Is Your Business Optimized?
“Optimization” is one of those words that we tend to associate with websites these days, and in this narrower respect it suggests that we may be missing quite a few opportunities to get more from our effort than we have previously realized by pulling on what might be several “levers” to get a better result. Optimizing an entire business follows the same principle by suggesting that any commercially oriented organization is much more than one single and simple entity, and is therefore best improved by becoming aware of its key “performance levers” and then learning to “pull” on these in intelligent ways.
Before we look at what business levers may be useful to consider, let’s first clarify what we mean by a “business”. For our purposes here, a business is any organization of people which has a commercial goal. This definition then envelopes not only small, medium and large enterprises, but other organizations such as professional practice firms (like lawyers, accountants or GP’s/Dentists for example), commercial agencies of various kinds (perhaps primarily doing research, for example) and even many non-profit organizations, which often have to be run on an entirely commercial footing. So, what levers are common to all these kinds of businesses?
Although the levers of business performance potentially run into hundreds at the micro level in any given organization, we propose that there are four major ones upon which we most need to focus. These are the levers of “Prospects”, “Processes”, “People” and “Profits”. It is clearly not necessary to “alliterate” the four business levers so that they all begin with the letter “P”. However, it does provide a convenient way to remember this set of four and not lose sight of the fact that although we can engage in optimization effort in any one of them, all four levers also need to be considered collectively, or with the overall impact of one on another being carefully thought about, in order to start to successfully optimize a business. So, let’s now look at what each realm covers.
“Prospects” comprise the first of the four key realms proposed here because an organization needs to know where its future sales prospects (or fund raising sources in the case of a non-profit organization) are coming from. There is no guarantee that even a strong customer base that has bought or utilized a business’s products or services on a regular basis in the past will continue to do so in the future. Particularly in today’s fast moving and highly competitive economy, continual awareness of customer expectations and the shifting needs landscape of its present and future customer base is essential if a business is to keep pace with the competition.
“Processes” are the means by which a business manages its internal operations so as to deliver the product or service it has promised its customers. In the modern world, these processes can encompass many internal functions and teams and so require effective coordination at all levels of the organization and even outside it, as external suppliers and other partners to the enterprise can also be part of the process.
“People” are the individuals and teams who work in the business, directly and indirectly, on a part- or full-time basis, to appropriately address the prospect, process, and profit realms so that they perform at their best. If these individuals and teams are not sufficiently focused and effectively aligned, the business will inevitably operate sub-optimally.
“Profit,” the final realm, determines whether or not a business not only has enough liquid capital to supply the products or services it sells to its customers but can also earn a profit. Much of the initial focus, in this realm, is therefore on such hard issues as the planning and control of investments, revenues, and costs, but a strong focus on the areas of governance and risk management is also necessary for optimization purposes.
So, simply put, by thinking about the business in terms of the above levers, any organization, no matter what its size or type, can perform at a higher level or be more successful. It is important to remember however, that business optimization should not be pursued as a random process. Rather, it needs to be viewed and pursued as a systematic and holistic approach in which you focus on the four overarching levers or what can also be called “realms of activity” at first individually, according to an assessment of which is in need of greatest attention, and then collectively. In ideal circumstances then these levers will first be addressed in this sequential order, before being reviewed collectively as follows:
- Have we optimized our focus on prospects?–winning and keeping customers
- Have we optimized our focus on processes?–effecting smooth task execution
- Have we optimized our focus on people?–aligning individuals and teams
- Have we optimized our focus on profits?–creating sustainable financial control
This review activity is best done by asking well-crafted questions about current performance, which will inevitably lead to yet more follow-up questions as responses are gathered. Don’t forget, not only is every business changing daily in terms of its efficiency and effectiveness but rapid change is also occurring in the outside world, such as technology, potentially new suppliers, possible partnerships or collaborations, competitor actions, etc. Constantly asking optimization questions of all kinds are therefore the best way to keep up and even get ahead.