Business Performance Analysis
Business Performance Analysis
Embedded Files
Analysis Tools
Analysis Tools
Future State
Ansoff Matrix
Balanced Scorecard
Force field
McKensey's 7s framework
Porter 5 forces
Analysis Business Performance
Analysis Business Performance
Business performance make decisions and reflect on, and learn from, critical incidents.
It is a process that involves mapping out the current state of a business process, identifying its strengths and weaknesses, and then designing a future state that addresses those weaknesses and optimizes the process for better results.
1. Future State Analysis
1. Future State Analysis
Current State is the existing state of the process, which is documented and analyzed to understand how it works and identify opportunities for improvement includes identifying inefficiencies, bottlenecks, waste, and other issues that prevent the process from working optimally.
Future stage is the desired state of the process that the organization wants to achieve includes process changes, new technologies, and other improvements that are necessary to achieve the desired results.
Identify the process to analyze: Selecting a process that has a significant impact on the organization and aligns with the organization’s goals.
Map the Current State: Map out the Current State of the process by involves documenting how the process works, including all the inputs, activities, and outputs. The information can be gathered through interviews with process owners, observation of the process, and data collection.
Analyze the Current State: Analyze information to identify inefficiencies, bottlenecks, and other issues that prevent the process from working optimally. The analysis tools can use mapping tools, such as flowcharts and value stream maps, and data analysis techniques, such as statistical process control.
Define the Future State: Designing a process that addresses the issues identified in the Current State analysis and optimizes the process for better performance. The Future State should be aligned with the organization’s goals and be achievable within a reasonable timeframe.
Develop a Roadmap: Develop a roadmap for implementing the changes required to achieve the Future State. The roadmap should include the steps required to implement the changes, the resources needed, and the timeline for implementation.
Implement the Changes: Putting the roadmap into action, including training employees, implementing new technologies, and monitoring the process to ensure that the changes are effective.
The Ansoff Matrix is a strategic planning tool that can help in developing strategic options for the expansion and growth of business. The Matrix provides four strategic options and highlights the levels of risk they pose for the business. By BSC
2. Ansoff Matrix
2. Ansoff Matrix
Market development is focused on selling more existing products to new markets. This strategy is concerned with reaching new customer segments or expanding internationally.
Ex: Netflix expanding its services globally, entering new countries, and adapting its content offerings to suit local preferences.
Diversification is when an organisation looks to enter new markets with new products. New products may or may not be related to a company's existing products. Microsoft have achieved this in the past by entering the phone and gaming markets.
EX: Amazon has diversified its business by entering new markets and offering new products, such as Amazon Web Services (AWS) and Amazon Prime Video, which are distinct from its original online retail business.
Market penetration is concerned with selling more of the organisation's existing products to existing markets by cutting prices, expanding distribution, or investing more in marketing.
Ex: Coca Cola has increased its advertising efforts, running promotional campaigns, and expanding its distribution network to reach more consumers within its existing markets.
Product development is concerned with developing and selling new products to existing markets. For example, Apple releases a new iPhone each year.
Ex: Apple consistently engages in product development by introducing new products and services, such as the iPhone, iPad, and Apple Watch, to its existing customer base.
3. Balance Scorecard
3. Balance Scorecard
The scorecard measures a range of areas to allow managers and business leaders to see at a glance how various business functions are performing.
The term balanced scorecard (BSC) refers to a strategic managementperformance metric used to identify and improve various internal business functions and their resulting external outcomes. It developed in 1992 by David Norton and Robert Kaplan
Example of completion BSC on Customer Service
Example of completion BSC on Customer Service
The example above is an example of an Integrated Balanced Scorecard. It includes all the elements of a strategy from Vision through to Initiatives.
Characteristics of the Balanced Scorecard Model (BSC)
Characteristics of the Balanced Scorecard Model (BSC)
Information is collected and analyzed from four aspects of a business:
Learning and growth are analyzed through the investigation of training and knowledge resources. This first leg handles how well information is captured and how effectively employees use that information to convert it to a competitive advantage within the industry.
Business processes are evaluated by investigating how well products are manufactured. Operational management is analyzed to track any gaps, delays, bottlenecks, shortages, or waste.
Customer perspectives are collected to gauge customer satisfaction with the quality, price, and availability of products or services. Customers provide feedback about their satisfaction with current products.
Financial data, such as sales, expenditures, and income are used to understand financial performance. These financial metrics may include dollar amounts, financial ratios, budget variances, or income targets.
The Strategy Map
The Strategy Map
The Strategy Map provides a powerful tool allowing the user to talk about the causal impact of investment at the bottom, leading to improved financial results at the top.
Session One (Champions / Leaders only)
Establish Teams and Roles, Process and Procedures, and plan for Automation
Plan for Change Management
Plan to Communicate “Why BSC and Why Now?”
