In a family managed business ( family managed business can range from 10 crores to 500 crores), it is often very important to get an objective perspective of the business so that the right priorities are set.
As the processes and systems in these companies are not well set, these companies often lack the wherewithal to 'scale up' the business. More often that not, the 'weak chain in the link' is not the execution, but the strategy that has not been planned properly. And sometimes, the issue is not the strategy nor the execution, but the divergent directions of family representatives that often pull the company resources in different directions.
A strategic audit of such a business, competently and objectively done, often guides entrepreneurs in providing directions in four areas that can make a difference of success and failure for the business:
1. Is the strategy of the company right ?
Often the business, when it commences, has a set of competitors, regulations, substitutes and customer segment to deal with. But as the industry grows and matures, the strategy has to be modified radically, or just tinkered a bit. This is true for all types of business, but value propositions in some businesses require more frequent reviews. For instance, businesses in service sector, retail sector, like software require frequent reviews because these businesses face lot more upheavals than the others.
Sometimes the strategy requires a review, because a company is caught in a business that is becoming less attractive every day. Here the company should quickly review its strategy and alter the direction, if necessary. Sometimes, the company also does this review to identify, what is called the sweet spots in the businesses that can multiply the company's results in geometric proportion. For example take this example of construction business.
2. Is the business model of the company right?
Having a right strategy is not enough to run a business. One should also have the right business model to succeed. Business model, as we have discussed earlier, is the right combination of nine components ( 4 revenue, 4 inputs and one value proposition) that are appropriate for the company's size and ambitions. More often that not, entrepreneurs tinker only with one component which often does not produce any result because these nine components are correlated with each other.
3. Are the resources appropriately placed in the different sections of the business?
In a family managed business resource allocation - of money, key people, and time - is often a bone of contention as different owners in the family have different viewpoints of a business and therefore tend to direct companies in different direction, sometimes directly in conflict with each other. Understanding the strategy and business model enables family owners to align themselves with each other without interpersonal conflicts and egos. This alignment enables family managed business to unlock its true potential.
4. Is the company executing the strategy appropriately?
This review should naturally be done, only after one is certain that strategy is right for the organisation. Otherwise a company may support a wrong strategy, and despite executing it well, may still fail.
This execution review will point out the gaps in the organisation that are causing the organisation to produce less-than-desired results. The gap could be in processes or systems, or could be the professional capacity of key people, or in the 'alignment' of people with the 'direction' of the company. These gap identification enables the company to take appropriate actions.
Finding the right review consultant is a big bottleneck
A good strategic and execution audit of business can help a business quadruple its revenue and profits. I have also observed, that although the need of review is felt by the business , they cannot find the right consultng agency which is competent, cost-effective and reliable.
Finding the right "review" consultant for a small and large business is tough because of two factors. One, large consulting companies, who have the expertise, are very expensive to hire. Morever, these large consulting firms also are 'unaware' of the 'dynamics of small companies' because of which their recommendations are not practical and doable. On the other hand, finding small consulting firm is troublesome, because the small consulting firms lack the knowledge base although they may have the experience of dealing with small business.
Of course, with the right help and guidance, finding the right review consultant is possible.
As the processes and systems in these companies are not well set, these companies often lack the wherewithal to 'scale up' the business. More often that not, the 'weak chain in the link' is not the execution, but the strategy that has not been planned properly. And sometimes, the issue is not the strategy nor the execution, but the divergent directions of family representatives that often pull the company resources in different directions.
A strategic audit of such a business, competently and objectively done, often guides entrepreneurs in providing directions in four areas that can make a difference of success and failure for the business:
1. Is the strategy of the company right ?
Often the business, when it commences, has a set of competitors, regulations, substitutes and customer segment to deal with. But as the industry grows and matures, the strategy has to be modified radically, or just tinkered a bit. This is true for all types of business, but value propositions in some businesses require more frequent reviews. For instance, businesses in service sector, retail sector, like software require frequent reviews because these businesses face lot more upheavals than the others.
Sometimes the strategy requires a review, because a company is caught in a business that is becoming less attractive every day. Here the company should quickly review its strategy and alter the direction, if necessary. Sometimes, the company also does this review to identify, what is called the sweet spots in the businesses that can multiply the company's results in geometric proportion. For example take this example of construction business.
2. Is the business model of the company right?
Having a right strategy is not enough to run a business. One should also have the right business model to succeed. Business model, as we have discussed earlier, is the right combination of nine components ( 4 revenue, 4 inputs and one value proposition) that are appropriate for the company's size and ambitions. More often that not, entrepreneurs tinker only with one component which often does not produce any result because these nine components are correlated with each other.
3. Are the resources appropriately placed in the different sections of the business?
In a family managed business resource allocation - of money, key people, and time - is often a bone of contention as different owners in the family have different viewpoints of a business and therefore tend to direct companies in different direction, sometimes directly in conflict with each other. Understanding the strategy and business model enables family owners to align themselves with each other without interpersonal conflicts and egos. This alignment enables family managed business to unlock its true potential.
4. Is the company executing the strategy appropriately?
This review should naturally be done, only after one is certain that strategy is right for the organisation. Otherwise a company may support a wrong strategy, and despite executing it well, may still fail.
This execution review will point out the gaps in the organisation that are causing the organisation to produce less-than-desired results. The gap could be in processes or systems, or could be the professional capacity of key people, or in the 'alignment' of people with the 'direction' of the company. These gap identification enables the company to take appropriate actions.
Finding the right review consultant is a big bottleneck
A good strategic and execution audit of business can help a business quadruple its revenue and profits. I have also observed, that although the need of review is felt by the business , they cannot find the right consultng agency which is competent, cost-effective and reliable.
Finding the right "review" consultant for a small and large business is tough because of two factors. One, large consulting companies, who have the expertise, are very expensive to hire. Morever, these large consulting firms also are 'unaware' of the 'dynamics of small companies' because of which their recommendations are not practical and doable. On the other hand, finding small consulting firm is troublesome, because the small consulting firms lack the knowledge base although they may have the experience of dealing with small business.
Of course, with the right help and guidance, finding the right review consultant is possible.
