Hello and welcome to this fourth video in our series: How To Build A Scalable Business. In this video we are going to focus on strengthening your business operating system.
We are not going to suggest you reinvent it, nor recommend how to build one from the ground up.
Rather, we are going to present and explain a self-assessment methodology and scorecard to help you and your team review your existing system quickly and simply to determine if it will support the growth you want within your chosen time horizon – and then to accelerate your transition from intention to action.
As always, we’ve structured this video and the transcript so you can watch or read the whole thing, or jump to the sections that interest you most.
The areas we will cover in this video are:
Let’s get straight into the first section:
Your Business Operating System – Scope And Challenge
Your operating system is the way you organise, equip and manage your business to execute your business model.
It includes all of the key functions, resources and activities necessary to create, deliver and capture value – whether these are performed in-house or outsourced to partners and suppliers; as well as the elements that influence the culture of your business and how you and your team actually work together in practice.
This constitutes a long list: budgeting and forecasting; organisation structure; roles and responsibilities; leadership and management rhythms; internal communication; data and information gathering; reporting routines and metrics; shared values and expected behaviours; performance management and monitoring; marketing; sales; new business development; customer relationship management; and so on.
The breadth and complexity of these different activities presents a significant challenge to entrepreneurs and leaders of SMEs: knowing where to prioritise for maximum effect at a given point in time, and what to do in each case. At times, this can seem overwhelming: it can be difficult to see the wood for the trees.
This explains the popularity of business system franchises like Starbucks, SnappySnaps or ChipsAway, which develop and maintain operating systems so that franchisees can profit from a better brand and operating system than they could likely create and evolve themselves. This of course doesn’t suit everyone, and comes at a cost.
In the corporate world, operating activities are usually considered separate from functions such as investment, treasury management and long-term funding strategies. These may contribute materially to overall results, but are not concerned with the day to day, core value-creation activities that a company is known for, and which create its operating profits.
In the world of SMEs, these non-operating functions either don’t exist, or to the extent that they do, they form part of everyday operational considerations such as managing exposure to exchange rates for export customers, for example.
For these reasons, we do not make the distinction within the Growth Mapping framework.
A Practical Toolkit For Self-Assessment
As entrepreneurs and leaders, you are striving to manage and evolve complex operating systems in a trading environment that includes more disruption than ever before.
This adds to the risk that your business evolves more by default than by design: decisions are rushed or lack context and over time, the operating system itself becomes more disjointed.
Existing solutions are either designed for the enterprise market and are too complex for most small businesses to implement, or they push users towards ‘cookie-cutter’ content that presupposes you need to reinvent what you have created to date. This makes them difficult to personalise to your particular needs and wants.
The Growth Mapping framework is designed to address this gap. It offers you, the founders and leaders of established SMEs, a practical toolkit for business self-assessment and improvement that is simple to understand and use.
It breaks down the complexity of diverse operating systems into a manageable form that is accessible to all, without glossing over important details or each company’s unique context, needs and preferences.
It also takes into account where your motivation is, so you are never obliged to complete steps or focus on areas where you perceive there is little benefit to be had.
The simplicity of the process and the resulting clarity will help you and your team complete your own assessment of your business, review and challenge each others’ perceptions and then agree priorities for action.
Next, it will help you to develop solutions, strategies and plans to implement these business improvements.
How To Use Your Self-Assessment Scorecard
You can watch a very brief video overview of our Growth Mapping framework by visiting the services section of our website and following the link to Business Growth Mapping.
Here, we are going to go into a little more detail, so that you can immediately download and use the toolkit if you choose to.
The framework is built to enable a simple, tick-box assessment of your business using a five-point scale; against a time-horizon that you choose – for example, the next 12 months, or the next three years.
The scale describes five outcomes in the progression from identifying a need in your business to having a fully scalable solution in place.
For each feature of your business, you are asked to what extent it is ready to support the growth you anticipate between now and your chosen time horizon.
