19 Financial Analysis Approaches Business Leaders, Managers, and Professionals Should Know

19 Financial Analysis Approaches Business Leaders, Managers, and Professionals Should Know

It is not often that I write about numbers. Why, because some professionals find it boring and want to nod off at the mention of numbers, while others simply say, well my numbers are giving to me by someone else.

Here’s the thing, you may not create the numbers, but you need to know how to read them and understand what they mean. At least you need to be able to have a meaningful conversation with a financial analyst, accountant or chief financial officer.

Recently I have been working on three separate strategic planning and business analysis initiatives. We followed standard best practices. That is to say, identify the current state, define the future state, assess the risk and create the strategic plans and roadmap so the clients could implement. As part of these initiatives, we have had to gather the numbers, which essentially means ask for them, and use them to help assess the current state financially. Eventually, we used the number to do future state projections and budgeting. I am a big believer in the adages, the numbers don’t lie, and you need to know where you are to determine where you can and need to go. Numbers help in making better business decisions.

So I thought I would provide some of the more common financial analysis options used to help business leaders and professionals make better business decisions. The type of financials you require will be driven, in part, by the type of initiative. You can use the following as a checklist for the types of financials you may need to understand. You should ask your accountant, financial analyst or CFO what other numbers maybe be required as I can’t cover them all here but I do hope this blog on the numbers helps.

Vertical Analysis is used on financial statements where each entry of the major accounts, assets, liabilities, and equities in the balance sheet are represented as a proportion of the account totals. It shows the relative sizes of different accounts on a financial statement. When done on an income statement the top line of sales (100%) is broken down by percentage of product or service sold. It can be used on a project to understand top line spend (100%) against a category of spend. For example, labor, hardware, software, etc. However, if you are looking at a company’s financials overall, you may want to understand the financial breakdown of sales vs. expenses regarding percentages. (PS: you should know what an incomes statement and balance sheet, and how to read them)

Horizontal Analysis is sometimes called trend analysis and should be something you understand and monitor. You compare ratios or line items in financial statements over a certain period. It’s a useful tool evaluate trend situations. You can use this analysis against a balance sheet, income statement, industry data or a multi-period project budget to understand what is going on.

Forecast to Budget: The use of historical data to determine the direction of future trends. Forecasting is used by companies to determine how to allocate their budgets for an upcoming period. It is also used to budget for projects.

Run-Rates: If a company has revenues of $100 million in its latest quarter, the CEO might say: “Our latest quarter puts us at a $400 million run rate.” All this is saying is that if the company were to perform at the same level for the next year, they’d have annual revenues of $400 million.

Productivity: Productivity is the relationship between the quantity of output and the quantity of input used to generate that output. It is a measure of the effectiveness and efficiency of your organization in generating output with the resources available. Productivity = output/input.

Return on Assets: Investors and managers base the market value of the business on the profit it generates. The return on assets, or ROA, of business, is a ratio commonly used to calculate profitability.

Inventory Turnover: Companies that are based on the sale of a product depend on regular sales to generate a profit. In these cases, the financial health of a business depends on its inventory turnover, or in other words, how many times a year it sells its average inventory.

Cost-Benefit Analysis is a systematic approach to estimating the strengths and weaknesses of alternatives that satisfy transactions, activities or functional requirements for business. It is a technique that is used to determine options that provide the best approach for the adoption and practice regarding benefits in labor, time and cost savings.

Breakeven Analysis: An analysis to determine the point at which revenue received equals the costs associated with receiving the revenue.

Sensitivity Analysis: A technique used to determine how different values of an independent variable will impact a particular dependent variable under a given set of assumptions.

Profitability Analysis: A component of enterprise resource planning (ERP) that allows administrators to forecast the profitability of a proposal or optimize the profitability of an existing project.

Net Present Value (NPV): Defined as the sum of the present values (PVs) of incoming and outgoing cash flows over a period. Incoming and outgoing cash flows can also be described as benefit and cost cash flows, respectively.

Internal Rate of Return (IRR): Also called the discounted cash flow rate of return. It’s a rate of return used in capital budgeting to measure and compare the profitability of investments. ‘Internal’ refers to the fact that does not calculate environmental factors like interest rates or inflation.

