20% of small businesses fail in the first year, and 50% of small businesses fail after five years.
Why you ask?
Clearly there are several reasons why small businesses fail, but I believe the biggest reason they fail is most small businesses lack a Business Operating System. A Business Operating System (BOS) is a common collection of business processes, which helps the business manage strategy development and execution. The objective of a BOS is to ensure daily work is concentrated on the company’s strategic objectives and is done in an efficient way. Many large diversified industrial companies have adopted a common collection of business processes. The most famous of these are Toyota and Danaher. In the case of Danaher, the business system is a core part of their culture and is a key driver of their corporate performance.
Companies that formulate and fully implement a BOS can experience several competitive advantages. They include improved business performance, increased process integration, improved coordination and better ability to handle growth. A BOS can be scalable and is typically defined by the size and complexity of the business. At a minimum, an effective BOS should include the following components: Core Values/Business, Key Processes, People (Organizational Structure/Accountability) and Performance Management Metrics.
Core Values/Business:Define the key attributes, behaviors and core business of the company. Core values define the company’s personality and when clear allows the company to attract like-minded people to the organization. Successful companies are devoted to a fundamental set of guiding principles that regulates their behavior and decisions. Core business defines clearly and simply what the organization does and why it does it.
Key Processes:Define and document the key activities going on in the organization.
People (Organizational Structure/Accountability):Determine what is the right structure to move the organization forward and create clarity around roles and responsibilities. Ensure the organization gets the right people in the right position at the right time.
Performance Management Metrics: Develop activity- based numbers to review on a regular basis.
It takes work to develop and implement a BOS, but it is worth the effort. According to research conducted by MIT, companies that have implemented a BOS reported the following:
- 17% greater strategic effectiveness,
- 31% higher operational efficiencies,
- 33% more customer intimacy, and
- 29% greater strategic agility than those companies that did not.
Success doesn’t happen by accident – you have to have a system to achieve it, a system that drives every aspect of your culture and performance.
Hannibal Consulting has deep experience in developing Business Operating Systems. We would welcome the opportunity to assist you. Please go to hannibalconsulting.com and schedule an appointment.
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