Article by Herb Rubenstein,
President, The LEEEGH

Introduction

Today, business plans are funded at the rate of 1 in 1000.  How does a good business plan defeat these tough odds?  More importantly, how does an ongoing business write a business plan for these turbulent times?  Today, businesses are seeing their old models decimated by lack of demand for their bread and butter products.  The businesses try to change and adapt by changing services or cutting costs and benefits, all in search of new strategies and models. Success in today’s marketplace requires more planning than ever and this type of planning is the best way to clarify and test a company’s ideas. Business plans must be based on the reality of today and tomorrow, not yesterday.

This article lays out some of the basic tenets of business planning in turbulent times.  The business plan that your company has in the minds of its principals needs to withstand the business pressures of today.  Obtaining investors and loans in these dynamic times requires a solid business plans in writing, vetted by all key stakeholders.  Business planning does not guarantee success, but the lack of business planning almost certainly guarantees failure.

Research, Facts & Value

A business plan must be a well-researched, fact-based document.  Poor business plans make great leaps from assumptions to projections. Excellent business plans are based on voluminous data on the cost of every element of the service or product being offered. They identify exactly who the customers are and how much they’re expected to buy over the next several quarters or years. Good business plans include research findings on similar products and competitors in the industry.

Today, for new products and services to be successful, they must meet the 10x rule –as in ten times better than the current option. This 10x superiority must be demonstrable with facts and statistics.  A good business plan clearly details how the idea or service is proprietary and protectable through the intellectual property laws and trade secret policies, and how it will deter reverse engineering.

Competitive/Market Analysis

A good business plan must make predictions not only about its customer’s responses, but also about how competitors will respond to the company’s success.  Conclusions in your plan should be fact-based rather than assumption-based. The more citations to outside research, the better these conclusions will be. A good business plan must show the names and relative prices of competitive products and services, their size in the market, and other objective measures of their value. Include detailed and clear explanations of how your company’s offerings demonstrably meet the 10x rule.

Three Financial Scenarios

A good business plan will present three separate scenarios with potential financial results that show how the company will survive in worst-case scenarios. A good business plan will provide details of the management team’s dynamics, where it succeeds, and where there is room for improvement.  Rather than merely stating that there is a gap, a good business plan identifies who is responsible for filling the gap and how it will be done.

Sales and Marketing Costs and Revenues

On the sales side, a good business plan addresses what the projections are and why it expects to secure x amount of sales in y time.  Have other companies done this? A good business plan must take into account actual experience-based data on the sales cycle and the full cost of securing large clients.

It’s been said that selling anything to Fortune 500 companies in today’s business environment takes an estimated $100,000 in sales, marketing, and advertising.  We completely reject this idea. What it will take is a plan to develop a product or service that solves a very big challenge for the customer, Fortune 500 size or not.  Further, it will take the coordinated efforts of many individuals who need to have read a great playbook created by the company.  Otherwise, they simply will not know how they can fully contribute to creating these excellent products and services that companies, even those on the Fortune 500 list, will buy. The sales and costs projections in a business plan must reflect the reality of this new selling environment by providing realistic estimates of what it actually takes to market and close deals. The process isn’t cheap but it can be budgeted. These costs must be allocated from current revenue to insure that the money will be available when the opportunity arises to make that large sale.

Conclusion

This new reality of the business landscape may seem harsh, but getting the plan right the first time is essential.  An excellent business idea that is not backed by a solid plan with clear implementation procedures will simply waste time and other valuable resources.

These basic tenants of writing a good business plan will help your company make the critical distinctions that are needed in today’s tough business climate.

Article by Herb Rubenstein,
President, The LEEEGH

Introduction

Everyone, including for-profit businesses, non-profit organizations, and educational institutions, has competitors. Organizations must be both intelligent (capable of learning) and knowledgeable (informed) about these competitors.

The goal of carrying out a competitive analysis is to identify your competitive advantages and disadvantages. The key is analyzing how to build on the advantages, and minimize the effects of the disadvantages.  The practice of analyzing your competition on a regular basis is a key aspect of your company’s ability to create strong sustainability strategies.

Competitive Analyses: Where Do You Begin?

To begin a competitive analysis, your company needs to answer these key questions:

• Who are, and who have been, your competitors? Think very broadly
• What are they doing and how are they doing it? How does it compare to what they’ve done in the past?
• What do you think they will do in the next several years?
• How have they changed/improved/

declined in the past several years?

• How do you think they will change/improve/decline in the next several years?
• How have they helped or hurt the organization in the past?
• How do you expect them to help or hurt your organization in the next several years?

The sources of this information are everywhere including the telephone, newspapers, public libraries, your board members. You can also simply ask your competitors these questions directly. Harvey McKay’s business books stress the importance of knowing your competition intimately.

Organizations are not islands. To know where you are in relation to your competitors is important, even critical, in order to understand your organization’s environment. This means knowing your competitors. It involves being aware of the entire economic landscape. It includes predicting how future events are likely to shape your organization and the organizations of your competitors.

Competitive Advantage

The ASTD Strategic Planning Book says that competition is an opportunity. Competitive advantage is defined as “adding more value to your target customers/members/students than your competitors and at a competitive cost.”

Value is a tricky concept. First, value can be either real or perceived. An “increase in value” can be the result of increasing the quality or utility of a product or service, or by producing and delivering the same quality or utility at a lower cost, a faster rate or with greater convenience.

Second, value can never be separated completely from cost. Organizations must often undertake to keep their cost structure in line with an industry cost structure that is forever changing. For example, not only has the Internet cut costs of distributing products, but the “old line” automotive industry has also made great progress in cutting costs in manufacturing.

The result of a competitive analysis can be put in a diagram form, like an atom. At the core of the atom are the strongest, most sturdy competitive advantages that are the hardest to imitate. After identifying your organization’s strongest competitive advantages, list some of its less sturdy advantages. In the atom diagram shown below, these advantages are (and act like) electrons swirling around the core. These “advantages” could easily disappear since competitors can equal them in either a short time or without expending substantial resources. An organization’s relatively “weak” advantage could still represent an area where the company or non-profit is doing great work.

For example, one of MicroStrategy’s strongest competitive advantages is its recruiting of excellent employees (“stars”) and its employee retention ability. MicroStrategy has grown from 150 employees to 950 over a period of three years. It has developed and is successfully implementing a world-class human resource system. It includes a great hiring strategy (talent recruitment) and enormous spending allotments for training (called “boot camp”) and events like cruises and conferences. The focus is on developing a culture that makes it very comfortable for any employee to make any statement to any other employee, even the President.

MicroStrategy utilizes another tactic that we wouldn’t call a “core advantage,” but is still a great one worth noting.  The company has approximately $40 million in the bank as the result of a very successful Initial Public Offering of stock in the company in the 90’s. By the end of the decade, its stock price was regularly 2–4 times its initial offering price. Given the ability of other high tech companies to raise substantial amounts of capital and to have strong stock price showings, this advantage is more like an electron rather than a core advantage, since other companies can duplicate it. We would, on the other hand, acknowledge that having $40 million in the bank is a significant advantage for a company over less capital rich competitors.

ASTD, on the other hand, has as its core strengths a longstanding, nationwide network of local chapters, a great publishing track record, highly successful conferences, and an excellent research department. Although it serves its members well with quick response and thorough support, other competitors could match ASTD on its general customer support functions. ASTD identified 88 competitors in its strategic planning book, “The Red Book.” In the ASTD strategic planning process each competitor is listed by name, address, phone number, number of employees, name of senior executive, and a description of what the organization does. This type of complete analysis allows ASTD to determine which competitors pose the greatest competitive threat, and the ones with which strategic alliances should be sought.

