In Why Simple Wins, Lisa Bodell explains why it is so vital for people to incorporate simplicity into every type of work. Through detailed case studies, interviews with company executives, and clearly explained group exercises, this book outlines how all types of organizations can cut through needless complexity and master the power of simplicity. With a simplified core as the main objective, employees at all levels will be granted the opportunity to discover work that really matters.
In today’s corporate world, everyday functions such as email communication, protocols for approval, and required meetings can hinder individuals’ ability to get their work done. Lisa Bodell examines the main strategies that can simplify how businesspeople approach their work in order to be productive and gain a daily sense of accomplishment:
- Reclaiming time by removing unnecessary work. When workers can eliminate the tasks that waste their time the most, they will be able to take on more creative endeavors.
- Defining complexity. To uncover more streamlined approaches, individuals must address and resolve complex operational problems.
- Finding work that matters. By stripping away complex layers, businesspeople will be able to discover the work that brings meaning to their daily endeavors.
- Attaining a simplicity mindset. When workers at every level look for ways to simplify, businesses as a whole benefit.
- Becoming a Chief Simplification Officer. No matter what roles workers occupy, they all must play a part in the simplification process. This ownership will provide them with opportunities to remove outdated, overused, or ineffective procedures.
- Perfecting simplicity. Simplicity is a constant work-in-progress that must be perfected over time.
About the Author –
Lisa Bodell is the founder and CEO of futurethink, which enables organizations to embrace change and become world-class innovators.
A globally recognized innovation leader and futurist, Lisa founded futurethink in 2003 to provide a simple approach to the otherwise complicated topic of innovation. Working with leading brands such as Starwood, Merck, and Bosch, futurethink has become the largest source of innovation research, tools, and training curricula in the world. She is the author of the provocative culture-change book, Kill the Company: End the Status Quo, Start an Innovation Revolution, which was named one of the Best Business Books of 2012 by booz&co.
More Info at: @LisaBodell @futurethinktank
The Building Blocks for Business Planning
Data and dashboard and scorecards are building blocks that support valuable business planning practices. The execution of business strategy is often hampered by a lack of reliable information. In a 2013 report on business planning practices KPMG determined that “seven out of ten executives do not get the right information to make business decisions.”
Data provides a common business language, a set of definitions and agreed standards. Data organized through the use of corporate data models ranging from corporate to individual systems should adhere to a common set of standards. There should be robust controls of the master data and clear ownership demonstrated throughout the organization around data requirements. A system of controls and governance should be in place to ensure the quality, consistency and completeness of information resulting in data that is consistent where applicable across multiple business units.
Dashboards and Scorecards
A dashboard measurement system provides a simple, clear message about the strategy that all employees can understand and internalize in their everyday operations. Design an efficient system that includes automated dashboards and scorecards. Build alerts and early warnings into the system by setting limits so that material variances get flagged when you hit that limit. This eliminates the need for someone to sit down and sift through a monthly report that has 200 variances and try to determine which ones are important. You also get agreement among company leaders as to what are the most important measures.
A well-constructed dashboard provides the roadmap for achieving the company’s strategy. It decomposes high-level stretch targets into ambitious targets for the linked objective and measures on the dashboard. The organization can then define the strategic initiatives designed to close the planning gap between the stretch targets and the organization’s current performance. In this way, the organization provides the knowledge, tools and means to achieve the stretch targets. The dashboard helps the organization mobilize by focusing and aligning all of its resources and activities on the strategy for breakthrough performance. Employees are more willing to sign up to the stretch targets because they can see the linkages, integration and initiatives that make achievement possible.
The most important criterion for initiating the dashboard is that the initiating unit has a senior leader whose leadership and management style emphasizes communication, participation and employee initiative and innovation.
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Dynamic Business Planning
The plan must be dynamic to respond to changes in the industry, the economy, the competition, key commodities and other planning assumptions. A dynamic plan enables the organization to adapt and grow to meet changing competitive conditions.
Analytic Tools and Predictive Models
Analytic tools and predictive models are excellent methods for enabling organizations to adjust to changing conditions. They require fewer inputs than traditional planning and help to automate and shorten the annual budget cycle. Analytic tools incorporated into the business planning process enable finance to generate scenarios needed to question old assumptions. They also stimulate new thinking by churning through internal and external data. Analytic tools challenge the idea that professional experience and intuition are reliable substitutes for fact-based decision making – it takes all three.
Predictive models enable organizations to design models that focus on leading versus lagging indicators and provide much greater insight into what’s happening in the organization. In addition, predictive models enable planners to evaluate alternative scenarios based on driver fluctuations.
Predictive models should be designed and implemented using a driver-based planning model. The models should incorporate critical operational data or drivers that influence financial outcomes. Over time they increase the predictive accuracy of plans. A driver-based planning model is not purely financial in nature; the model captures the inter-dependencies of the business and provides a better-rounded picture for the future of the business.
