NOT EASY CHOICESTHE BUSINESS OF MAKING STRUCTURAL CHOICES

A L A N M c C A F F E R T Y

Copyright © 2011, 2012, 2013 Alan McCafferty

All rights reserved. This book or any portion thereof may not be reproduced or transmitted in any form or

by any means, electronic or mechanical including photocopying, recording or an information storage and

retrieval system without the express written permission of the author. The author however does grant the

sole exception for brief quotations along with full recognition for the author.

ABOUT THE AUTHOR

Alan McCafferty’s was educated in several Canadian and US, Universities, Colleges and Professional

Schools in engineering, business, Integrated logistics support and risk management. His career has

been in Aerospace, Technology, Defence, Construction, Services and Healthcare. As a seasoned

business executive with more than twenty five years of hands on experience he is an advocate of

continual learning. Alan built a successful business and has been an active member of leadership teams

responsible for strategic planning for projects exceeding a billion dollars and responsible for the

execution of these programmatic initiatives.

Alan McCafferty

alan.mccafferty@rogers.com

SIMPLE IS NOT THE SAME AS SIMPLISTIC

As you read this book you will come across simple business concepts and models,

although simple they are not simplistic. In the purest sense the concept of simple =

deep and fast and simplistic = shallow and fast.

An example of simplistic would be “experience is the best teacher”. On the surface a

truthful statement however if we examine it further we quickly discover this is only a

half truth. All experience teaches us something but teaching without context or new

skills does not necessarily make us wiser or smarter, just the benefactor of

experiences.

An example of simple is E = MC2 although simple in its components the result is

undeniably equal to years of study, numerous skills and layers of experience.

Therefore a statement such as simply lead is the result of education, skills and

contextualized experience.

PREFACE

This book is what I refer to as the little book of business and I’ve attempted to create what I believe is an explanation and exploration of

the main concepts with regards to how to structure a successful business. The information, examples and data in this book has been

acquired from several sources including more than 20 years of work experience with start-ups to fortune 500 companies, interviews with

colleagues and business leaders, research in libraries, the Internet, whitepapers and articles.

The book is divided into four unique parts that can be used as independent tools and knowledge or collectively as a guidebook or road

map i.e. skills. Part one deals with common things you need to know in business although some people might find this redundant,

however for the majority it can be viewed as checklists for benchmarking the business. Part two is structural business models that can

be used as a transference of knowledge by explaining the different structures you find in different size businesses. Part three is a series

of formulas that every business should take advantage of so that they gain further insight into the business. Finally part four is a simple

yet highly powerful predictive modelling tool that allows for the determination of things like if a business is stalled, on a successful

growth path or destructive growth path and much more.

In the end this book is somewhat representative of the path I’ve taken in my career and have attempted to transcribe these experiences

and knowledge into a series of tools and models. More than once during that time managers and owners have approached me and

asked for advice examples and tools to help them get over a hurdle or issue that had stalled their department or business. I strongly

believe that this book can be used as a tool by three unique groups of readers. The first would be a new business owner, the second

would be a manager or director going through change and the third would be the established business owner looking at what the future

holds.

I wish you all the luck on your journey and hope you’re blessed with the good fortune that I have been given.

Best Regards

Alan McCafferty

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Things you need to know

PART 1THINGS YOU NEED TO KNOW ABOUT BUSINESS

TOP 10 THINGS YOU SHOULD KNOW ABOUT BUSINESS:

1. A business does not immediately translate into success and prosperity

2. A business is simply a means of transferring wealth from the customer to the

business

3. In a business cash is king, just remember rainy days will happen

4. In a business cash can come in many different shapes and sizes

5. Every business has a particular culture that involves people and processes

6. Business growth is a proportional result of trustful delegation

7. Business failures can be just a beneficial as a business successes

8. The best business decisions are made as close to the customer as possible

9. A business partnership is easier said than done

10. Responsibility starts and stops at the CEO’s desk

WHAT IS A BUSINESS?

