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Archive for the 'Strategy & Operations' Category

Improving business decisions

Improving business decisions
We explore and summarise interesting insights which could help to make better strategic decisions.
Interesting insights from McKinsey and Harvard Business Review
McKinsey & Company share interesting insights on strategic decision-making in interviews with Martin Sorrell, chief executive at advertising firm WPP, Randy Komisar, partner at investment firm Kleiner Perkins Caufield & Byers, and former Xerox chairman Anne Mulcahy.
Decision-making should be quick, flexible and informal, says Sorrell. “This is not to say the process shouldn’t be rigorous: run the analyses, suck up all the data, and include some formal processes as well”. “The only way to avoid making mistakes is to avoid making decisions”, adds Sorrell; “Instead, learn from mistakes and listen to feedback.”
Komisar suggests creating a balance sheet, “where everybody around the table is asked to list points on both sides”. Rather than giving judgements, contributors first outline the good and the bad points relating to a decision. Once done, participants share their opinions and discuss the decision based on objective insights and personal judgements. “By assembling everyone’s insights rather than their conclusions, the discussion can focus on the biases and assumptions that lead to the opinions.” Komisar adds: “Listen to the little voice… It’s great to see a leader who will echo the little voice in the back of the room that has a different point of view – and thereby change the complexion of the discussion”.
“You need internal critics”, says Mulcahy, “who have the courage to give you that feedback”. Timeliness is also important: “Decisions have shelf lives, so you really need to put tight timeframes on your process.”
In an article for Harvard Business Review, Tom Davenport explains that animation studio Pixar conduct a ‘postmortem’ on major aspects of a project, where team members are asked to present five things they would and would not do again. Postmortems weed out problems, says Davenport, providing crucial feedback which helps to learn from mistakes when making future decisions.
Instinct is important, “but only when four tests are met”, says McKinsey. The familiarity test asks whether we have experience in similar situations, because: “If we have plenty of appropriate memories to scan, our judgment is likely to be sound.” The feedback test questions the availability of reliable feedback in past situations, and whether the right lessons were learnt. The measured-emotions test asks if a decision evokes highly charged emotions which can unbalance judgement. And the independence test asks if we are “likely to be influenced by any inappropriate personal interests or attachments?”. “If a situation fails even one of these four tests, we need to strengthen the decision process”, argues McKinsey.
Turn insights into better decisions
According to these insights, decision-making should be quick, flexible and informal (to avoid missing opportunities), but also rigorous and process-driven. The process should include analysis of relevant data, pros and cons, personal opinions, judgements, instincts, and past experiences such as feedback and lessons learnt. Where no relevant experience exists, or where instincts or judgements are weakened by bias, charged emotions or personal interests, further analysis must be done to strengthen the process and avoid bad decisions. Listening to the ‘little voice’ and ‘internal critics’ could provide the necessary challenge which further tests the quality of decisions.
These insights could be used to create simple decision-making tools, such as Komisar’s balance sheet or McKinsey’s four tests. So why not take a few moments to jot down your own ideas for a quick-but-rigourous decision-making process to suit your business and management team?

We explore and summarise interesting insights which could help to make better strategic decisions.

Interesting insights from McKinsey and Harvard Business Review

McKinsey & Company share interesting insights on strategic decision-making in interviews with Martin Sorrell, chief executive at advertising firm WPP, Randy Komisar, partner at investment firm Kleiner Perkins Caufield & Byers, and former Xerox chairman Anne Mulcahy.

Decision-making should be quick, flexible and informal, says Sorrell. “This is not to say the process shouldn’t be rigorous: run the analyses, suck up all the data, and include some formal processes as well”. “The only way to avoid making mistakes is to avoid making decisions”, adds Sorrell; “Instead, learn from mistakes and listen to feedback.”

