What is the strategic business?
20th century management plans the future enterprise and does not plan the business
20th century management used today develops strategies and plans using maps, corporate plans, budgets, etc that are laid over the business. Corporate plans plan the corporation and are unable plan the strategic value to be created by the business and the capital development needed to create strategic value. The business is not planned and strategies and plans become invalid as the business changes. New plans try to bring the enterprise plans in closer alignment with the current and future business.
The business is “the utilization of capital of worth in performance to incur costs to produce value in results”
Result-performance Management (R-pM) is based on the definition of the enterprise business as “the utilization of capital of worth in performance to incur costs to produce value in results”. This definition includes the current business that must be conducted every day to utilize capital the enterprise invests in to produce results needed for business success. The definition also includes the future business that must be the objective or the business strategy to produce strategic results utilizing capital that must be available when needed?
The management strategy plans the business at the strategic horizon
The strategic business is “the utilization of capital of worth in performance to incur costs to produce value in results at the strategic horizon”. The strategic business is described as management strategy capital. The business strategy, strategic business structure, and business plans to execute the strategy are management strategy solutions.
The strategic business defines the results to be produced and the capital to be utilized to produce results at a future time called the strategic horizon. Results include the economic outputs required to create estimated value for a successful future business. Capital includes the performance solutions needed to incur estimated costs to produce strategic results. Results can include current results produced today and new results needed for future growth and competitiveness. Strategic results may not be completely understood today and require result development to finalize the desired results. The capital required as performance solutions to produce the results may not be available today and thus require capital development to acquire and implement. Developing the results required by the business and the capital to produce the results is 21st century result-capital development, replacing 20th century capital development.
A strategic horizon is maintained within two to five years
Every business must maintain a strategic horizon at a future date to plan the expected future business. Normally the strategic horizon set at about four to five years to plan the strategic business. The business is planned to develop the capital needed and produce continuing and new results to create value month by month to reach the value planned at the strategic horizon. The approved strategic business plan and structure is set and progress to the strategic result values are evaluated monthly. If there is change to a strategic result value a new strategic estimate is made with explanations for the change for comparison against the strategic plan. As the business progresses to bring the strategic horizon to within less than two to three years or whenever opportunities or threats cause a change in strategy, a new further strategic horizon is selected for the strategic business, and the strategic business is planned and approved again.
The strategic business guides result-capital development
The strategic business plan plans new results needed and new and replacement capital as specific performance solutions to produce new results. The use of the strategic business to plan result-capital development becomes routine as R-pM is learned and experience is gained. It is important to understand the value of strategic results, the existing capital that can be utilized or upgraded to produce the results, and the new capital needed in terms of specific performance solutions to produce the results. The point that the result is needed is set and result-capital development is planned back from that date to ensure that the capital can be planned, developed, and implemented in time. Monthly goals include both on-going operations and result-capital development needed to produce future strategic results.
Result goals and performance expectations show the month by month transition from the current to the strategic business
The important thing is to set result goals and performance expectations to move month by month from the current business to the strategic business. Existing result value is projected month by month until the result closed or replaced. New result development is planned month by month to develop the new goods and service results that must be produced for future success. New results must meet result goals starting from the period launched. New capital development is planned month by month to develop the capital in specific performance solutions needed to produce results of value. Result-capital development projects must be planned, initiated, and completed according to dates established in the strategy. New capital is implemented as performance solutions with performance expectations prior to the need to be utilized to produce results.
The strategic business is the main tool for corporate governance
The strategic business structure and monthly result goals and ongoing performance expectations are tools used for good corporate governance. Actual results are reported by month or other reporting period for comparison to result goals. If a month’s results or average results from strategy start fall behind monthly goals the strategic value for that result must be evaluated to ensure that planned strategic value can be created. If there are result symptoms preventing reaching goals, a new strategic estimate is prepared for the result with the unresolved symptoms. The performance problems causing the symptoms are identified and capital improvements or development is planned to bring results back on track. The strategic estimate can only be increased after result symptoms are removed and the result is achieving goals. Again, once the actual business is understood and experienced is gained in result and capital management, this becomes normal business routine.
This is the article six under the forum “Why Manage your Business”
The Business Change Forum is now running series of articles under the forum “Why Manage your Business?” to explain Result-performance Management (R-pM) fundamentals for actual business organization and 21st Century Management. This is article six in the forum. A new article will be posted every Friday.