Session Two (Strategy Management Team)
Balanced Scorecard Overview Training
Mission, Vision and Values
Session Three
Refine Mission, Vision, and Values
SWOT, Customer Value Proposition and/or other strategy exercises
Session Four
Strategy Profile
Perspectives
Strategic Themes
Session Five
Strategic Results and Strategic Objectives
Session Six
Strategy Mapping
Session Seven
Strategy Mapping and Objective Documentation
Session Eight
Performance Measures / KPIs
Session Nine
Performance Measure / KPI Definition
Session Ten
Initiative Prioritization
Rollout and Communications Planning
4. Force Field
4. Force Field
The force field analysis is a slightly more sophisticated version of a pros and cons list which is scored and weighted. By WIX
6 steps to conduct force field analysis
- Define the objective of your change project
- Identify and list all driving forces for the change
- Identify and list forces pushing against the change
- Assign each force an impact score
- Propose solutions to positive influence the forces
- Create a Change Management Plan
- Define the objective of your change project
The first step to effective change management in all cases is defining the expected outcomes.
2. Identify and list all driving forces for the change
2. Identify and list all driving forces for the change
Internal driving forces of change might include:
Outdated product lines
Old machinery
Diminishing employee morale
Declining profitability
External driving forces could include:
Rapidly changing industry
Disruptive technologies
Increased competition
Changing demographic trends
3. Identify and list forces pushing against the change
3. Identify and list forces pushing against the change
Forces against the change, or restraining forces, are factors that will resist the change and make it harder for you to attain your desired outcome.
4. Assign each force an impact score
4. Assign each force an impact score
Each force has a varying degree of influence on the expected outcome. To accommodate this, score each individual restaining and driving force a score from one(weakest) to five(strongest) to showcase which forces have the most impact.
5. Propose solutions to positive influence the forces
5. Propose solutions to positive influence the forces
Based on your evaluation, you can identify which forces may be weakened and which you can strengthen.
EX:
Train staff to minimize the fear new technology adoption
Invest in better L&D tools to reduce training time
Buy new machinery to make your maintenance costs even lower
Make sure the new machinery is sustainable to reduce your environmental impact
6. Create a Change Management Plan
6. Create a Change Management Plan
If your proposed solutions cannot help you meet your goals, you may have to rethink your strategy.
But if your approach is viable, formalize your solutions in the form of a change management plan.
The well-defined objectives of the change project
Space for feedback from all stakeholders
Learning & development training sessions
All the action steps you need to take
Who’s responsible for each action step
Timeline for each part of the plan
Milestones you need to hit
Resources at your disposal and ones you need
McKensey 7-S Framework
McKensey 7-S Framework
1. Strategy
1. Strategy
The strategy element is a detailed plan that organizations create for successful change implementation and to gain a competitive edge. A well-crafted strategy is aligned with the other six elements of the 7-S model and is reinforced by a strong vision, mission, and values.
2. Structure
2. Structure
Structure or organizational structure refers to a clear chain of command to avoid chaos & confusion. Structure is a simple yet crucial element as it creates a sense of employee accountability within the organization.
3. Systems
3. Systems
Systems refer to the business processes and operational procedures employed to complete a business’s routine activities. An organization’s SOPs consist of such practices and workflows that directly impact productivity and decision-making.
4. Shared Values
4. Shared Values
These are the core values governing an organization’s health. While implementing a change, organizations expect a behavioral modification from their employees, which is only possible in a strong change culture and organizational values.
5. Style
5. Style
This element refers to the management style prevalent in a company that decides the level of employee productivity and satisfaction.
6. Staff
6. Staff
This element represents the talent pool required, the size of the existing workforce, and their motivations. It also considers how they are trained and rewarded within the organization.
7. Skills
7. Skills
Skills refer to the abilities of employees to complete tasks. A study suggests that 45% of respondents reported that a skill gap caused a loss in productivity. Skills gaps overburden experienced employees who have to pick up the slack for their coworkers’ inexperience. It’s essential to identify the skill gaps and create relevant employee training programs to bridge these gaps.
5. McKensey's 7s framework
5. McKensey's 7s framework
The McKinsey 7S introduced by Lowell Bryan is a framework that focuses on seven internal factors of an organisation that need to be aligned for success. It can be used to implement new policies and procedures, to analyse the impact of change on an organisation and/or to help align operations with organisational culture. Whatfix
6. Five Porters
6. Five Porters
Michael Porter's five-force strategic analysis model, introduced in a 1979 article published in the Harvard Business Review. Investopodia
1. Competitive Rivals
1. Competitive Rivals
The number of competitors: The more competitors in an industry, the more fierce the rivalry, each fighting for scraps of market share.
Industry growth: In an expanding industry, competition is usually less dramatic because the market is growing so fast that competitors have little need to fight for customers—think of the automobile industry of the early 20th century and the dot-com boom of the late 1990s. However, in a stagnant or declining industry, competition can be ferocious as firms fight for a larger piece of a shrinking pie, such as in the global coal mining or print media industries of today.
