Setting goals that increase the value of your business

How do you keep your mind focused on increasing the value of your business?

I come across this problem more and more as both and younger and older people are taking that step into a life as an entrepreneur. On the good side the internet has opened a whole world of opportunities for those with an entrepreneurial spirit to leave the corporate jungle and lead a more fulfilling life.

On the downside, there is an enormous amount of information and complexity out there and I see people from all walks of life, including seasoned veterans struggling to cope with it.

The bottom line is that to succeed in business you must have laser beam focus on delivering value and within that framework of value you need to focus on a set of goals.

Value Generation

When I talk about value, I mean this from two angles. Firstly, the customer angle i.e. what is it that my customers are looking for and secondly your own viewpoint i.e. that of the business owner who wants to increase the value of his business.

In this blog I want to focus on the second statement, which is all about you.

The key to running a successful business is by understanding how your business generates value to you as a business owner. In the corporate world they are called Value Chains or Value Streams. To the layman they are high level processes that include the usual suspects of Marketing, Sales, HR, Operations etc.

Focusing on Value using Strategy Maps

If I use a relatively recent example, a business owner told me he wanted to implement a new Payments and Till System that was connected to the Door Entry System. The rationale was that members could gain access the same way they do today but that the “Days and Time on Site” as well as other interesting data such as alcohol purchased could be retained for analysis. It sounded quite interesting until he pointed out his other critical business challenges such as poor cash flow, lower revenues, poor website, staff costs too high, members attendance reducing, poor stock inventories…… the list went on.

We talked for some time about what was truly important to him and after some time that profitability was key. I’m sure you all know that profitability is the difference between your revenues and costs over a given period and so we focused on some goals for these that we thought were reasonable. You’ll see that in the Strategy Map below

And so, once these high-level business goals were locked down, we then talked about all the other things that would have to happen to get the overall results. As you can see above the are several lower level objectives that need to be achieved in order to achieve the overall goal.

The process above is cyclic and you can refine the goals depending on how achievable the objectives are.

The beauty of this approach is its simplicity, it’s ability to help you focus and you can put the lower level objectives into a plan to help track success – example below

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Brian Hill is the principal partner at Rubiks Cube Management services and can be contacted at here

Communications Strategy in Transformation

Communication is a critical element of business transformation. The purpose of a communication strategy is not just to keep people informed, it is a vehicle to help shape and implement change

A poor or none-existent communications strategy can start with low levels of buy-in but then result in confusion and conflict and then eventual demoralisation of the work force, leading to the failure in achieving of the desired outcome.

A communications strategy needs to consider the different stakeholders and their views. It also needs to consider what the key messages are, what channels of communication they prefer and timing of the message. Critically, one must identify the different types of stakeholders and the impact they can have on the delivery of the strategy.

These questions can be broken down into the standard 6 questions of Who, Why, What, How, When and Where. The typical questions are shown in the table below.

Consider the table below:

Below is a limited example of a stakeholder set and the concerns and needs:

Stakeholder Group (Who) Stakeholder Concerns (Who) Communications Needs (Who)
Board / Executive Concerned about overall business performance and investors returns. They play a crucial role in strategy development, implementation and risk mitigation Communication is critical throughout all stages of transformation from strategy development through to implementation. Early stages will require alignment of views, negotiations and trade-offs as well as conflict management
Finance Concerned with company financials. Profitability and Cash Flow, Investment returns. His focus is on making sure the company’s money is managed effectively. Communications strategy needs to consider company’s financial position and timing of any investments as well as reporting to investors. Over the transformation lifetime there are likely to be financial challenges that will require communications and alignment
  Operations Concerned about Operational Performance. Are we meeting our SLA’s / KPI’s? Communications strategy needs to consider impact on operational performance. Change maybe time intensive and likely to distract from current performance as re-alignment and training take shape. Key here is to be aware of key business periods of heavy operational activity i.e. retail is usually Christmas period
Sales & Marketing Concerned about the Sales Pipeline. Are we targeting the right people? Are we able to convert leads into sales? Communications strategy needs to consider impact on Sales and Marketing plans and teams. Changes to target customers or products are likely to see knock on impacts to processes, tools, personnel and training
Human Resources Concerned with overall recruitment strategy, development of a company’s culture and overall performance and remuneration Communications strategy needs to consider any effects on HR policies, recruitment drives, organisational change, redundancies, salaries and benefits. Also needs to consider possible needs to change culture (as example one focused on quality to one focused on speed)
Risk & Compliance   Concerned with management of business risks. Are we doing things the right way i.e. according to the industry regulations? Do we understand and are we mitigating the main business risks? Communications strategy needs to consider how various risks are managed and mitigated
Change (Programme / Project Managers) Concerned with the implementation of strategic changes. Communications strategy needs to consider what is being delivered / changed, by whom and when
Supplier and Partners Concerned with impact on existing contracts as well as potential for future business Communications strategy needs to consider ability to leverage existing contracts or potential exit complications
Auditors and Regulators Concerned with the company’s compliance against industry and government regulations Communications strategy needs to consider compliance against existing regulations and mitigation strategies and roadmaps for the future