Komisar suggests creating a balance sheet, “where everybody around the table is asked to list points on both sides”. Rather than giving judgements, contributors first outline the good and the bad points relating to a decision. Once done, participants share their opinions and discuss the decision based on objective insights and personal judgements. “By assembling everyone’s insights rather than their conclusions, the discussion can focus on the biases and assumptions that lead to the opinions.” Komisar adds: “Listen to the little voice… It’s great to see a leader who will echo the little voice in the back of the room that has a different point of view – and thereby change the complexion of the discussion”.

“You need internal critics”, says Mulcahy, “who have the courage to give you that feedback”. Timeliness is also important: “Decisions have shelf lives, so you really need to put tight timeframes on your process.”

In an article for Harvard Business Review, Tom Davenport explains that animation studio Pixar conduct a ‘postmortem’ on major aspects of a project, where team members are asked to present five things they would and would not do again. Postmortems weed out problems, says Davenport, providing crucial feedback which helps to learn from mistakes when making future decisions.

Instinct is important, “but only when four tests are met”, says McKinsey. The familiarity test asks whether we have experience in similar situations, because: “If we have plenty of appropriate memories to scan, our judgment is likely to be sound.” The feedback test questions the availability of reliable feedback in past situations, and whether the right lessons were learnt. The measured-emotions test asks if a decision evokes highly charged emotions which can unbalance judgement. And the independence test asks if we are “likely to be influenced by any inappropriate personal interests or attachments?”. “If a situation fails even one of these four tests, we need to strengthen the decision process”, argues McKinsey.

Turn insights into better decisions

According to these insights, decision-making should be quick, flexible and informal (to avoid missing opportunities), but also rigorous and process-driven. The process should include analysis of relevant data, pros and cons, personal opinions, judgements, instincts, and past experiences such as feedback and lessons learnt. Where no relevant experience exists, or where instincts or judgements are weakened by bias, charged emotions or personal interests, further analysis must be done to strengthen the process and avoid bad decisions. Listening to the ‘little voice’ and ‘internal critics’ could provide the necessary challenge which further tests the quality of decisions.

These insights could be used to create simple decision-making tools, such as Komisar’s balance sheet or McKinsey’s four tests. So why not take a few moments to jot down your own ideas for a quick-but-rigourous decision-making process to suit your business and management team?

Capturing the Challengers

This year we showcased 100 inspirational local businesses of all sizes and from all sectors. Each one displays the type of drive, passion and innovative approach that has enabled them to challenge larger, established firms and succeed despite fierce competition.

These ‘Challengers’ have captured the imagination and admiration of businesses across the region. Today we take another look at all 100 case studies to try and capture the essence of a Challenger business.

To do this we tried something different. We took all 46,600 words from the case studies and put them into a ‘word cloud’ generator. The resulting ‘cloud’ features the top 50 most popular words; the bigger a word appears in the cloud, the more frequently that word appeared in the case studies.

Capturing the Challengers

So, does the cloud reflect the true essence of a Challenger?

Customer(s), People. Challengers talk about ‘people’ as opposed to ‘customers’ – a reminder that behind ‘target audiences’ and ‘customer groups’ are unique individuals. They are keen to know what both existing customers and new prospects want and need. They are also focused on developing their own people.

Innovation, Development, New, Ideas. As one business put it, it’s about “constant innovation, expansion and improvement”. Another adds: “Innovation and reinvention are vital”. In addition to product development, service innovation was frequently mentioned. Clear focus on new ideas, new products and services, new markets and ventures.

Sales, Marketing. Challengers are sales focused, and have a tight grasp of sales numbers. Online sales – or an online presence to promote offline sales – was frequently mentioned. Employee development also said to be a key sales driver. Two quotes reflect the mood towards marketing: “We are absolutely marketing led”, and “Marketing is vital”. Sales and marketing innovation is important; one firm said it “thinks outside the box”, doing “lots of smaller activities” rather than more costly approaches.

Local, International. Great importance attached to ‘local’, in terms of local markets and use of local tradespeople, but also a clear focus on cracking international markets and becoming global businesses.