Similarities in what's offered: When the products or services in a market are awfully similar (think of the lower page of results in any Amazon product search), competition tends to be intense because customers can easily switch. However, if a company offers a unique product or service or has earned brand loyalty, this can reduce competitive rivalry. Apple, Inc. (AAPL) comes to mind in tech goods, just as Rao's Italian sauces or King Arthur flour do in your supermarket aisles, each charging a higher price given its style, taste, or whatever makes it unique.
Exit barriers: When it's difficult or costly for companies to leave the industry due to specialized assets, contractual obligations, or emotional attachment, they may choose to stay and compete, even if the market's prospects grow dimmer by the day. The airline industry is a classic example. Airlines have high costs for their assets, contractual obligations (leasing agreements and labor contracts), and regulatory requirements, which means that when airlines face a shrinking market—or even an unprofitable route—they can't retreat from the market quickly.
Fixed costs: Porter notes that if an industry has high fixed costs, companies have a "strong temptation" to cut prices rather than slow production when demand slackens. Paper and aluminum manufacturing are two good examples that Porter gives.
2. Potential for New Entrants in an Industry
2. Potential for New Entrants in an Industry
Economies of scale: Industries where large-scale production leads to lower costs face less of a threat from new entrants. New firms would need to achieve a similar size to compete on price, which might be difficult or costly.
Product differentiation: When existing firms have strong brand identities or customer loyalty, it's harder for new entrants to gain market share, reducing the threat of entry.
Capital requirements: High startup costs for equipment, facilities, etc., can deter new entrants. For example, starting a car manufacturing business requires significant investment, so until Tesla Inc.'s (TSLA) growth in the early 2010s, Americans from the 1950s could have named the major U.S. car brands of the early 2000s.
Access to distribution channels: If existing firms control the distribution channels—retail stores, online platforms, cable infrastructure, etc.—then new entrants would need to find a way to replicate that structure while competing with the established firms on price, a tricky proposition.
Regulations: Licenses, safety standards, and other regulatory standards can create barriers, making it too ungainly or costly for new firms to enter the market. Examples would include those looking to build new hotels in downtown areas or supply power to a region.
Switching costs: If it's costly or difficult for customers to switch from existing firms to new entrants, the threat of entry is lower.
3. Supplier Power
3. Supplier Power
The number of suppliers: When few firms can give a company something it needs to stay in business, each has greater negotiating power. They can raise prices or reduce quality without fear of losing business.
Uniqueness: If a supplier provides a unique product or it's not easy to find a substitute, it is more dominant. Businesses can't easily switch to another supplier.
Switching costs: If it's costly or time-consuming to switch suppliers, then they have more power. Businesses are less likely to switch, even if prices increase.
Forward integration: If suppliers can move into the buyer's industry, they have more power. They already have access to the necessary supplies, making it difficult for their former buyers to compete once they decide to enter the market themselves.
Industry importance: Some sectors are tightly intertwined, such as automotive suppliers and the major auto companies or the semiconductor and tech industries, which can balance the power between the suppliers and those in the sector. This is because the supplier needs these buyers to do well so that it can, too. When a supplier can just as easily sell its products elsewhere, that gives it a great deal more power.
4. Customer Power
4. Customer Power
The number of buyers: The fewer the buyers, the more they have power. In sectors like aerospace manufacturing, each major airline, the industry's customers, has significant leverage in negotiations and can demand favorable terms because the sellers depend on their business.
Purchase size: Just like you head off to the big box stores to buy in bulk for a cheaper per-unit cost on whatever now fills up your garage, major retail chains like Walmart Inc. (WMT) buy in large volumes and can negotiate better terms and discounts.
Switching costs: In industries like telecommunications, where it's easy for consumers to switch providers, companies such as Verizon Communications, Inc. (VZ) and AT&T Inc. (T) have to offer competitive terms.
Price sensitivity: In the fast-fashion industry, where customers are highly price-sensitive, brands must keep their prices low to attract cost-conscious consumers.
Informed buyers: In many sectors, the customers are savvy, know the competitive terrain well, and thus can negotiate better prices.
5. Threat of Substitutes
5. Threat of Substitutes
Relative price performance: If the cost of a substitute is lower and its performance is comparable or better, customers are likely to switch to the substitute. For instance, streaming services like Netflix became a substitute for traditional cable TV, providing a lower price that soon threatened the cable industry.
Customer willingness to go elsewhere: The threat is high if buyers find it easy to switch to a substitute. For example, in the early 2010s, customers found switching from taxis to ride-sharing apps like Uber or Lyft cheaper and easier.
The sense that products are similar: If buyers perceive that there are few differences between your product and a substitute, even if there are, they may be more likely to switch.
Availability of close substitutes: Though this sounds the same as the last bullet point, you have to strategize differently around it. There are times when potential substitutes are very different from a company's products but consumers still treat them as the same. But in other cases, there are genuinely similar products in the market and the threat of substitutes is high, such as between brand-name and generic medications.
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