Return on Investment: A performance measure used to evaluate the efficiency of an investment or to compare the efficiency of some different investments. You calculate ROI, the benefit (return) of an investment is divided by the cost of the investment; the result is expressed as a percentage or a ratio.

If you don't know your numbers, you don't know your business. Marcus Lemonis Share on X

Asset Turnover:  Indicates business capability to generate sales per every dollar invested in total assets

Cash Conversion Cycle: Measures the effectiveness (average amount of time in days) to convert resource inputs into cash

Current Assets to Liabilities Ratios: It calculates the extent to which a firm can meet its short-term obligations.

Debt to Equity Ratio: It indicates how much of total funds are provided by creditors versus by owners.

Market Segmentation Analysis: It indicates revenues by your business market segments and can be adjusted to segment product and service lines.

Final Thoughts

So, did I just bore you? Are your eyeballs rolling back into your forehead? Sorry about that. I know I didn’t provide you a lot of case examples. I have limited space in a blog. These are the financial analysis basics. When I am working on an initiative, I find myself working with a team. Most recently that team has included a combination of stakeholders all working to serve the client’s needs. It has included a senior consultant, project lead, a researcher, financial analyst and of course the client we are serving. As the management consultant wearing the hat of a strategic business analyst and business advisor, I get to work with a team of people who provide the information needed and packaged in a way that it can be analyzed. All I have to do is ask. I guess for you, as a business leader or professional, you need to be able to do the same thing. You may not have to create the numbers, but you do need to know what to request, how to read them and determine what they mean or at least ask what they mean.

Good luck!

Remember, do your best, invest in the success of others and make your journey count.

Richard

Staff, Investopedia. “Forecasting.” Investopedia. June 05, 2015. Accessed October 27, 2017. http://www.investopedia.com/terms/f/forecasting.asp.
“Run Rate.” WordReference Forums. Accessed October 27, 2017. https://forum.wordreference.com/threads/run-rate.3041745/.
Phillips, Jack J., and Patricia Pulliam Phillips. Handbook of Training Evaluation and Measurement Methods. London: Routledge, 2016.
Marshall, Alfred. Principles of Economics. Houndmills, Basingstoke, Hampshire: Palgrave Macmillan, 2013.
Smith, Charisma. “An Analysis to Determine the Point at Which Revenue Received.” Prezi.com. April 18, 2014. Accessed October 27, 2017. https://prezi.com/ghwtqx4172gc/an-analysis-to-determine-the-point-at-which-revenue-received/.
Staff, Investopedia. “Sensitivity Analysis.” Investopedia. December 03, 2015. Accessed October 27, 2017. http://www.investopedia.com/terms/s/sensitivityanalysis.asp.
“What Is Profitability Analysis? – Definition from WhatIs.com.” SearchERP. Accessed October 27, 2017. http://searcherp.techtarget.com/definition/profitability-analysis.
“Net Present Value.” SpringerReference. doi:10.1007/springerreference_2028.
Boundless. “Internal Rate of Return.” Internal Rate of Return | Boundless Finance. Accessed October 27, 2017. https://courses.lumenlearning.com/boundless-finance/chapter/internal-rate-of-return/.
Staff, Investopedia. “Return On Investment – ROI.” Investopedia. September 01, 2017. Accessed October 27, 2017. http://www.investopedia.com/terms/r/returnoninvestment.asp.

7 Challenges Artificial Intelligence Brings to your Business and Career

7 Challenges Artificial Intelligence Brings to your Business and Career

robot-507811_1920I was reading the blog of a well-known and established management consultant who recommended that, in order to perform better we have to learn faster. This was in relations to BI (business intelligence) and AI (artificial intelligence) and what professionals need to do to survive the advent of AI into the business world, into decision making and into professional careers. It was suggested that the way to beat AI is to learn faster.

I had no choice but to write this business leader a personal email outlining that his recommendation could be equated to the song, John Henry. John Henry was a Steel Gang Lead who had a hammer in his hand. He competed against the Steam Shovel at the turn of the century to beat technology down, saying he would die with a hammer in his hand. The Steam Shovel won and John Henry was laid to rest. To this day, trains pass by to haunt the man who died with a hammer in his hand. My point is, telling people to learn faster is like saying “here’s a hammer – now go beat the AI computer in your analysis and decision making.” Eventually AI will win, you will die and the economy will change. You should be asking, “what is the impact?”, “ why is it important?” and “how should I proceed so I can prepare for another shift in my professional landscape?”

