Different organization comes up with different models to run the business. A business model is an essential tool to ensure that the operations within the organization are interlinked and that the customers needs are met while at the same time, the organization maintains its reputation and makes profits. There are four elements that every organization needs to meet to create a profit making model.
Customer value proposition (CVP)
A successful company will have a model that understands the customer requirements. It is not easy to meet the customer requirements before understanding the problems they face. Customer value proposition is a model element that is aimed at ensuring that the organization evaluate the customer position and fulfill their demands as best as possible. A good model that applies CVP must, therefore, put three facts into considerations. First, the information on the target customers must be gathered in plenty. Secondly, the job to be done or problem to be solved in the targeted market must be understood. Finally, the organization in question must provide an offering that will meet the demands of the target customers.
A good model should provide a profit formula. The profit formula for an organization is a blueprint that defines how the organization will be making profits while offering the best services to their customers concurrently. It is noted that, an organization without profit formula may get lost in providing better services to their clients while not meeting their central goal of making profit. A good profit formula will define the scale and resource velocity needed to achieve the desired profits. High performance organizations use profit formula to calculate the desired profit by setting the price required to deliver the CVP and then working backwards from there to determine what the variable costs and gross margins must be.
No organization can be successful in the business field without resources. For an organization to reinvent its model, it must come up with ways to ensure that their resources are acquired and managed properly. Some of the very important resources in an organization include people, technology, products, facilities, equipment, channels, and brand required to deliver the value proposition to the targeted customer. It should be noted, however, that a good business model will be that which can define the most important element from the rest of the resource to improve interactions between the business and their customers. When key resources are managed properly, the organization will stand a better chance to meet the customers demands and be successful in the market.
Key processes which include recurrent tasks as training, development, manufacturing, budgeting, planning, sales, and service allow managers to deliver value in a way they can successfully repeat and increase in scale. It is important that an organization have their key processes well defined to assist the management in reinventing the business model.
It can be concluded that these four elements are all critical for a business to reinvent its model. For better success to be noted, these elements must be interlinked and the decision at any stage communicate to the next.
Article: Using the Balanced Scorecard as a Strategic Management System
An organization must use a scorecard as a reference o their performance in the market. A balanced scorecard is a cycle with no end and has four elements which are all critical.
Translating the vision
The vision of an organization must be translated in a way that it is well understood by the people who will implement it. In most cases, different organizations fail to meet their vision and goals because they have not reached a consensus with their employees on the demands of the vision. A high performing organization must ensure that they communicate their vision to their staff in a timely manner and keep reminding all the stakeholders on their roles to meet the goals.
Communicating and linking
Meeting the goals drafted within scorecards needs the linking between personal and corporate visions. It is the primary role of a balanced scorecard to ensure that there are no conflicts of interest among those responsible for the achievement of the business goals. To ensure this, communicating and educating of the employees must be achieved during this stage. The communication channel to be used lies within the organization under question. An organization can decide to adopt the top-bottom or bottom-up communication model. Such communication informs the executives and the board in specific terms that long-term strategies designed for competitive success is in place. During the communication process, the organization must also ensure that goals are set and rewards linked to performance measures.
Developing a balanced scorecard involves planning. It involves clarifying the strategic objectives and then identifying the few critical driversalso creates a framework for managing an organizations various change programs. Having a business plan is important to manage initiatives such as reengineering, employee empowerment, time-based management, and total quality management, among others to ensure that scare resources such as senior managers time is not overstretched.
Feedback and Learning
With a balanced scorecard, a manger can continually test their strategy. Its like performing real-time research. A feedback and learning provides an organization with an opportunity to review where they performed better or failed in the market. In a balanced scorecard, the feedback and learning stage should involve articulating the shared vision of the staff. After evaluating the shared vision, the organization should go further and supply a strategic feedback on the vision and how they show similarities with what employees consider as personal goals. Finally, a strategy review should be provided as a platform to learn the market strategies and advise the executive on the better ways to implement strategies to meet the organizational visions.