Intellectual Property As A Source of Competitive Advantage

With regard to CocaCola, or any other soft drink brand, one of the core competitive advantages is the symbol and packaging for its product. While in Brownsville, Texas one of the authors observed what appeared to be a Coke can with the brand’s lettering and color scheme, but with the writing in Spanish. This can was not a “Coke” can and did not contain the Coke product. Rumor had it that sales of Coke declined significantly before these cans were taken off the market. We have heard estimates of tens of thousand of corporate logo violations annually and we are aware of strong organizational efforts to police intellectual property rights.

The entire body of intellectual property law is designed to allow trademarks, copyrights and patented information to become core strengths and major assets of an organization. Without these laws, the advantage given by “branding” would be very small and would fly away from an organization as easily as electrons fly away from the nucleus of an atom.

One new strategy of organizations is to conduct an intellectual property audit and appoint a senior officer as “V.P. for Intellectual Property.” Identifying the intellectual property assets of an organization, maximizing their value, and policing the Internet and traditional venues of commerce for violations will certainly become a more heavily used high-growth strategy in the future. Intellectual property has the distinct advantages of distinguishing your organization and its products from all others. This creates loyalty within the organization (among employees and investors) and outside it (among customers, vendors and the media). Intellectual property has a shelf life that can last hundreds of years with the value increasing over time rather than suffering from diminishing marginal returns. The best competitive analyses will discuss plans for promoting and exploiting the value of your intellectual property rights, and will compare how their value stacks up to that of the competition’s.

Significant and longstanding competitive advantage generally comes from a number of sources (better price and service, for example). Also, an organization must have some large-scale advantage related to its core strengths or competencies. This type of advantage will serve as the key launchpad for development of successful high-growth strategies.

Securing intellectual property protection for logos, inventions and other intangible assets can be expensive. However, it is often this protection that heightens value just enough to catapult that growth strategy into a high-growth, sustainable strategy. A general rule of thumb regarding intellectual property is “If you do not want your competitor to use what you have, protect it with a copyright, trademark or patent in as many markets as you plan to compete in in the future.”

Limiting The Impact of Competitive Disadvantages

It is equally important to analyze an organization’s competitive disadvantages in order to avoid strategic disasters. An entire book could be written just on the topic of competitive disadvantages because they play a pivotal role in limiting or short-circuiting efforts to create high-growth strategies. A few sources of competitive disadvantage include:

• poor geographical location
• lack of market share
• high cost relative to competitors
• less money, resources, talent, or intellectual capital than competitors
• weaker transportation and distribution systems
• outmoded manufacturing facilities
• less effective, insightful, productive research and development (R&D) programs
• weaker reputation and less publicity/brand name appeal
• less developed organizational infrastructures
• less skilled or trained workers
• inferior management or board of directors
• weaker supply chain management systems
• weaker use of technology
• weak CEO
• limited access to capital

While thinking about an organization’s competitive disadvantages, it is important to get beyond standard measures and categories and analyze why these disadvantages exist, and how to craft strategies that can either improve these issues or limit their adverse impact on growth potential. For example, you may find that your organization has a number of competitive disadvantages, including that it is less willing than its competitors to:

• take risks
• make good, quick decisions
• change and innovate
• invest in training, employee development and new technology
• modify business models
• seek strategic alliances or enter into joint ventures
• turn suppliers into partners
• get to know its customers by listening
• accept less profit per sale in order to expand total sales

All of the areas listed above may be the root causes of your organization’s competitive disadvantages. They need to be dealt with in order to achieve strength in your organization’s ability to compete effectively. One CEO we interviewed informed us that an organization cannot be strong in any of the areas of marketing, employee recruitment and retention, finance, technology, administration, product development, public relations or organizational development unless the CEO has been personally well trained in each of them. His view is that a thorough “competitive analysis” must include a careful study of the strengths and weaknesses of the competitor’s CEO. When this company identifies a competitor CEO’s weakness, the tendency is to assume that the entire organization will be fundamentally weak in that area of business. This company then develops its competitive strategy to focus on the area of weakness of the CEO of its competitor.

Prabhu Guptara, Group Director, Organisational Learning & Transformation, Union Bank of Switzerland and Chairman of Advance, Management Training, Ltd. has developed a similar theme over the past 20 years, arguing that no CEO today of any organization of any reasonable size can function properly without a clear understanding and proficiency in all related computer technology. The multi-faceted position of CEO today clearly requires a broad-based set of skills. Organizations whose CEO has a limited, specialized base of skills and knowledge often face a serious competitive disadvantage when competing with more broadly trained and skilled CEO’s.

Evidently, what one person believes is a competitive disadvantage, another person may see as an advantage. However, clarity must be sought in determining whether a particular fact is either advantageous or disadvantageous for the particular goal in mind. If after careful analysis, there is doubt, ambiguity or disagreement regarding a particular item, put it in both categories and analyze it accordingly. Of course, whether the glass is half-full or half empty often depends on whether one is pouring or drinking!

Conclusion

For those of you who think your organization or business does not have competitors, the authors strongly suggest to you that you do have competitors. The De Beers diamond company has an expansive view of its competitors. In a recent advertising campaign, diamonds are prominently displayed and the caption reads, “New Kitchen… Next Year.” However, if you still do not think your organization has even one competitor in the world, you can still use a form of a competitive analysis that will be useful.

Compare your organization against itself (its past and expected future), or against some ideal or benchmark (numerical goal) that you give your organization. Apply the same techniques in the analysis and compete against “yourself” as you constantly look for outside competitors.

Introduction

The days of “one man rules” are dying fast. Some suggest the days of “one woman rules” are coming fast. Most likely, the future will be characterized by a middle ground where enlightened leadership will be leadership that actively takes into account the positions of many groups within an organization.

Stakeholder analysis is the systematic identification of key stakeholders and appraisal of their influence and posture towards implementation of high-growth and sustainability strategies. This form of “organizational radar” is necessary at the early stages in developing these strategies, in order to avoid wasting resources on a strategy that key stakeholders will not support.

Broadening Your Definition

Organizations need support of front-line workers who can determine the exact level of customer satisfaction that is achieved. Management needs to know what the front-line workers are learning from customers on a daily basis. Companies need to know who the stakeholders are in every situation:

• the Internet
• human capital
• knowledge management
• the role of teams and virtual teams
• values-driven growth models
• new paradigm for boards of directors
• Councils of Masters/advisers
• spinoffs/spinouts
• outsourcing
• consolidation and roll ups
• profit zone analysis
• globalization

For example, Child Trends, Inc. is a non-profit organization that analyzes data on the well-being of children and youth. With a budget of nearly $3 million from government funds, foundations and publication revenues, the organization prepares papers for key Congressional Committees and policy makers in the US at the federal level.

When asked who the stakeholders were for their organization, we were told that the 100 leading federal policy makers were the key stakeholders. Our own analysis of their research findings shows that the true stakeholders are the 50 million people in the US who either are children, have children, or are likely to be very interested in the well-being of children. An organization with 100 stakeholders will have a completely different business model and different breakthrough potential than an organization with 50 million.

Just ask the people at the American Association of Retired Persons (AARP), which has 32 million members with over 500,000 persons volunteering on a regular basis. This is an organization that knows who its stakeholders are – and it is not the 100 leading policy makers on issues affecting the senior population.

Stakeholder analysis is also very helpful in reformulating and improving high-growth strategies in order to win the approval of key stakeholders who have objections. Defining the key stakeholders as broadly as possible will open up not only areas of potential, but also new approaches to rapidly expanding the capacity and capability of your organization.

Organizations usually define their stakeholders as owners – people occupying powerful positions within the organization, or people with the power to affect the organization’s costs and revenues significantly. Stakeholders may be internal or external. This narrow, stifling view of stakeholders may have been appropriate before the world became linked, or at least linkable, via the Internet. It is now less appropriate.