Pick Your Battles:  I don’t want to simplify this too much. I learned from raising teenagers, that I needed to pick my battles. Again, you think that lesson would be learned in the professional world. Teenagers can be somewhat moody. So, you need to know when to engage and when to pull back, or else everything blows up in your face. When you look at AI and BI you need to know when to pick your battles and develop an understanding of what you should or need to lean into and what you need to let go. Some of your day-to-day work will disappear and the business world will be moodier for a while, so it is better to create a flexible plan with alternative routes now.

Interesting Article:  8 Things You Must Do Better To Make Better Decisions

When Stephen Hawking Speaks:  When I hear Stephen Hawking’s name, I stop and listen. He has made some dangerous predictions about AI in 2015. It is along the lines of AI having the drive to reproduce and survive like biological organisms. If you are a sci-fi fan you can pick the language to use. The main, simplified point: AI with goals could take human resources away. The counter to the point is, AI, with specific complex communities, will be like social bees. For example, an AI hive could be created in a complex supply chain manufacturing environment to manage the environment and needs of the business. For the human piece, you need to ensure you advance your skills and capabilities in other areas to minimize your displacement. In other words, job loss.

Creep into Decision-Making:   AI has already made its way into decision-making and is impacting work and computing. I suspect a lot of people don’t even realize it. We need to recognize now that AI and BI will grow exponentially. It’s sped up and improved to add value to business via business intelligence. It will continue to be part of the value chain for basic decisions and will advance further. When I think of basic decisions, in today’s terms, I think of smart investment systems that automatically define your investment portfolio and make adjustments based on a set of criteria that you specified, or the airline ticket systems that adjust pricing based on pre-set criteria. These decisions, in the not so distant past, had human intervention. Now they are serviced by an automated system.

Friend or Enemy:  We can go back to the turn of the 20th century industry song, John Henry to say that technology has replaced many routine jobs. Initially, machines needed a human hand. Now, we can say that automation has replaced human workers in more decision-making roles and routines. I was reading and thinking about “black box” decision-making. It is unknown how an AI system arrives at a decision, conclusion or recommendation. In a human business system you would test the validity of the problem statement, the assumptions and the final solution. Using a standard process, you define, solve, implement and measure all events with professional intervention. With the human component removed there might be less prejudice, but there is the other side where humanization of decisions, considers not just facts but the human element. Within business you will need to the balance profit drive and public good. How that plays out I do not know.

Power Rangers Rescuers:  The reality is this whole article is about the power; the power of computers and the power of decision makers. If decision-making is being replaced by machines, then so are the decision makers. In business, you use a process to arrive at recommended decisions that are presented to decision makers, usually a sponsor. Our future with, AI in it, is one where the professional and the manager have to improve their abilities to produce value. People who can think strategically and creatively will be the power rangers of tomorrow. Not the tactical person since tactics could be sourced by machines.

For the past decade, in my business analysis and strategic planning training programs and writing, I have been telling professionals and business leaders to work on their strategic and creative thinking abilities. If things continue on the present course, success in the middle is not an option. This means that middle management and middle careers will further be eroded, organizations will slim and the savvy, strategic, creative professional will rise to the top. Your professional relationship with the organization will change as you embrace multiple organizationally initiatives across a varied business landscape. You will be the Power Ranger Rescuer that is able to integrate AI and BI into your work.

Related Article: 3 Levels of Questions to Ask in Your Business

Maybe you will become a rewarded hero of an age of creative business problem solutions. This is something I don’t think organizations do well, that is reward the intellectual abilities possessed within the business analysts mind. Traditional business models don’t work. But that will be another article just about rewards. I sometimes wonder who’s worth more; the project manager who brings a project to completion, or the business analysts who finds a business problem solution that saves an organization millions. You decide. Who’s the hero?

