Value Propositions

Business Model Decisions Driven by Value Discipline - misc notes from BlogTalkRadio. Remember the rules:

• competitive in all three
• exceed in one - primary
• very good in another - secondary
• cannot be great in all - confused organization

Operationally Efficient

• Functions: Production, Logistics, Finance
• Processes: Order Fulfillment, Resource Management
• Information: Transactions, Costs, Time
• Metrics: Costs, Quality, Time
• Concerns: Past Trends, Transactions, Employee Tasks and Tools
• Structure: Centralized Authority
• Culture: Process, Product-Driven Conformance
• Systems: Integrated Low Cost Transactional Processes
• Management: Command and Control, Quality

Product Leadership

• Functions: R&D, Legal (licenses), Engineering
  
• Processes: Product Development, Concept to Customer Speed
  
• Information: Linkages, Communications
  
• Metrics: Ideas Thru the Funnel, Patents
  
• Concerns: Future Trends, Portfolio of Products & Services, Ideas, Risks
  
• Structure: Ad Hoc - Team Based, High Skills - Loose Structure
  
• Culture: Process, Conceptual, Future driven, experimentation, Out-of-the-Box
  
• Systems: Collaboration and Project Management Platforms
  
• Management: Rewarding Innovation, Risk and Exposure

Customer Intimate

• Functions: Marketing, Sales, Service
  
• Processes: Marketing, Sales, Customer Loyalty
  
• Information: Customer Perceptions, Customer Usage of Offer
  
• Metrics: Loyalty, Customer Success, Testimonials
  
• Concerns: Current Trends, Relationships, Employee Empowerment
  
• Structure: Empowerment at Customer Contact Points, High Skills at the Boundaries between Functions and Departments
  
• Culture: Customer Driven, Acceptance of Wide Variation of Needs, Immediate Customization
  
• Systems: Detailed Customer Base, Linkages between Customer Needs and Processes, Analytical Tools
  
• Management: Customer Quality Measures, Life time Value (Loyalty)
  

See Missing Link #1 for Overview

The 11 Best Practices for Attacking Low Cost - High Margine Opportunities

Drill down from 8 JUL 09 blogtalkradio show

1. Digital Infrastructure: use technology as the core organizing theme for the business; reduction in waste and repetition of tasks, reduce the knowledge pools or incompetence and increase the knowledge pools of excellence
2. Networked Organizational Structure: reduction of hierarchy and layers of management (or prevent it from occurring organically), use technology to increase dialog and collaboration - think twitter or facebook
3. Self-Managed Cost Centers: make every department, function, work group carry all of its true costs; if you aggregate costs - you don't know the true cost or profit of anything and therefore can't manage it
4. Run Inside like Outside: outlaw monopolies - everything is interconnected, internal support departments must run with the efficiency of the "for-profit' parts of the company, if they can't or won't - outsource the function
5. Markets Inside the Firm: big corporations are welfare states - especially in budgeting, there are no guaranteed budgets or use of last years numbers, everyone presents a business case for the requested budget and competes for dollars - owner/executives function as venture capitalists and invest accordingly
6. Turn Cost Centers into Profit Centers: all internal departments and functions have portfolios of internal and external customers, support/internal departments sell excess capacity externally to generate revenue
7. Only the Best - Marquee Customers, Marquess Suppliers: enhance brand through associating with recognized leaders, collaborate and co-develop new products, services, and internal processes with the best, use their expertise and infrastructure to reduce costs and improve your offer
8. Executive Management of Continuous Improvement & Reinvention: the top priority of the owner/executive team is constantly improve the offer while reducing costs at the same time, "competing in advance or go to where the puck will be" - anticipating future threats and opportunities
9. Organic Growth and Acquisition: mix between building it your self and buying it, when creating something new - go organic, when looking for capacity or sales - acquire if there is a good deal available
10. Multiple Product Lines - Service Offers: each component of your offer is both a revenue stream and a continuous improvement opportunity to learn and enhance your competitive advantage

If you want the full article and presentation, go to my personal blog and our radio show page and download the MP3.

If you don't listen or are not following our corporate blogs - what are you thinking! No place on the web will you find more knowledge or higher quality insights on how to grow your business - AND IT IS FREE.

Profiles in Success - Entrepreneurial Competence Part 2

Given the constraints of time, we couldn't pursue these additional traits with any degree of detail. What follows are the remaining characteristics of successful entrepreneurs. We will weave a more detailed description of each over the next two weeks as we discuss the ownership demands of each growth stage.

Planning Orientation - what are the components?

• Information Seeking
• Goal Setting
• Systematic Planning and Monitoring

Information Seeking - what are the behaviors you would see as evidence?

