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Strategic Planning Tools To Maximise Your Profit Potential

Tuesday 16 December, 2008
Whole-of-business thinking enables you to increase the profit potential of your business. So, how can you act now to adopt a whole-of-business approach?

If you are like most business leaders, then you are in business to make a profit. Whether you make a profit for yourself, shareholders, or other stakeholders, you should use whole-of-business thinking in your strategic planning process.

Just how much profit do you want to make, and when do you want to make it?

Different people have different perspectives of your business

In business, we generally each have a different "map" of how the business operates.

  • Accountants

    See the business from a financial perspective
  • Marketing people

    See the business from marketing and customer perspective
  • Operations people

    Have an operational systems and process map
  • Human resources

    Have a recruitment, learning and growth map

Combining these perspectives helps you to use a whole-of business approach in your strategic planning process.

Think of the benefits of whole-of-business thinking

  • Strategies your people can understand

    Eliminate the confusion and anxiety associated with change, and create focus on important strategic initiatives.
  • Strategies your people can effectively implement to achieve your performance goals.
  • Strategies to maximise your profit potential

    Align your people, resources, and systems to deliver what your customers value and pay for.
  • Strategies to streamline operational processes decrease costs.
  • Strategies to meet shareholder and stakeholder expectations

    Deliver on your corporate, social and environmental promises and create a business that is respected and admired.

Strategic thinking tools

  1. The balanced scorecard

    You have probably heard of the balanced scorecard - a strategic thinking model developed by Kaplan and Norton in 1996. If you haven't, the balanced scorecard enables you to combine different perspectives to create a balanced, whole-of-business view of your organisation.

    Consider this balanced scorecard diagram:

    Balanced Scorecard

    By answering the questions in the diagram's boxes, you can use whole-of-business thinking to: 
     
    • Create long-term strategic goals;
    • Identify organisational strengths and weaknesses;
    • Align your people, resources, and systems to deliver what your customers value; and
    • Develop focussed, action-oriented implementation plans.

    Effectively communicating the strategic plan is essential to maximise profit potential. As any effective business leader knows, your strategic plan must be easy to understand by anyone in the organisation, to increase the probability of success.

    Research indicates that roughly 30% of organisations who fail to achieve their goals do so due to poor execution of the plan. The number one reason for poor execution is that the strategic plan was poorly communicated, or worse still, mis-communicated to employees.

    Poor communication results in anxiety and confusion amongst employees. People become uncertain as to what they need to do and consequently do not perform to your expectations.

    So, how can you effectively communicate your strategic plan in a way that everyone in the organisational understands so they know what they need to do?

  2. Strategy mapping

    Most people find diagrams useful for understanding complex concepts. After all, a picture says a thousand words.

    In 2004, Kaplan and Norton evolved balanced scorecard thinking to include visual maps of the strategy - strategy maps.

    Kaplan and Norton found that with strategy maps, employees are far more likely to understand strategy, and most importantly - employees understand how their activities contribute to the strategy. This results in effective strategy execution and significant performance improvement.

    Strategy Map 

    Here's how to read the strategy map:

    • Financial perspective

      The purpose of business is to make a profit. You increase profit by either increasing revenues and / or decreasing costs.
    • Customer perspective

      To increase revenues, the organisation must create value for customers.
    • Operations perspective

      To deliver value to customers and to decrease costs, the organisation must focus on critical operational, marketing, innovation, and social and regulatory processes.
    • Learning and growth perspective

      To support processes in the operations perspective, the right attitudes, skills, knowledge, IT systems, and organisational culture must exist. (See why it's easier to use strategy maps rather than words to explain the strategy?)

What the balanced scorecard and strategy mapping means for your organisation

Used together, balanced scorecard and strategy mapping helps you to take action and:

  • Effectively communicate your strategy to your employees - eliminating confusion and anxiety, enabling you to create focus on what is important to achieve your strategic goals;
  • Identify gaps in organisational skills, knowledge, systems and processes;
  • Maximise your profit potential. Align your people, resources, and systems to deliver customer value; and
  • Meet shareholder and stakeholder expectations - deliver on your corporate, social and environmental promises and create a business that is respected and admired.

Author Credits

BDO Kendalls. For further information contact on phone 07 3237 5967 or visit the web site: www.bdokendalls.com.au
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