Accelerated Education:  This is where I started. I mean, learning faster is something we human’s won’t be able to do as AI and BI are integrated into the fabric of our existence. But that does not mean we stop learning. It will just be a different kind of learning. Recently, I was in a meeting regarding education. The question posed was, “why do some mature professionals have their master’s degree and other don’t, and why does the work history of these “others” without a master’s degree equate to a master’s degree in business, easily. It was suggested that the learning had to be done by doing and attending advance boot camp programming that gave the person the skills, information, knowledge and exposure they needed for applicable thinking and tools now. I agree partly with the response because in the corporate world, acceleration means learning applicable skills now. This might appear to counter what I stated earlier about how learning faster to beat AI is like John Henry hammering at the mountain. You aren’t going to win. With boot camps you are not trying to beat AI and BI systems. You are focusing on a specific skillset that embraces creative-thinking and is applicable now. That is it. Hopefully, we will get past hard skill learning and embrace experiential soft skill learning on another level.

The greatest danger of Artificial Intelligence, people conclude too early, they understand it. Eliezer Yudkowsky Share on X

Final Thoughts: With this blog I was not trying to debunk AI, BI or education in any way. But I do believe the advances in AI and BI will radically change the way professionals (who use business analysis best practices) survive the next transition wave of business and technology integration with smarter machines. I do think that the professional who considered their learning in relation to AI and BI design interactions; who can go past the operational and tactical and groom their creative abilities along with their strategic insights, can prepare themselves for a heck of a career journey.

When I was in university, years ago, I wrote a philosophy paper answering the question “can computers think?” I based my paper on a Cola Machine that said “thank you” after you paid for a drink. At the time, I argued that no machines can think. Using the example, a human had to program and maintain systems that simply acknowledged receiving payment for services rendered.  A human can do this, but in this case there were no other interactions or pleasantries. I received an A+ for this paper. That was 30 years ago.

I did mention in my paper, that as the decades pass we may actually have thinking and deciding systems that go past the limitations of wires and circuitry. I guess my point now, is that I believe it is time that we, within the professional business community, embrace ourselves for a change in decision-making and careers now so we can contribute to tomorrow. Be strategic, be creative and build relationships. Good luck.

Remember, do your best, invest in the success of others, and make your journey count. Richard.

Be Teaming With Success: Using Assessments And Profiling To Understand Yourself And Others

Be Teaming With Success: Using Assessments And Profiling To Understand Yourself And Others

shadow-198682_1920I have received a number of emails regarding a statement I made in one of my previous blogs. In that particular post, I mentioned the importance of understanding yourself and others through profiling. The exact quote, “you should profile yourself and the people around you”. So let me explain the importance of profiling and give you some options.

See Original Article:  Master These 7 Skills to Become an Excellent Interviewer

A business leader and professional is a leader who must engage people in order to get stuff done. This reality exists whether through identifying business problems or opportunities, evaluating solution alternatives, or planning and implementing projects. Nothing happens unless you can engage people appropriately. Profiling helps. I learned this years ago when I was a Senior Manager with PricewaterhouseCoopers. It was a valuable professional and life lesson.

Three Profiling Rules And Profile Types To Endure

There are a few rules about profiling that you need to internalize. First, it is not about you so leave your ego at the door. Second, it is all about the other person’s communication needs. Third, you need to adapt to the communication needs of the other person.

Generally, there are three kinds of profiles to consider; intelligence quotient (IQ), emotional quotient (EQ) and culture quotient (CQ). EQ has to do with emotional intelligence and is now considered more important than IQ in achieving success in our lives (business, career, and life). Success is dependent on our ability to read people and act appropriately.

Related Article: Six Strategic Leadership Styles – the impact they have

Four Attributes Of Emotional Quotients (EQ)

Self-Awareness: You are aware of your thoughts and emotions and the impact they have on your behavior. What you think is what you feel, what you feel is how you act and how you act is the results you get (think, feel, act, results).

Self-Management: Can be defined as your ability to manage your feelings and behaviors. It includes your ability to adapt to changing circumstances.

Social Awareness: This is where you engage in understanding other people. In essence your ability to read the situation around you, pick up on social cues and adjust accordingly. It is all about people and group dynamics.

Relationship Management: Emphasis is placed on your ability to develop and maintain good relationships. This could be short-term (for projects), to influence and motivate others, to interact for the purpose of understanding a problem, to manage conflicts, etc. I like to think of this as your ability to get on and get along in life.

