evident that Dover and Grecia ne longer shared a common vision. This led to some confusion in the messages being communicated throughout the company. Acknowledging this, the co-CEOs tasked Mumtaz Singh, the new vice-presi- dent of human resources, with identifying a tocl that would get the entire company on the same page and enable employeas to support the company's overall mission of "promoting the sales of WG prod- ucts through retail outlets and the online store through high-quality, reasonably priced sportswear and casual wear.\" Singh, who was familiar with a performance measurement tool called the Balanced Scorecard (BSC), assembled a cross-functional team who produced a scorecard that could be displayed and discussed using PowerPoint slides and Excel spreadsheets. While most employees (including the co-CEQs) were intrigued, the project stalled, largely due to the difficulty in compiling and circulating results. This took much maore time and resocurces than anyone had realized. The project remained idle until August of 2012, when Aina Smith became the new managing director, a role created to focus the company on effective strategy formulation and execution. Determined to renew the BSC effort, Smith authorized the building of a new IT system that would facilitate the BSC use and circulation on the company's intranet. With the BSC in place, Smith and her team (largely the original BSC team plus a few other employees who represented functions across the company) decided to deliver a new focus on strategy by ensur- ing that the BSC was communicated and deployed across all levels of the company. To date, the firm 3 had espoused an open, decentralized culture in which employees would feel free to speak their minds and challenge management's ideas. In reality, very few people out- side of senior management had participated in any discussions about strategy and the development of future business. The channels of communication were simply absent. Smith believed it was time to mobilize the strong pool of intel- lectual capital for strategy implementation. All involved firmly believed employee engagement and measurement would be critical to the future success of the company. What is a Strategy Map? Strategy mapping (Figure 1) is a strategic tool that has revolutionized the way strategy is formu- lated and executed. It was introduced in 2000 by Robert S. Kaplan and David P. Norton, and it quickly became a popular tool for organizations to depict and execute strategy. By diagramming cause-and-effect linkages, an organization's strategy can be depicted in such a way that it is clear not just to those formulating the strategy, but to the employees who are charged with executing the strategy. Strategy mapping alleviates many communication issues through the use of pictures; something almost everyone can understand. More information can be found in CPA Canada's guideline Strategy Mapping: Applying a six-step process to your organization. FIGURE 1: GENERIC STRATEGY MAPPING GENERIC STRATEGY MAPPING Maximize organizational value FINANCIAL Revenue growth Productivity strategy Asset strategy utilization WHAT WE WANT TO ACCOMPLISH Add/retain Increase revenue Reduce cost CUSTOMER high value customers per customer per customer Customer Innovation & Internal Effective Perception; INTERNAL management commercialization operations governance & public leadership on supremacy excellence control relations HOW WE PLAN TO ACCOMPLISH AND GROWTH (1) Human capital (2) Information capital (3) Organization LEARNING (staff competencies) (technology Infrastructure) capital (climate for action)Strategy Review In early 2013, WG hired a strategy consultant firm to study and provide insight on the 2012 and 2013 strategic plans. The consultancy presented a comprehensive report to the senior management team. The two major areas where immaediate action was recommended fell into two categories: structura and communication. Responding to said challenges also demonstrated the need to employ some or all of the drivers of the RAISE philosophy to ensure their rasilience, adaptability and innovation in the face of continuous change and disruption. Structure The consultants noted that, while the company was manufacturing and selling two different types of product lines (sportswear and casual wear), all decisions {including manufacturing and marketing) were made on a company-wide basis. The caonsultants recommended creating two distinct divisions, one for each line, so each could pursue its own strategy around the value proposition set most appropriate to it. The sportswear line would focus on product leadership in an innovative context, staying on top of the latest moisture-wicking technologies. At the same time, but to a lesser degree, the division would focus on operational excellence in order to keep prices reasonable and maintain a healthy profit level. The casual wear division would also focus on product leadership; however, the context would be far more focused on fashion. Research and development would focus on current trends, and products would be made in much smaller quantities, seasonality being a major factor. Communication The consultants also observed that, like most growing companies, the informal style of communication that had been sufficient in the past was no longer effective. As the company had grown and crganized itself into various functions, the need for a communications strategy had also grown. In a two-day offsite retreat, senior management brainstormed and produced seven key directives for 2013: Promote innovation {(performance and fashion). Be the employer of choice. Meet and exceed customer expectations. Be seen as a leader in the environmental movament. Promote a uniform message throughout the company. Continue increasing customer accessibility to products. Be profitable. NSO s e The consultants' feedback put a larger priority on directive five (promote a uniform message). It was decided that the platform for this uniform message should be the seven directives themselves. The intent was that virtually all communications, including meetings and reports, would be in the context of the seven directives on the list. For this new strategy to succeed, WG would need to invest in the technology and human resources necessary to communicate the seven directives throughout the company. It needed to align and focus the workforce around the new strategic model. Meeting Notes from WG's Strategy Map Discussion Aina Smith's team met with the company''s senior managers and the external consultants, as well as with several staff members throughout the company, and compiled the following notes and insights with regard to each of the four quadrants associated with the strategy map. The financial perspective needs to reflect the normal combination of revenue growth and cost optimi- zation objectives. The term \"optimization\" was used by several senior managers to send the message that costs should not be reduced at any sacrifice to quality. There was also a focus on profitable growth. With regard to the customer perspective, the proposed strategy map needs to capture the value proposition, starting with non-differentiable factars, that is, those elements that must be part of every apparel line operating in this market space: for example, (i) ease of purchase, (ii) high leval of quality, and (i) comfort. However, the map also needs to display what differentiates WG wear by stating those elements that, when combined, produce a brand unique to the industry. WG's internal process objectives need to capture the fact that the company wants to simultaneously pursue operational excellence by rationalizing operations, customer managemeant by leveraging cus- tomer service, and innovation by exploiting trends in science and fashion. To rationalize operations, WG wants to move more of its sales to an e-commerce channel that would provide more convenient customer access, increase the customer's contact efficiency, and lower operational costs associated with customer contacts. At the same time, WG is aware that many new customers purchase its apparel at retail outlets, so it is strategically important to continue to strengthen its retail partnership model for ease of purchase. To leverage customer service, WG wants to personalize the purchasing experience (whether it ba e-commerce or retail), reduce the number of total interactions, and improve the ease of purchasing experienced by the customer. On the e-commerce side, the strategy is to overhaul the corporate website into a state-of-the-art store, where customers can make purchases, ask questions, and learn about the company and all of its offerings. On the retail side, the retail partnership model would include agreements for staff to wear WG apparel, test new offerings, and undergo product knowledge training. The idea is, no matter where or how customers attempt to purchase WG products, their experience will be efficient, friendly, and knowledge based. The goal is to exceed customers' expectations. To exploit trends, WG wants to focus on customer value from two perspectives: (i) performance in the sportswear lines and (i) style in the casual wear lines. The intent is to use a two-fold strategy of com- bining in-house expertise with skilled external partnering. The divisional re-structure would make this new approach fairly straightforward. For learning and growth, management needs to focus on having the right resources in the right places for proper execution of the new strategic approach. Staff competencies are paramount recruitment, hiring, and training must be undertaken in the context of how each assists in the realization of stra- tegic objectives. In an instance where competencies cannot feasibly be fully satisfied in-house (e.g., ever-changing fashion knowledge), partnering agreements are expected to be put in place