Unique business models
All business models have their own unique ways of doing things, whether they are a small employment agency or a satellite manufacturer. What sets these individual businesses apart from their peers are the differences in the way in which they put these actions together to get things done.
These variations will mean the difference between running HMV or Google. In my experience, it is invariably the experiences of the founders of the business that create and develop these methodologies.
Of course, this is largely dependent on the business leader’s breadth of experience. But also of key importance is their willingness to employ others with different and possibly better skills, and their ability to listen to them.
Businesses that fall into this category, that seek to embrace cultural diversity and that actively listen to all their people, then have the problem of how to assimilate this information and ensure that it is used to its best advantage.
Co-ordination of resources
Like the cogs and wheels that make up the mechanism within a clock, it is essential for the efficient running of the business that they work in harmony with each other and have an absolute understanding of what the other cogs are doing.
This is never more so than when implementing a change or turnaround strategy.
The Balanced Scorecard
Over the years I have studied, and used to great effect, the Balanced Scorecard as originally developed by Kaplan and Norton in 1992. This methodology, and variations of it, continues to be used by many businesses to assist them in their performance management, employee engagement and strategy development.
The original purpose of the scorecard was as a system of operational measurement. However, as the methodology has been adapted and developed over the years, it has also proved an extremely effective strategic management tool.
If this tool is used effectively, it can assist businesses greatly in communicating, implementing, and indeed adjusting strategy where appropriate. It can lead to greater cross-functional integration and understanding, and it will help transcend traditional notions about functional barriers, thereby leading to improved decision making and problem solving.
The scorecard enables simultaneous review of the key areas and drivers of the business from different stakeholders’ perspectives, and facilitates a greater perception and understanding of how they are inextricably linked. Greater employee engagement is achieved as a result of this sharing of information.
Four quadrants
1. Financial Perspective
For example: Return on capital employed (effective use of assets), net current assets (working capital), cost of client acquisition, profit per client, etc.
2. Internal Business Perspective
In this quadrant we should be looking at goals such as operational efficiency (management of budget), technology capability (system down time/fit for purpose), staff development, employee engagement, etc.
3. Customer Perspective
This section measures how well our business model is doing in creating outputs that reflect the needs of customers.
Here we should be looking at goals such as client satisfaction, likelihood of positive client referrals, conversion rates, percentage of repeat business, client life
4. Innovation and Learning Perspective
It is my belief that a company’s ability to innovate, improve and learn relates directly to its ability to prosper in the short term and maintain a sustainable business model over the medium to long term. By this process of continual innovation we are constantly seeking to satisfy both new and existing customers, with their ever changing needs, and simultaneously raising the barriers to entry for potential copycat competitors.
In this section, goals measured should be issues such as number and size of Innovation meetings, number of new ideas per month, best practice benchmarking, R & D spend, etc.
Distribution
The Scorecard quadrants should be completed by the individual heads of the various functions before being returned to the controller, who then pulls the information together and sends the resulting document out to an agreed mailing list. The more people it is sent to, the greater the number of people who will come to take a more holistic view of the business, and come to realise that success is most easily achieved when the various functions are working in harmony, rather than as individual outposts.
If you would like to hear more about my use of the Balanced Scorecard and how it has been successful in developing integrated workforces with high levels of employee engagement please contact me at john.thompson@transcapital.co.uk or on 0845 689 8750.
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