Strategy

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Strategy

Asking "What if?" questions to improve performance.

How to find opportunities for performance improvement inside your business

Do you have more than one product or sales territory or branch in your business? If you do this whitepaper will show you how to define a sequence of changes that will transform your business performance.

Of course you need a KPI model to find and test the decisions before you make them, because you cannot improve performance unless you are measuring performance.

It is a three-step process and it works every time. It works because when you focus on your key performance indicators they provide your summary of the real levers of productivity.

Step 1: Find the best and the worst performing units in your business and compare their KPIs. Where are they different?

Step 2: Now dig a little deeper, what is A doing better than B? What is B doing differently from A. What drives A's superior performance?

Step 3: Ask your "what If?" question. What if B did the same as A at this stage in the process? How profitable would B become? Keep asking "what if?" and very quickly you will have a new strategy for B. You will have defined the decisions that B needs to take to become as good as A.

The best way to show you how to do this is to describe a real example from my casebook. I have created a small KPI model to show you the numbers and the sequence. This will help me illustrate the sequence, so it is worth the work of following through the sequence.

When you see how simple it is it will blow your mind.

When you apply it to you own business you can use the same process to transform your profitability and know that it will work, because one of the units is already doing it.

The situation.

A government client was in the facilities management business. They maintained air bases for the air force, doing everything, maintenance, new construction, systems, that was needed to keep them operational and able to respond to emergencies.

They looked after 2 air bases, let us call them North and South. North was much more profitable than South, in fact South was losing money. They used the same systems and did similar types of work.

One was bigger than the other, and that had confused the debate about how to improve the performance of North because people were looking for scale economies. They were looking in the wrong place.

They sent me the annual accounts for North and for South. It was immediately obvious that they were different, but no amount of poring over the accounts was going to produce the answer. Better accountants than I had been doing that for three years without generating any strategic insight.

I chatted to the managers about what they did so that I had a starting point for creating a KPI model that would work for both sites.

The modeling technique

I drew the model on a large sheet of paper, wrote in in the numbers for North, and got the calculator out to test it. Then I built it in Excel, and added the numbers for South.

The "What if?" questions

What if North worked as well as South at a specific function or operation? And vice versa.

As I worked my way through one function after another I found the levers of performance improvement.

South outperformed North in operational returns. North had lower overheads. South had lower asset turns which suggested under-utilized plant and equipment.

From analysis to strategy

The analysis generated a performance improvement strategy that we knew would work because one of the units was already doing it. In addition, we knew what the target performance was and what the effort would return.

When it was implemented, we found that some of the projected returns could not be achieved because of concealed operational differences between the two units, but overall after 12 months, the ROFE for the combined units had been improved by over 75%.

You can find similar returns hidden in your business if you start asking "What if?" questions and use a KPI model to reveal the strategy.

You can get the fully illustrated paper on this important topic at realkpis.com and also download a copy of the model I used to explore the diffences in performance of these businesses. This will give you a head start on your competitors. All you need to do is register at realkpis.com and subscribe to The KPI Bible.

Developing Your Strategy Picture

This whitepaper extends the "wasgij" strategy thinking process to fill the strategic framework covered by the first two papers.

It starts with the marketing strategy and works through the concept of "product/market fit" to the resourcing and systems issues that flow from a decision to own a customer segment.

We provide guidance on thinking about market segments that smaller business owners will find helpful as a small business cannot dominate a national market. Effort needs to be focused where it will pay off.

When a customer segment is linked to the product or service those customers want to buy, and supplied with the resources needed to succeed, success prospects are greatly enhanced. The customer can see or feel the difference between your product/service and that of your opposition. Your need to be different in a way that is meaningful to the customer is turned into a reality, and demand will grow.

Smaller businesses can own a segment by discovering new segments below the radar of the mega-corporations, and dealing with that group of customers in a way that competitors find hard to match. The paper guides you through the process and lets you apply it to your own business situation.

Order out of Chaos

Order out of Chaos is the first in a series of Whitepapers that explain a new way of thinking about strategy.

Is it possible to craft a strategy that unlocks a path to the future you would like to create for your business? I firmly believe that it is, and its not metaphysical witchcraft either. Let me explain.
It is well accepted that a clear vision of your goal acts as a guiding compass, probably by guiding the decisions you make on a daily basis, at the subconscious level. Less well understood it is the idea that we can create a strategy by working back from the future, but when you understand it it makesperfect sense.
To explain this, I use a thinking metaphor based on the concept of a jigsaw puzzle, to show you a way to combine the discipline of analysis with the power of goal setting. introduce you to “Wasgij thinking”; that is how to create a bubble of order for your business in a chaotic business environment.

My friends and students who have used this concept have found it a powerful way of reversing their usual thinking process and problem solving strategy. The comment I often hear is "I wish I had known about this a year ago."

Creating Your Strategy Framework

The second in our Strategy Whitepaper series guides you through the process of defining the frame in which your jigsaw strategy will fit, and provides further explanation of "Wasgij Thinking".

The history of great, long lived, organisations has shown the importance of this step in development of a successful strategy.
All organisations that have achieved long life and prosperity have a clear framework inside which all their actions can fit. They make sense to their customers and their staff. If you only do the things that are valued by your customers you greatly reduce the risk of failure and you avoid wasting energy on irrelevant activities.

The paper explains how to define the four corners of your frame, the anchors for the way that you intend to do business. You will learn from examples how to define your operating principles and your business purpose. The edges of the frame will probably be your target customers, and the products of services you will provide to them, the rules of the game in your industry and the trends in your operating environment close your framework.

This is the second step in the strategy process, and it will be followed by a Whitepaper on the essential elements of your strategy mix, the things you have to work on to achieve your goal.