A business by definition is to undertake a venture with the purpose of selling valuable goods or

services also known as your products to customers with the goal of increasing wealth. The

process of doing business or being in business is the result of an organized approach of

acquiring assets in the form of products and services, transforming the said assets to increase

their value such that the customer will purchase them.

BUSINESS

Describe your business in the space provided.

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TOP 10 THINGS YOU SHOULD KNOW ABOUT MARKETING:

1. Effective marketing is engaging, emotional and addresses customer need

2. Marketing ≠ Advertising ≠ Sales

3. Market product and service benefits and not features

4. Relevant, meaningful and helpful content is king, (narrow instead of broad)

5. Every employee regardless of what they do will represent your brand outside

so make sure they understand how to communicate your message

6. Focus on a reaching and engaging an initial group of highly motivated

customers so they act as advocates and champions for your business

7. Incorporate customer feedback using up to date methods and technologies

8. Think relevant mobile, how many customers are on the move and connected

9. The CEO must be deeply committed, involved and take full responsibility for

marketing

10. Change is the only constant in marketing

WHAT IS A MARKETING?

The process of creating and describing an organization’s value proposition in order to be

successful in selling a product or service that people not only desire, but are willing to buy.

The process is supported through research into anticipating the customers' future needs and

wants, which are often discovered through demographic and geographic research. Therefore

good marketing must be able to create a "proposition" or a set of “benefits” for the customer

that delivers “value” through products or services.

MARKETING

Summarise your marketing in the space provided.

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TOP 10 THINGS YOU SHOULD KNOW ABOUT SALES:

1. Sales ≠ Business Development

2. Rank your customers, then target prospects that resemble the highest ranked

customers

3. Address a prospect’s pain with a solution instead of delivering a sales pitch

4. Develop and monitor Key Performance Indicators (KPIs) for your sales cycle

5. Always listen to your customers’ and integrate it into a business feedback loop

6. Understand your customers’ purchasing timelines and align your sales cycle to

then

7. Train, train and train your team again on to overcome objectives

8. Your sales methods, needs to match your pricing strategy

9. Match your selling methods with your customers purchasing preferences

10. Sell yourself, at the end of the day your business is your product

WHAT IS SALES?

A systemic approach to identify, capture, manages and executes a mutually beneficial

interpersonal exchange of products and services for equitable value. For the most part selling

is concerned with discovering a customer’s existing product or service pain and how best to

overcome that pain. Therefore a good sales person is an expert at establishing a relationship

of trust and integrity while communicating the benefits applicable to the customer.

SALES

Compare your selling methods to your customers’ purchasing preferences in the space provided.

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TOP 10 THINGS YOU SHOULD KNOW ABOUT CORPORATE FINANCE:

1. The playing field in never level within your industry

2. Investors are not only willing to rent you money

3. A successful business keeps its cash flow and analysis up to date

4. A business will use financial ratios and break-even analysis to understand

corporate financial health

5. Owners and managers should understand the rule of 72

6. Understand that future money always has a net present value

7. Investors to do not invest in good ideas but in people and products

8. Institution money (senior debt) is in last and out first

9. Corporate finance must be included as part of your tax planning

10. The best time to raise money is when you don’t need money

WHAT IS CORPORATE FINANCE?

Corporate finance is a discipline of acquiring and managing capital that can be divided into

long-term and short-term planning decisions that businesses make to maximize shareholder

value. Numerous strategies are used for capital acquisitions, investments, banking and the

management of capital.

FINANCE

List the corporate finance options you have in the space provided.

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TOP 10 THINGS YOU SHOULD KNOW ABOUT ACCOUNTING:

1. The three major elements of accounting includes assets, liabilities and capital

2. Accounting is a historical record of transactions not a prediction of the future

3. The accounting process is to identify and analyse transactions, record them in journals, post them to the ledger, determine trial balances and financial statements

4. Accounting ≠ bookkeeping

5. Accounting along with research and a pro forma budget allows a business to predict one or more versions of the future

6. A budget is a management tool that should be updated every 30 days

7. Business is about the transfer of wealth or the flow of money and accounting measures the flow

8. Accounting records require higher levels of security than other corporate data

9. Accounting tools and systems grow proportionally with the business

10. Efficient accounting is only one aspect of tax planning

WHAT IS ACCOUNTING?