Assignment #3 Turning Great Strategy into Great Performance
Rule 1: Keep it simple, make it concrete.
Having a clear vision within an organization is important to ensure that the promised strategy is met. It becomes very challenging when an organization does not communicate its strategies and policies in a clear manner to the lower level management. Therefore, to start off the planning and execution process on the right track, high-performing companies avoid long, drawn-out descriptions of lofty goals and instead stick to clear language describing their course of action. Clear and concrete business plan will give an organization an upper hand in putting everyone in the organization headed in one direction thus closing the strategy-to-performance gap.
Rule 2: Debate assumptions, not forecasts.
Planning in most organization always looks like politically motivated rather than having a concise business orientation. Having a financial projection within an organization is not easy, even those that have planning process that is free from political motivations. A high performing organization which looks forward to closing the strategy-to-performance gap will, therefore, debate on assumptions, not forecasts. Both short term and long term forecasts are important in realizing a high financial projection.
Rule 3: Use a rigorous framework, speak a common language.
Having a profit pool as a reference point is a necessary step for any business model that is willing to compete effectively in the market. First, the business must decide on the size of the pool before using it as a reference point or else it will not manage to beat the competition in market. To be productive, the dialogue between the corporate center and the business units about market trends and assumptions must be conducted within a rigorous framework.
Rule 4: Discuss resource deployments early.
Resources such as work equipment and human resources are critical for the higher performance of any organization. To ensure that an organization meets its strategy, they must ensure that they create a more realistic forecasts and more executable plans through discussing up front the level and timing of critical resource deployments.
Rule 5: Clearly identify priorities
Success in any organization means that critical decisions must be made and put into actions. However, not all decision has equal weight in an organization. A well-formulated strategy will mean that the management is capable of choosing the most important decisions and executing them ahead of those that are less important. Therefore, developing a priority is one very critical stage in closing the strategy-to-performance gap.
Rule 6: Continuously monitor performance.
Tracking performance of an organization is one way to make sure that it does not derail from its strategy. It is through monitoring that an organization can conclude on whether they have deployed adequate resources or not. Additionally, monitoring progress makes high performing organizations prevent concentrating on activities that are less profitable to whilst putting much effort on those with higher returns.
Rule 7: Reward and develop execution capabilities.
A poorly motivated staff is time bomb. A high performance organization must make sure that they motivate their employees through rewards for the hard work they have shown throughout the stages to realize high performance. Moreover, an organization must also be ready to punish those employees who do not show much concentration in ensuring high performance.
Article: The Secrets to Successful Strategy Execution
The Elements of Strong Execution
1. Everyone has a good idea of the decisions and actions for which he or she is responsible
Organizations with stronger execution mentality have 71% of its staff agree that everyone has a good idea of the decision and action for which he or she is responsible. Organizations with weak execution, on the other hand, will have only 32 percent of its staff agrees to this statement. However, a bigger challenger arises when an organization expand in size. It is never easy to evaluate where the responsibility of an individual begins or where it ends. Therefore, creating a link between the corporate managers and the lower level management, while communicating the strategies of the organization is the best way to ensure that there is no conflict of responsibilities in an organization strong on execution.
2. Important information about the competitive environment gets to headquarters quickly
Headquarters forms a center where patterns are identified and best practices promulgated throughout the business. It is not easy for an organization with poor market intelligence to formulate such bets practices while promulgating the identified patterns within their headquarters. Additionally, inadequate market intelligence will make the headquarters to implement their own politics and opinions rather than offering what is closer to their customers. For high performance, therefore, it is important that information about competitive environment gets to the headquarters quickly. In organizations that are strong on execution, 77% of the staff will agree with the statement as compared to 45% percent of the staff in an organization weak on execution.
3. Once made, decisions are rarely second-guessed
Having a clear responsibility in an organization helps during the decision making process. In an organization with stronger execution policy, most of the staff has a belief that a decision once made, it should rarely be second-guessed. A challenge occurs in a situation where employees including the management do not understand their resp...
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