The Business Case For Performance Improvement

<body topmargin=0 leftmargin=0 marginheight=0 marginwidth=0> <table cellpadding=0 cellspacing=0 border=0><tr> <td valign="top" colspan=2 height=120 BGCOLOR="#FFCCFF" TEXT="#080000" bgproperties="fixed" background="0433f781egdyul.png"> <div> <FONT SIZE="5" COLOR="#009900" FACE="Arial" ><B>BalancedScorecard.net Site</B></FONT> <B> </B><B>|    </B><B> </B><A HREF="index.htm" TARGET="_top" TITLE="BalancedScorecard.net Site"><U><B>home</B></U></A></div> <div> <A HREF="whyperformance.htm" TARGET="_top" TITLE="Why Performance Management?"><U>Why Performance Management?</U></A>   |   <A HREF="aboutus.htm" TARGET="_top" TITLE="About Us"><U>About Us</U></A>   |   <A HREF="products.htm" TARGET="_top" TITLE="Our Products and Services"><U>Our Products and Services</U></A>   |   The Business Case For Performance Improvement   |   <A HREF="news.htm" TARGET="_top" TITLE="News and Events"><U>News and Events</U></A>   |   <A HREF="location.htm" TARGET="_top" TITLE="Location"><U>Location</U></A>   |   <A HREF="faq.htm" TARGET="_top" TITLE="FAQ"><U>FAQ</U></A>   |   <A HREF="contactus.htm" TARGET="_top" TITLE="Contact Us"><U>Contact Us</U></A>   |   <A HREF="linktotestimonials.htm" TARGET="_top" TITLE="Testimonials"><U>Testimonials</U></A></div> <div> </div> </td> </tr><tr> <td valign="top" width=190 BGCOLOR="#CCFFFF" TEXT="#080000"> <div> Latest white papers:</div> <div> <A HREF="http://www.eclicktick.com/StrategyEthics.pdf" TARGET="_top" TITLE="http://www.eclicktick.com/StrategyEthics"><U>"Ethics and Strategy:</U></A></div> <div> <A HREF="http://www.eclicktick.com/StrategyEthics.pdf" TARGET="_top" TITLE="http://www.eclicktick.com/StrategyEthics"><U>How strategy, ethics and corporate governance connect"</U></A></div> <bR> <div> <A HREF="http://www.eclicktick.com/EclicktickTelecomWhitePaper2.pdf" TARGET="_top" TITLE="http://www.eclicktick.com/EclicktickTele"><U>Selling to telecom vendors with business cases</U></A></div> <bR> <div> <A HREF="http://www.eclicktick.com/books.htm" TARGET="_top" TITLE="http://www.eclicktick.com/books.htm"><U>Recommended Business and Technology Books</U></A></div> </td> <td valign="top" height=360 BGCOLOR="#CCFFFF" TEXT="#080000"> <div> The Business Case For Performance Improvement</div> <div> Performance improvement is one of the easier business cases to make. As a general rule, companies that can benefit from performance improvement programs will outperform their competitors based upon return on sales, return on investment and return on assets.</div> <bR> <div> A <I>one day assessment exercise</I> will typically reveal the size of the opportunity.</div> <bR> <div> There are very few companies that cannot benefit from a conscious attempt to improve performance.</div> <bR> <div> Some general rules of thumb:</div> <bR> <div> 1. Most companies are doing too many activities. Out tasking or using suppliers can reduce your costs and increase your quality.</div> <bR> <div> 2. Most companies find that 20% of their customers account for 80-120% of their profits.</div> <bR> <div> 3. Most companies find that a small number of their products account for most of their revenues.</div> <bR> <div> So, profitability for most companies increases merely by focusing upon the the more profitable customers and the activities where the company creates the most value.</div> <bR> <div> However, when you look at your value chain (the series of activities that you perform to create value for your customers), there are oppotunities in each activity to make it more efficient. Each activity can be driven by one or more of the following strategic drivers:</div> <bR> <div> 1. <B>Scale</B>. The bigger the level you produce at, the lower the cost per unit.</div> <bR> <div> 2. <B>Experience curves.</B> The more you produce, the smarter you get at producing it. This driver leads to the option of pricing based upon where your costs are going to be rather than where they are today. Lower prices means higher market share. Higher market share allows you to advertise more. Advertising more increases your cumulative volume and your costs go down as expected.</div> <bR> <div> 3. <B>Economies of scope</B>. You can sell similar products or add on products and services to the same customer for little additional cost.</div> <bR> <div> 4. <B>Capacity utilization</B>. If you can increase the volume of sales with the same fixed costs, your profitability goes up. Think MacDonalds adding breakfast to its fast food lunch and dinner business.</div> <bR> <div> 5. <B>Time through the system</B>. Shorter time through the value chain and smaller batches lead to faster learning. True in both manufacturing and software.</div> <bR> <div> Growth Strategies</div> <div> What this all means is that even if you are a startup, you need to think about measuring and improving your performance.</div> <bR> <div> Typical questions you need to ask include:</div> <bR> <div> 1. What is my cost of customer acquisition?</div> <bR> <div> 2. How can I create a self sustaining growth strategy?</div> <bR> <div> 3. Which customers are really important for me to acquire and retain?</div> <bR> <div> 4. How do I measure and communicate the customer value I am creating? Is this value embedded in my proposals and account management communication?</div> <bR> <div> 5. How do I track why I am failing with prospects? How can I up my close rate?</div> <bR> <div> 6. Which activities are sensitive to scale? When do I outsource? When do I bring activities in-house.?</div> <bR> <div> 7. How do I create incentives for customers to want to keep on doing business with us or recommend us to other potential clients?</div> <bR> <div>   <script> var page_name = ''; var invisible = ''; function sE(){return true;}window.onError=sE;var lp=0; function clr(){lp++;if(lp==1){document.ctr.src="http://64.49.222.57/0.gif";} else {clearTimeout(myT);return true;}} var myT=setTimeout('clr()',120000);var rn=Math.random(); document.write('<a href="http://www.web-stat.com/stats.shtml?alistairdavidson"'); document.write(' target="new"><img name="ctr"'); document.write(' src="http://www.web-stat.com/count.cgi?'); document.write('alistairdavidson::'+top.document.referrer); if (window.screen){ document.write('::'+screen.width+'x'+screen.height+'::'); document.write(screen.colorDepth+'::'+page_name+'::'+invisible+'::'+rn); }else{document.write('::::::page_name::'+invisible+'::'+rn);} document.write('" onError="clr();" onAbort="clr();"'); document.write(' onLoad="clearTimeout(myT);"'); document.write('border=0 alt="Web-Stat hit counter"></a>'); </script><noscript> <a href="http://www.web-stat.com/stats.shtml?alistairdavidson" target="new"> <img src="http://www.web-stat.com/count.cgi?alistairdavidson::NoJavaScript" border=0> </a> </noscript>   </div> <bR> </td> </tr></table></body>