The tools and systems used for the primary purpose of recording, summarizing, maintaining

and preparing statements concerning the assets, liabilities, and operating results of a

business. Secondary purpose also includes the process of analysing statements for the

determination of financial viability of a business.

ACCOUNTING

List your accounting tools in use in the space provided.

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TOP 10 THINGS YOU SHOULD KNOW ABOUT DOCUMENT MANAGEMENT:

1. A business is never too small for Document Management

2. Document management evolves proportionally with business growth

3. Document management systems tightly integrate with business applications

4. Workflow is an added value for lower document management costs

5. Document management is a critical component of effective disaster recovery

6. Document management simplifies and improves customer service

7. Document management reduces the strain of audits and assessments

8. Document management is a key component of your risk management

processes

9. Document management reduces the risk of intellectual property loss

10. Document management has a positive impact on your business ROI

WHAT IS DOCUMENT MANAGEMENT?

Document management is an organized and systemic approach to create, track and store

electronic documents. This involves the coordination and control of the flow (storage, retrieval,

processing, printing, routing, and distribution) of electronic and paper documents in a secure

and efficient manner, to ensure that they are accessible to authorized personnel as and when

required.

DOCUMENTS

Describe how your documents are managed in the space provided.

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PART 2STRUCTURAL BUSINESS MODELS

Structure

• BUSINESS DEFINED BY SALES

• A business can be defined in several ways however I’ve found that by using annual gross revenue (sales) you can groupcommon business features and structure around these sales bands:

• SMALL $0 to $5M

• SMALL – MEDIUM $5M to $25M

• MEDIUM – LARGE $25M to $100M

• LARGE $100M+

• VALUE PROPOSITION

• A business should define the total transfer of benefit of it’s products and services to the customer by a value propositionthat falls into one or more of these categories:

• B to B: Increase in Sales and/or Decrease in Costs and /or A Reduction in Customer Churn

• B to C: Increase in Pleasure and/or Decrease in Pain and /or A Reduction in Product/Service Churn

• PRODUCTS AND SERVICES

A note about relativity: It’s important to remember that this information is relativeto specific industries and should be scaled appropriately. As an example, $25M inannual sales for a house cleaning business may be considered large however $25Mfor certain defence contractors would be considered small .

Structure| 13 |

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YOUR

PRODUCTS

AND

SERVICES

YOUR

CUSTOMERS’

NEEDS

COMPETITORS’

PRODUCTS

AND

SERVICES

A

B

C D

A. Your products and your competitors do not address your customers needs

therefore your value proposition has no value for this customer.

B. Your products and your competitors products are equal and address your

customers needs, therefore your value proposition is price sensitive and

challenged by the competition.

C. Your products address unique customer needs without competition,

therefore your value proposition is without price sensitivity. This

allows you to establish the entry level price and to develop the niche

inside the market.

D. Your competitors products address unique customer needs without

competition, therefore upon entry into this niche your value proposition will

need to address this barrier to entry

Chasing

Money

Up to

$1-$5M$5 to $25M $25 to $100M $100 to $500M

SMALL SMALL, MEDIUM MEDIUM, LARGE LARGE

Managing Sales: A process that establishes measurable points of reference through the use of Key Performance

Indicators (KPIs) based on items to establish realistic assumptions, objectives and strategies

Managing

Money

Process Centered

Financial Strategies

Process Managed

Financial Strategies

Market

Dominated

Financial

Strategies

Managing The Organization: The leadership and tools used to get people to achieve a collective desired goal

where a Successful Business = A Healthy Business + A Smart Business.