• personally seeks information from clients, suppliers, and competitors
• does personal research on how to provide a product of service
• consults experts for business or technical data

Goal Setting - what are the behaviors you would see as evidence?

• sets goals and objectives that are personally meaningful and challenging
• articulates clear and specific long range goals
• sets measurable short term objectives

Systematic Planning and Monitoring - what are the behaviors you would see as evidence?

• plans by breaking large tasks down into time-constrained sub-tasks
• revises plans in light of feedback on performance or changing circumstances
• keeps financial records and uses them to make business decisions

Influence Choices - what are the components?

• Persuasion and Networking
• Independence and Self-Confidence

Persuasion and Networking - what are the behaviors you would see as evidence?

• uses deliberate strategies to influence or persuade others
• uses key people as agents to accomplish own objectives
• acts to develop and maintain business contacts

Independence and Self-Confidence - what are the behaviors you would see as evidence?

• seeks autonomy from rules or control of others
• sticks with own judgment in the face of opposition or early lack of successful
• expresses confidence in own ability to complete a difficult task or meet a challenge

Given this exercise of digging deep into our knowledge base, we will design a quick survey for anyone interested in assessing where they stand on the competencies. Look for a post on this topic in the next few days.

Profiles in Success - Entrepreneurial Competence

Good Day, this is rutter radio – your guide to fast and sustainable business growth. It is 0600 eastern or -4 GMT on 24JUN09 and the show is about Profiles for Success – Entrepreneurial Competence.

I am William Eastman, your host and Managing Partner for US Operations at Applied KnowledgeLabs, the show is hosted from our Atlantic Regional Office located in Richmond, Virginia.

You can join the conversation by clicking chat now link on our program page or call in at 347.215.7471.

The majority of our focus is on trainable skills because why discuss things you cannot change? However we would be guilty of malpractice if we didn't address the characteristics or traits of successful entrepreneurs.

But first some background. I had the opportunity to work with the United Nations Development Programmes in the 1990's. One of their initiatives was a program called Empretec, helping small business thrive and secure financing for growth. While engaged in one of our business development incubators, I had a blinding flash of the obvious – entrepreneurship is a calling and we have more in common with each other than our own families.

As part of the process, we had screen hundreds of applicants for just 30 positions. That was my introduction into the research on the traits and personal characteristics of successful entrepreneurs. What follows are those traits of success.

• Achievement Motivated
• Planning Orientation
• Influence Choices

Our show is only 30 minutes in duration, so I will cover just the Achievement Cluster and check out our Chief Growth Officer blog for the remainder of the information.

Achievement Motivated – what are the components?

• Opportunity Seeking & Initiative
• Risk Taking
• Demand for Efficiency and Quality
• Persistence
• Commitment to the Work Contract

Opportunity Seeking & Initiative – what are the behaviors you would see as evidence?

• does things before being asked or forced by events
• acts to extend the business into new areas, products, and/or services
• seizes unusual opportunities to start a new business, obtain financing, equipment, land, work space or assistance

Risk Taking – what are the behaviors you would see as evidence?

• deliberately calculates risks and evaluates alternatives
• takes action to reduce risks or control outcomes
• places self in situations involving a challenge or moderate risk

Demand for Efficiency and Quality – what are the behaviors you would see as evidence?

• finds ways to do things better, faster, different, or cheaper
• acts to do things that meet or exceed standards of excellence
• develops or uses procedures to ensure work is completed on time or that work meets agreed upon standards of quality

Persistence – what are the behaviors you would see as evidence?

• takes action in the face of a significant obstacle
• takes repeated actions or switches to an alternative approach to meet a challenge or overcome an obstacle
• takes personal responsibility for the performance necessary to achieve goals and objectives

Commitment to the Work Contract – what are the behaviors you would see as evidence?

• strives to keep customers satisfied and places long term good will over short term gain
• pitches in with workers or in their place to get the job done
• makes a personal sacrifice or expands extraordinary effort to complete a job

Well, we have just a few minutes left, so lets review.

Go to our blog and review the list. Be honest with yourself, how many of these behaviors do you exhibit daily? over the space of a week? and how well do you perform it?

We will loop back around on this list over the next week when we discuss the demands of ownership/leadership by each growth stage.

Thanx for listening, check out our support materials. The transcript of today's show will be available in the afternoon.

This is William Eastman, your host at rutter radio, have a great business day.

Laws of Business and Gravity

the rutter Program Notes – 23JUN09 0600 (-4UTC)

This is the rutter radio live on BlogTalkRadio, I am William Eastman, Managing Partner for US Operations at Applied KnowledgeLabs.

Today's show is the first in a series of 8 shows based upon our upcoming book - the code4growth – the revolution of business ownership.

