When we go on a trip, a map is sufficient, but for more complex projects such as building a business, house, ship, car etc. a Blueprint is required.
Despite this, most companies don’t have Blueprints of their business from strategy, through operations to valuation. That is a problem for them, as the Blueprints provide clarity and visualisation of the current business, where to go and how to get there.
Instead, companies typically have a functional-based view captured by an organisation chart or use frameworks such as the business plan which is useful for presenting ideas and facts but not for building and scaling a business.
For businesses that are up and running, accounting provides an essential representation of the past. But, these are lag measures – Deming, famously noted that trying to manage a company by looking at financial data is ‘like driving a car by looking in the rearview mirror’.
However, none of these provides a dashboard and insights into the forward-looking key drivers that are necessary to build and profitably scale a business.
As a result, most Business Plans tend to gather dust on a shelf, unused. Senior managers use accounting reports to determine how well the company is performing, but find them unhelpful to successfully run the business.
To Increase Profits & Scale you, as business owners, entrepreneurs and leaders need:
- Blueprints that map out the business from strategy, through operations, to valuation, and show how it creates, delivers and captures value.
- Blueprints for you to Work ‘On’ the business to strategise, systemise, visualise, analyse, innovate, to strategically position, execute and make the business agile.
The Problem
Businesses are complex and for you to win in a competitive market, you need a strategy which creates an integrated capabilities system that delivers a unique value proposition and superior value to your target customers relative to the competition.
These capabilities can often comprise people, technology, processes, systems, intellectual property and organisation capital. We think of resources as the inputs and capabilities as the outputs; examples of capabilities are innovation, brand building, speed, customer service etc.
Blueprints are required to create and operate these integrated capabilities systems. The Blueprints enable management and employees to visualise and intuitively understand how the capabilities system works as a connected whole and how their work impacts the system.
If any part of the capabilities system is functioning poorly, it will materially impact results. This is a double-edged sword as competitors must replicate the whole system to achieve the same benefits. Hence, the system is as strong as the strongest capability!
In a world of rapid change, hypercompetition and uncertainty, these Blueprints are highly valuable for companies of all sizes and stages of their lifecycle.
Low business survival rates
Building and scaling a profitable business with a durable competitive advantage is challenging:
- For small businesses: the American Bureau of Labour Statistics shows that approximately 1 in 5 fails in their 1st year; about 1 in 2 make it past their 5th year and about 3 out of 10 make it past their 10th year.
- For large businesses: there has been a marked decrease in their ability to sustain their competitive advantage and to adapt to unlock new opportunities. The average lifespan of a company listed on the S&P500 has decreased from c.60 years in the 1950s to less than 20 years currently.
It doesn’t have to be this way; having value-based Blueprints can be a game-changer for success and longevity of your business.
A gap between perception and reality
Kahneman and Tversky in ‘Thinking fast and slow’ point out that small business owners are typically over-optimistic. They state that ‘81% of the entrepreneurs put their personal odds of success at 7 out of 10 or higher, and 33% said their chance of failing was zero’.
The authors point out that the financial benefits of self-employment are mediocre. People on a like for like basis would, on average, be better off selling their time and skills to employers.
Such apparent irrational behaviour of small business owners can’t be explained away using the same logic as to why buying a lottery ticket with a negative expected return can be rational. With the lottery ticket, the tiny possibility of hitting the jackpot provides additional emotional value for minimal risk.
For small businesses that fail, the owners can suffer severe financial and emotional damage. And for those that survive, the journey can be gruelling and all-consuming.
A lack of Value-Based Business Blueprints
Most business owners, entrepreneurs and leaders would agree that having Value-Based Blueprints of the business from strategy, through operations to valuation would be highly useful. Unfortunately, such Blueprints are hard to find.
Commonly available frameworks view the business through organisation charts, business plans, accounting reports, financial plans, strategic plans, tactical plans, products, markets, customers etc.
However, as these abstractions are not value-based, there is no unifying logic tying the business together.
A lack of such logic has a propensity to result in a business architecture that is opaque, fragmented and disconnected from value creation. In part, this causes the persistent wide gap between strategy and execution – for more details see our blog Business Strategy: Simplicity, Visualisation & Slow and Steady Wins the Race!
IVC’s Solution
To help you work “ON” the business we designed our Valuable Business Builder System©. The system helps you to build or exit a valuable business by following a five step process:
- Learn IVC’s Strategy & Valuation toolkit© to strategise, design, position, systemise, perform industry analysis and value based management; and create a Business Blueprint Operating System© (steps 2, 3 and 4 below).
- Create Your Strategy Blueprint© to define and visualise the company’s mission; how it creates, delivers and captures value and the measurement systems.
- Construct Your Valuation Blueprint© to visualise and identify the critical levers driving value and which levers to pull. It is the invisible hand guiding strategy and tactics.
- Map out Your Business Blueprint© to visualise, align and systemise the business from strategy, through tactics, to valuation.
- Work “ON” Your Business: using IVC’s strategy & valuation© toolkit and Business Blueprint Operating System©
Over the coming weeks, we will publish a series of blogs and videos on how to create IVC’s Strategy Blueprint©for your business, and how to successfully apply it (see below for a visualisation of our Strategy Blueprint©).
Valuable Business Builder System©
IVC’s Strategy Blueprint© Visualised
By Hugh Page
MD Integrated Value Consulting (IVC)
- What IVC does: we help SME entrepreneurs and leaders build & exit a valuable business at a premium
- How IVC Does It: we demystify business strategy & valuation and help you work “on” the business using our Valuable Business Builder System©