This feature is not yet ready to support the growth you want.
L 2: ‘Defined’
You have an agreed vision of what your business needs and a documented strategy to fulfil it.
L 3: ‘Sufficient’
You have a workable solution embedded into your business that will suffice until your chosen time horizon.
You have refined your solution in light of your experience and all anticipated needs until your chosen time horizon.
You have systemised the solution such that it can accommodate substantial future growth beyond your chosen time horizon without further investment
Your choice of levels should reflect which of the outcomes has already been fully achieved in your business today.
Your chosen time horizon is important. You might want to consider the readiness of your business (or individual functions) to support growth over the next twelve months, or over the next three years, and the needs of your business and hence your assessment of it may differ substantially between the two.
In this next section, we’ll walk through an example, or if this seems clear to you already, you can forward to the following section entitled Your Instinctive Assessment: A Snapshot..
Imagine that 18 months ago, you and your leadership team agreed that in the light of your business plan for the next three years, your business needed to upgrade a critical resource: its CRM system, and that this ought to be a priority. At that moment of agreement, that the status quo was insufficient, you stepped onto the scale at level 1.
You assigned the project to one of your team who then spent 3 months pulling together a specification of users’ current and anticipated needs over a three year horizon, and researching the available alternatives. During month 4, they collated their findings and submitted a written business case and supporting strategy to the Board, for approval.
At the next Board meeting these were both signed off. At this point, the business achieved L2 for a three year time horizon.
During months 6-8, the business acquired the user licenses, and ran a training programme in partnership with the supplier to progressively develop the capability and processes in the business to use the system effectively. At the end of this programme, the business arrived at L3. Whilst the solution may not be perfect, it is certainly workable and will suffice if needs be.
Having used the system for six months; you then conducted a review of users’ experience to date and of the assumptions documented in the business case versus the reality that had unfolded since. This identified that one of the modules you were paying for was not being used, and that there was a high demand for additional functionality that was available as an optional upgrade. Furthermore, the company had grown faster than anticipated such that the number of ‘seats’ required over the three year time horizon would be 20% greater than first forecast.
This in turn would put pressure on the bandwidth of the company’s internet connection, and it was estimated that this would need to be upgraded in about 6-9 months. The costs for this were included in the investment proposal to the Board regarding these various changes.
The Board approved these additional investments that were implemented over the following month; with the exception of the internet connection that could wait a little longer. At this stage, the business moved to L4, which is where it still is today when assessed against a three year time horizon for this resource.
The business will only move to L5 with regard to this solution once the internet bandwidth is increased, as it is only at this point that the system will indeed accommodate substantial future growth beyond your chosen time horizon without further investment.
So far, we have mentioned a tick box assessment of areas of your business using a five point scale against a chosen time horizon, and explored how this might be applied in practice.
Now let’s look at how the framework breaks down the complexity of your operating system into a manageable form that you and your colleagues can use.
Your Business Snapshot: An Instinctive View
In this series so far, we have already seen the three features at the core of the framework, and the importance that these are all aligned with each other: Ownership, Business Model and Operating System.
These are the focus of the first part of your assessment, when you and your colleagues each make an instinctive, ‘snapshot’ rating of each of these focal points, applying the 5-point scale for your chosen time horizon.
For example, and taking an eighteen month time horizon, the sorts of questions you might ask yourself are:
- Will your ownership arrangements serve sufficiently over the next eighteen months to future-proof the shares in your business and the critical relationships in it?
- Is there a shared and documented understanding amongst your leadership team of both your business model today, and how this is likely to evolve over that same time horizon?
- When viewed overall, will your operating system support your planned growth over your planning horizon? If not, where would you place it on the scale when considered as a whole?
This ‘snapshot’ will give you and your colleagues an immediate sense of whether you share similar or divergent perceptions of the readiness of the business to support growth, expressed as your chosen level for each of these three features, and as a total ‘snapshot’ score.
