Tools for improving the performance of your enterprise

Enterprise performance depends on the efficiency of managing resources, the productivity of human resources and the developed unique value or products that customers want. The critical factors for fostering the enterprise performance are leadership management, strategic thinking, resources management, sales and marketing, operations and financial performances. In this article, I have summarized a list of tools for improving the performance of the enterprise.  

Tools for decision-making:

  • Scientific approach: Decision making is based on data and using logic and rational ways to make a decision.
  • Opportunity-cost approach: It is based on studying the opportunity cost of similar cases and making a decision according to it.
  • Intuition approach: It is making a decision based on gut feeling rather than data and rational analysis.
  • Decision tree approach: It is based on describing several possible alternatives, a probability for each alternative and outcomes.

Tools for creating a lean startup:

  • Vision: Outcomes are a business concept and new product development.
    • Customer and value mapping: where customer’s pains are identified, prioritized, tested and matched with a tested solution( value proposition).
    • Problem/solution fit ( customer development): Where problem( pain) is matched with the solution ( value proposition) and tested with evidence with potential customers.
    • Product development and product/market fit( customer validation): It is all about creating customer value, develop a product/market fit and to meet customer needs.
  • Strategy: Outcomes are building and testing a business model
    • Building and testing a business model: Business model is how to develop, deliver and capture values.
  • Acceleration: Outcomes are achieving a growing and profitable revenue.
    • Managing acceleration: Plan, execute and control a plan for a startup acceleration.

 

  • Testing for Lean Startup: Lean startup goes through 3 distinctive tests before a company is created. Tests are:
    • Test (1) for a Problem/solution fit- Customer discovery: through mapping the pains of target customers, testing with potential customers that these pains are accepted to them and developing a solution ( unique value proposition) that can be bought by potential customers.
    • Test (2) for a product/market fit- Customer validity: a product and commercial offering are developed and accepted to buy by the potential customers.
    • Test (3) for scalability test- Customer creation: It is evidenced that a business has a record of growing profitable revenue.

 

 

Tools for marketing performance:

  • Product life cycle: Introduction, growing, maturity and declining. Each phase of the product life cycle will require different market mix strategy.

 

  • Technology Adoption Life Cycle: The buyer groups for any new technology product consist of:  innovators (Techies), early adopters (Visionaries), early majority (Pragmatists), late majority (Conservative) and laggard (Skiptics). Each group of prospective buyers represents a unique psychographic profile, that makes the market responds differently.

 

 

  • The path to epiphany- the customer development model: It encompasses a searching group of processes (customer development and customer validation) and execution group of processes ( customer creation and company building).

 

  • Customer discovery: it aims at discovering your customers (who are they and how to reach them) and testing your business concept (problem-solution fit and value proposition).
    • Customer validation: it aims at validating your sales model (product-market fit and sales roadmap) and achieving repeated sales.
    • Customer creation: it aims at creating demand and driving the distribution channels.
    • Company building: it aims at transforming the company, including building formal organizational and management structure, hiring staff and management.
  • Extension strategies: Finding new markets for existing products; product development and enlarge product portfolio.

 

 

 

  • Boston matrix: It is a matrix of the market growth and the relative market share.
    • Dog: When a business is characterized by low growth and market share.
    • Question mark: When a business is characterized by higher growth and lower market share.
    • Star: When a business is characterized by high growth and share.
    • Cow: When a business is characterized by low growth and higher market share.

 

 

  • Pricing strategy:
    • Skimming: Higher launching-product price then lowered pricing level.
    • Penetration: Low price to enable foothold in a market.
    • Leadership: For a strong business brand where pricing level set by the business leader.
    • Taking: Set prices similar to average market pricing level.

 

 

  • The Ansoff matrix: It is a matrix analyzing the correlation between a product and market within uncertainty condition to grow a business.
    • Market penetration: low risk- using the existing product to increase market share in the existing market.
    • Market development: Medium risk- finding a new market for existing products using market research and segmentation to identify new groups of customers.
    • New product development: Medium risk- producing new products for the existing market.
    • Diversification: High risk- producing new products in new markets.