Six Tools Of The Assessment Trade (There Are More)

There are many tools that can be used to develop your understanding of yourself and others. I believe that throughout your career it is important to use several tools in order to develop a self-profile that goes beyond just the standard EQ assessment. It’s important to look at your career and work fit, your career anchors, and of course the standard emotional intelligence profiling options. Here is a list of options to help you build your ability to understand yourself and others so you can improve your professional effectiveness.

DISC Profile: This is a behavioral model that examines individual behaviors in their environment, their styles, and behavioral preferences. Four areas looked at include; Dominance (control, power, and assertiveness), Influence (social situations and communication), Steadiness (patience, persistence, and thoughtfulness), and Conscientiousness (structure and organization). This is a powerful tool for profiling, building teams and relationships. Click for Further Information: DISC Profile

Self-Management Pro: This one is used to predict management and leadership potential so that organizations can develop their professionals. The tool has been proven effective in predicting performance and retention. I like the way it looks at your profile and style in terms of process and structure, learning, orientation, self-direction and lifestyle management. Click for Further Information: Self-Management Pro

Related Service: IMPACT Teaming with Success

Myers-Briggs Type Indicator (MBTI): A personality inventory that measures people in four key areas; how you relate to others (either by extraversion or introversion), how a person takes in information (sensing or intuition), how a person makes decisions (thinking or feeling) and how a person orders their life (judging or perceiving). Click for Further Information: Myers-Briggs Type Indicator

Career Anchors: We are all anchored in something. This tool will help you understand your career anchors and other people’s career anchors. Everyone is not anchored in the same things. You and the person you are working with will fall into one of eight categories (autonomy/independence, security/stability, technical/functional, general management, entrepreneurial creativity, service, pure challenge, and lifestyle). Knowing a person’s career anchors tells you a lot about their natural motivation. Click for Further Information: Career Anchors

Successful people keep moving. They make mistakes, but they don't quit. Conrad Hilton Share on X

Career Fitters: My new favorite profile as I filled this one a few weeks ago and I was surprised how accurate it was. This profile looks at your personality in the workplace and then provides you insight into career options based on your work personality style. It is great for working with teams and individuals to understand fit or even working with other people and their fit to what they are doing. Click for Further Information:Career Fitters

Coaching Skills Inventory: The coaching skills inventory generates an overall coaching-effectiveness profile. It teaches you how you do in meetings from the opening, communicating, gaining agreement and closing. Don’t let the title fool you as it is not just about coaching. It can be used to improve your meeting performance. Something I found incredibly valuable in identifying my weaknesses and then developing my meeting skills. This is a huge bonus. Click for Further Information: Coaching Skills Inventory

Final Thoughts:

The importance of understanding yourself and others continues to grow. I think it has become imperative that the professional step up and take the time to learn how to profile and adapt in order to increase their success. A combination of emotional quotients and career profiling provides valuable insight into the world around you. These profiles are becoming increasingly relevant to organizations and people development, and the ability to solve business problems because they provide a way to understand and assess behaviors, styles, beliefs, values, attitudes and interpersonal skills. All of which impact your ability to do your job.

Over the course of my career I have done a lot of interviews, small group meetings and workshops where understanding the people around me was critical to the initiative success. Sometimes we would profile on-the-fly and other times we would do formal profiling using a combination of tools, one-on-one debriefs and Group to Business Impact Sessions. Something I still do for clients today.

Building a Strategic and Implementation Plan for Your Business

Building a Strategic and Implementation Plan for Your Business

The S.E.T. for Success Approach and the SET-Ability Model Revealed

I have been asked by a lot of my blog readers what is the SET for Success Approach for building a strategic plan and an action roadmap. I have often hesitated to write this blog as I did not know how to write it without it coming across as a marketing piece. In the end, the information I provide here are summaries of work that I have published elsewhere.

What I have done is taken components of my book and website, and provided you with an abbreviated version of the SET for Success Approach and the SET-ability model to business analysis, strategic planning and building an implementation roadmap for your organization.

Strategic Planning Defined

Sometimes you have to state what some people think is obvious so that everyone is on the same page. That is why I often provide definitions. 

Strategic planning and management involve the formulation and implementation of the major goals and initiatives taken by a company’s top management on behalf of owners, based on consideration of resources and an assessment of the internal and external environments in which the organization competes.