Table 1: Stakeholders (Who information)

Once you have a clear understanding of who your stakeholders and their concerns you can then look at what influence they will have, where they have influence and how to work with them to mitigate any risks / expose any opportunities. You can then agree how you can communicate with them in the future, how often and under what circumstances.

Be mindful that building rapport with you key stakeholders is key to a successful communications strategy. Remember, it is often very difficult to get all the key stakeholders together at the same time and if you can, you may not get much time. It is important to get to know each stakeholder and their preferences. A CEO will often have a different schedule to an Operations Director. For instance, an Operations Director may spend most of his time local to the business and his time structured for key points in the week. A Sales / Marketing Director may spend much of his time on the road visiting his Sales and Marketing team or current / prospective strategic accounts. One stakeholder may prefer email while another may prefer a face to face meeting over coffee

We have a free product here that is a useful example for you to use.

Example Communications Strategy Blueprint

Developing a communications strategy is a complex undertaking with lots of moving parts. PR pros like Dianna Booher understand best practices and exactly what goes into creating and executing an effective communications strategy.

Dianna Booher, CEO of Booher Research, is a bestselling author of 47 books, including her latest: Communicate Like a Leader: Connecting Strategically to Coach, Inspire, and Get Things Done. She works with organizations to help them communicate clearly and with leaders to expand their influence by fostering a strong executive presence. Good Morning America, USA Today, The Wall Street Journal, Investor’s Business Daily, Bloomberg, Forbes.com, Fast Company, FOX, CNN, NPR, Success, and Entrepreneur routinely interview her for opinions on critical workplace communication issues.

Meanwhile, Booher has an eight-step process she uses to develop a communications strategy plan for a client, company, or specific event:

Step 1: Interview all the primary stakeholders to get their perspective on the problem and the goal.

Step 2: Analyze the data to see where there’s agreement.

Step 3: Decide if it’s necessary to collect more data to further investigate the misalignment.

Step 4: Interview other stakeholders (second-tier people) to understand how they see the problem and the goal.

Step 5: Reconfirm the goal with the primary stakeholders.

Step 6: Design an implementation plan, along with measurements of success.

Step 7: Execute the plan.

Step 8: Measure success

By the way, if you want to take our free business model assessment Challenge, please feel free. It’s simple and you’ll have your report back in a day

Supplier Exit Strategy

In business, very few relationships are permanent. Change in the business environment and competition mean an ever increasing focus on the value of any relationship.

Business leaders should be thinking in the long term and assessing which relationships will provide value over the long term. It is all too easy for to think in terms of cost alone but this is where the danger lies

I have a current example of one of the companies I am consulting for. The client outsourced their IT to the lowest cost provider. The relationship deteriorated over a number of years in terms of value and personal relationship. System failure became increasingly common and change became increasingly costly and timely. This lead to a high turnover of staff at the front line who were targeted on sales results but increasingly frustrated with the systems that supported the sales processes.

A decision was made to exit the current agreement and go to market again.

However, as exiting as it was to start on a new path, it was painful to extract from incumbent. What became increasingly apparent was the lack of documentation that supported the systems. The current systems had not been invested in for a number of years and were held together with tactical fixes and patches. The incumbent supplier staff who had been managing the systems felt overly empowered by the weakness of the client. As a result of the power dynamic there was little motivation to assist in the extraction

Lessons learned in this scenario are:

1) Be aware there is power dynamic between client and supplier, which needs to be monitored and balanced over time

2) Put in place mechanisms for easy extraction at the end of any relationship i.e. retain key documentation (for instance, have a shared document vault

3) Keep you supplier motivated throughout the relationship, even towards the end. All people are motivated by rewards so don’t disrespect the exiting supplier. Find ways to keep them positively motivated

What Is Strategy?

Today we’re going to come back to what strategy is and is not. Its important to know because people can get confused and this doesn’t help especially in the communication to those impacted by change. Here’s an interesting article in the Harvard Business Review called “Many Strategies Fail Because They’re Not Actually Strategies”.