 

 

 

  • Porter’s five forces of competition:
    • A threat of new entrants
    • Buyer bargaining power
    • Supplier bargaining power
    • A threat of substitutes
    • Rivalry from existing competitors

 

Tools for operational performance:

 

  • Increasing efficiency: Getting more outputs from a given level of resources.

 

  • Increasing productivity: Getting more outputs from a given level of labour forces.
  • The importance of efficiency and labour productivity: Reduce the cost of the product and the selling prices which lead to a greater level of competition in a market.

 

 

  • The lean production: It is a Japanese approach to get more from fewer resources and include cutting wastes (time, physical, space, resources), JIT, Kaizen, TQM, Quality circles.
    • JIT: Will receive stock when you need it and thus it will reduce the waste and cost of the stock. It does have some drawbacks like running out of stock, losing the opportunity for bulk purchase and requires a high level of trust in supply chains.
    • The Double Diamond: It is a concept that is built-in two sections of processes which are Design System (consists of discovering, defining & designing) and Make Serve System (consist of developing & delivering).
    • Value Stream Mapping: Lean manufacturing processes, including product development,  will be scheduled and made based on the requirements imposed by the customers, their essential needs and willingness to pay.
    • Five S:
      • Spot: You only keep the materials and resources required for producing and delivering a batch.
      • Simplify: You get the most simplified process, smallest batch possible, lowest production lead time, lowest cost of production.
      • Scan: You scan all logistics, production, delivery, resources, policies, procedures, …etc for depicting areas for improvement.
      • Standardization: You work according to a written system and make it repetitive processes.
      • Sustain: You plan and conduct an audit to ensure reduction of waste, time, cost and highest quality; training and development, increase participation and independence.
  • Improving quality:
    • Methods of improving quality: The quality is not only the product but rather it the whole processes from receiving raw materials to making final products.
    • Quality assurance: Mechanism put in place to ensure that the entire operations process meets the required standards.
    • TQM: It places on employees of a firm as an individual and collective responsibility for maintaining high-quality standards. By checking throughout the process, it aims for zero defects.
    • Kaizen: It is a Japanese philosophy of continuous improvement where all employees are encouraged to identify and suggest possible improvements in the production process.

 

  • Porter’s value chain: The ability of your company to compete successfully is a product of everything the company does and organizes.
    • Support Activities: firm infrastructure, human resource management, technological development and procurement.
    • Primary activities: inbound logistics, operations, outbound logistics, marketing & sales and service.

 

 

Tools for financial performance:

  • Construct an annual budget:
    • Cash in: Revenues, increase net working capital, selling fixed assets and investments, short-term and long-term investment dividends, taking loans and increasing equity.
    • Cash out: Operating expenses, non operating expenses, purchasing, investing in working capital, investing in fixed assets and investments, repaying loans and obligations and dividends.
    • Net deficit and surplus and refunding.
  • Forecast cash flow: Forecast cash flow from operation, investment and finance.
  • Construct the breakeven point: Construct a breakeven chart, and calculate the breakeven point as sales quantity or value by dividing the annual fixed cost on the gross profit per a sold unit.

 

  • Analyze profitability:
    • Gross profit margin: Gross profit/ sales revenue.
    • Operating profit margin: Operating profit/ sales revenue.
    • Net profit margin: Net profit/ sales revenue.

 

 

  • Analyze financial performance:
    • Balance sheet: Evaluate working capital, net asset value, financing structure, assets employed.
    • Income statement: Revenues, cost of goods sold, gross profit, expenses, operating profit, finance income and expense, profit before tax, taxation, profit after tax, profit utilization, profit quality and growth.
    • Financial ratios:
      • Profitability: Gross margin, net profit margin, return on investment, return on equity.
      • Liquidity: Current ratio and quick ratio.
      • Gearing or leverage ratio: Non-current liability into total equity and non current liability. Efficiency: Asset turnover, equity turnover, payable days =payable/cost of good sold * 365; receivable days= receivable/ sales *365 , inventory days= inventory/ cost of good sold *365, inventory turnover= cost of sales/ inventory.