Defining who the key stakeholders are is an art. But, we do know that most mistakes are made by defining stakeholders too narrowly. Usually, stakeholders are defined by their power within the organization. We expand the term stakeholders to include people who are currently outside of your organization who could become an important part of your business model if you achieved breakthrough growth. Stakeholders are those interested in and capable of significantly contributing to (or creating barriers to) your organization implementing high-growth strategies and improving its organizational capacity.

Another example comes to mind of how a progressive organization defined its stakeholders far too narrowly. Upon the proper identification of the broader range of its actual stakeholders, it reversed a key policy and embarked on a very successful high-growth strategy.

For several years, Starbucks refused to serve drinks with skim milk and non-fat milk, as Howard Schultz believed the company should only sell coffee with whole milk. Schultz reportedly said that products with skim or non-fat milk could not be “Starbucks products.”

Presumably, he was trying to keep his company’s products consistent with those whole milk coffee products he experienced in Italy and upon which he modeled his company. By refusing to sell skim and non-fat milk in his products, he may have been faithful to the tradition upon which the Starbucks product was based, but he ignored the important stakeholder: the person who wanted the Starbucks’ experience, but did not want the taste, fat or calories of whole milk.

Involving Employees

In the Starbucks example, someone within the organization spoke up often enough and loudly enough to change not only the way Starbucks served coffee, but also how it defined itself as a business. This illustrates the value of the employee as a stakeholder.  The result was that the company was able to multiply the number of customer shareholders and capture increased earnings from these additional sales.

Stakeholders, especially those within the organization, do have immediate political power. They must have an opportunity to have their views heard at every stage in the process. Employees are clearly stakeholders.

One airline in the US did not consult its employees on an issue that adversely affected the employees and soon thereafter customer luggage mysteriously began to be rerouted to the wrong city to the great dismay of customers – and you thought they “lost your baggage” through incompetence!

The stakeholder analysis will tell you early on which stakeholders will need to have their issues addressed before strategic alignment takes hold. In addition, by weighting the relative influence of each stakeholder or stakeholder group, an organization could go far in gaining insight into making the right judgment calls.

Two Analytical Methods

In the Starbucks example, the relative influence of hundreds of thousands of potential customers for skim or non-fat products should easily have outweighed the lone voice of one man, Howard Schultz, voting with the past in mind rather than engaging in breakthrough thinking.

If Starbucks at that time before skim and non-fat milk products had sought to reinvent itself to expand its customer base, rather than sticking to its traditional product line, it might have had an easier time in giving consumers what they wanted. Today Starbucks sells ice cream and other products, and is clearly a company capable of listening to all of its major stakeholders.

A deeper form of stakeholder analysis is called the stakeholder agenda analysis. This type of analysis takes each stakeholder, one at a time, and probes deeply as to why this particular stakeholder is either supportive of the high-growth strategy or against it.

This detailed analysis is now becoming more critical as our workplaces are becoming more culturally diverse, and a higher level of understanding of the values, predispositions, attitudes and personalities of key stakeholders is becoming more important.

This form of “high touch” analysis is qualitative in nature and subject to being only as good as the person performing the analysis. However, its value cannot be underestimated in getting an organization from the conceptual stage of “we want high-growth” through successful implementation.

A third stakeholder analysis technique called stakeholder prioritization completes the stakeholder analysis triad. One of the authors developed this technique while working with Domino Printing Sciences, an international technology company based in Cambridge, UK.

The process rank orders the stakeholders in terms of the importance they have or influence they have in getting their way within the organization. Use of this simple device creates a navigational device through the political minefields of the organization and provides key insight to strategic planning consultants in the development and promotional aspects of the planning process for high-growth strategies.

Conclusion

Stakeholder analysis requires learning. Often, organizations have never defined “stakeholders” more broadly than owners, board members, key customers, suppliers and top management. Defining stakeholders to include large blocks of potentially profitable customers or persons in need of the services or products that your organization offers could lead to breakthrough growth.

Often when organizations, especially non-profits, gather data and information showing just how many people need their services, they get energized, raise funds, expand the number of volunteers, gear up their strategic planning processes and seek to expand to meet the need for their services.

To achieve success in the marketplace today, organizations need to know exactly who their stakeholders are. Gone are the days when an organization can narrowly define this group as just customers or board members.

Do not be conservative when labeling individuals or groups as stakeholders. The more stakeholders your organization can identify, the more opportunity is created and the greater your chances of achieving high-growth and sustainability. 

About the Author

Herb Rubenstein is the Executive Director of the nonprofit organization, THE LEEEGH, which stands for leadership in education, energy, environment, governance and health.  He is also the President of the Sustainable Business Group, a consulting firm to businesses, He is an adjunct professor of strategic management at the Global Energy Management Program of the University of Colorado Denver.

He is the lead author of Breakthrough, Inc.: High Growth Strategies for Entrepreneurial Organizations, lead author of Leadership Development for Educators, and the author of the American Bar Association book, Leadership for Lawyers.  He has authored over 100 articles and over 80 videos on business strategy, entrepreneurship, leadership, and improving organizations.

He can be reached at herb@sbizgroup.com or 303 910-7961. The website for the Sustainable Business Group is www.sbizgroup.com and for THE LEEEGH please see www.theleeegh.org. You can learn more about Mr. Rubenstein’s books at www.leadershipforattorneys.org, www.leadershipforeducators.org and view his videos at www.youtube.com/theleeegh and www.vimeo.com.

Introduction

Capital does not flow in mysterious ways. It does occasionally follow a fad or trend over the cliff.  However, capital generally flows where someone has already demonstrated, at least in theory, that investment in a particular endeavor will be rewarded handsomely. Some venture capitalists will say that they invest in “people” and therefore the quality of the management team is the essential ingredient.

Other venture capitalists will say that they invest in ideas, products, proven systems and market potential. If they don’t like the people they invest in, they just get rid of them anyway. The truth is that venture capitalists invest in industries or sectors that they believe are “hot.”

Almost every organization that has made it to a multimillion

 dollar or even a multi thousand dollar budget has a great rags to riches story. They will tell you that the money they needed came just in the nick of time from the last source there was any chance of getting a dime from. Most of these stories probably have some truth to them because entrepreneurs tend to feel comfortable spending all of their own money and all of anyone else’s money until they prove they are right, or go bust trying.

Rules of Raising Money

There are some general rules about raising money that every entrepreneur and every organization must follow whether seeking loans

(debt), capital (equity), or both. You (or your organization) must:
• invest your own money, time and effort in order to attract capital
• seek the money before you really need it
• shoulder a significant part of the risk
• give up a significant part of the ownership rights for large amounts of capital unless you have demonstrated a strong track record
• have a clear, simple business plan
• have a track record of success to secure the best deal
• have a solid vision and show great potential for the business
• have a good management team in place or willing to join in.

One company had a very successful initial public offering. They sold 4 million shares at $12 a share. Most of the shares were not voting shares. Therefore, company officials were able to keep 97 percent of the voting control of the company after selling well over 12 percent of the equity of the company. A key ingredient that allowed them to be successful with this approach is its stand that it will never be bought-out. This view – held since the beginning by the company principles – allowed investors to leave the voting power with the people who have given the impression that they will never leave the company.

Using Credit

Raising small amounts of money for businesses through debt has never been easier. With the proliferation of credit cards in the US and easy credit, small organizations, including non-profits, can often raise up to $100,000 in
debt capital. In fact, the authors are aware of companies putting in excess of $250,000 in company purchases on certain credit cards. It has recently been reported that 47% of all small businesses finance all or part of their businesses with credit cards and the amount of credit card debt for small businesses may equal the amount of debt owed by small businesses to banks through traditional loans. With the rebirth of “receivables” financing, companies, at a significant cost, are able to generate money through credit by selling their accounts receivables.