- Healthy Business = Leadership + Clarity + Communication + Training + Avoiding Bureaucratic Spin

- Smart Business = Forecasting Tools + Accounting Tools + Customer Relationship Tools

Layered to Regionally

integrated into an Enterprise

Person to Process Process to layered

A company, business or organization will naturally evolve through several stages of growth regardless if you want to or not. The

challenge for an owner or manager will be to identify when you reach a threshold and need to change. At each threshold a business

needs to change: Management, Communication Style, Tools and Skills

Inventors to Managers Managers to Creators Creators to Innovators

Structure | 14 |

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CORPORATE SUSTAINABILITY

• The first part of corporate sustainability is defined by the sale of products and services. Sales is the result of an

organized and managed process that leads to the discovery of customer needs and pains and matching those needs

and pains with your products and services. It’s the transfer of your products and services that represents the value to

the customer. Once discovering the needs and pains the major challenge is to define the most appropriate price.

• Product and service pricing is the result of understanding customer needs and pains along with market knowledge and

trends

PRODUCT PRICING:

• There are only three prices in the world for every product and service created and yet to be created:

• Price is equal: You compete on equivalent features and services

• Price below or above: You compete on equivalent features and services with a

measurable difference in one or more

• Price is a submarine: Your price is so low you’re attempting to disrupt a market

based on price only

PRICING WITHIN A MARKET SEGMENT:

• Identify the market segment your product fits into, you want to find an under serviced niche in that market this allows

you to establish the initial price point.

• Deliver your product into the niche with the highest price possible that allows you to capture the largest share of the

market in other words you want to drive your product deep into the market.

• Once you’ve established that your product is the standard in the niche now go wide with other complimentary products

and services. Using this technique you will be able to establish the product price across the entire market by leveraging

your deep niche.

THE FIVE MISTAKES MOST COMPANIES MAKE ESTABLISHING PRICES: Base their prices on their costs, not their customers’ perceptions of value Strive for the same profit margin across all product lines Fail to segment and rank their customers Fail to establish sale KPIs and assign sufficient resources to monitor them Change pricing without notice or hold pricing too long without understanding the market’s reaction

Structure | 15 |

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CORPORATE SUSTAINABILITY

• The second part of corporate sustainability is your financing in this case its not how much you make but how

much you keep and this is can be the more difficult one of the two.

• Every decision you make in your organization has financial implications, and any decision that involves the use

of money is a corporate financial decision. The basic corporate finance terms and definitions are as follows:

• Firm = Any business selling products or services

• Assets = Investments (both fixed and current)

• Assets in place = Assets the firm has already invested

• Growth Assets = Assets the firm is expected to invest in the future

• Debt = Raised money with an interest payment component

• Equity = Residual claim on cash flow i.e. left over after interest payments are made

CASH IN < CASH OUT CASH IN = CASH OUT CASH IN > CASH OUT

CASH IN = Single source of revenue or no defined source of revenue

CASH IN = Normally 2 independent sources of revenue

CASH IN = Normally 3 or more sources of revenue that are mutually significant yet independent

BAD BETTER BEST

This organization is not sustainable

Two cases when this is ok:

• A start up

• The launch of a new product or service

To fund this you need an asset that you

can back stop the debt that will be created

Rules of thumb:

Debt to Asset = 1:4

Debt to Equity = 4:1

Asset Value = loan + payments + fees

Loan payment = net new revenue

This organization is balanced or revenue

neutral but is not yet sustainable, change is

still recommended. Experience has shown

that if you maintain this position for to long

you will default back to the first and not the

third because of being blind sided by a

competitor.

Rules of thumb:

• Balance leads to complacency

• Competitors seek your complacency

• Complacency quite often leads to being

blind sided by the competition

This organization is net positive and

should be sustainable however growth

should not be derived from arrogance. The

tendency is to hire and expand at all costs

to own market share the result can be a

quick boomerang to the first position.