 

 

 

  • Investment appraisal:
    • Payback period: Cost of investment divided on annual net operating cash flow.
    • The average rate of return: Average net profit made over the life expectancy of investment divided by the investment made.
    • The net present value: Present value of operating cash flows minus to investments made.
    • The internal rate of return IRR: The discount rate that makes NPV is equal to zero.

 

 

  • The value of sensitive analysis: what if scenario.

 

Tools for the human-resource performance:

 

  • Analysing human resource performance:
    • Labour turnover: No of labour leaving in a year to total no. of staff.
    • Labour retention: No of employees with one or more years of service to the total no. of staff.
    • Labour productivity: Total outputs per time period to total no. of staff.
    • Labour cost per unit: Labour cost per term to the total no. of outputs per the term.

 

 

  • How to improve employee engagement and motivation:
    • Financial methods: Wages and salaries, bonuses, rewards, commissions, share ownership.
    • Non-financial methods: Meaningful work (providing jobs that are interesting and challenging); involvement, responsibility and recognition, leadership and management styles, corporate culture.

Tools for strategic positioning:

  • Strategic positioning: Choosing how to compete in terms of benefits and price. A business should choose its competitive advantages and produce a business value that customers desperately want it. A business uses these competitive advantages to differentiate its business from other competing businesses and to better meet customer needs. Strategic positioning is based on competitive advantages and unique values tailored to fulfil customer needs.
  • SWOT:
    • Internal: Strengths and weaknesses.
    • External: Opportunity and threats.
    • The value of SWOT: It helps a business to evaluate its strengths and weaknesses and plan for opportunities and mitigate threats.
  • The importance of core competency: Competitive advantages, USPs and value propositions. Offering a product or service that carry a unique value to customers and justify customers to acquire.
  • Explore the core competency:
    • Understand the external environment.
    • Evaluate the competitive dynamics in the market and internal organization.
    • Explore what makes your organization distinct from competitors.
    • Choose the competitive advantages of your organization, enforce it and brand it.

 

  • Tools to assess business performance:
    • Kaplan and Norton’s balanced scorecard model: Financial, the customer ( satisfaction, retention, market share, brand strength), learning/growing (employee satisfaction, turnover, retention, skills), internal business process ( inventory, production, orders, resource allocation cycle time, quality control).
    • Elkington’s  Triple Bottom line: A business is sustainable if 3 pillars of economic performance (net profit), social performance ( people welfare and community support and environmental performance ( protecting environment and conserve natural resources).

 

 

 

  • Evaluating the external environment (PETELS)
    • Political and legal change: competition, labour market, environmental legislation. The impact of UK and EU government policy: encourage enterprise, the role of regulators to protect the public interests, infrastructure, the environment, international trade.
    • Economic change: the GDP, taxation, exchange rate, inflation, fiscal and monetary policy, open trade vs protection. The reasons for greater globalisation: Improved transportation, technology, WTO, multinational companies.
    • Social change: Urbanization and migration, changes in consumer lifestyle and buying behaviour, the growth of online business.
    • Technological changes: There is no doubt that technological changes have had a big impact on the goods and services produced and sold. The benefits of technological change are: lower cost, improved communication, increased sales, improving the working environment, quality. Technological developments have brought some problems like the cost of change, competition, security.

 

 

 

  • Carrol’s corporate social responsibility pyramid: Economic responsibilities: Be profitable; legal responsibilities: obey the law; ethical responsibilities: do the right thing; philanthropy responsibilities: be a good corporate citizen and improve the lives of others in society.

 

Tools for the strategic directions:

 

  • Factors influencing strategic directions:
    • Objectives and risk attitude: If a business is risk averse, this will reflect on strategic direction that an organization chooses.
    • Cost: Cost of strategic direction chosen.
    • Barriers to entry: Barriers like customer duties, quotas, regulation usually affect business strategy chosen.
    • Competitors’ actions.
    • Ethics.

