Your business is
either headed up or it is going downhill October 16, 2006
Here is a health check for your business
using Sorach’s Slope analysis
By Donna Lee - dch@sorach.com
A
couple of years ago at a business luncheon, I met an interesting gentleman who
owned a business that provides media infrastructures for events. On asking how his business was doing he
explained that his business is always constant based a solid customer list that
he supports every year. I asked him if
he had any new projects to expand his business in the near future. He said that
there was no need to do that as he made a handsome living and he enjoyed what
he is doing. A few days ago I found out
that his business is under bankruptcy protection. What happened in 2 years to that “constant” business? This is what I found out. Most of their customers were from a single
market segment. Many of them had closed
shop or sent their work overseas creating a sudden drop in the event
business. A competitor had also set up
shop that provided a full event support services. These factors had decimated a business that had been ‘constant’
for many years. We have developed what
we call the ‘slope analysis’ for businesses. This can be applied to almost any organization or a part of the
organization to examine the heading of the business. It allows decision
makers take remedial actions to change
the heading to a solid positive slope.
Here is a short explanation of this analysis.
Technology and business-innovation are marching forward no matter what we think. These changes are the main reason that when business is not actively nurtured, it starts to decline. You may think of this as business friction, that erodes business naturally. So how can we quantify this friction and put programs place that will change the slope of the business to a positive slope? In this paper we will only look at calculation of the slope.
The business has a number of parameters that contribute to its growth or contraction.
From one period to another, the change is calculated for these parameters and normalized as per the total impact of the parameter. Over time trends will surface. This trend can be used for strategic planning to correct the heading of the business. Areas that must be analyzed include the following:
Customer segments
Geographical segments
Product or service diversity (number of
models, variations…)
Business model & process innovation (financing
the customer, payment methods, self assembly of products, advertisement,
supplier side innovation...)
Intellectual property (patents, trade
secrets, formulations, processes)
Planning tools & initiatives
Employee development
Cost improvement
Margins
In
case your business does not have the data readily available in these areas
means that business planning tools and processes need to be updated. The slope model is based on the delta of
the parameters. This information provides a way to do structured
planning in the organization. It also
stresses the need to collect and process critical survival data for the
organization by developing a holistic trend for the organization.
Further
Information
To receive a free ‘Think Card’ for this article that shows a diagram of the actual implementation in an organization please send email to msc@sorach.com with your email address and card16 in the email body.
For comments please feel free to contact Donna dch@sorach.com