Energy, Environmental. Numerous mentions of energy efficiency, lowering fuel usage, renewable energy sources, green business policies, reviewing energy consumption. Challengers take pride in an ethical approach and see financial and marketing benefits in being green.

Commitment. Constant commitment to customers, customer service, quality, product and service development, people, relationships, the brand, social media, modernisation. The words ‘focus’ and ’time’ frequently attached to these phrases, suggesting such commitments are not always easy. Finally, to quote a Challenger, there’s simply: “A commitment to deliver exactly what customers are looking for”.

Approach. Challengers take pride in their approach, calling themselves: entrepreneurial, pioneering, different, new, unusual, flexible. While they see value in traditional approaches, they are not afraid to approach things differently.

Download the Challenger Guide to Business

Top Tips: Finance

Top Tips: Finance
Quick-fire tips with links to more information on 18 business finance related subjects.
Cashflow
Cashflow monitoring can be crucial for survival, while effective cashflow management boosts profitability.
Manage cashflow, Improve cashflow
Cost Cutting
If you cut costs in areas that deliver customer value you may damage sales and customer satisfaction, so focus on identifying and cutting ‘wasteful’ costs which offer little or no customer or business value.
Cost cutting tips, Cost cutting ideas, Waste not
Balance Sheet
Make balance sheet comparisons over time to help both monitor and assess financial performance.
Balance sheets: the basics
Borrowing
Be strategic about debt. If you need it to survive, develop a strategy for reducing your reliance on borrowing over time; if it aids growth, have a plan for reducing borrowing using profits from growth.
Get debt help and advice
Invoicing
Ensure invoices include the information required by law and clearly set out pertinent details such as payment terms and credit limits.
Invoicing
Insurance
Make sure your business, its assets and people are adequately insured, and that it’s insured against business liabilities. Use our interactive tool to work out which forms of insurance you need.
Insurance
Debt Recovery
Be ready for bad debts: read up on managing late payments, calculating interest on unpaid debt, and recovering debt via formal requests for payment or through the courts.
Debt recovery
Pricing
Take ten to evaluate pricing by reviewing your cost price but also your value. What value do customers find in your products or services, and what’s your worth compared to competitors?
Ten minute price review
Financial Contingency
Cash reserves, or a plan for accessing finance quickly should you need it, could help to survive threats such as economic downturns or opportunities such as grabbing market share from a failing competitor.
Banking
Review your banking and consider transferring if you are not getting a good deal; explore the pros and cons of business debit or credit cards; find out about accepting card payments from customers.
Business banking
Payment Cards
If you accept card payments you should be aware of twelve requirements that apply to all companies holding personal and payment data; PCI DSS rules come into force in September.
Accepting online payments, About the PCI Data Security Standard
Bootstrapping
New projects often need financial resources, but they also need control to minimise risk. And balanced financial discipline could help to pursue projects previously thought to be too expensive.
Bootstrapping
Online Filing
File returns and company information online to save time and money, and know your key filing deadlines.
Online tax and filing services, Get email alerts for key tax deadlines
Suppliers
Review supplier performance in relation to cost. If the balance of cost and value weighs against you, use this intelligence to re-negotiate, or use as the basis for evaluating alternative suppliers.
Six tips for reviewing suppliers
Factoring & Discounting
Release cash from invoices in advance of them being paid.
Debt factoring & invoice discounting
Business Plan
If you need to raise finance, a business plan is a powerful tool; get to know what to include.
Preparing a business plan to raise money, Use your business plan to get funding
Finance Options
Explore the various sources of finance available and their advantages and disadvantages.
Interactive tool – Identify finance options, Finance options, Sources of finance
Insolvency
If you are having problems paying debts – consider the options for avoiding or dealing with insolvency.
Avoid insolvency, Insolvency: the basics

Quick-fire tips with links to more information on 18 business finance related subjects.