 

 

  • Porter’s generic strategies: It is a matrix analyzing the competitive advantages of a business ( differentiation and low-cost) and target customers ( broad or niche).
    • Low-cost strategy: A business sells to a broader scope of the market at a low-cost.
    • Differentiation: A business gets differentiated in its offering in an open competitive market.
    • Focusing strategy: Using low-cost or differentiation offering to specific segments or niche.
  • Bowman’s strategic clock: Developed on the basis of Porter’s generic strategies, where the cost is replaced by the price and value and 8 strategies have been developed accordingly.
    • low price/ low value added: e.g. Poundland.
    • low price: e.g. Aldi, Lidl.
    • Hybrid: fair price and fair value. e.g. IKEA.
    • Differentiation: high value with designer products at a reasonable price. E.g. Nike and BMW.
    • Focused differentiation: high value at a higher price. e.g. Armani and Rolex.
    • Increased price/standard product: short-term strategy.
    • High price/ low value: a classic monopoly market.
    • Low value / standard price.

Tools for pursuing strategies:

  • Mckinsey’s 7-S Framework: strategy depends on combining lots of parts in a way that can deliver success. The 7-S’s are structure, system, style, staff, skills, strategy and subordinate goals.
  • Kim and Mauborgne’s blue ocean: its focus on creating a unique value or a product that is new and different from steam ones. To achieve this desired value you will need to evaluate the existing product or products and exercise activities like reduce, raise, eliminate and create new value that customers want.  
  • Greiner’s model of growth:
    • Phase 1: growth through creativity. This is the first step into growing where small team management can lead the business into growth, resulting in many challenges.
    • Phase 2: growth through directions leadership crisis. Managers are brought in, who knows more about planning and tactics and can help with strategic thinking.
    • Phase 3: growth through delegation autonomy crisis. The response to the autonomy crisis is to create a great structure with a clear hierarchy of responsibilities and authorities.
    • Phase 4: growth through coordination control crisis: greater efforts put to improve reporting and communication among aspects of a business.
    • Phase 5: growth through collaboration-Red Tape crisis encourage greater collaboration and focusing on organizational objectives.
    • Phase 6: growth through alliances growth crisis: thinking for external opportunities to achieve growth.

 

  • Assessing methods and types of growth:
    • Organic (or internal): Growth is financed and caused by internal sources like revenues.
    • Mergers and takeover (or external): a vertical, horizontal, conglomerate of diversified ( two businesses with different fields merged).
    • Venture (external): or joint venture agreement between two or more businesses to agree on a pool of resources for achieving a specific task.
    • Franchising (external): it occurs when an existing business ( the franchiser) grants the right for another party ( the franchisee) to use its trade name and sell its products or services.

 

 

 

 

  • Assessing innovation: Refers to the creation of effective processes, products, ideas that can increase the probability of business succeeding. Innovation is to have a better product and more efficient processes.
    • The pressures of innovation: Survival, shareholders, competitive environment, social and ethical.
    • The value of innovation: competitive advantages, aligned to strategic positioning, stakeholder value.

 

  • The ways of becoming an innovative organization:
    • Kaizen:  It focuses on making continuous small improvements that can help keep business at the top of its field.
    • Research and development: Research to come up with new products and efficient processes.
    • Intrapreneurship: Is the act of encouraging employees to behave like entrepreneurs within a business context.
    • Benchmarking: It is the process of measuring the performance of an organization against the best in the industry ( best practices).