Rules of thumb:

• Product or service independence can be

hard to prove and is often misread

• Market dominance leads to arrogance

• Arrogance creates a boomerang effect

Structure | 16 |

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Existing Investments that generate cash flows today

Includes long lived (fixed) and short lived (working capital)

assets

Expected Value that will be created by future investments

Fixed Claim on cash flows Little or No role in management Fixed Maturity

Residual Claim on cash flowsSignificant Role in managementPerpetual Lives

Assets in Place

Growth Assets

Debt

Equity

ASSETS LIABILITIES

Long Lived Real Assets Fixed Assets

Financial Investments

Current Liabilities

Equity

ASSETS LIABILITIES

ACCOUNTING BALANCE SHEET

CORPORATE FINANCE BALANCE SHEET

Current Assets

Intangible Assets

Debt

Other Liabilities

Short Lived Assets

Investments in securities and assets of other firms

Assets which are not physical, like patents and trademarks

Short term liabilities of the firm

Debt obligations of the firm

Other long term obligations

Equity investment in firm

CORPORATE FINANCE VERSUS ACCOUNTING

• Assume you are looking at the same company from two different points of view

• Note the contrast between this Corporate Finance Balance Sheet and a conventional Accounting Balance Sheet

• An accounting balance sheet is primarily a listing of assets in place, though there are some circumstances where growth

assets may find their place in it

Formulas to Remember

Assets = Liabilities + Owner’s EquityResources (Claims or Resources)

Assets = Liabilities + Owner's Equity+ Revenues- Expenses

+ Gains- Losses+ Contributions- Withdrawals

Present Value:C1 = Cash flow at period 1r = rate of returnn = number of periods

Net Present Value:-C0 = Initial InvestmentC = Cash Flowr = Discount RateT = Time

Structure | 17 |

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COPORATE CULTURE

Corporate Culture is the energy that permeates the employees' psyches, bodies, conversations, and actions. Its comprised of what employees experience, what customers experience and starts and ends with the owner or senior management team.

Every company has a culture regardless if you think so or not and can be divided into 5 categories:

1. Pathological: Behaviour that is habitual and compulsive

2. Bureaucratic: Rigidly devoted to the details of administrative procedure

3. Reactive: Tending to be responsive or to react to a stimulus

4. Proactive: Acting in advance to deal with an expected difficulty; anticipatory

5. Generative: Having the ability to originate, produce, or procreate

REACTIVE REACTIVE to PROACTIVE PROACTIVE to BUREAUCRATIC

Pathological Approach

Generative Approach

CEO/Owner/Manager: This

person is a doer, hands on and

will most likely do the work

prior to delegating.

CEO/Owner/Manager: This person is

a mover, they focus on motivating

and managing people to move with a

common goal.

CEO/Owner/Manager: This person is a leader and

communicator that inspires an organization, they

focus on selecting and managing an executive team

which is delegated to accomplish corporate goals.

The Entrepreneur The Professional Manager The Seasoned Executive

Up to

$1-$5M$5 to $25M $25 to $100M $100 to $500M

SMALL SMALL, MEDIUM MEDIUM, LARGE LARGE

Notes on Leadership:

1. Assign tasks and you get followers

2. Assign authority and you get leaders

3. Engaged employees require three things the safety to think, feel and act

Structure | 18 |

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CEO

Executives

Managers

Departments

Supervisors

Employees

• 77% of Total Cost• Cultural foundation is here• Engagement starts with employees

Raw Material+

Products+

Services

Products +

Services

= Value

Dele

gate

Tasks =

Follo

wers

Dele

gate

Auth

ority

= L

eaders

Com

munic

ation C

hannels

Com

munic

ation L

ayers

As the CEO/Owner you establish the

lead with regards to the corporate

communication and delegation

COPORATE CULTURE

Corporate Culture in any organization starts at the top. The CEO will establish a healthy on unhealthy culture.

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Structure | 19 |

Owner’sCommitment

Face to Face Approach & Delivery

Management Tools &Processes: Discrete & Sporadic

ExecutiveCommitment

Systemic Approach & Delivery

Management Tools &Processes: Formalized

CorporateVision

Systemic Approach & Delivery

Management Tools &Processes: Integrated

A

B

C

A

B

C

A

B

C

Decisions are based on:

• Increasing sales

• Managing overall costs

Knowledge and information is normally

transferred face to face on an adhoc

basis as a need arises.

