3 September 2021
Every business goes through a growing process. The entire life cycle of a company is similar to that of a human. According to the Adizes model, it has 10 stages: Courtship, Infancy, Go-Go, Adolescence, Prime, Stable, Aristocracy, Early Bureaucracy, Bureaucracy, and Death. Unfortunately, organizations often ignore this chain and skip some of the stages, going straight to the most interesting one.
Is skipping stages a problem?
The desire to stay in line with trends has driven many companies through digital transformation. Many of them have tried to implement process automation without preparation. As a result, they were in complete chaos instead of a working business model. If there was a mess in the company’s data before the integration of the CRM system, then after the implementation, nothing changed. Employees were too lazy to fill out the system, both before and after the CRM installation. Without analysis and preparation, a working model cannot be built. Improvisation often harms the enterprise rather than improves it. Consistency is essential here because it helps to avoid mistakes or minimizes them.
How to use levers to grow your business successfully
Business success depends on many factors, such as the sequence of the transition between the stages. To understand how to work with a business properly, it is worth paying attention to the “Six Levers” model, aimed at providing consistent and smooth business development. It helps you properly organize your business operations.
1. First lever. Income Generation Model
This lever will help you learn how to make money and what you need to do to maximize profit. If you look at Porter’s Five Competitive Forces model, we will see the main factors affecting the profitability of an enterprise:
- Competition in the industry
- Clients
- Substitutes
- Suppliers
- New entrants
They all interact with each other. Digitalization helps customers gain access to information about offers on the market, which leads to an increase in the importance of price or non-price advantages. Suppliers strive to drive competitors out of the movement of goods, build their platforms, and control the supply channels. New players seek to capture a certain niche, and substitutes claim market share, although they may not be present in it.
The balance of forces in the market forms the profit-making zone, a part of the market that helps the company generate revenue. Since market earnings have been determined by market share until recently, now it is vital for businesses to distinguish innovations, new management models, and non-standard solutions. These tools increase intersection with the profit-making zone and lead a company to prosperity. To receive this result, it is better to analyze the extraction zone and move with it.
10 strategies to protect profits
10 main mechanisms for keeping profits are:
- Product differentiation: in terms of efficiency, this model is inferior to other methods of retaining income. Although many marketers and business people strive to be different from competitors, it is unprofitable without good reason because finding a consumer of a specific product is not easy.
- Differentiation with cost parity: efficiency is slightly higher due to the structuring of costs by analogy with other market participants.
- Differentiation with cost leadership: a good model for protecting income. There are times when entrepreneurs produce their product and optimize its cost structure. If the analysis reveals a fragment with a high cost and low utility, it is withdrawn.
- A one-year lead in technology: an investment in R&D will help create an innovative technological solution that competitors will have no earlier than in a year. This strategy model has medium profit protection effectiveness.
- A two-year lead in technology: a good investment with a head start. With the right approach, companies can increase users’ loyalty to a particular technology and profit in the long term.
- Brand and copyright: a recognizable brand gives advantages, and the copyright protects against entire inheritance because patents prevent innovations from being cloned by competitors.
- Customer Relationship Ownership: Companies collect large amounts of user data and build a loyalty program model based on it. Communication with the client allows you to bring current offers to the market and receive a stable income.
- Dominant position strategy: the larger the company and the wider the range of services provided, the higher its place in the market.
- Value chain management: vertical integration of the holding, when the entire production cycle takes place in one company. Highly effective revenue protection strategy model.
- Establishing an industry standard: releasing a niche product with no analogs. This model is trendy nowadays, although it may fail without proper investment and analysis.
Strategies can and should be combined because it helps to maximize profits.
Second lever. Marketing policy
To go to the profit-making zone, you need:
- Pricing policy. Working with pricing at the market level, focusing on competitors and consumers.
- Quality policy. Quality control and streamlined production processes focused on international standards.
- Service policy. Interaction with customers after the completion of the transaction.
- Positioning policy. A reference point for the desired market niche with an analysis of current trends.
- Functionality policy. The proposal of product properties that solve the consumer’s problems.
- Assortment policy. Product table with categories and management.
- Distribution policy. Organization of sales channels and product volumes.
- Partnership policy. Selection of potential business partners with optimal products and solutions.
If the firm implements the second lever, it gets the tools to move to the profit zone.
Third lever. Business processes
Positioning should be visible in the daily operations of the company. The most important feature of positioning is the ability to be displayed at each point of contact. A customer journey can be thought of as simply a collection of points of contact.
These points of contact are symmetrical to the organization’s business processes. If we assume that the client makes some requirements to the company’s positioning that can be described in the context of the EST model, then at each point of contact, the client will make demands on it in the logic of the EST model.
Points of contact are divided into online and offline.
Online:
- advertising;
- site;
- blog;
- social media;
- chatbot;
- reviews;
- application;
- content model;
- mailing.
Offline:
- business processes;
- advertising;
- office;
- products;
- technologies.
It creates a connection between the customer journey and business processes. And since each stage of the customer journey is tied to the income component, it can be said that the Customer Journey Map model is a graphically fixed profit formula, and business processes are a Customer Journey Map, based on the internal logic of the company’s work.
Fourth and fifth levers. Organizational structure and HR policy
The organizational structure is a reflection of the business model. The competency model says that employees are responsible for their roles and carry out operations related to the specific requirements of customers and their ability to pay. In the formation of the competence of employees, RASCI and FTE tools will be helpful, which allow you to assign tasks and areas of responsibility to employees and organize a workflow with a clear schedule. The idea is that business processes should define resource costs and job roles with the competent distribution of functions among employees.
Sixth lever. Automation
One of the most important levers on this list is the company’s automation process. It is needed to speed up work, save resources, and improve quality.
Any organization should have an executive part and tools for process monitoring. It helps to analyze internal procedures and optimize them effectively. A “digital twin” of the company may be used to implement it. After the virtualization of enterprise processes, it will be possible to analyze every aspect of the activity and plan further development based on the consequences.
Digital displays of all processes are necessary for better monitoring because only they make it possible to connect the enterprise’s IT architecture and operations.
The strategy level and marketing model should be integrated with business analytics systems, a tool that helps management make decisions based on data processing. Also, it is necessary to implement ERP systems for monitoring assets, debts, and other balance sheet indicators to control finances. Production management is integrated with MES systems: programs for coordinating production processes, tracking product quality parameters, allocating resources, and maintenance control. Production automation is combined with process monitoring systems such as SCADA, dispatching systems ADTCS, and automated control systems (ACS).
Remember that only the transition from each stage to the next enables the company to implement reforms without the risk of failures in individual system elements and with maximum efficiency. The six-leverage principle is the key to the successful implementation of a new operating model and the ability to monitor and analyze the state of the business continuously. And we at Rocketech.IT will help you with this!