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Michael Taplin
Michael Taplin
realkpis.com is the home of The KPI Bible and offers the lowdown on KPI modeling

Corporate Dynamics Ltd
Principal Consultant

Websites:

Business Plans, Business Models or KPI Models?

Posted about 8 years ago

I want to challenge conventional thinking.

Could it be that the most important success factor for a business is a unique business model that provides a clear differentiation from competitors?

During my extended stint as a volunteer business mentor I was constantly confronted by the same old conventional mantra. You have heard it ad-nauseum from the teachers of business planning – fail to plan means plan to fail.

I dealt with many small businesses. The most successful of them had no business plan, until the bank or a government agency demanded one in a prescribed format as a condition of support. I spoke with a small business owner just this morning who told me she only produced a plan when she wanted to sell her business. She commented that when she set up the business she did not know enough to write a sensible plan, and found that her success strategy evolved over time. It was dynamic as economic changes demanded a response. She still owns the business and it continues to evolve and grow its customer base.

Over the same period I met many business owners who had crystal clarity about their business model but no written business plan and no KPIs to help them realize their true potential.

After I helped them translate their business model into a spreadsheet format KPI Model, their business performance was transformed, and to this day they marvel at the insight they gained from the process and the increase in profit.

Is the differentiating factor the KPI Model?

There is a strong case to support this idea. There is a growing understanding that it is as important to be able to provide staff members with feedback on their contribution to KPI improvement, and clarity of business purpose that is not offered by a conventional business plan.

This is the way I see it.
• A good KPI model captures the essential drivers of profit for a business. It may be a single worksheet or a number of linked worksheets. It is a diagram of how the business works in its own right. The visual format explains how it works. Everyone can understand it.
• A KPI model is activity based, and since activities are the common thread that make a business work for customers, everyone has a personal stake in it.
• Everyone will gain a sense of pride in their personal contribution and your trust in sharing the achievement with them.

What about evolution?
• A KPI model will reveal opportunities for evolution. Strategic change moves from intuition to tested options.
• The new strategy is captured in the changes to the KPI model, and of course, the KPIs for the changes are revealed.
• New performance targets are easy to set.
• Staff will believe in the change and want to make it work because they can see how it will work.
• Blind alleys and crazy ideas will be exposed before you invest time and money.

If you have a business plan, check out how good it is by adding a KPI model.
If you have a business model turn it into a KPI Model for a lift in performance.
You will find most of what you need in my blog at kpilibrary.com and more free resources at my website. Try it. You can only win.

Comments (4)

Karel van der Poel
Karel van der Poel
Founder and CEO at Mirror42

Michael, I agree. Being an entrepreneur myself, I have written and reviewed many business plans. Every business plan is just a snapshot in the thinking process of an Entrepreneur. In Hi-tech, the plan is outdated the soon as you finished it. Business plans and financial plans are often written for banks, investors or consultants to understand a business. They are not written to manage, steer or drive business forward. They can’t be, because they dont make the differentiation about “doing things right versus doing the right things”. Starting a business is not about doing things right…. its all about doing the right things. KPIs help you to define your milestones, track progress against them and help you focus on the really important things to fix or get moving before you start focussing on any thing else.

Karel.

Posted about 8 years ago | permalink
John M.
John M.
Multifinance Solutions Limited

As someone who has made a living helping people in busibness prepare plans there are a couple of positives. First the act of preparing a business plan helps people clarify their thinking about where there business is and where they want to be. It helps them to discard certain paths they could have followed without some thought in depth. Secondly the big downside on business plans is that they are written for a specific reason as a one off exercise usually to raise finance and then discarded. A note on best practice I have seen so far. An entrepreneur who owns a company with about 50 staff. Every weekend with great discipline he took his business plan home and adjusted it in the light of events that week and their impact on his perceptions. Wow a weekly business plan! It helped him survive the credit crunch. So it’s easy to be critical when you are not doing the right things for the right reason!!

John Matthews

Posted about 8 years ago | permalink
Ross Feliciano
Ross Feliciano
Manufacturer of Low Voltage Panels

I am doing internal quality audit based on ISO 9001: 2008.

May I know please if monitoring progress of Sales Engineers who did not meet the objective of the company, which I rate as nonconformity, a key performance indicator (KPI)? I presented to the management their performance in the form of graphic presentation. My question is: Which one is the dashboard, the documented procedure for the Sales Engineers to follow or the graphic presentation? Please explain as I am confused about this term KPI although I know that basically it refers to something like a draft for which I have to follow in order to obtain my objective. Please reply.

Posted about 8 years ago | permalink
Ross Feliciano
Ross Feliciano
Manufacturer of Low Voltage Panels

I am doing internal quality audit based on ISO 9001: 2008.

May I know please if monitoring progress of Sales Engineers who did not meet the objective of the company, which I rate as nonconformity, a key performance indicator (KPI)? I presented to the management their performance in the form of graphic presentation. My question is: Which one is the dashboard, the documented procedure for the Sales Engineers to follow or the graphic presentation? Please explain as I am confused about this term KPI although I know that basically it refers to something like a draft for which I have to follow in order to obtain my objective. Please reply on: rosaurof@yahoo.com

Posted about 8 years ago | permalink

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