A proper business focus will keep your sights set on the things that matter, not clouded by those that don’t, argues Ed Vernon
I’ve always believed business success can be made easier by focusing on a limited number of critical areas. This was brought home to me a few months ago when I was on a judging panel for a competition held by a university leadership school.
The goal was to find the top candidates for inclusion on an advanced executive development programme from a wide range of sectors including services, retail, manufacturing, construction and technology.
Reviewing the applications reminded me that successful firms have common traits beyond mere profit and loss. So what is that makes them stand out?
There were four key boxes the applicants could each tick: a strategic plan that changes as the needs of the business change; an organisational structure that encourages people to deliver their best; operational support systems that track performance KPIs and relieve management of unnecessary detail; and, finally, a strong leadership team where it all comes together.
Successful businesses operate within a framework usually set in a three-year context. The strategic plan details the company’s mission to serve its customers and value propositions, and how they can be improved.
It identifies target markets and pricing strategies, a marketing plan to promote the business and any alliances or other issues seen as crucial to success.
Too often businesses fall into the trap of thinking that the plan is done once implementation begins. That is delusional. Successful businesses have a plan to execute the strategy, a programme of change implementation setting out projects, timescales and owners, and a system of review as the plan develops.
Organisation and structure
The basic components here are an organisation chart, job descriptions, a performance evaluation system and a competitive compensation and incentive scheme. It’s crucial to recognise the importance of people development since it’s people who are the primary drivers of innovation, growth and, ultimately, the ability to outperform the competition.
Couple that with a system of management to underpin consistent and scalable growth, which can mean daily, weekly, monthly, quarterly and annual ‘task lists’ with associated systems of review and correction.
Operational support systems
Every business needs to know how well it is performing, so it’s important to identify and report on the ‘critical few’ KPIs, while keeping at bay the ‘irrelevant many’ bits of information which confuse management, cloud judgment and could make for poor decision making. This is where a clear business focus is essential.
Sales, margins, cash, customers and people indicators are typical when identifying KPIs. The trick here is to focus on a limited number of measurements which really drive the desired outcomes.
This is easier said than done as sometimes the most important things are the most difficult to measure. But all successful organisations find a way to measure and then manage those few really critical KPIs.
The growth of many businesses can be fundamentally constrained by the quality of leadership. Businesses often fail to develop because of flaws not in the product but the leadership.
This lack of growth then becomes self-perpetuating as ambitious people decide they have better prospects elsewhere. So leadership itself can become the fundamental constraint to growth.
That’s why leadership must evolve by identifying its own limitations and correcting by means such as executive development programmes and, where necessary, by bringing in additional talent and experience.
So there you have it: the four areas that differentiate successful businesses from unsuccessful ones, the poor from the good and the good from the great. All four need to be in place and working well for business focus, sustainable growth and success. Simple!