You talk with us directly by clicking “chat now” or dial in at 347.215.7471.

Yesterday we briefly covered today's agenda, the Laws of Business. Like the Laws of Physics, there are business rules that are universal and violated at your own risk.

3 major Laws of Business

• Systems
• Cycles
• Control

Systems: treating/improving one part of the business doesn't mean a fix for all, a company's performance is the sum of the parts – a sum of it's processes.

Cycles: all living objects are influenced by the cycle of birth, growth, decline, and death; companies are nothing more than social networks organized for economic purposes and live under the same rules.

Control: the issue is not whether to control or not control, it is about what to control; all systems require methods of control to survive and thrive.

Systems (and Processes)

• Financial – end of period measures used to evaluate past performance, and real-time measures that link decisions to current performance.
• Strategy – creation and enhancement of brand through a yearly plan, and aligning the organization to achieve the plan objectives.
• Sales – acquisition of new accounts, and growth within existing accounts and reestablishing relationships with former customers.
• Production – production of products and/or execution of services, and development of new products and services.
• Relationships – bringing in new players (employees, partners, suppliers), and managing the performance of existing relationships.

Cycles

• Dream2Plan – identification of competitive advantage in a targeted market, selection of a business model to exploit competitive advantage, creation of brand identity, build first product/service, quick to market.
• Go-Live – create brand identity, reduce risks of purchasing from new company through executive selling, find marquee accounts, create sufficient and predictable cash flow.
• Next Act – reevaluate competitive advantage, business model, and brand identity; create growth plan, determine capacity improvements, allocate budget, upgrade operations.
• Big Fast – scrutinize costs, accounts receivable, quality defects, and service complaints; focus on maximizing efficiencies.
  
• Stable – eliminate unnecessary costs, upgrade policies and procedures, maximize all margins; decide on the future – sell, reinvent, or decline?
• Reinvent – unlock innovation within the company; team employees with customers, suppliers, and subject matter experts to upgrade/create new products and services and/or upgrade internal processes.

Control by Stage

1. Direct Supervision – only the owner can transform the dream/business idea into reality, owner as the hub of a wheel, active engagement in all aspects of the startup.
2. Direct Supervision – owner directly supervises core processes – sales and financials, owner is engaged in the sales process either as lead salesperson or used strategically by sales force to build relationships.
3. Process – owner creates intermediate management/supervision, focuses this group on creating best practices for all processes to optimize resources.
   
4. Results – owner focuses on metrics identified in strategic plan and manages next level through results against goal.
   
5. Team Work – bringing together subject matter experts and stakeholders to innovate all essential aspects of the business.

This seems like allot of information, but it really isn't. If you read between the lines, each growth stage has it's own situational and specific demands on the business owner and executives. That is why our approach is take it one at a time and simply a winning Growth2Capacity plan.

Remember to checkout tomorrows broadcast on the characteristics of successful entrepreneurship. I will recount our experiences with building businesses around the world.

BlogTalkRadio

AKLabs is happy to announce it's latest knowledge service to our readers, clients, and partners - BlogTalkRadio. We are adding to audio our media platform, click on the link above and check it out. Currently we broadcasting live @0600 USEastern (-4 UCT) to test out the service and our platform. You can tune in live or download the mp3 for listening at your convenience.

Here is our scheduled programming for the next two weeks:

1. 22JUN09 - Intro to the rutter: rutter: likely from French routier and Dutch ruiter, meaning "something that finds a way", A guide who leads the way through a difficult or unknown course. Bring onboard your own CGO4Hire (Chief Growth Officer), gain the insights to grow your business from zero to a billion.
2. 23JUN09 - Laws of Business and Gravity: This is first in a series of 8 shows based upon eastman's upcoming book - the code - on how you can manage business growth; what are the laws of business that operate with the effectiveness of gravity.
3. 24JUN09 - Profiles of Success - Entrepreneurial Competence: This is second in a series of 8 shows based upon eastman's upcoming book - the code - on how you can manage business growth; the characteristics of successful entrepreneurs.
4. 25JUN09 - Turning Your Dream Into a Winning Plan: This is third in a series of 8 shows based upon eastman's upcoming book - the code - on how you can manage business growth; Growth Stage I - Dream2Plan.
5. 26JUN09 - Cash is King: This is fourth in a series of 8 shows based upon eastman's upcoming book - the code - on how you can manage business growth; go-live - starting fast and making money, sell-sell-sell.
6. 29JUN09 - After Catching Your Breath, What Now? What Next? This is fifth in a series of 8 shows based on eastman's upcoming book - the code - on how you can manage business growth; stage III - you have survived and proved both the business idea and your ability to manage the chaos, what is next beside catching your breath.
7. 30JUN09 - Big Fast - Growing2Capacity: This is sixth in a series of 8 shows based upon eastman's upcoming book - the code - on how you can manage business growth; stage IV, time to repay your investment - making the business finally produce results for customers, employees, and yourself.
8. 1JUL09 - Your Future - Sell, Decline, or Reinvent: This is seventh in a series of 8 shows based upon eastman's upcoming book - the code - on how you can manage business growth; stage V - reaching your first plateau and rethinking the end game - do you sell, sit on your laurels, or go for it again?
9. 2JUL09 - Path to Market Dominance: This is last in a series of 8 shows based upon eastman's upcoming book - the code - on how you can manage business growth; stage VI - reinvention of the business and taking the path to market leadership or domination.
10. 3JUL09 - Rules of the Road - Fast Growth and Your Business: What are the best practices of fast and sustainable growth companies? How did they defy the odds? Most business experts conform to a theory of "thirds": Of all the new business startups, 1/3 eventually turn a profit, 1/3 break even, and 1/3 never leave a negative earnings scenario. Only 2/3 of all small business startups survive the first two years and less than half make it to four years. Only 1 in 400 make it from their first reinvention to a billion in revenue.