Cashflow
Cashflow monitoring can be crucial for survival, while effective cashflow management boosts profitability.
Manage cashflow, Improve cashflow

Cost Cutting
If you cut costs in areas that deliver customer value you may damage sales and customer satisfaction, so focus on identifying and cutting ‘wasteful’ costs which offer little or no customer or business value.
Cost cutting tips, Cost cutting ideas, Waste not

Balance Sheet
Make balance sheet comparisons over time to help both monitor and assess financial performance.
Balance sheets: the basics

Borrowing
Be strategic about debt. If you need it to survive, develop a strategy for reducing your reliance on borrowing over time; if it aids growth, have a plan for reducing borrowing using profits from growth.
Get debt help and advice

Invoicing
Ensure invoices include the information required by law and clearly set out pertinent details such as payment terms and credit limits.
Invoicing

Insurance
Make sure your business, its assets and people are adequately insured, and that it’s insured against business liabilities. Use our interactive tool to work out which forms of insurance you need.
Insurance

Debt Recovery
Be ready for bad debts: read up on managing late payments, calculating interest on unpaid debt, and recovering debt via formal requests for payment or through the courts.
Debt recovery

Pricing
Take ten to evaluate pricing by reviewing your cost price but also your value. What value do customers find in your products or services, and what’s your worth compared to competitors?
Ten minute price review

Financial Contingency
Cash reserves, or a plan for accessing finance quickly should you need it, could help to survive threats such as economic downturns or opportunities such as grabbing market share from a failing competitor.Business banking

Banking
Review your banking and consider transferring if you are not getting a good deal; explore the pros and cons of business debit or credit cards; find out about accepting card payments from customers.

Payment Cards
If you accept card payments you should be aware of twelve requirements that apply to all companies holding personal and payment data; PCI DSS rules come into force in September.
Accepting online payments, About the PCI Data Security Standard

Bootstrapping
New projects often need financial resources, but they also need control to minimise risk. And balanced financial discipline could help to pursue projects previously thought to be too expensive.
Bootstrapping

Online Filing
File returns and company information online to save time and money, and know your key filing deadlines.
Online tax and filing services, Get email alerts for key tax deadlines

Suppliers
Review supplier performance in relation to cost. If the balance of cost and value weighs against you, use this intelligence to re-negotiate, or use as the basis for evaluating alternative suppliers.
Six tips for reviewing suppliers

Factoring & Discounting
Release cash from invoices in advance of them being paid.
Debt factoring & invoice discounting

Business Plan
If you need to raise finance, a business plan is a powerful tool; get to know what to include.
Preparing a business plan to raise money, Use your business plan to get funding

Finance Options
Explore the various sources of finance available and their advantages and disadvantages.
Interactive tool – Identify finance options, Finance options, Sources of finance

Insolvency
If you are having problems paying debts – consider the options for avoiding or dealing with insolvency.
Avoid insolvency, Insolvency: the basics