Conclusion

It is important to note that many businesses today do not require the amount of capital that they would have required just ten years ago. The growth in home-based businesses, leasing equipment rather than buying it, and other economic efficiencies created through information technology allow companies to do more with less capital. Strategic planners must become thoroughly aware of ways that their organizations can accomplish strategies with a low capital investment.

About the Author

Herb Rubenstein is the Executive Director of the nonprofit organization, THE LEEEGH, which stands for leadership in education, energy, environment, governance and health.  He is also the President of the Sustainable Business Group, a consulting firm to businesses, He is an adjunct professor of strategic management at the Global Energy Management Program of the University of Colorado Denver.

He is the lead author of Breakthrough, Inc.: High Growth Strategies for Entrepreneurial Organizations, lead author of Leadership Development for Educators, and the author of the American Bar Association book, Leadership for Lawyers.  He has authored over 100 articles and over 80 videos on business strategy, entrepreneurship, leadership, and improving organizations.

He can be reached at herb@sbizgroup.com or 303 910-7961. The website for the Sustainable Business Group is www.sbizgroup.com and for THE LEEEGH please see www.theleeegh.org. You can learn more about Mr. Rubenstein’s books at www.leadershipforattorneys.org, www.leadershipforeducators.org and view his videos at www.youtube.com/theleeegh and www.vimeo.com.

Introduction

Michael Porter has developed a useful framework for analyzing a company’s immediate and future competitive environment from the customers’ point of view. We combine these five forces with another element identified by author Tony Grundy in his book, Breakthrough Strategies for Growth: Delivering Sustainable Corporate Expansion.  Together with our seventh and eighth tool, you will have the integrated elements you need to guide your organization in developing strong and stable sustainability strategies.

Porter’s Five Competitive Forces

Porter is known for his generic strategies (cost leadership, differentiation and focus) which have guided many strategic planners for years.
His five competitive forces are as follows:

• Entrants of other companies, non-profits, and schools
• Substitutes – better, cheaper products, alternative products that reduce demand for your services, NPO’s agenda
• Buyer Power (i.e. of customers) – reduction of loyalty, increase in group purchasing, buyers becoming sellers to compete with buyers
• Supplier Power – when supplies of one or more elements in the supply chain diminish and the price goes up, or when a supplier has such a large share that it can dictate the terms of the deal
• Competitive Rivalry (between existing players) – which may result in price wars, mergers, acquisitions, etc

Industry Mindset

The next competitive force we incorporate is what Grundy identified and explored – Industry Mindset. Industry mindset applies both in the for-profit and non-profit sectors. It refers to the perceptions, expectations and assumptions about the competitive environment, the level of financial returns and the factors critical for success in an industry. Industry mindset is, on one level, easy to discern by reading trade press and going to conferences.

For example, the industry mindset in the computer industry is that people expect the speed of personal computers to double every 18 months. This leads many people to replace computers every two years, or more often.

In the computer industry, there is a competitive mindset that if your organization is not gaining market share, it will die. This mindset clearly sets the stage for the goal of every computer technology organization to increase its market share. History has shown that the computer companies that aren’t increasing their market share are becoming targets for acquisition by those companies that are.

In the 1950’s and 1960’s, US cars were so badly made that they were replaced every 2–3 years as they fell apart. Now, improvements in the automobile industry are such that replacement within two years because of poor craftsmanship or design is rare, and car owners are holding on to their cars for much longer periods of time. In addition, with the improvement of automobile manufacturing, the industry and customer mindset pertaining to used cars and long-term leased cars has changed in a positive direction quite dramatically.

Scenario Planning & Visualization

Scenario planning and visualization are actually different tools, but we are combining them since they fit together so well. Scenario planning, as used extensively by Royal Dutch Shell and other major corporations (as well as every little league baseball coach and family gardener), is the simple to sophisticated use of “what if” questions. These questions allow you to develop a set of futuristic pictures and planned behaviors designed to achieve certain objectives.

The more “what if” questions one can ask, answer and organize, the more sophisticated the analysis. Diagrams, flow charts, computer simulation, computerized mapping and the old pencil and paper can be used in scenario planning, and can help your organization plan for differing versions of the expected future.

Scenario planning sets out several different comprehensive pictures of the future relevant to your organization and its strategic plan. It looks at the future like a video, taking one frame or time period individually, with each one building on the results of the previous. A story line moves the scenario through each time period.

Scenarios are greatly affected over time by key transitional events that are envisioned by the planner that combine to create a predicted future pattern of events. Since key transitional events are difficult to predict with any certainty, often an organization will construct three scenarios of the future (optimistic, neutral and pessimistic) and then assess their probabilities.

The value of scenario planning is that it allows organizations to create strategic plans consistent with each of the potential scenarios. It also allows them to leverage some value out of their view or views of the future.

Scenarios have, in the past, been the result of brainstorming sessions. They usually involve one or two small teams working in parallel fashion. The teams identify first the key issues/drivers that are of most concern to the organization and its future. Then they take these key issues/drivers and plot how they may occur in the future.

The process is intricate, but not necessarily difficult since everyone has some view of how the future will look, based on their own form of scenario planning. In order for scenarios to benefit businesses, the scenario builders must take into account the interrelationships of many unpredictable factors. These include technology, government policies, personal attitudes, economic and political trends, and lifestyle changes. They must also consider changes in relative economic costs and personal values in areas that can affect an organization’s future economic viability of its products and services.

Computer technology could enable you to include inputs from large numbers of people from your organization to contribute to the scenarios that are developed about the future.
Visualization is the “seeing” of an event before it actually occurs. Jack Nicklaus said that he had never hit a golf shot without first visualizing exactly how and where he wanted the ball to go. That’s why he is such a slow player, especially on the green where he sees in his mind the ball roll along a line into the cup before he actually putts the ball.

One great composer, when asked if he had ever heard his greatest symphony played perfectly said, “Yes, when I composed it.” Walt Disney is given great credit for his visualization skills.

Visualization in business has been prompted by computer graphics and some argue that visual modes of thinking are now becoming more and more popular due to the influence of television and computers. The authors welcome the myriad of books touting visualization, “scientific visualization,” and environmental scanning. They suggest that “foresight” is the goal of strategic planning and strategic thinking.

Through rigorous scenario planning, putting things down on paper in novel, picturesque ways and through being willing to innovate with computers, 3-D graphics and data mining tools, the reader can go far along this recommended path to “seeing” the objectives of the organization and the best ways of getting there.

Conclusion

Your organization needs to delve into these issues and others such as differentiation and cost leadership, and future economic value and analyzing it from the customer’s point of view.

Analyzing the Porter competitive forces along with the industry mindset and the scenario planning and visualization techniques, you and your organization can plan strong, successful sustainability strategies. 

About the Author

Herb Rubenstein is the Executive Director of the nonprofit organization, THE LEEEGH, which stands for leadership in education, energy, environment, governance and health.  He is also the President of the Sustainable Business Group, a consulting firm to businesses, He is an adjunct professor of strategic management at the Global Energy Management Program of the University of Colorado Denver.

He is the lead author of Breakthrough, Inc.: High Growth Strategies for Entrepreneurial Organizations, lead author of Leadership Development for Educators, and the author of the American Bar Association book, Leadership for Lawyers.  He has authored over 100 articles and over 80 videos on business strategy, entrepreneurship, leadership, and improving organizations.

He can be reached at herb@sbizgroup.com or 303 910-7961. The website for the Sustainable Business Group is www.sbizgroup.com and for THE LEEEGH please see www.theleeegh.org. You can learn more about Mr. Rubenstein’s books at www.leadershipforattorneys.org, www.leadershipforeducators.org and view his videos at www.youtube.com/theleeegh and www.vimeo.com.