To be strategic means to provide overall direction to the enterprise and involves specifying the organization’s objectives, developing policies and plans designed to achieve these objectives, and then allocating resources to implement the plans.

You will have to bridge the gap from the strategic to the tactical to operational in order to make that happen effectively. The starting point is strategic planning and the use of a model that works.

The SET-Ability Model used in Strategic Planning

In chapter two of SET for Success, a roadmap to transform your business I discuss and define the SET-Ability Model on page 17 for business analysis, strategic planning, and the development of implementation roadmaps to bridge the gaps between the strategic, tactical and operational levels of business. I believe a good model bridges the gaps between these business areas and elements. This is especially true when it comes to efficiency,  solving problems, leveraging opportunities and managing implementation.

The SET-Ability model as a whole is made up of impact zones, ripple effects, and outcomes. You cannot push on one impact zone without affecting the others. For example, if we push on business development, it will ripple into the other impact zones. Add additional clients, and there is pressure on your business processes, the tools you use and the people and culture of your organization. If something needs to be done more quickly you will create an acceleration effect that could have negative consequences on your business. If you adjust how your work gets done with your people and company culture, you will impact process and productivity, and so on. It is like the stone thrown into a pond: one stone, one ripple; many stones, multiple colliding ripples, and significant business impact across zones. 

Deliverables and Outcomes from Strategic Planning

The focus for “going the distance” is really about putting together all the deliverables and outcomes.

A deliverable is something that is produced as the result of a project and delivered to customers, either internal or external. It can be tangible (i.e. a physical product) or intangible (i.e. a service).

An outcome is a positive change that results from a successful planning process. Every organization can benefit from common deliverables, using an approach that can help them clarify and achieve their outcomes.

From an action plan perspective, the documents needed to implement your plans include;

  • a strategy map,
  • a road map (implementation plan identifying champions, initiatives, projects, priorities, timelines),
  • work plans (key activities, resources, budgets),
  • communications plans (a major weakness in most organizations)
  • the management implementation process (well-defined project management requirements).

The S.E.T. for Success Approach focuses on yielding concrete deliverables and clear outcomes that the management team can implement. It bridges the gaps from the strategic to the tactical and the hands-on practical, the operational.

Final Thoughts

It ‘s hard to summarize an approach to planning and implementation in 800 to 1200 words. Especially when you have spent a career investing in the success of organizations and developing a program that works. There are components that I believe are necessary to discuss. For example, organizational structure and the business impact at various levels. I think that the main point I am seeking to make if you are going to engage in strategic business analysis, planning and management make sure you start with an approach that is right for you. I hope this helps you understand my thinking and approach more. Good luck.

If you are looking for someone to work with you on your strategic plan, let me know. Send me a note or contact me via the contact section of my website.

Catapult The Organization Forward: Discover A CEO’s Thinking

Catapult The Organization Forward: Discover A CEO’s Thinking

business-1477601_1280I was interviewing a CEO of a successful technology product and service company. We were discussing what made the company successful and also their challenges. He openly spoke of the way they approach business growth and their culture with an emphasis on people – both internal and external stakeholder relationships.

Here are the things that were on the CEO’s mind and the commitments they made. I suspect some of these are on your leaders’ minds and you should know them if you want to participate in your company’s success.

Business Growth

When we started talking about business growth I asked the CEO to define what this meant to his company. It was clearly stated that they measured business growth two ways; by top line sales and bottom line results. From an strategic business analyst (SBA) and management consultant’s (MC) perspective this helps tell you where you can have an impact. For example, if your focus is on cost reduction then you get to impact the bottom line through process improvements or other cost reduction measures.

Acquisition

One part of the approach to business growth for this CEO was through acquisition. The acquisition strategy was about finding complementary products and services that were within the business’s ability to acquire that fit with the culture of the organization. There was a huge emphasis placed on people and culture because acquiring another business that did not fit made no sense to this CEO. The reason was simple; wrong culture and wrong fit mean conflict and negative business impact.

 

So for this company, if the SBA/MC is part of a team evaluating acquisition. they would need to know the parameters of analysis using a combination for financial, human resource and risk management approaches to help determine if a move forward is a good idea. This could apply internally as well as when looking at department adjustments. Not to mention if the company succeeded in acquiring another organization, the SBA/MC would need to document all the cultural changes, process shifts and adjustments that need to be made. The BA should be part of the success of this approach.