Ten minute innovation

Ten minute innovation
Take ten to improve your business, its products or services, and how you get things done.
Before we begin, remind yourself why innovation is important
It’s the process that transforms new ideas into customer value and business success.
It’s not just about big ideas, it’s about small or incremental improvements that we can all make.
It’s not just about products or services, it’s about processes; about improving how we do things.
It’s a chance to do good in our working lives by making things better than they were before.
Step 1. Make innovation a priority
Research suggests that people and culture are the most important drivers of innovation, and that the best way to create an innovative culture is to formally integrate innovation into the management agenda. Doing so means that innovation can be proactively encouraged, introduced, managed and measured.
So take two minutes to invite your management team to discuss innovation as a key business priority. If you work alone, take a moment and make time in your diary to think through your innovation plan.
Step 2. Plan for innovation
An innovation plan formalises intent and provides focus for you, managers, and the business as a whole. So take five to work through the following tips, and list your innovation objectives and priorities.
Look at your products, services, customers, marketing presence and business processes. How could you innovate within these dimensions? Are weaknesses present? Are there any unmet customer needs or underserved segments? Could you adapt processes to improve efficiency and effectiveness?
When reviewing these dimensions, consider the different ways to innovate: Solve problems that customers face, or problems faced within your business; Simplify products, services and processes; Differentiate by creating or improving upon points of difference between you and competitors; Change products, services or experiences by adapting elements that don’t meet customer needs or are deficient relative to competitors; Create new products or services that meet unmet or underserved customer needs; Create innovative points of marketing presence, or new distribution channels.
In just five minutes you can create a draft innovation plan which you can refine and discuss with others. Ask management to work through step 2, focussing on their own business functions. If you work alone, seek an outside perspective by discussing your plan with a business associate or Business Link adviser. Also search online for innovation tips and resources, and read our business i innovation series.
Step 3. Buy into innovation
Ten minutes can spark innovation, but as discussed, people and culture are what drives it forward, and an innovation plan is what helps to give and maintain focus. Your plan, and innovation itself, need buy-in from you and your people. So to push things forward, take your plan to management, develop it together, and make sure they believe in it; then take it to your people and invite ideas to pursue your goals. If you work alone, keep your plan front-of-mind so that you constantly aim to think differently and innovate.
The business case for innovation
Use innovation to grow your business
Planning innovation

Take ten to improve your business, its products or services, and how you get things done.

Before we begin, remind yourself why innovation is important

  • It’s the process that transforms new ideas into customer value and business success.
  • It’s not just about big ideas, it’s about small or incremental improvements that we can all make.
  • It’s not just about products or services, it’s about processes; about improving how we do things.
  • It’s a chance to do good in our working lives by making things better than they were before.

Step 1. Make innovation a priority

Research suggests that people and culture are the most important drivers of innovation, and that the best way to create an innovative culture is to formally integrate innovation into the management agenda. Doing so means that innovation can be proactively encouraged, introduced, managed and measured.

So take two minutes to invite your management team to discuss innovation as a key business priority. If you work alone, take a moment and make time in your diary to think through your innovation plan.

Step 2. Plan for innovation

An innovation plan formalises intent and provides focus for you, managers, and the business as a whole. So take five to work through the following tips, and list your innovation objectives and priorities.

Look at your products, services, customers, marketing presence and business processes. How could you innovate within these dimensions? Are weaknesses present? Are there any unmet customer needs or underserved segments? Could you adapt processes to improve efficiency and effectiveness?

When reviewing these dimensions, consider the different ways to innovate: Solve problems that customers face, or problems faced within your business; Simplify products, services and processes; Differentiate by creating or improving upon points of difference between you and competitors; Change products, services or experiences by adapting elements that don’t meet customer needs or are deficient relative to competitors; Create new products or services that meet unmet or underserved customer needs; Create innovative points of marketing presence, or new distribution channels.

In just five minutes you can create a draft innovation plan which you can refine and discuss with others. Ask management to work through step 2, focussing on their own business functions. If you work alone, seek an outside perspective by discussing your plan with a business associate or Business Link adviser. Also search online for innovation tips and resources, and read our business i innovation series.

Step 3. Buy into innovation

Ten minutes can spark innovation, but as discussed, people and culture are what drives it forward, and an innovation plan is what helps to give and maintain focus. Your plan, and innovation itself, need buy-in from you and your people. So to push things forward, take your plan to management, develop it together, and make sure they believe in it; then take it to your people and invite ideas to pursue your goals. If you work alone, keep your plan front-of-mind so that you constantly aim to think differently and innovate.

The business case for innovation

Use innovation to grow your business

Planning innovation

Self-employment, limited company or partnership?

