Platt Perspective on Business and Technology

Planning for and building the right business model 101 – 32: goals and benchmarks and effective development and communication of them 12

Posted in startups, strategy and planning by Timothy Platt on October 13, 2017

This is my 32nd posting to a series that addresses the issues of planning for and developing the right business model, and both for initial small business needs and for scalability and capacity to evolve from there (see Business Strategy and Operations – 3 and its Page 4 continuation, postings 499 and loosely following for Parts 1-31.) I also include this series in my Startups and Early Stage Businesses directory and its Page 2 continuation.

I began discussing three specific exit strategies in Part 31, in the context of discussing exit strategies per se and what that term actually means as a stage of development, fundamental change-based transition point:

1. A new venture that has at least preliminarily proven itself as viable and as a source of profitability can go public and with all of the organizational change and all of the transparency and reporting requirements that this entails as they begin offering stock shares.
2. A new venture can transition from pursuing an organic growth and development model (as in exit strategy 1, above) but to one in which they seek out and acquire larger outside capital investment resources, and particularly from venture capitalists as briefly touched upon in Part 28, Part 29 and Part 30 of this series.
3. A new venture, and certainly one that is built around a growth-oriented business model, might build its first bricks and mortar site, in effect as a prototype effort that it would refine with a goal of replication through, for example a franchise system.

And at the end of that series installment, I stated that I would continue its flow of discussion here, examining these same three transitional changes in greater detail and in terms of goals and benchmarks, and communications issues as they play out in businesses going through them.

• If I were to summarize the basic set of topics that I will at least begin to address here, in a single brief phrase, it would be to note that my goal here is to at least briefly outline the core generic elements of the How, of strategically mapping out and evaluating basic business transition options moving forward, on the basis of specific, carefully gathered, organized and evaluated and communicated empirical evidence.

This overall flow of business process and review steps has, or at least should have its roots in the normal and normative day-to-day practices followed by business owners and their leadership teams as they manage their businesses in the face of more routine change and uncertainly. Efforts to develop and follow effective review and evaluation processes in the face of impending disruptive change, which true business transitions always involve, cannot work for people who have not already built an effective foundation for that from well considered evidence based business management practices, as carried out in the face of simpler, routine change and variety as arises every normal business day. And I will add that the data and insight gained from this more normal and every day review and analysis practice, serves as essential baseline data and both for identifying need for more significant change and early on, and for more effectively planning and preparing for it.

In the context of this series and this portion of it, that means knowing when and how one or another, or one or more of the above three listed exit strategies might be starting to make sense, and how and why. And this posting is all about looking at and measuring and tracking the right performance metrics and looking for and documenting exceptions and exception handling, as need for that arises, and as a part of that same business analysis process.

The goals and benchmarks of this, need to be realistic and that means they need to be clear and precise and framed in terms of the business performance measures actually followed. Subjective can be vitally important here, and certainly when that means coming to an awareness that not all of the right types of data and insight are being considered here. But ultimately, this analysis and the raw data that enters into it need to be objective and specific; subjective impressions and estimates cannot offer any real value and certainly when it comes to the supposedly raw business data that is going to be used for this type of business analysis.

What should you look for here, as measured objective data and as sources of it? Look to the basic business model and what the business does that collectively would, or at least should make it profitable and effective enough in its marketplace to reach that goal and stay there. And at least start addressing all of that, in the financial terms of cash flow and availability, and costs and returns on investment and how systems fit together in those terms. And as this is a business transitions type of analysis under consideration here, look both short-term and longer-term, and project outward according to two distinct models:

• What happens if the business simply continues on with a business as usual approach for the area of the business under immediate consideration here?
• What options might be available for disruptively breaking away from that old pattern and in a new way?
• And what would variously happen if one of these transitional changes were entered into, pro and con, short-term and long?

Ask this of each of the options considered in the second bullet pointed question here, in terms of the basic metrics used for your ongoing business analyses, as augmented where and as gaps in what they can tell you become apparent. And remember: any gaps and uncertainties in how you would answer these questions, represents risk faced from pursuing whatever approach: whatever next step development model that is under direct consideration at the moment. Here, risk represents cost and potential loss faced, and at least ideally for capability to measure and determine, as a product of the sum of direct and indirect costs faced if an adverse event were to occur, as multiplied by the chance that it would take place (as measured as a proportion – e.g. a 1% chance of occurrence represented by the fraction .01 and so on.)

This addressed what is considered, and certainly as a first step analysis where it would become clearer that problems and challenges might be arising. Now consider which stakeholders are included in these conversations, and really involved in them: not just in the room but silently so.

• Effective inclusion here in these conversations is essential for finding better approaches for addressing the gaps and challenges identified here, where a best path forward might mean pursuing some particular type or combination of basic exit strategy options as noted above, by way of those three possible examples.
• It means more effectively and fully characterizing and understanding the gaps and problems faced that would go into that type of determination.
• It means more effectively arriving at workable approaches for carrying out any necessary changes that are agreed to.
• And this is essential for gaining buy-in so the necessary changes and all the work that enters into them, are actually done and in a coordinated manner by all necessarily involved stakeholders.

I have been writing here in general and relatively abstract terms. I am going to delve more into the specifics in my next series installment where I will consider exit strategy 1 from my above list of three in detail: the fundamental change scenario of a business going public with all that that entails. After that, I will more specifically consider each of the other two exit strategy scenarios under consideration here.

Meanwhile, you can find this and related postings and series at Business Strategy and Operations – 4, and also at Page 1, Page 2 and Page 3 of that directory. And you can find this and related material at my Startups and Early Stage Businesses directory too and at its Page 2 continuation.

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