Michael Porter, the celebrated professor of economics and business strategy at Harvard states that strategy is:

“defining a company’s position, making trade-offs, and forging a fit among activities. Strategy is about sustaining a unique competitive position, which serves to produce above average profits over time”

Strategy is not operational effectiveness

Strategy is not the same as operational effectiveness and in his ground breaking article “What is strategy?” , Michael Porter shows examples of how Japan lead the way in Total Quality Management and Continuous Improvement. In my own experience there is much focus on methods such as Agile, Lean and Kanban as ways of improving productivity and which impact cost and speed of delivery. But these in themselves are not strategies. Strategy does involve developing uniqueness and being aware of what’s critical for success with your chosen demographic(s). It’s about focusing on developing that uniqueness in a way that differentiates you from the competition. It offers your demographic a viable choice.

In order to truly have a strategy one must understand the overall market place and which particular demographics are over or under served. It involves then understanding the competition and then differentiating one’s self from the competition in a way that is difficult to copy. Coca Cola is a great example of a company that is difficult to copy. Their uniqueness is based on the taste of the product. See the wikipedia article “The Coca-Cola Company’s formula for Coca-Cola syrup, which bottlers combine with carbonated water to create the company’s flagship cola soft drink, is a closely guarded trade secret.”

Pharmaceutical companies develop new products and they remain unique for the life time of a patent which is typically 20 years. Once the patent has elapsed the active ingredient is copied and made generic such as Ibuprofen or Paracetamol. Profits tumble once the patent has elapsed and the uniqueness is lost. Astra Zeneca are a prime example of a company that were once hugely successful but lost there way when their pipeline of viable products reduced, and the big sellers became generic such as Symbicort.

When a company identifies how it wants to differentiate itself it needs to understand which capabilities underpin this uniqueness. The grouping of these capabilities is where the effort needs to be continually focused in order to retain competitive advantage. Business leaders need to be prepared to make trade off’s in order to maintain uniqueness. For instance, being the best in class may come a cost which erodes competitive advantage

Feel free to complete our free business model assessment if you want an insight into how you’re managing your business strategy

Competitive Positioning

Today we are going to discuss competitive positioning within are Industry Scan using an example of a local business we completed some work for in Southgate, Enfield.

This local business wanted to introduce food into the establishment after reading a breadth of market reports on the state of the pubs industry. The overall view was that pubs and clubs where diversifying more into food due to the loss of wet sales and closure of 1000’s pubs and clubs over time.

And so, we undertook a review of the sort of food that could be provided, where the trends where going and what the competition looked like.

The thing about strategy is that it doesn’t just operate in isolation of the market place. We often use two terms to talk about strategy and these are:

  • Doing the right thing –           obtaining the optimum market position
  • Doing things right      –           executing the strategy in order to deliver the chosen product or service

In order to review the competition, you need to know what the critical success factors are for your industry and demographic. We wrote about this in a previous blog critical success factors.

And so, for our product we determined that our demographic where both food quality conscious and price conscious. Based on that information we undertook some research of all the cafes and restaurants on Chase Side, Southgate where all the competition was.

Above is a simple perceptual map that was built up which showed that the majority of food outlets where under the category of fast food of reasonable quality and so the choice to enter the higher end of quality at a reasonable price was a good fit for the market

Feel free to complete our free business model assessment if you want an insight into how you’re managing your business strategy

Business Model Design

Transformation Lifecycle

The Business Model canvass is one of my favourite products as a Business Architect and is the second major product in our Transformation Lifecycle. The BMC (template found here)  decomposes business into 9 key elements shown below

BMC

The right hand side of the canvas is customer facing and deals with your Customers and whom you are dependent on a sources of revenue. Customers are provided value by virtue of your Value Proposition. The way you engage with you customers is through some form of relationship. Products and Services are promoted to customers through various Channels.

The left hand side of the Canvas deals with how you are organised to deliver value to you customers. This includes all the various processes, the assets you use including people, which have capabilities. Where value cannot be created internally you will use partners and all of the above comes at a cost, which is caught in the cost structure.

The beauty of this canvas is in support of the initial brainstorming sessions. Its a fantastic tool for looking holistically at your business model and then looking across the model for impact and reality checking.

For instance, you may have a goal to double revenue but when you look at the processes that need scaling and the capabilities of internal staff and partners may not be realisable without refinement or suitable alternatives.

And now you haven’t lost money or put your business at risk.

Feel free to complete our free business model assessment if you want an insight into how you’re managing your business strategy