 

 

 

 

 

  • 10 types of innovation:
    • Profit ( How to make money?)
    • Network ( How to network to make value?)
    • Structure ( How to organize your talents and assets?)
    • Process ( How to process to achieve innovation?)
    • Product performance (Develop a distinguishing feature)
    • Product system ( Create complimentary products/services)
    • Service ( support your offering)
    • Channel (how to deliver values to customers?)
    • Brand (How are your representation and your offering values?)
    • Customer experience (foster customer interactions)

 

 

  • Tools for innovation:
    • Altshuller’s innovation pyramid: It is based on a study classifying the innovative actions as 68% of actions are apparent solutions, 27% of actions are apparent improvement, 4.3% of actions are invention inside a paradigm, 0.24% of actions are a new generation of existing system and 0.05% of actions are a new system.
    • Osterwalder’s business model Canvas: He developed a business model consisting of 9 business blocks.
    • Ries’s lean model: Validated learning: build, measure and learn.
    • Christensen’s disruptive innovation: disruptive innovation is about disrupting domain player in a market by inventing new products or market.
    • Design thinking: empathise (observe and searching) and define (visualize the problem, ideate, prototype and test).

 

 

  • How to protect innovation and intellectual property:
    • Patent: it gives the inventor exclusive rights to use his/her invention for 20 years and prevent others from copying or selling the invention without the permission of the inventor.
    • Trademarks: it is a brand name or logo or design or all of these.
    • Copyrights: it is the author’s legal ownership of creative work such as a literary or musical work.

 

 

 

 

  • Assessing greater use of digital technology:
    • The pressure to adopt digital technology: improve performance, keep up with consumer and market trends.
    • E-commerce
    • Big data: It refers to the ever-increasing amounts of structured, semi-structured and unstructured data that have the potential to be mined for information. Tools are the volume of data, velocity (the speed at which new data is generated), variety ( technology allows a different type of data to be analyzed), veracity (technology increases the ability to work with low-quality of data).
    • Data mining: It is the process of turning big data into useful information.
    • Enterprise Resource Planning ERP.

 

 

 

 

 

 

  • The value of digital technology:
    • Financial: Monitoring and analysis with the quicker and easiest way to do.
    • Marketing: Helps to create customers values, conduct market research, discover customers, retain customers, grow customers, develop new markets.
    • Operation management: Enable greater automation of production, more efficiency in inventory control, leading to lower costs, better quality, increasing efficiency and productivity.

 

 

 

 

Tools for managing change:

  • Lewin’s force field analysis: Changes in business is inevitable and it is a key factor in the success of the business. The change happened as a result of two opposite groups of forces ( driving forces and restraining forces). In case of equal or balance forces, the business continues with no noticeable change otherwise changes happened if driving forces are stronger than the restraining forces.
  • The value of change: a business which is likely to change, is a flexible business, progress, benefit from opportunities, better satisfy customer needs and challenge the current situation for improvement.
  • Barriers to change: Employee resistance, management resistance, inadequate resources and organisational culture.
    • Kotter and Schlesinger’s four reasons for resistance to change: self-interest, misunderstanding and lack of trust, different assessment and low tolerance of change.
    • How to go over barriers of change: education and communication, facilitation and support, participation and involvement, negotiation and bargaining, explicit and implicit coercion.

 

  • Managing organizational culture:
    • The importance of organisational culture: Corporate culture is the belief, values and principles that together make up the corporate culture. Good cultures inspire, engage, and motivate employees, whereas poor cultures lack collaboration and passion among employees. The importance of corporate culture is Identity of a business, direction ( guidelines, roles and responsibilities), loyalty ( employees feel like part of the business), competition, attitude to change.
    • Cultural models:
      • Handy‘s cultural model: Handy described four types of culture: task culture ( focus on doing the job), role culture (focus on roles and responsibilities) , power culture ( focus on putting power within few roles and managers), person culture ( focus on individual employee and the organisation exists to satisfies the needs of individual staff).
      • Hofstede’s national cultures: Individual vs. Collectivism: I or We culture. Power distance: high power culture is decentralised and every role has the authority and power to achieve tasks but in low power distance the power is centralised among few people and power is unequally distributed.

 

 

 

 

Prepared by: Munther Al Dawood

Enterprise Development Professional

Grow Enterprise

www.growenterprise.co.uk

maldawood@growenterprise.co.uk

My Linkedin Profile

Reading, UK

 

1 thought on “Tools for improving the performance of your enterprise

  1. This is great information, and I enjoyed reading it! https://themulticulturalmarketer.com

    Like

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