Bring onboard your own CGO4Hire (Chief Growth Officer), gain the insights to grow your business from zero to a billion.

Holding Your Base

Based on Mondays (2MAR09) blog, exactly how does an organization hold it's base?

1.0 Review your current accounts and sort based on the following criteria:
1.1 Highest revenue accounts over the last 12 months (20% that produce 80% of your revenue)
1.2 Highest margin accounts (20% that produce 80% of your margin)

2.0 Build a priority list of the top ten current accounts:
2.1 Accounts listed in both revenue and margin as A accounts
2.2 Accounts just listed in the highest revenue as B accounts
2.3 Accounts just listed in the highest margin as C accounts

3.0 Finalize the Top Ten List:
3.1 Identify core processes used to market, sell, produce, and service these accounts

4.0 Executive to Executive reach out:
4.1 Business owner/top executives preemptively call their peers or the senior level in each account, hopefully this is not your first conversation with them!
4.2 Ask the question "we know the economy is seriously affecting business, we want to improve our offer to you, can we schedule a meeting between our two companies to explore this opportunity?
4.3 Create a cross-company project team to identify areas for improvement

5.0 Look inside (next blog post):

Best Practices for Contracting Economies

Our first series of economic news commentary posted today is a wake-up call for all business owners. Here is our analysis of the current market:

• the Dow is headed down to 4000 (another 2500 points)
  
• the S&P Index is headed to 350 (50% of current value)
  
• unemployment will be close to 10% by the end of the year, 20% by the time the market finally bottoms (another 25% increase this year, 3 X the current rate)
• the contraction could last until 2012
  

What does it mean for your business?

1. All of your energies needs to be directed at holding your base; keeping your best (highest revenue, highest margin) customers.
2. Even if you currently occupy this position, you must become the lowest cost producer in your industry.

Holding Your Base

Your customers are experiencing the same market demands, you need to analyze every component of the relationship to improve the value of your offer. They are already discussing it, imagine the impact of a preemptive call from the owner/executive! Image creating a joint team from both organizations to find a way to help them stay in business, and therefore tell you how to improve your offer. They are going to continue to cut costs, why wait until they call you canceling future business.

Lowest Cost Producer

This doesn't mean the lowest price which is a separate decision. It is about doing it better the first time, doing it faster with fewer steps, and improving your value to enhance their success. If you are actively engaged in holding your base, they will provide you with all the information necessary to do it better, faster, with greater value.

One more thing. If you are really interested in radically changing the business and surviving this ugly economy, one more thought. What if you built an open source company? A company that integrates the process of its suppliers and customers to improve everyone's value.

Checkout our Project 1440 blog for details on this new and intriguing business model.

New Direction, Same Best Practices

Just a quick note to our readers. We have changed the focus of our blog dedicated to misc. ramblings from living in the corporate consulting world. We will continue to skewer stupidity when ever and where ever it is encountered, however dealing with the governments mismanagement of the economy requires we add economic insights to one of our blogs.

The current government induced economic contraction has forced us, like most businesses of our size, to change our focus from growth to survival. It doesn't change our underlying library of best practices, it only changes the application.

We are adding a new economic reporting business unit to provide you with the latest information to save your business, to save everything you have invested to date.

Tomorrow marks our new news unit.

Ciao and keep your head - we will win. Whenever entrepreneurs and government bullies tangle, entrepreneurs win! The reason, if they were as smart and dedicated to preserving wealth, they would not work for government. We can invent and therefore resist faster than they can legislate.