Two of you might arrive at the same score, but having assessed the individual components very differently. This might shine a light on your different priorities, on a blind-spot or on your varying perceptions of the future challenges your business plan is likely to present.
Your Business Operating System: A Detailed Assessment
Next, the framework breaks down your operating system in more detail. It looks first at those elements that are within your sphere of influence and groups them into four viewpoints.
It invites you to assess your operating system by looking:
- Backwards, at your formative experiences to understand how they have shaped your business
- Inwards, at how well your business is structured, managed and resourced
- Outwards, at the value-added it creates, and for whom
- Forwards, at where it is heading, and its chosen path to get there
Within each of these dimensions, there are seven focal points for you and your colleagues to assess, using the five-point scale against your chosen time horizon. Each focal point is clearly defined to ensure a consistent understanding. To make your assessment, you simply tick the box corresponding to the level you assess each one to be at.
You then total your scores as indicated on your self-assessment scoresheet, and tick which areas you would prioritise, noting down any observations as you go using the questions on the back of the worksheet to help you.
Your Detailed Assessment: What It Will Reveal
The focal points are necessarily summary in nature – for example, within the Inwards dimension, one of the focal points is Capability. This invites you to consider the extent to which your business has the capabilities it will need to execute your business plan over your chosen time horizon.
Clearly there are multiple capabilities in your business, and the scoresheet is prompting you to make a summary choice and record any observations as you do so.
The benefit of this is firstly, it will ensure that each of you considers a consistent set of focal points, one of which is the capabilities the business will need.
Secondly, the level you each choose for this focal point will reflect which capabilities you each feel will be most critical; and their readiness to support growth over the time horizon. You might note this down as you conduct your assessment.
When you come together to review your results, this will prompt you to each reveal what capabilities have most influenced each of your scores.
Thirdly, the assessment will highlight the balance or otherwise between the readiness of each of the four dimensions to support sustainable growth over your chosen timeframe. This might reveal an imbalance between the outwards-facing elements such as your brand and customer engagement strategies, and the infrastructure and resources needed to support them, for example.
It might equally flag critical weaknesses in your operating system that put multiple other elements at risk, such as inadequate solutions for ensuring the well-being of a growing workforce.
Each focal point, then, is both a prompt and a catalyst: they prompt you to consider each aspect of your business and its readiness to support your business plans over your chosen time horizon; and each acts as a catalyst for you and your colleagues to align your perceptions and priorities.
External Influences On Your Business Operating System
The previous four viewpoints are all shown in the framework diagram as being within your sphere of influence, represented by the dotted grey line, meaning you can exert a high degree of control over them.
The diagram equally shows four areas that are outside your sphere of influence, which means that the degree of control you have over them is less.
- Trading Environment
- Partners and Suppliers
- Prospective Stakeholders
Consider a supplier for whom you are an important customer: you may have some influence over how they deliver their services to you – indeed, they may even seek your input into this over time, however, it is ultimately their choice.
As with the other areas, the framework summarises these external influences into four groups. It provides definitions of each to ensure consistency and invites you to make an overall assessment of them against the same scale, in light of your chosen time horizon, and noting any observations as you go.
Using the 5-point scale, the framework is inviting you to consider the extent to which you are clear about your present and future strategy towards these four areas – for example, whether you have designed and embedded ways of monitoring changes relating to any of them that may impact your business, directly or indirectly.
Alignment With Colleagues
You will now have completed three layers in your business self-assessment over your chosen time horizon, which according to your preferred work style may have taken a few minutes or significantly longer:
- Your instinctive ‘snapshot’ of your 3 core foundations: ownership arrangements, business model and operating system
- Your detailed assessment of your operating system from four viewpoints, comprising 28 focal points that are within your sphere of influence
- Your assessment of 4 external influences that are outside your sphere of influence.