Organic Growth

The organic growth is a portion of growth that applies to increased output, customer base expansion, new product development, innovation, or the geographic placement of your company to serve a clientele. This CEO explained that this is something they can do at a relative consistent annual rate given the nature of their business. For example, a 5 percent annual growth rate per year would be consistent.

But with a little creative development, they could create a revenue pop in their business. The example provided was when a group of business analysts had the idea of recycling metal from old equipment and selling to recycling companies. It turned out to be a small but doable branch of their business done by a couple of people who cared about the environment, took the time to identify the requirements, recommend solutions and help make it happen.

Related Article: Question Everything About Your Business:
7 Candid Questions That Need to be Asked

Three-Legged Stool Analogy

This analogy has been around for a long time and is sometimes referred to as the Three-Legged Strategy. When this CEO and I started to discuss this business approach we had a good laugh as we both understood that the Three-Legged Strategy applies to a lot of things. But our focus is the CEO’s perspective. In this case, we talked about customer service, product sales, and maintenance agreements.

They placed a lot of emphasis on training their people to do three things. First, making sure they are solving the customer’s problem no matter what. Second, asking their customers who else should they be speaking to in their company that could also use their services? Third, the simple question, how can we help? All three of these things helped build the business through relationship building and can be part of the external and internal culture of the business.

Their product line was twofold, soft consumables and hard products. Their business growth starts first with customer consumable products. This particular technology company sold customer products that customers would consume on a regular basis, creating a regular cash flow. The consumable products helped the company create a wedge in their customer’s business, opening the door to other opportunities. Think an inch wide and a mile deep. Once they opened the door, they could sell other products.

All progress takes place outside the comfort zone. Michael John Bobak Share on X
Their hard products, he felt, were things they could sell once due to the cost. Generally, it would be a capital purchase by a client. They are always looking to sell their hard products, but the real cash flow is in the maintenance agreements to service the equipment. So the emphasis was placed on ways to maintain these contracts and to find additional offerings related to this service. This way they were focused on value services. Their SBA helped define the service and maintenance programs through analysis of the business intelligence data.

There are many lessons learned here relating to the Three-Legged Stool approach. You can see that their culture is a customer focused environment where making sure that the needs of the customer are completely understood and solutions were forthcoming. The culture also reflected that they thought out where their revenue streams were and they emphasized actions towards supporting that area. From an internal perspective, I could see services of an IT department (or any department) following a similar approach for their internal clients. It just needs to be defined.

People And Culture

This was the final piece of the puzzle for this CEO. Not necessarily the last. It just happened we agreed at the start of our discussion to follow a certain flow.

Their culture, he felt, was one of the most important parts of the business success. They were always having discussions on how to improve that part of the business. He was proud to tell me of the $250 annually that each employee gets to give to charity and the company match on top of that and the weekly call out sessions where employees complimented their peers on the work they did. Basically creating a culture where people are engaged and work together to solve problems. But the big word was FIT. People they hired needed to fit with the organization and live the business values. As we reviewed the values, I had the CEO provide examples of what living the values looked liked. Given the nature of the project we were about to embark on this was important to know. Overall this company wanted a culture of trust. Something a Strategic Business Analyst and Management Consultant can learn to do when working with people using the formula; like you, know you, and trust you and I will work with you. But maybe that is another blog on how to build a culture of trust.

Related Article:  What CEOs Want:  8 Essential
Management Team Attributes?

Final Thought

As I share this blog and the interview that I did with this CEO I can’t but help think about what I found out. This was a reconnaissance mission to understand the business, the issues, the driving forces and risks. I did get what I needed. This important conversation provided me insight into what was on the CEO’s mind, the leadership commitments of the organization and the lessons learned. I got to ask all sorts of questions related to the business to gain perspective and thinking. This provided valuable information to help define the future, analyze commitments and implement solutions.

As a strategic business analyst, I believe that information and business intelligence data can be used to help business’ achieve its goals and objectives, to analyze aspects of the business to solve problems and provide solutions that fundamentally will help catapult the organization forward. It is important to discover what is on the minds of the CEO. Hopefully, you do too.