Welcome Inc bloggers

Poll Directions – on the left side of the page are two polls important to next weeks Inc's blog. The first poll asks about your end game – when the time comes for you to leave the business, how will that happen? The second poll asks about your current stage of growth - what are the real priorities demanding immediate attention and what can be postponed to a later date? We intend to build next week’s article from your responses – so decide what we write!

Your End Game

Instead of discussing the pro’s and con’s of your end game options, lets start the discussion by working backwards – How are Businesses Valued? When an outsider looks at the business - how is value determined? By understanding how they will view the business, you can make a better decision about your growth strategy. There are three methods used by business brokers, merger & acquisition firms, and venture capitalists to determine value:

• Net Asset Value
• Market Multiple Value
• Income or Discounted Cash Flow Value

Net Asset Value looks at the market value of components of the business. It works well for acquisitions where the buyer wants individual pieces, not the whole operation. Some times the individual parts are worth more than the whole and this is a method to pull value out. It works well for companies that are comprised of mostly hard assets like real estate and natural resources.

Market Multiple Value looks at the expected earnings and cash flow over a period of time generated by the entire operation to establish a formula. The valuation establishes the worth of the business like 2 or 3 times sales. It works well for mergers where the buyer wants the operation to improve or enhance an existing business. In addition, it works well for companies comprised of soft assets like brand reputation and knowledge.

Income Value looks strictly at cash flow over a period of time. It's valuation is a function of how much this additional cash flow is worth to the acquiring business. It works well with companies that have large and predictable high velocity cash flows like pay day loans, pawnshops, bars and clubs.

Here is my rationale, if you know how the business will be valued, that should determine which growth strategies make the most sense. For example, if your end game is to grow and sell, then investing in either hard assets or functions that improve the amount and velocity of cash flow make sense. Making sizable investments in human resources or infrastructure will actually decrease your valuation! These investments make sense if your end game is to grow and hold such as taking the company public and the value will be captured as part of a Market Multiple approach.

We will investigate this further on next week’s 1:1 meeting @Inc. blog.

Hot News

Look for a Press Release later today on the topic but for all of our readers - no sense waiting. Our Chairman and Founder Bill Eastman has joined the staff at INC Magazine's Online Portal and will be writing a weekly blog - CGO4Hire - Chief Growth Officer for Hire.

Look for a full transcript of the Press Release later today.

You Must See This Movie - IOUSA

We typically don't involve these blogs into the world of politics. However, occasionally there are issues that transcend politics because of its potential impact on the economy. As entrepreneurs, there are 26 million solopreneurs and small business (under $50m in revenue) in the United States representing 40% of the jobs, there are issues that cannot go unnoticed. We have been on this story for quite awhile and used these projections into our growth plans - our editorial board this information should be shared.

Review and let me know your thoughts.

Growth in a down cycle?

I just finished a long road trip meeting with clients and our guild members in the MidWest. One thing is becoming very clear, it doesn't matter what the FED says, most our network believes we are at the beginning stages of a recession. There is an obvious fear about discretionary spending. The common theme of the discussion with our guild members is: should we change our message away from growth to cutting costs?

My answer was no and here is why: economic downturns are the time to prepare for rapid growth and here is how I got there.

Using the Business Life Cycle Model and matching it to the economic cycle leads to the following 4 tactics:

1. Begin to look for operational efficiencies. Take a hard look at your processes for delivering products and services and determine if you are currently operating @90% capacity. In other words if everything works as it should, are you building, selling, servicing at a level that is 90% of the businesses capability? If you're not (the right answer 99% of the time) then look to remove all non-value added activities; those things you do to produce, sell, deliver, service that you couldn't add to the invoice. Identifying those gaps between todays efficiencies and what is possible will reduce cycle time and waste, and most importantly improve margins. Imagine if you could charge for everything required to exceed customer expectations!
   
2. Determine which of your competitors that will be hit the hardest by the economic downturn. Who will go out of business or will be so seriously damaged that when the economic trends begins its upward cycle, they will be just hanging on. Look closely at the specifics of their offer: the features of their products and services, and the prime accounts you would like to own.
3. Asses your offer and capacity to deliver on these future sales. Since you have already upgraded your operations (Tactic 1), what additional capacity do you need to add. Use some the money gained from increased margins with existing accounts and build the capacity to sprint out of the blocks.
4. Launch and create buzz. Ready your marketing campaign, you don't need to spend allot of money - just have some in reserve to raise your exposure to the targeted accounts you seek to steal. Most company's who use this tactic upgraded their marketing materials, enhanced their packaging, and bought limited but effective media - like radio or local publications.

When we first built our library of best practices for fast growth, it was apparent the best of the best timed their operational improvements with a downturn in the economy and where ready to sprint when the cycle upturned and drove new sales from their weakened competitor.