Introduction

In the, “Recruit, Organize, Manage and Deploy” approach, one aspect of running or working at a business, non-profit organization or educational institution transcends time and strategic categories: the aspect of measurement. It is crucial to create a system to measure as many different aspects as possible of your organization and how it operates. With these measurements in place, your organization’s strengths, weaknesses, goals and objectives will be more clear and you will be better able to implement high-growth and sustainability strategies.

Metrics

Organizational development requires two types of measurement. First, it requires measurement of what is going on today. Second, it requires the setting of a standard that each part of your organization is to achieve as part of your high-growth strategy.

The term used today to discuss these types of measurements is “metrics.” Every organization seeking high sustainable growth must firmly answer the question of “What metrics are important to the organization?” Identifying the metrics that best describe your organization’s current level of performance, current level of ability, and willingness to adapt and grow and its ultimate growth potential are as critical to creating high-growth strategies for entrepreneurial organizations as maps are on a road trip.

The good news is that there are many places companies, non-profits, and educational institutions can turn to for help in getting new measurement systems put into place. Often professors and students from MBA programs and organizational development programs can assist your organization in developing measurement systems.

Other companies and non-profits are often willing to share or give away the descriptions of their measurement efforts. Joining into a strategic alliance with another company or non-profit organization can also speed up implementation and reduce the cost since some of the measurement issues will overlap between your organization and the business down the down the street.

Designing a Measurement Plan

Much has been written about the work of Robert S Kaplan and David P Norton, whose book The Balanced Scorecard: Translating Strategy Into Action and consulting services have made the term “balanced scorecard,” synonymous with an organization creating and implementing a system of measuring carefully numerous aspects of your operations and using this information to help guide your organization. We endorse wholeheartedly the concept that organizations seeking to develop and implement high-growth strategies should:

• identify benchmarks or levels that are considered to be “success”

• identify carefully what it is they intend to measure (“the metrics”)

• determine how to measure key aspects of the organization

• allocate resources for measurement and analytical efforts to insure that adequate resources are deployed in this effort

• develop a plan to integrate the results of their measurement and analytical efforts so they are properly used by the organization in strategic
planning and implementation efforts.

The Balanced Scorecard and EVA

A common approach to measurement emphasizes profits or earnings using generally accepted accounting principles. For some companies, this approach may be seriously flawed and must be modified in order to use valid economic measures to drive bonus systems, resource allocation and investment decisions. This will allow economic success of the enterprise to be measured accurately.

The Balanced Scorecard is a measurement tool used by businesses and business consultants to collect information and statistics on many processes in the business. For example, using the Balanced Scorecard, a sales operation can collect data on the number of cold calls made, number of calls answered, number of sales made from these calls, etc. The point of the Balanced Scorecard is to support companies in collecting useful information on many of the internal processes where they had previously not collected date on a real time or short delay.  With new information management systems, collection and analysis of these data can occur a very short time after the data are entered by the employees.

EVA, Economic Value Added, is an analytical tool based on the return on the value of the assets used in a business process. For example, if a generator cost $1 million, and produced $200,000 in annual value, one would know that the payback period is five years. If the life of the generator is 20 years, and assuming no maintenance costs exist, the return on investment, $4 million income vs. $1 million cost would be 400%. However, in many companies assets are valued on some other figure far less than cost due to depreciation or some other write off.  When companies calculate ROI on a reduced asset amount, it actually overstates the ROI. EVA simply makes companies look more closely at the true amount of investment in their operations and seeks to make operations produce positive returns on the higher figures for cost rather than lower figures for cost often used by companies.

Both the “balanced scorecard” and “EVA” represent advancements to the state of the art in measuring important elements of organizational behavior and their results.

Measuring the RIGHT Elements

Often large and small companies, non-profits and educational institutions fail at measuring key elements of their economic activities, employee behavior, customer attitudes or true growth potential in terms of either revenues or profits. No company can or should measure everything that an analyst can imagine.

However, it is critical for both non-profit and for-profit organizations to expand the number of items in their operations that they do measure and to measure them over time. This is the best way to discern trends and patterns.

For example, one non-profit, Child Trends, Inc., is in the business of measurement. The 30 researchers at Child Trends, Inc. measure poverty levels among children, teenage pregnancy rates, and the impacts of new federal programs on children’s well being. They are considering to be creating a “youth well-being index” that will track changes over time. The organization has an annual budget of $3 million.

One of the authors asked the organization’s leaders if they realized that they were spending only a nickel per year per youth of this country (there are approximately 60 million people under the age of 18 in the US).

Not only did the organization’s leaders admit that they had never made this calculation, they were quite surprised when asked if their research, their publications and their findings were worth $1 per youth per year. The CEO’s unequivocal answer of “Yes” to this question did reveal that in their eyes their agency should be a $60 million per year organization and not the $3 million per year organization trying to eke out a few percentage points of growth each year.

High-growth and sustainability strategies must be based on some rational belief or aspiration regarding just how big a company or non-profit organization can become within a given period. Measuring key elements of the economic and demographic landscape in which a businesses or a non-profit operates provides critical insights regarding how much growth potential it really has.

Measurement of the outside economic environment, competitors, and total market size and market share within your particular markets is critical to becoming intelligent about your organization’s high-growth potential.

This high-growth potential will change over time and only through measurement will an organization know whether it has vast room for growth in its market segment or needs to begin to explore other markets for high-growth opportunities.

Non-profits may have a tougher research task in measuring the appropriate indicators of their external economic marketplace, but the job is no less important than it is in the for-profit sector.

Precision is required when measurement takes place, especially if wages, jobs, investments, resource allocation and other important business strategy decisions depend on the measurement results. The segmentation and fragmentation of the training industry today may serve as a “growth brake” limiting either service providers (trainers or their companies) or service receivers (trainees or their companies) from ever doing rigorous research on the actual impacts of the training in such areas as changing workplace behavior, contributing to increased  productivity or profits or enhancing employee well-being.

Human Capital

Companies and non-profits cannot wait until the perfect measurement devices are created to begin to evaluate the effectiveness of the training programs in which they invest billions of dollars each year. Before sending someone to training, the organization must have a clear set of expectations of the results and be able to measure employee behavior against those expectations both before and after the training.

Econometricians are not needed (though they may be helpful at a steep price) to help organizations figure out whether a training program has  increased productivity, increased profitability, reduced costs or has been a waste of money.

Measurement of human capital is in its infancy though it has been discussed for over 100 years. Human capital, as we described earlier, is a measure of the relevant skills, knowledge and ability of the individuals that comprise an organization. While it may be arbitrary to say, “John’s Ph.D. is worth ‘x’ dollars,” we can assign a value to it because organizations are willing to pay Ph.D.s, on average, more than they are willing to pay for those with Master’s degrees. This is true if the knowledge gained or human capital gained through the Ph.D. program is expected to be useful to the organization.

Even more important than measuring the static value of the human capital on a particular day, if the organization wants to grow in its skills, knowledge(s) and abilities, it is important to measure the change over time of employees’ skills, knowledge(s) and abilities. While precision is always preferred, crude measures of human capital and the changes of human capital may be useful to an organization that seeks high growth and sustainability. They are certainly better than no measures at all.

Involving Employees

Measurement is a way that an organization says to everyone that what is being measured is important. Measuring the number of suggestions that employees make for improving an organization and measuring how many of them  management has adopted sends a strong signal to employees that their suggestions “count.”