Remember to:
Do your best,
Invest in the success of others,
Make your journey count,

Richard

It all Happens from the “Get Go” – 7 planning steps to achieve measurable results

It all happens from the get goBusiness leaders need to ensure that planning and implementation is focused. A well thought-out planning and implementation approach considers linking strategy, tactics and operational needs. It includes considerations for key business impact zones (productivity, tools, people and culture) and the outcomes required for solutions to business problems. Consider the business objectives, the process and the work approach that must be used to successfully achieve results in an organization. Results should be resource-driven beginning with shared thinking and consideration of the challenges that need to be addressed. Call them points of pain. All businesses have them and every business leader knows it. A checklist would be handy at this point. Consider common business challenges such as issues with focus and direction, trust, communications and collaboration, productivity, effectiveness and efficiency, process and work procedures, outdated equipment and tools, people experience, skills, beliefs, values or even blame-storming. No matter the issue, they all add up to one thing – a negative impact, something a business leader seeks to avoid.

Here are 7 steps to consider when planning for measurable results:

Step 1. Understand your business priorities What five things are on the strategic agenda of the organization? Why are they so important to the business? In what way can your team make those items happen? If you can answer these questions you are on the path to good business leadership thinking.

Step 2. Identify the challenges What are the points of pain? What are the key challenges? How are these challenges impacting the business? Can we qualify and quantify the problem? Have we considered the impact to productivity, our tools, people and culture? What are the overall impacts and ripple effects to the organization? Write a clear and concise business problem statement that everyone understands. Share that statement and engage in shared thinking and creative solutions with your people.

Step 3. Determine key solutions Throughout the process, encourage teams to assist you in solving the business problems. Be careful here, as coming up with ideas on how to solve business problems does not mean implementing solutions. Provide support and insight to people whose natural approach is to roll up their sleeves and jump right in. At this point, as a business leader, you should be seeking thinking and solutions. Only after the ideas have been put forth do you seek to prove their viability.

Step 4. Choose a solution that makes sense This is where viability comes in. It really comes down to what, why, who, how, when, where, how much and what’s in it for the organization, the benefit, risk and return factor; all the things we learned in grade school and on the playground only with more risk. The best thing is to review situations and possible impacts. Pick three solutions: the do nothing solution, the do something solution or the do something else solution. Think through the issues and make a decision.

Step 5. Implement the solution It’s not always easy, but it must be done. As the business leader, make sure you have your team together. Establish your approach to deal with people and team dynamics across the organization. Change means push back so be prepared. Be honest about your resource abilities. Invest in their success through investing in your own development. Use a good business coach to avoid future issues. Make it part of the process so your people will embrace it. This is a preemptive approach for solution implementation. Remember, as the leader you do not need to be the sage on stage but be the guide on the side.

Step 6. Measure the results Ensure that you have put the right items in place to measure the results. This could be at many levels. Answer the simple question: does it work? The answer needs to be a yes or no, not maybe or sort of, eh! Did you get what you expected? How long did it take? Is it over or under budget? Will you see the expected return on investment? If so, over how many years? Do we have the right people? Have you considered the impact zones and the impact? Does the solution (process, tools, people, etc) align with what is important to the business? The list of questions here is long and depends on what was set as the measurement needs earlier in the planning process.

Step 7. Capture lessons learned This is an area that business leaders rarely engage in. Yet, it is extremely valuable at all levels in the business. A feedback loop should always exist and the business leader should explore what was learned internally and externally. This is your intellectual property that can be used for future planning and continuous improvement. In the end, it comes down to following a planning and implementation approach that ties strategy and tactical solutions together. As the business leader your success depends on following a proven approach, engaging your people in the process and building key business skills. Planning for measurable results happens from the ‘get go’.

It does all happen from the ‘Get Go’. Taking the steps is important. What are your business priorities and in what way are you considering achieving them? This is a discussion that would be great to have with someone that has been there. Connect with me at 1-866-559-8126 Ext 201 and I will send 30 minutes chatting with you about your concerns. Richard Lannon, all rights reserved 2012, but enjoy.

Get to Know Richard

Richard works with companies that provide products, services, and expertise to other businesses. As a senior strategic business analyst and consultant, his focus is strategic planning, business analysis, and training and development of client organizations.

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Richard Lannon
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Website: http://braveworld.ca
Email: richard@braveworld.ca

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