Value drivers include market share; service and products – existing, new, mix; customer channels – channels, segments, service; and market growth – contract life cycle. These value drivers are owned by business managers to drive the focus across the organization. Clearly defined value drivers measure progress against targets that are linked to the organizational strategy.
If you’re new to designing predictive models, start small, use model-based forecasting to support target setting and build your experience using data to create meaningful scenarios.
Retain Best Practices
In the end, when it comes to designing your planning blueprint, determine what works for your company and confirm with stakeholders. Retain practices that add value and eliminate the rest.
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When should you start your exit planning? The time to be thinking about the sale of your company is when you start it. Everything you do from Day 1 should be focused on driving enterprise value upon sale.
Startup entrepreneurs typically fail to consider when and how they will prepare for an eventual exit. Thinking with the end in mind, companies manage their businesses better and that helps prepare them to sell.
How do I prepare my business for my eventual exit?
The core strategy to improve your business and achieve your periodic and long-term financial metrics is to use key performance indicators (KPIs).
KPIs are the metrics that judge your business’s performance based on the success you would like to achieve. They serve as your scorecard.
By incorporating key financial ratios and metrics into your regular internal financial reporting and understanding how these measurements impact value, it will allow you to be more proactive and strategic in your decision-making.
Many buyers appreciate this type of reporting as it suggests not only that you are managing your business strategically and with an eye toward key operating metrics, but it also help them understand your business better, which can reduce perceived risk.
Most small to mid-sized businesses are lacking in financial and operating information that is readily available to help managers make decisions. By having this information ready and in a format where buyers can quickly understand trends and indicators, you will likely increase the perceived value of your company and will be in a better and more informed position to make important decisions along the way.
Key Performance Indicators (KPIs)
Sales / revenues
Amount and percentage of cost of goods sold
Amount and percentage of marketing costs
Amount of inventory levels
Amount of accounts receivable
Amount and percentage of net income
Number of key financial / operating ratios (examples – current ratio, quick ratio, debt ratio, asset turnover ratio, sales/working capital ratio, etc.)
Most important for a startup – Amount of cash / cash flow
Number of customer leads
Customer conversion rates
Number of new customers
Number of subscribers
Percentage of customer satisfaction
Number of products manufactured
Number and percentage of product defects
Percentage of employee turnover
Number of new employee hires
Amount of payroll
Number of PR mentions
Number of website visitors
Other metrics that are specific to your business and industry
Metrics for a technology startup might include:
Intellectual property – patents
Quality and depth of your development team
An effective planning process begins with a blueprint that includes thoughtful choices around resource allocation, the planning horizon, management accountability and participation, transparency, internal communication tools, and the level of detail to include.
Align resources with strategy and coordinate across the organization. This is the time to evaluate internal projects to determine the best opportunities with the best return on investment for the organization.
The Planning Horizon
Select the planning horizon that fits your business. Align the planning horizon with lead times associated with your business processes such as manufacturing, sales and payment cycles. The planning horizon depends on the operating model and must be tailored for the operating decisions you need to make. You should plan out only as far as you can see or as far as your decisions require. The typical planning horizon is a 12- or 24-month plan or rolling forecast.
Management Accountability and Participation
Establish roles and responsibilities for individuals included in the business planning process and incorporate management accountability and participation into the process. Determine how best to measure progress and to align financial targets and rewards. Establish incentives that drive the correct behaviors by clearly articulating accountabilities that link the plan to the individual’s performance. The goal is to encourage behaviors needed to execute the strategy. This leads to less sandbagging and gaming.
Be intentional about adding transparency to the planning process. Transparency enables you to achieve greater trust, coordination and cooperation across the different functions within the organization. It can also help reduce the tendency for managers to sandbag.
Internal Communication Tools
Select communication tools and channels that include all stakeholders in the process. The communication approach should define the purpose of the budget and forecast process. An approach focused on cascading and enabling strategy with incentives that drive the right behaviors cross the business. Forward-thinking organizations are developing interactive visualization of data to communicate their strategies. Two excellent examples of interactive visualization are the 2006 TED.com video “Hans Rosling shows the best stats you’ve ever seen”; and Kiva.org’s Intercontinental Ballistic Microfinance visualization of loan-funding and repayment flows.
Level of Detail
Produce as little or as much detail as needed to make smart business decisions. Focus on the questions that need to be answered. More detail doesn’t mean better decisions. Too much detail can reach the point of diminishing return where the cost of knowing may increase and the value of knowing may decrease. Begin by focusing on the questions that need to be answered such as where are we headed and how will we get there.
Focus and only plan line items that really matter. Don’t populate every number from scratch, prepopulate as much of the data as you can for 80 to 90 percent of the line items. To get a baseline, build in algorithms that will take your current trend data in each area and project that out for the year.
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