Measurement programs can create opportunities for the rational allocation of rewards and friendly competition within different sectors of an organization. Measurement has never been cheaper. With new technology, a simple measurement system could be designed that would ask every employee every week to measure such factors as the following:

• attitudes
• self-assessments of how well they performed that week
• assessments of how well their co-workers performed that week
• assessments of how well their managers performed that week
• how much they learned on the job that week compared to previous weeks
• how willing or able they think they are to implement new procedures
• how willing or able they think others in the company are to implement new procedures
• how good their products or services were that week compared to previous weeks
• how satisfied or not satisfied their customers were that week compared to previous weeks
• how wasteful or efficient they believe their organization was that week
• other questions relevant to your organization.

Having employees, suppliers and customers (and students of educational institutions) pencil in answers in a multiple-choice format on a pre-coded answer sheet or respond by e-mail to questions posed by the organization can reveal, for pennies per answer, tremendously valuable information.  The organization can use this information to assess where it is, how to improve and give direction in developing and implementing high-growth and sustainability strategies.

Precision in Measurement

The implementation and improvement of measurement activities do not require a bevy of consultants, although many consultants will sell you fancy measurement tools that may be a step up from your home brewed version.
Some of us from the “old school” still appreciate the home brew for what it was: “the best we could afford under the circumstances and a lot better than nothing.” One of the silver bullets to high-growth strategies is that your organization, regardless of its size, can improve its measurement of key factors immediately and can learn and grow from the process.

Precision is important regardless of the size of the organization. Certainly, precision in space engineering is important because a small mathematical error can send a spacecraft thousands of miles off target due to weightlessness in outer space. In outer space, imprecise approaches and calculations can costs millions of dollars in a split second.

The importance of your organization, your business, your application of talents, energies and dedication is no less valuable than the millions that we shoot into outer space. Precision is the goal, but the inability to reach it with your organization’s first efforts at measurement must not get in the way of starting in earnest to measure what previously has been unmeasured.

Non-profit organizations would be well served to calculate the costs as precisely as possible of each service they provide (using some form of “activity-based accounting”). In addition, they should also enter into that equation a “cost” for capital that is donated to the organization and is employed in providing the service.

Measures of efficiency can be created for non-profits and educational institutions, just as an efficiency measure can be created for for-profit companies and, for example, NFL quarterbacks. The goal of this measurement is not to figure out to the last hundred of a cent how efficient your organization is at the present time. The goal is to track over time how efficient your organization is in delivering its goods and services in order to be able to think rationally about how to become more efficient over time.

Conclusion

Growth strategists often suggest that reinvention will yield greater results than improvement. From our consulting experience, we are clear that there is generally room for both improvement, which must always be based on some measurement system, and reinvention, which is the use of a completely new approach to success.

Measurement does not always require the use of an outside party to do the measuring or the analysis of the information/data generated by the measurement system. Self-measurement, by employees and managers, may well produce valuable information at low cost. In all measurement systems, the quality of the information generated will be the result of the quality of the questions asked and the integrity of the answers and analysis generated.

Measuring employee output and performance, measuring the amount and types of leadership exhibited by a senior manager, measuring the contribution of a board member, measuring the efficiency of your direct marketing program, sales and training efforts, measuring the value of the office location are just the tip of the iceberg of measurement activities that can be performed today. Measurement systems will evolve, and some will be abandoned along the way.

Organizational growth and development does not occur just because someone wants a bigger bottom line or higher revenues. Organizational growth is not just the result of trying to create a better product or advertising campaign. Organizational growth is promoted by knowing the current level of success or failure that each part of your organization is currently experiencing and this requires measurement.
Early implementation efforts of measurement systems will be experimental in nature and patience is required in implementing full scale, intensive measurement systems. The rewards from these systems can be bountiful and can contribute handsomely to your high-growth and sustainability strategies.

The existence of such measurement systems can be a significant asset in promoting your organization to foundations for contributions, to venture capitalists for funding and to other companies as they seek merger or acquisition candidates.

About the Author

Herb Rubenstein is the Executive Director of the nonprofit organization, THE LEEEGH, which stands for leadership in education, energy, environment, governance and health.  He is also the President of the Sustainable Business Group, a consulting firm to businesses, He is an adjunct professor of strategic management at the Global Energy Management Program of the University of Colorado Denver.

He is the lead author of Breakthrough, Inc.: High Growth Strategies for Entrepreneurial Organizations, lead author of Leadership Development for Educators, and the author of the American Bar Association book, Leadership for Lawyers.  He has authored over 100 articles and over 80 videos on business strategy, entrepreneurship, leadership, and improving organizations.

He can be reached at herb@sbizgroup.com or 303 910-7961. The website for the Sustainable Business Group is www.sbizgroup.com and for THE LEEEGH please see www.theleeegh.org. You can learn more about Mr. Rubenstein’s books at www.leadershipforattorneys.org, www.leadershipforeducators.org and view his videos at www.youtube.com/theleeegh and www.vimeo.com.

Introduction

In today’s fast-paced business world, staying ahead of the competition is more crucial than ever. With the recent struggles the economy has endured, one key element in your organization’s sustainability strategy planning is the evolution into a “learning organization.” 

It is important for organizations to be successful in their sustainability strategies, but it is also important for them to know why the strategy was successful. Daryl Conner uses the term “consciously competent” to describe the situation when a person or organization is both successful and has learned the key ingredients and processes that will assist in achieving future success.

Organizational capacity for growth is enhanced by the creation of conscious learning resulting from experimentation, from implementing new strategies and from undertaking new activities.

Consciously Competent

In many businesses and non-profits the approach is to try “x” or “y” and see if it works over time. Most often, people inside of the organizations can rarely tell you why an activity worked or did not work. We acknowledge that serendipity may play some role in organizational success; but more often than not there is no clear understanding of the key factors that led to that success.

Understanding why and how an organization’s actions produced results is critical to being able to replicate that success, and to build on it to promote future breakthrough growth.

An organization is consciously competent when it understands why its actions produce, both internally and externally, results, and it can teach its entire organization (and others) why the result occurred. An organization is not consciously competent when it cannot determine quickly why something is working or not working.

For example, two chefs may each produce a great dish. Ask one how he or she did it and the chef may not be able to describe the recipe at all. The chef may be able to reproduce the dish, but cannot teach others how he or she does it. The chef is not conscious about all the ingredients, their amounts, the order, the cooking process, or why the exact combinations worked so well for the dish.

Ask another chef who has studied cooking from a different, more conscious, vantage point and he or she can show you exactly the recipe followed, the technique employed, and can describe the role of each ingredient.

The first chef will not have the ability to teach others or transfer his or her knowledge, skill or ability in his or her organization. This chef will not be able to create a legacy of improved culinary skills in succeeding generations. Most importantly, the chef who is not consciously competent will not be able to generate breakthrough economic growth through creating a cooking school and opening up four-star restaurants around the globe.

While the chef example may seem somewhat far-fetched in an article about sustainability strategies for entrepreneurial organizations, a close look at the restaurant industry reveals there is no successful large scale “four-star” restaurant chain in the world. The restaurant chains that thrive are generally “no star” operations, yet they are very consciously competent in their ability to make bad food that sells well.

The high-end restaurant market is dominated by chefs that are fabulously competent, but not consciously competent and therefore cannot expand their economic base.  Becoming consciously competent is one of the silver bullets to sustainability strategies as shown by the fast food and other franchise operations.

In the software development world, accurate, clearly worded documentation represents the consciously competent part of this highly creative industry. Yet, software developers often require six months to a year after the development of their custom-made software to document each step in the process. Outsourcing companies like Information Experts, Inc. are now growing rapidly to meet the demand to write documentation and on-line help systems for the software industry.

A critical test for sustainable growth in entrepreneurial organizations is to devote sufficient resources to becoming consciously competent while not getting so bogged down in the process that the creative elements start to lag.