Your thoughts?

Our Unique Offer

We have moved our successful big business consulting practice to the mid-market and start-ups where high growth companies live. We grew weary of trying to “boil the ocean” which is common to all large corporations. We decided to stop fighting bureaucracy and work with clients who shared our sense of urgency for getting things done. Our offer is equal to the large consulting firms with one significant difference; we have eliminated price point as a legitimate objection.

After two years of development by researchers with over a half-century of delivering results to the Fortune 1000, we have created a new business model for delivering knowledge to business.

Our extended team represents recognized thought leaders in the issues essential to growth: Market Intelligence (competitive advantage), Brand Superiority (core competence), Talent (discretionary performance), and Operations (productive capacity).

Where do we look to achieve Optimum Growth for our clients?

• Core Measures – Measuring to Manage: what are the most significant (and few) measurements in your business that will determine success and failure?
• Leading Indicators – Predicting the Future: based on core measures, which metrics identify barriers and opportunities for growth, and drive this yearÂ’s strategy?
• Real Time Indicators – Leading in Real Time: based on leading indicators, what can be measured daily (weekly) to indicate progress?
• Trailing Indicators – Evaluating to Learn: what was the impact of the business strategy on financial performance, and what can we take forward to next year?

The team members at AKL all have long-standing reputations for achieving results, helping clients reach the next level. Each member has years of industry experience within specific areas of consulting practice:

• Strategy and Optimum Growth
• Product and Service Quality
• Human Capital

Given the nature of the consulting business, the challenge of measurement presented us with two problems. Starting inside our company, how do we effectively measure performance in a labor-intensive business? Then transferring our attention to clients, how do we measure the impact of partnerships? In both cases, our added value was the application of knowledge. Since you cannot manage what is not measured, how do you measure the application of knowledge internally to become the lowest cost provider? How do you manage the application of knowledge externally to create a return on performance for clients? These concerns have occupied our best minds for years.

Our journey brought us to a simple understanding of the role of measurement in business and the demands of management.

The application of business measures has just three objectives:

• Predict: based on a set of Leading Indicators, if nothing changed - what will happen, if we make change – what should happen
• Describe: based on a set of Real-Time Indicators, how do we measure performance daily and weekly to ensure progress is being made or obstacles identified
• Evaluate: based on a set of Trailing Indicators, the ability to match the cost of actions taken against the return achieved

The AKL has collected an extensive list of best practices over our half-century of driving business results. Our organizational assessment FORECAST measures the best practices in four critical strategic elements of growth.

• Competitive Advantage
• Core Competence
• Productive Capacity
• Discretionary Performance

Best Companies - A Simple Answer

I just finished attending an executive team meeting with one of our channel partners, and instead of participating I was trying to rationalize my unease.

It seems most people at this paygrade, in order to sound smart, need to over complicate business. I didn`t have our library of best practices at my finger tips, but when it was my time turn - the following simplicity made sense.

The very best companies did a couple of things better than their good competitors, things that distiguished them from the crowd. Here is what I said:

1. They understand where the current and future competitive advatange exists.
2. They created an overarching brand that embodies their competitive advantage.
3. They aligned people with strategy, and processes with customers.
4. They built processes for production and service where ordinary performance creates extraordinary results, and
5. They developed employee problem solving and decision making skills so people could self-manage.

This is very similar to our four major catories of best practices for sustainable growth:
• Market Intelligence
• Brand & Strategy
• Systems & Processes
• Human Performance

But that doesn`t roll off the tongue, and didn`t make me sound smart. Or did it?

Best Practice - Intellectual Leadership

From Monday, 14JAN08 Investors Business Daily:
TOP EXECS CROWD SPEAKER CIRCUIT
´´Big companies are putting more chief executives and other honchos on the global speaking circuit to hone their corporate reputations.
A study by PR firm Weber Shandwick found....´´

Nice reference point for one of our best practices for fast and sustainable business growth - Intellectual Leadership.
Our research found that the fast growth - quickest to a billion dollars - companies achieved their success through creating brand. And that happened when the corporate executives made market intelligence a role responsibility and then used various media sources to make it known.

What are you doing to:
1. Understand the future of your industry and it`s clients, and
2. Capitalizing on the knowledge to enhance your brand?

notes from the field on our nokia8000 VIA (Virtual Internet Assistant)

Evaluating Business Performance

Let me start with the following disclaimer – I am not an accountant, financial consultant, Chartered Accountant, or CPA. I am business owner who can read the balance sheet, who understands the impact of short-term expenditures on long-term financial performance.

