Tiffany & Company: Innovative Global Simulations
December 04, 2008
A leadership alignment simulation case study provided by BTS
Company Profile: Since 1837, Tiffany & Co. has been a premier jeweler and America's house of design. Through its subsidiaries, the $2.9 billion company is engaged in product design, manufacturing, and retailing activities. Tiffany and Company, the main subsidiary, is a jeweler and specialty retailer whose merchandise offerings include an extensive selection of jewelry (83 percent of net sales in fiscal 2006), as well as timepieces, sterling silverware, china, crystal, stationery, fragrances, and accessories.
Tiffany and Company's recent growth led to its new status as a geographically diversified retailer, with stores in 18 countries, including 87 in the Asia-Pacific region. A greater focus on shareholder value needed to be added to its leadership curriculum as the company grew, so Tiffany partnered with BTS to develop a learning curriculum that would help build stronger financial and business acumen skills throughout its leadership ranks.
Tiffany sought to drive shareholder value by providing opportunities for executives to better understand the impact of decisions on company financials and by aligning the organization around a unified strategic focus. The company needed a solution that would define the big picture while also providing enough in-depth analysis to bring an understanding of impacts to brand image and its preservation, and how to optimize investment decisions.
Customized and Innovative Solutions
First, BTS developed a two-simulation approach utilizing the realistic modeling of a computer simulation, followed by a board simulation. Creating two simulations allowed Tiffany to proivde potent and realistic learning to the senior levels of the organization while delivering more fundamental level-setting financial acumen with the stand-alone board simulation for the manager level. The simulations provide a financial primer steeped in the complexities of Tiffany's business of supply and demand management, vertically integrated manufacturing, and retail operations.
Second, a live, interactive broadcast is delivered at the end of each quarter, reviewing key performance indicators and providing clarity on what happened and why, and identifying future expectations. The broadcast ensures the retention and application of learning points from the simulations with an idea-sharing component to help leaders make the principles learned come to life in everyday operations.
Managing the Business—Developing Future Leaders
The computer simulation enables teams to be at the helm of a simulated Tiffany & Company for three "years"—in reality 2.5 days. Each team runs three lines of business in a global geography; competes for sales in a multichannel retail environment; allocates scarce resources to differentiate from the competition; forecasts both supply of scarce resources and demand for product; pursues and manages a diversified risk-adjusted portfolio; manufactures product and manages vendors, all while keeping an eye on the success of their businesses by managing to their financial statements. Teams make multiple revisions of their financial forecasts based on their decisions and resource allocations, and are forced to adjust their strategies on the fly, based on unexpected events and the competitive dynamics of the marketplace.
Managing the Enterprise: Financial Acumen
The board simulation puts teams of participants in charge of leading three business lines from demand management and design all the way through supply management, manufacturing, distribution, and finally, to the retail channels.
Teams compete to generate income while managing risk, quality, costs, and investment decisions. Reacting to unexpected events along the way forces them to re-evaluate their financial projections as they execute their initial project strategies.
Participants experience the movement of money from the customer through their balance sheet, income statement, and cash flow statement. In turn, seeing the direct ramifications of each decision they make, this process develops a clear understanding of the real-world impact their decisions have on the financial, execution, risk, and brand management of Tiffany.
Retaining the Learning Points—Application and Idea Sharing
After the release of each quarter's results, a broadcast reaches an unlimited audience of senior-level participants. Via WebEx and conference line, participants connect with each other and BTS, while BTS facilitates a review of key performance indicators on Tiffany's income statement and balance sheet
provide clarity on what happened during the quarter and why. The broadcast is an opportunity for Tiffany's management team to communicate strategy and expectations, assess the gap in financial understanding through the technical capability of polling, and harvest ideas from the field for return on asset improvement.
The Team-Based Approach
The participating executives and senior managers of the simulations were divided into groups of 25 and teams of five people. They competed directly against one another to generate the highest results on a balanced scorecard representing primary value drivers in Tiffany's business (Return on Assets, Growth, Same-Store Sales Growth, Profitability, and Brand). After each simulation period, debriefs focused on drawing links between the decisions teams made and the impact of those decisions on the balanced scorecard drivers.
Tiffany was able to launch its learning curriculum with immediate success. The BTS solutions enabled participants to gain first-hand experience of the company’s challenges and the decisions driving shareholder value and superior financial performance, while it aligned senior management with the drivers of Tiffany's future success. The simulations and broadcasts focus participants’ understanding of shareholder value creation by:
• Appreciating the impact of business decisions on company brand image and integrity.
• Practicing the principles of Return on Investment analysis.
• Conveying the importance of diversification across geographies and projects in driving consistent, long-term results.
• Practicing risk assessment and management at the portfolio and project levels.
• Evaluating and understanding quarterly results and future expectations.
• Linking individuals' job function to their ability to impact revenue growth, cost control, and asset utilization.
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BTS is a world leader in customized business simulations and other discovery learning solutions that enable corporations to change, grow, and succeed. BTS adds value to its clients through three practice areas: Strategic Alignment & Business Acumen, Leadership & Management, and Sales. With approximately $80 million in revenues, BTS has 250 employees supporting 400 clients from 17 global locations. For more information, visit www.bts.com.
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