Email is the most formal tool used and

new ones are created as a crisis or

problem arises, data about products,

costs and customers normally involves

spreadsheets, discrete CRM and

accounting.

Decisions are based on:

• Increasing sales

• Decreasing costs

• Lowering customer churn rate

Knowledge and information is transferred

using documents such as contracts,

emails, various business plans, meeting

minutes, project plans and several other

methods that are captured throughout the

organization.

Tools are normally integrated across the

organization and decisions are processed

from the results of P&L lines, costs and

customers data. This data is managed in

centralized databases and synchronized

with regional offices or sites, typically SCM.

Decisions are based on:

• Increasing sales

• Decreasing costs

• Managing customer churn rate

Knowledge and information takes

more of a formal approach and is

documented in emails, memos,

checklists and forms that are used

with understood processes and

procedures.

The organization adopts more

formal approach to capturing and

maintaining data about products,

costs and customers this normally

involves relational databases,

integrated CRM and accounting,

typically an MRP or ERP.

A

B

C

Up to

$1-$5M$5 to $25M $25 to $100M $100 to $500M

SMALL SMALL, MEDIUM MEDIUM, LARGE LARGE

CORPORATE KNOWLEDGE

Corporate knowledge can be defined as the sum of all information, data and processes – knowledge – retained within a corporation

as a business system, that has the ability to act upon it with the purpose of attaining specified business goal.

Structure | 20 |

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PAIN

PLEASURE

NEE

DS

WA

NTS

PAIN SOLUTION PRODUCT B or P SERVICE B or P

Definition of eachpain from the customer wheel

A description of the solution required to alleviate the pain

What product(s) is needed for the defined solution

Build, Buy or Partner for the delivery of the product

What service is needed for the defined solution or needed to enhance the product

Build, Buy or Partner for the delivery of the service

1. A customer centric model starts with the customer at the center of a circle looking

out and defining all of their Pain, Wants, Pleasure and Needs (requirements).

2. A table is created to describe each requirement in detail

3. A limited number of solutions are identified on how to solve all of the

requirements. The number is limited because when a customer is faced with too

many choices their decision is to make no decision. As an example a customer

will make a selection upon first glance if the choice is between three types of jam

but will delay the selection if the choice is between 10 types of jam

4. Each solution is broken down into the appropriate products and services needed

to create that solution

5. For each solution based product and/or service an economic decision is made to

define if the product and/or service should be:

• Build i.e. do we have the resources

• Buy i.e. can we buy it and add value for the customer

• Partner i.e. can we find a third party with the product or service and

together add value for the customer

• Marketing, sales and financial plans i.e. the Business Plan can then be traced

back each and every time to the resolution of a requirement regardless if it’s done

today or in the future

Structure | 21 |

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CUSTOMER FOCUS

SUMMARY

Notes:

Description of your sales strategy

Description of your value proposition:

Description of your marketing strategy

REVENUE

Structure | 22 |

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Use this page to summarize your business

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PART 3FORMULAS FOR DAY TO DAY USE

Formulas

FORMULAS

• General

• Assets = Liabilities + Owner's Capital

• Assets = Liabilities + Owner's Equity + Revenue - Expenses – (Draws and/or Dividends)

• Liabilities = Assets - Owner's Equity

• Owner's Equity = Assets – Liabilities

• Breakeven Formulas

• Profit = sales – variable costs – fixed costs

• Target net income = sales – variable costs – fixed costs

• Gross margin = sale price – cost of sales (material and labor)

• Contribution margin = sales – variable costs

• Pre-tax dollars needed for purchase = cost of item ÷ (1 - tax rate)

• Price variance = (actual price - budgeted price) × (actual units sold)

• Efficiency variance = (Actual quantity – budgeted quantity) × (standard price or rate)

• Variable overhead variance = spending variance + efficiency variance

• Ending inventory = beginning inventory + purchases – cost of sales

• The Herfindahl Index measures market concentration, and is used by regulators to determine whether a company has

a monopoly on a market.