However, I understand how growth needs to be measured financially, especially if your goal is to eventually sell the company or take it big time with investment capital. Everything you do – land new accounts, develop a new product, purchase equipment, hire people, etc. is measured against its impact on:

• Market Value
• Cash Flow
• Revenue and Revenue Growth
• Return on Invested Capital
• Cost of Capital

Market Value:
The current quoted price at which investors buy or sell a share of common stock or a bond at a given time. The market capitalization plus the market value of debt. Sometimes referred to as "total market value.”

Cash Flow:
A revenue or expense stream that changes a cash account over a given period. Cash in-flows usually arise from one of three activities - financing, operations or investing - though they also occur because of donations or gifts in the case of personal finance. Cash out-flows result from expenses or investments. This holds true for both business and personal finance.

Revenue and Revenue Growth:
The amount of money that a company actually receives during a specific period, including discounts and deductions for returned merchandise. It is the "top line" or "gross income" figure from which costs are subtracted to determine net income. Revenue is calculated by multiplying the price at which goods or services are sold by the number of units or amount sold.Revenue is also known as "REVs"

Return on Invested Capital (ROIC)
A calculation used to assess a company's potential to be a quality investment by determining how well (i.e. profitably) a company's management is able to allocate capital into its operations. Comparing a company's ROIC with its cost of capital (WACC) reveals whether invested capital was used effectively.

Cost of Capital
The required return necessary to make a capital budgeting project - such as building a new factory - worthwhile. Cost of capital would include the cost of debt and the cost of equity.

Operationalize Growth Metrics by Managing Your Financials

1. Create attractive gross margins early – target 60% or greater and maintain it through various growth stages – never sacrifice gross margin to buy market share
2. Contain expenses to achieve 20+ EBITDA – total investment equals/never exceeds the difference between gross margin and 20+% of EBITDA (Earnings before Interest, Taxes, and Depreciation)
3. Become cash flow positive early – deliver consistent cash in proportion to revenue growth
4. Utilize incremental gross margins to self-fund incremental investments – provides a unique opportunity to self-fund a higher level of investment in sales and marketing as well as product development

………Profit at All Costs

However, you cannot successfully manage these metrics after the fact. Using financials or trailing indicators to run the business is like driving the car by looking through the rear view mirror or driving your boat by watching its wake.

Only by installing a predictive measurement can you decide what actions are on your short list (the principle of ONE THING) and then measured in the real time so you can drive business measures in the right direction.

Leading in Real-Time

Running a business with real time information - the dream of most executives and managers has become a reality. Whether you call it Business Intelligence, Real-Time Enterprise, Real-Time Operations, etc., the solution is now available if you have the desire.

FORECAST
Applied Knowledge Labs is your powerful and cost effective choice. Our system enables your business to achieve the dream of competing with on-demand information. This capability improves in-the-moment decisions, and makes execution a core competence.

Imagine being just one click away from having today's information on customer service, information from current production teams on reduction in cycle time or how inspired are your front line people this week.

Corporate Dashboards
Collaborating with your executive team, we integrate current measures into dashboards and ensure line of sight to each individual. You can in one location combine the three elements of alignment:

• contribution to business objectives
• participation in improvement projects
• job requirements

Individual Scorecards
Far more challenging is designing a method of capturing data that does not distract from work or makes unreasonable demands. Our philosophy is to make the system match the requirements of common “day-timer” systems. We use this as our standard and depending on the frequency of updates driven by the job, our goal was a functioning system running on an investment of 15-20 minutes a day.

By taking a few minutes to update the system, each person will have a real time report on how well they are doing as self-managers. When this information is rolled up to the executive level, everything you need to run it in the real-time is available. Welcome to on-demand, real-time business information.

We can either build you a simple to operate low-tech paper system for posting visible performance targets, or help you find a software partner to automate that process.

The only question is in your mind is paper or electronic, not yes or no to building visible measures of day to day performance. You cannot manage what is not measured, whether that is management of self or management of the firm.

Predicting the Future

The challenge of any profession is to make the complex simple. Over our half-century of business improvements, we have directly experienced the complexity of running a sustainable business. Our job is to understand all of the underlying forces and nuances we experienced and make it simple. You cannot execute what is not understood or easily performed.

Predicting the future is not about crystal balls, reading entrails, or interpreting Nostradamus's quatrains. It is about understanding the most fundamental question in business: where is value today and where is it headed? Or what are my customers currently paying for and what will that be tomorrow?

Our organizational assessment FORECAST is the start of a process to capture an accurate and complete picture of your business. It allows a company to determine where and how value is being created and for whom, and what core competence is required to make this competitive advantage a reality.

Once we understand the competitive advantage opportunity of your market and position in that niche, we can help you identify the barriers and causes of gaps. FORECAST's analysis capabilities bring the internal barriers and causes, the upset conditions, to the scrutiny of all effected members of the organization.