Conclusion

Today with the use of video and other forms of technology, organizations will be able to document more carefully how they undertake activities. This allows the knowledge obtainable from a careful study of “best practices” to be bottled and disseminated throughout the organization quickly and at low cost.

The communication technology available can give organizations the ability to test the knowledge of each employee (and customer) periodically, if not daily.  With this, we can begin to measure quickly just how much of the newly created knowledge and conscious competence is spreading throughout your organization. Then the transition to a “learning organization” will ensure successful sustainability and growth strategies.

About the Author

Herb Rubenstein is the Executive Director of the nonprofit organization, THE LEEEGH, which stands for leadership in education, energy, environment, governance and health.  He is also the President of the Sustainable Business Group, a consulting firm to businesses, He is an adjunct professor of strategic management at the Global Energy Management Program of the University of Colorado Denver.

He is the lead author of Breakthrough, Inc.: High Growth Strategies for Entrepreneurial Organizations, lead author of Leadership Development for Educators, and the author of the American Bar Association book, Leadership for Lawyers.  He has authored over 100 articles and over 80 videos on business strategy, entrepreneurship, leadership, and improving organizations.

He can be reached at herb@sbizgroup.com or 303 910-7961. The website for the Sustainable Business Group is www.sbizgroup.com and for THE LEEEGH please see www.theleeegh.org. You can learn more about Mr. Rubenstein’s books at www.leadershipforattorneys.org, www.leadershipforeducators.org and view his videos at www.youtube.com/theleeegh and www.vimeo.com.

Introduction

Sustainability strategies in for-profit companies must be based on a clear understanding of the “profit zone” within a given industry. This phrase –made popular by Adrian J Slywotzky and David J Morrison in their book The Profit Zone: How Strategic Business Design Will Lead You to Tomorrow’s Profits – identifies that within broad industry categories, some subparts of the industry are quite profitable while others are not. All organizations will be able to benefit from properly identifying profit zones, especially when deciding on which sustainability strategies to implement.

Profit Zone: Not Where You Might Think

In the late 1980s and early 1990s when IBM focused on making and selling computer hardware, the profit margins were so low that the value of the company dropped from $80 billion to $20 billion in five years. Digital, Inc. suffered a similar fate focusing on the large mainframe computer market.

The profit zone in this industry was in the software side of the market. Similarly, Coca-Cola discovered that the profit zone was not in the syrup they made, but was in the bottling, the signage and the vending machine area. Over the past decade, Coca-Cola consolidated its holdings by buying forward in the distribution chain to capture the profit zone.

Similarly, IBM has consolidated operations by moving into the software and consulting side of the computer business. The creation of the Business Intelligence Division and The Knowledge Management Institute represent IBM’s efforts to capture some of the rapidly growing market share of the large accounting/consulting firms and to capture some of the huge profits in the software industry were successful.

One company decided to terminate its relationship with a supplier of a platform on which its software was based to consolidate its operations and produce its own platform. This decision was made even though it temporarily deprived the company of many important customers who did not have equipment to use the new product. 

Although the decision was originally painful for the company, it was the result of a clear strategy to capture the profit zone within the software industry and proved to be the right decision.

Finding the profit zone within the software industry and other industries is a daunting task,  and one for which consultants are paid huge sums. Business strategists, however, must take this type of analysis into account when assisting companies in developing sustainability business strategies, especially when sustainability is defined as “high profit” by the organization.

Non-Profit Profit Zone

A similar analysis is applicable to educational institutions that focus not on profits to such a great extent, but on growth and gross revenues.
In addition, as non-profit organizations seek to find ways to cover overheads that grants do not and to stabilize income through the thick and thin of grant awards, they will need to find services they can provide and products they can sell that constitute their entry into profit zones that surround them.

Many non-profits provide training programs that are not profitable. However, there is a significant profit zone “next door” to the training program, and that is in the temporary and permanent placement business now inhabited by Manpower, Inc. and other companies.

We are personally aware of non-profits that assist their trainees in finding jobs on a regular basis and charge fees for this service. They can capture part of this profit zone that had previously been outside of their business model.

For many organizations selling some of the information they gather, such as mailing lists, books, sharing their website domain name, etc. can prove to be profitable. Non-profit organizations who find for-profit organizations with similar values may form strategic business alliances. They can leverage the organization’s brand name and reputation when the non-profit assists in the marketing of the company’s products.

A good example of this is the American Society of Association Executives’ endorsement of the Legg Mason Wood Walker investment firm’s cash management products for non-profit organizations. This type of leveraging of a non-profit organization’s asset (its name as an endorsement) requires a careful analysis of the value of the non-profits assets to the for-profit world. They must involve stakeholders early in the process to secure their input and approval.

Recently, the American Medical Association had to stop a potentially lucrative endorsement program when there was a backlash by members who did not believe that the AMA should be endorsing products for a fee.

In another example, the American Automobile Association (AAA) has started an interesting, socially useful and potentially remunerative expansion possibility. AAA has begun to offer driver education services in Maryland and charge for its driver’s education programs. The leveraging of their AAA brand and the reputation for quality that they have achieved could provide a good basis for its strategy to expand into this market which is currently very fragmented and often viewed as providing a low quality service.

In addition, with 42,000 deaths on American highways annually, AAA’s driver education program has the potential to become very large as improved driver education is obviously required in the US.

Conclusion

Each industry, either for profit or not, has a unique profit zone. Identifying what that profit zone is, and then expanding on it, is crucial in the today’s economy. Your sustainability strategies will have everything to do with where you decided to position yourself in the market based on what your most lucrative profit zone is. All organizations large and small, for profit and not for profit, will benefit from carefully analyzing their profit zone and incorporating that information into their sustainability strategies.

About the Author

Herb Rubenstein is the Executive Director of the nonprofit organization, THE LEEEGH, which stands for leadership in education, energy, environment, governance and health.  He is also the President of the Sustainable Business Group, a consulting firm to businesses, He is an adjunct professor of strategic management at the Global Energy Management Program of the University of Colorado Denver.

He is the lead author of Breakthrough, Inc.: High Growth Strategies for Entrepreneurial Organizations, lead author of Leadership Development for Educators, and the author of the American Bar Association book, Leadership for Lawyers.  He has authored over 100 articles and over 80 videos on business strategy, entrepreneurship, leadership, and improving organizations.

He can be reached at herb@sbizgroup.com or 303 910-7961. The website for the Sustainable Business Group is www.sbizgroup.com and for THE LEEEGH please see www.theleeegh.org. You can learn more about Mr. Rubenstein’s books at www.leadershipforattorneys.org, www.leadershipforeducators.org and view his videos at www.youtube.com/theleeegh and www.vimeo.com.

Introduction

In the current state of the economy, instead of extensive business plans, organizations are now focusing on creating survival plans.  This article outlines what should be in your organization’s economic growth plan (EGP). 

Contents of an Economic Growth Plan (EGP)

1. Description of the Organization

Your EGP will begin with a description of the organization. This can be presented in three simple paragraphs. The first should be a financial, organizational, and product & service history. The second part is a description of current management and operations of the organization. The third part is the projection of the future of the organization and its capacity. 

2. Opportunities

This section describes the market 

(a) financial, organizational and product/service history
(b) description of current management and operations of the organization
(c) description of the future of the organization and its capacity.

3. Description of the market, product, service opportunity – four paragraphs:
(a) product/service need/utility
(b) competition
(c) description of the customers and why they choose (will choose) the organization
(d) marketing strategy.

4. The economics of the organization – seven paragraphs:

(a) current economic picture
(b) start up/expansion/initial high-growth costs
(c) ongoing operating costs in high-growth state
(d) prices for various products/services
(e) numbers of product or service units to be sold/distributed in a timeframe
(f) financing needs
(g) future economic picture.