Self-employment, limited company or partnership?
We explore the three main business structures and outline the responsibilities, pros and cons of each.
The legal structure of a business determines several factors, including administrative, tax, and national insurance responsibilities, personal liabilities, and control over business decision-making.
Self-employment
You must register with HMRC when you become self-employed. Aside from some exceptions the self-employed must pay Class 2 National Insurance; the current rate is £2.40 a week. Self-employed people must also keep financial records, submit self-assessment tax returns, pay income tax, and pay Class 4 NICs on profits. Other duties may include VAT registration, obtaining permits, or paying business rates.
Pros: sole control of business; simple structure, rules and administration. Cons: sole responsibility for business and any debts; not usually suited for raising investment/capital.
For a more detailed overview read Setting up and registering as self-employed
Limited company
A limited company must be incorporated; this process can be self-administered or you can appoint a formation agent, solicitor, accountant or chartered secretary. Ongoing administration includes preparing company accounts, paying corporation tax, and operating a PAYE system to pay income tax and National Insurance for employees. Companies may choose to register for VAT or be required to do so if turnover is expected to exceed VAT threshold. Limited companies are usually controlled by one or more directors and owned by shareholders, although shareholders may have decision-making influence.
Pros: paid in full shareholders are not liable for business debts; money can be raised by selling shares in the business; some customers/clients may perceive limited companies to be more professional. Cons: relatively complex administration and rules which may require professional handling.
For a more detailed overview read Setting up and registering a limited company
Partnership
General business partners share the control, responsibilities, profits and losses of a business. Usually the officers of a partnership are self-employed, so they must register with HMRC and administer their own tax and National Insurance affairs. General partners may be personally liable for business debts, whereas limited liability partnerships offer reduced personal responsibility.
Pros: alternative option to incorporation for those setting up with others. Cons: potential sole or shared liability for business and any debts; shared control over decision-making.
For a more detailed overview read General partnership or Limited liability partnership
Seek professional advice if you are unsure about which structure to choose. Also try our interactive tool, Choose the right legal structure, and read Legal structures: the basics

We explore the three main business structures and outline the responsibilities, pros and cons of each.

The legal structure of a business determines several factors, including administrative, tax, and national insurance responsibilities, personal liabilities, and control over business decision-making.

Self-employment

You must register with HMRC when you become self-employed. Aside from some exceptions the self-employed must pay Class 2 National Insurance; the current rate is £2.40 a week. Self-employed people must also keep financial records, submit self-assessment tax returns, pay income tax, and pay Class 4 NICs on profits. Other duties may include VAT registration, obtaining permits, or paying business rates.

Pros: sole control of business; simple structure, rules and administration. Cons: sole responsibility for business and any debts; not usually suited for raising investment/capital.

For a more detailed overview read Setting up and registering as self-employed

Limited company

A limited company must be incorporated; this process can be self-administered or you can appoint a formation agent, solicitor, accountant or chartered secretary. Ongoing administration includes preparing company accounts, paying corporation tax, and operating a PAYE system to pay income tax and National Insurance for employees. Companies may choose to register for VAT or be required to do so if turnover is expected to exceed VAT threshold. Limited companies are usually controlled by one or more directors and owned by shareholders, although shareholders may have decision-making influence.

Pros: paid in full shareholders are not liable for business debts; money can be raised by selling shares in the business; some customers/clients may perceive limited companies to be more professional. Cons: relatively complex administration and rules which may require professional handling.

For a more detailed overview read Setting up and registering a limited company

Partnership

General business partners share the control, responsibilities, profits and losses of a business. Usually the officers of a partnership are self-employed, so they must register with HMRC and administer their own tax and National Insurance affairs. General partners may be personally liable for business debts, whereas limited liability partnerships offer reduced personal responsibility.

Pros: alternative option to incorporation for those setting up with others. Cons: potential sole or shared liability for business and any debts; shared control over decision-making.

For a more detailed overview read General partnership or Limited liability partnership

Seek professional advice if you are unsure about which structure to choose. Also try our interactive tool, Choose the right legal structure, and read Legal structures: the basics