Formulas | 24 |

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Where

Si = market share of firm i in the market

N = number of firms

• Weighted Average Cost of Capital (WACC): The firm's overall cost of capital considering all of the components of the capital

structure

•

• RATIOS

• Leverage = Assets / Shareholder's Equity

• Gross Margin = Gross Profit / Sales

• Net Profit Margin = Net Income / Sales

• Total Asset Turnover = Sales / Total Sales

• Return on Assets (ROA) = Net Income / Assets

• Return on Equity (ROE) = Net Income / Equity

• ROE can be calculated indirectly as:

• ROE = (Net Income / Total Assets)( Total Assets / Equity)

• ROE can be calculated using DuPont analysis:

• ROE = (Net Income / Sales)(Sales / Total Assets)(Total Assets / Equity)

• ROE can be calculated bu multiplying three levers

• ROE = (net profit margin)(total asset turnover)(leverage)

• Liquidity Ratios

• Current Ratio = Current Assets / Current Liabilities

• Acid Test = (Current Assets - inventory) / Current Liabilities

Formulas | 25 |

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Where

Re = cost of equity

Rd = cost of debt

E = market value of the firm’s equity

D = market value of the firm’s debt

E/V = percentage of financing that is equity

D/V = percentage of financing that is debt

Tc = corporate tax rate

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PART 4PREDICTIVE MODELING MADE EASY

Predictive Models

SMALL SMALL, MEDIUM MEDIUM, LARGE LARGE

Revenue

Growth

Culture

Cultural

Approach

Management

Team

Knowledge

Transfer

Chasing Money Managing MoneyProcess Centered

Strategies

Market Dominated

Strategies

Reactive Reactive to

Proactive Bureaucratic

Pathological Generative

Proactive

Pathological /

GenerativeGenerative

Owner is

CommittedExecutive

Commitment

Executive

Commitment

Corporate

Vision

Face to

FaceFace to Face to

SystemicSystemic Systemic

Tools and

Processes

Discrete and

SporadicFormalized

Formalized with

IntegrationIntegrated

Customer

CentricityYes or No Yes or No Yes or No Yes or No

HOW TO USE THE DIAGNOSTIC TOOL

STEP 1: Establishing your pattern

• In combination with the text review your company and place a check mark in each of the appropriate boxes. The only exception is the first row where you enter your annual revenue again using the text as a guideline and then placing it in theappropriate category. The second exception is the last row simply answer the question has your organization adapted a customer centric model?

STEP 2: Analysing your pattern

• If all your check boxes are in one column then the result is very straight forward

• If your check boxes are spread across all columns then you need to align them according to revenue

• If your company is in a growth period after revenue you should see management and culture lead first follow by tools and processes

Modelling | 27 |

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Modelling | 28 |

SAMPLE PREDICTIONS: Three examples of how to read the predictive model patterns

The Business is Maturing Properly

The Business is Over Structured an will Stall

The Business is Expanding to Quickly

In this model management has taken the lead and has matured or changed as

the company has grown. The management team at each stage of growth has

maintain a focus on customers and continues to drive the message throughout

the organization. Tools and knowledge transfer has matured as well normally

just behind management changes, this is the result of the new management and

skills that they have brought to the organization.

In this model the organization has expanded to quickly. Although the expansion

can been rapid it is not sustainable. First and foremost the organization will

loose its customer focus because without the right structure in place too much

energy will be required to control cash flow. Also there is a misconception of

market dominance, because without structure the organization’s competitors

will move in and displace it.

In this model the organization is expanding its infrastructure faster than its

required. The result of developing a company this way is that revenue can stall

prior to management noticing even with all the additional infrastructure. The

other situation is that to much infrastructure makes the organization very

inefficient and is unable to respond to competitive pressures because of the

lack and management experience and expertise.

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