5. General description of high-growth strategies – one paragraph for each growth strategy (select fewer than 10).

6. Ownership and compensation – six paragraphs:

(a) ownership allocation plan – present and future
(b) compensation, benefits and bonus plan – present and future.

Assuming a large number of sustainability strategies, 10, for example, this plan is only 33 paragraphs long and would include fewer than 5 charts.

That means in 10 pages your organization can have an economic growth plan (EGP) to guide it into the future. The plan will assist your organization in capturing both its focus and its breadth of opportunities and may help you raise money from investors.

About the Author

Herb Rubenstein is the Executive Director of the nonprofit organization, THE LEEEGH, which stands for leadership in education, energy, environment, governance and health.  He is also the President of the Sustainable Business Group, a consulting firm to businesses, He is an adjunct professor of strategic management at the Global Energy Management Program of the University of Colorado Denver.

He is the lead author of Breakthrough, Inc.: High Growth Strategies for Entrepreneurial Organizations, lead author of Leadership Development for Educators, and the author of the American Bar Association book, Leadership for Lawyers.  He has authored over 100 articles and over 80 videos on business strategy, entrepreneurship, leadership, and improving organizations.

He can be reached at herb@sbizgroup.com or 303 910-7961. The website for the Sustainable Business Group is www.sbizgroup.com and for THE LEEEGH please see www.theleeegh.org. You can learn more about Mr. Rubenstein’s books at www.leadershipforattorneys.org, www.leadershipforeducators.org and view his videos at www.youtube.com/theleeegh and www.vimeo.com.

Introduction

The worlds of business, non-profit, and educational institutions are merging. Nowhere are they doing so as quickly as in the area of cost management. When critics say that non-profits need to be run more like businesses, they most often mean that they must integrate service strategies with cost management strategies and figure out how to provide more service for less money. In business, strategic cost management makes companies focus on where to make investments and how to measure their profits and returns.

Cost management in most organizations is done in an ad hoc, tactical manner. The question, “How can we save money here or there?” is no longer adequate for running even the smallest non-profit, much less the largest conglomerate.

Today, organizations can operate at many different scales. They can sell “x” number of widgets or “10x.” Non-profits can do the same with, for example, serving “x” number of meals to the elderly or “10x.” The cost per unit sold (delivered) may significantly go down as the number of units goes up. Similarly, we know that cost per unit levels may go up when a business or non-profit offers more services or different products.

Strategic planning must take this type of cost into account when arriving at an estimate of the optimal size of the operation. The plotting of this analysis is called the “experience curve” and the generic term for this is “economies of scale.”

Strategic planning must take into account the impact on the overall cost structure of the enterprise resulting from adding or keeping diverse products and services in its range.

Cost leadership is defined as the ability to produce or distribute a certain product or service at the lowest cost, either within an industry or among a certain group of competitors. Low cost-per-unit is a strong form of competitive advantage. It is the key supporting link in the consolidation wave moving across America. It is certainly the driving force in the boom of “ecommerce,” where costs of service can be a fraction of the costs of doing business in the normal bricks and mortar way.

The alternative to cost leadership is a strategy of differentiation. By making your products different, by finding your niche, your organization can charge a premium or can seek contributions at very high levels without much direct competition. The strategy of differentiation involves costs – the costs to make your product or service better or different, the cost to serve one geographical area over another, and the cost of educating consumers of your differentiated product.

Strategic planning must focus on the costs of differentiation as compared to the returns. This will help you make economically rational decisions regarding when to pursue cost leadership and when to pursue value-added differentiation.

A critical role for strategic planning under the label of strategic cost management is to identify all of the costs associated with each part of the organization. EMMAUS of Washington is a non-profit organization in the business of serving the elderly population. However, when the company purchases a building, they are actually in the real-estate business. 

By identifying each of the costs associated with a business or non-profit, you can identify the “businesses” that your organization is actually in. Once you have identified and isolated each of these “businesses,” you can then manage each section by evaluating the costs and the returns of that section. This is often called “activity-based accounting.”

This way of looking deeply inside your organization is critical for strategic planning in several respects. Your organization may not need to be in all of these businesses. If you determine that you are losing money from one element, you can spin off or outsource that activity. The key distinction in deriving value from outsourcing is the notion that “leasing” is sometimes cheaper than owning.

Possible Value-Chain Analyses

The following are questions to ask and points to consider during this type of strategic planning. 

1. What are all of the costs that your organization incurs broken down into normal accounting terms and broken down again programmatically (if your organization has more than one program, service or business)?
2. Which costs are discretionary?
3. Which costs can be incurred in another manner – such as leasing rather than buying, outsourcing instead of hiring in-house, distributing electronically, moving locations or staying where you are, sharing costs and revenues of an endeavor with another organization or incurring all of the costs and returns within your own organization, foregoing the expense rather than continuing it?
4. Which overhead costs have little economic value added in the short run? In the long run?
5. What economic value added can you attribute to each employee, each division, each activity within your organization?
6. What economic value added can you attribute to each product or service that your organization provides?
7. What are your organization’s financing costs and how can they be minimized?
8. What are your organization’s cash, receivables and other asset management policies, and how can maximum benefit be obtained from securing the highest possible return from assets within your willingness to tolerate risk?
9. Is your organization promoting a “cost-aware culture?”
10. Are your organization’s cost information systems operable daily, weekly, monthly and are they well monitored?
11. What “sacred cows” are there in your organization that cost money, such as real estate, employee policies, pricing policies, etc?
12. At what price does your organization achieve quality internally in the administration and externally in services and products for customers and how can the quality/price ratio be improved dramatically?
13. Which 20 percent of your organization’s costs offers 80 percent of the potential for improvement?
14. Does your organization set target cost levels systematically?
15. Does your organization benchmark costs and outputs on a regular basis?
16. Does your non-profit or educational institution regularly compare the costs (including time spent by volunteers) of fundraising activities to their returns?
17. Is there significant underutilization of resources in your organization?
18. Are non-quantitative beneficial results targeted rigorously and monitored over time?
19. Are there areas of new investment that could greatly improve economic performance?
20. A re there areas of old investment that are not producing reasonable returns?
21. Are you in the right area of the market or should you migrate to another area of the market where your organization would have a competitive/financial advantage?
22. Is your organization’s strategic planning system running in accordance with a schedule?
23. Is implementation of strategies monitored for financial costs and economic or other returns both in the short run and in the long run?
24. Have the actual returns of your organization’s business strategies equaled, fallen below or surpassed the expectations expressed in the strategic plan?
25. Is your strategic planning process cost-effective, lean and dynamic?

By identifying which aspects of the organization provide economic value added, you will be better able to assess the overall value of each individual function of your business. This approach to strategic cost management will allow businesses and non-profits alike to offer more product and service for less cost.   

About the Author

Herb Rubenstein is the Executive Director of the nonprofit organization, THE LEEEGH, which stands for leadership in education, energy, environment, governance and health.  He is also the President of the Sustainable Business Group, a consulting firm to businesses, He is an adjunct professor of strategic management at the Global Energy Management Program of the University of Colorado Denver.

He is the lead author of Breakthrough, Inc.: High Growth Strategies for Entrepreneurial Organizations, lead author of Leadership Development for Educators, and the author of the American Bar Association book, Leadership for Lawyers.  He has authored over 100 articles and over 80 videos on business strategy, entrepreneurship, leadership, and improving organizations.

He can be reached at herb@sbizgroup.com or 303 910-7961. The website for the Sustainable Business Group is www.sbizgroup.com and for THE LEEEGH please see www.theleeegh.org. You can learn more about Mr. Rubenstein’s books at www.leadershipforattorneys.org, www.leadershipforeducators.org and view his videos at www.youtube.com/theleeegh and www.vimeo.com.