You will also have collated the supporting scores and the observations you have made along the way, and you may have used the questions provided to unearth further insights prompted by your absolute and relative scores.
Your next step is to review these outputs with colleagues as a basis for discussion, alignment and prioritisation.
What You Are Looking For
There are many different insights and interpretations that could flow from your personal scores, and how these compare with those of your colleagues or of a business coach, if you have one. Some helpful questions to ask include:
- What are the similarities and differences between your assessments?
- Where are they most marked?
- What is the reasoning behind them?
- Have you identified similar priorities?
- How do your priorities balance investments for today / tomorrow; infrastructure and revenue generation; risk mitigation and asset creation?
- Which are the areas where you each feel there is no business need at present?
- How balanced or skewed are your scores across all of the four viewpoints?
- How does your assessment of external influences compare to the four internal viewpoints?
- Within each viewpoint, are the scores the result of peaks and troughs, or do your individual assessments of the seven focal points all fall within a narrow range?
- Is there a noticeable difference between the assessment of your colleagues, and that of an external party such as a coach?
- What time horizon have you chosen and to what degree would your assessment change against a shorter or longer one?
- What are the key assumptions that underpin your assessment and how might it change if one or more of these proved to be false?
- Are there any critical dependencies that came to light as you completed your assessment?
- Are there any areas that you feel unable to challenge and were you to do so, how might this change your assessment?
- If you asked the next layer of management in your business to complete the same assessment, would you expect their results to be similar or different?
You will no doubt think of additional or different questions that will reflect your unique context.
The real value of the framework will flow from the discussions prompted by your assessments, and the value of these discussions will depend on the quality of the questions you ask yourself, and each other.
Invest some time to really consider the questions that you need to be asking, and what they might reveal.
Fit With Business Planning Cycle
You can use your self-assessment toolkit at any point in the business planning cycle, and apply it to one or more dimensions of your operating system:
- At the outset, you could assess each focal point in the Forwards dimension, for example, to decide whether the way in which you have embedded your purpose, vision and mission is still sufficient to provide the inspiration and guidance needed (L3), or whether you now need to refine this in light of your experience.
- Once you have a draft of the next iteration of your business plan, your leadership team could each complete a self-assessment against this backdrop to align your thoughts about the operational priorities for business improvement that it creates
- If you are falling short of targets during the course of a year, you might each use the self-assessment as a quick yet comprehensive method of auditing the different elements of your operating system to compare notes about possible source issues and remedies.
Your Business Culture: The Missing Focal Point
Whilst we are strong advocates of the view that every decision you take in your business will have both commercial and cultural implications, we do not show culture as a separate focal point in the framework.
The reason for this is that the culture of a business is the product of decisions taken in every focal point in every dimension. Take a moment to review any of the focal points and confirm this for yourself: whether it be the beliefs that the business has developed throughout its formative experience; the way it measures and manages capacity internally; its brand and the way it positions itself outwardly or the expression of its purpose and vision looking forwards; all will impact the culture of the business.
How To Get Started
Follow these three simple steps to get started right away:
- Download your Self-Assessment Scorecard
- Review the helpful links for further information and inspiration
- Complete your self-assessment and consider what it tells you, using the questions included under ‘What You are Looking For’.
In the next video in this series, we will look at how you can use additional templates in your toolkit to help build shared commitment to your chosen priorities and accelerate your transition from intention to action.
Please, leave any comments on anything you have seen or heard in this video, below, as well as your rating of it.
If you want to accelerate your progress towards the outcomes you want, book an introductory call to discuss how we can help you, using the link or the buttons provided.
Finally, here are some helpful links offering further information, insights and potential solutions to help you understand and strengthen your Operating System – in the way that is right for you. Plus, of course, the link to download your self-assessment scorecard.
Thanks for watching this video and we hope you’ll check out the next one in the series.
Wikipedia page: Business Operating System See also the links from this page giving examples of company-specific operating systems.