Our research group designed FORECAST to be a flexible and customizable assessment to fit your unique issues. It is built on 26 micro-assessments such as Process Management and Customer Enthusiasm and can even evaluate your readiness for ISO as an example. Our ability to customize is limited only by the creativity of your questions.

The Four Critical Strategic Elements of Growth:

1. Competitive Advantage: (MARKET INTELLIGENCE) The essence of understanding market leadership, it identifies where the organization can excel and is the matched set for Core Competency. Competitive Advantage exist in both real time and the future, understanding the under or unserved needs with significant financial gain of a targeted niche.


2. Core Competence: (BRAND SUPERIORITY) It starts with brand, and what makes your brand superior in the eyes of the customer. Not just a marketing campaign, it is about perceived customer benefits of your end product and the experience of buying and using, it must be difficult for competitors to imitate, and finally creates uniqueness from anyone else.


3. Discretionary Performance: (TALENT) The amount of performance the organization can capture beyond what is required. Typically, standards are set artificially low. No business is able to sustain itself when people do the minimum. Every successful company has a competitive advantage through people who work harder then required or compensated.


4. Productive Capacity: (OPERATIONS) The essence of your business model, it measures the organization's ability to provide products, services, and customer enthusiasm to specified markets. It is the delivery component for Core Competency.

These form the core of our assessment technology; however, we are about more than gaining understanding. FORECAST's foundation is smaller, discrete assessments that provide the detail necessary to solve problems and create a plan to win.
Our assessment library includes:

1. Clarity of Vision, Mission, Values


2. Competitive Advantage


3. Vertical and Horizontal Alignment


4. Internal Operations and Support Processes


5. High Performance Employment Systems


6. Core Competence


7. Performance Management


8. Knowledge Management


9. Team Effectiveness & Focus


10. Learning & Growth


11. Change Readiness & Management


12. Customer & Market Dynamics


13. Organizational Structure


14. Environmental Dynamics


15. Horizontal Links to Client Development


16. Horizontal Links to Market & Innovation


17. Leadership Effectiveness


18. Sales Effectiveness


19. Employee Inspiration


20. Customer Enthusiasm


21. Customer Intelligence


22. Market Intelligence


23. Competitive Intelligence


24. Baldridge Award


25. Innovation Management


26. Process Management


27. Quality Management


28. Technology Management


29. Project Management


30. Management Efficiency


31. Training System


32. Productive Capacity


33. Canada’s Best Managed Companies

Measuring to Manage

After spending many years working with and competing against the big 5 consulting firms, we decided to build our own comprehensive organizational assessment. The difference would be a focus on sustainable growth and not an excuse to sell consulting services. Most of our competitors (McKinsey, et.al.) used assessments to sell their considerable assortment of products and services. This allowed the client to question the objectivity of the results because the process appeared to be nothing more than another step to sell more stuff.

We on the other hand only sell and service ONE THING – an assessment of the best practices for fast growth companies. That is it, nothing less or nothing more.

We call it FORECAST and the goal is in the name, to provide an accurate picture that identifies gaps between the future and present. It best serves managing growth, business planning, and improvement projects.

When we began the design process 2003, it was apparent a coherent model for measuring business performance as needed to explain the process. Using our background in process improvement and SPC (Statistical Process Control), we built the following model for business metrics: Predictive (Leading Indicators), Descriptive (Real-Time Indicators), and Evaluative (Trailing Indicators).

The ability to Predict: is starting the year or performing a mid-course correction with the knowledge of which actions will achieve the desired results - a short list of actions spells the difference between success and failure. The challenge is to have a model of how the company should function so being off-track is obvious to everyone.

The ability to Describe: is to track performance in real time. It makes running a real-time enterprise a reality. The challenge is how to build a scorekeeping system that is bottom up? How do you roll those measures up to create individual, group, and organizational dashboards? This bottom-up approach challenges every individual to “their best performance to date.”

Additionally it breaks the truth-fear paradox. Most business measures are not designed or used as corrective feedback (TRUING) instead it is employed for blame and faultfinding. The result is fear of the truth! How can any of us run a business when truth is avoided like the plague?

The ability to Evaluate: is the ability to review results against plan. It takes advantage of your current financial measures by expanding its ability to review decisions and actions taken during the year.

Most end of year evaluations simply measure results without a clear line of sight to cause and effect. Our critical addition is to back track through the various decisions and actions by using FORECAST to drive next year’s improvements.

A partnership with AKL enables your executives and managers to review and evaluate performance over the year. This ability cannot be overstated, you are now armed with your unique best practices to assess, design, align, and execute to achieve optimum growth.