Insights

 

“You can’t get there from here.”

 I remember telling that to the CEO of a company as he made plans for significant expansion for his company. We had just reviewed the computer systems architecture and the business organization and concluded that both were incapable of making the necessary transition.

Like many others currently, he attempted to be both innovative and entrepreneurial. Luckily, we had just completed a business study emphasizing the interdependence and interactive nature of elements within his company. We were able to prove our convictions that his plan would not work.

Like most people in this situation, he could have gone back to a standard business plan and attempted to give it a “twist” that suggested innovation. Investors have a low tolerance for failure within organizations, resulting in risk-averse decision-making and requirements for rigid strategic plans.   Consequently, companies typically drift through years of incremental competitive advantages (or” twists”) without being agile or risk-taking.

Who can blame them for innovating or being entrepreneurial is the opposite of what most businesses do daily? Companies are formed to strategize and operationalize routine: customers want predictable product quality, dependable service, and consistent experience every time they encounter a business.

Businesses would like to believe that their markets will remain stable – knowing that this is not accurate means that they look for areas around their edges hoping to get some strategic advantage; hoping to find something unique, they then use marketing to push an edge while avoiding risk and searching for cost-reduction.

Based on most business plans, businesses do not know how to be innovative and entrepreneurial or adapt to the necessary changes, let alone changes that will invariably happen because of biotech, robotics, the internet, artificial intelligence, or machine automation. Most will opt to stay incremental despite appeals to be more innovative or entrepreneurial. Authentic innovative or entrepreneurial behavior means that, at the very least, we must have an excellent understanding of our current business and an ability to examine and analyze options that might be open to us.

The net result is that most businesses won’t get there (the land of innovation and entrepreneurship) from here because they don’t know where here is, and they certainly don’t know how to get there.

Historically we looked at specific areas within an organization without understanding the full impact of an entire structure. Today we realize that an organization’s total needs must be understood, evaluated, and considered in their development. However, exact, and complete business requirements are frequently challenging to obtain. There are four main reasons for this:

1. There is a significant lack of entrepreneurial thinking and innovation – at least, there appear to be few ways to achieve this without adverse risk.
2. The complexity of eliciting information requirements to support significant changes.
3. The complex nature of effective communication amongst stakeholders trying to define requirements.
4. The limits on us to be effective information processors.

So, how can we “frame” an entire structure that is objective, honest, and meaningful? A new or modified Business Plan?

A business plan (or so Google tells us) is a written description of your business’s future, a document that says what you plan to do and how you plan to do it. However, writing a traditional business plan will not show flaws in your idea; you need more of a “Systems Thinking” approach to do that and to identify problems and provide a future view of the business. Traditional business planning is an activity trap (the risk of becoming so busy with activity as to forget what it is supposed to achieve …) in a lengthy list of what one should do to set up or re-examine a business.

So, what is a “Systems Thinking” approach, and why should I start with one?   Systems thinking is a holistic approach to analysis that focuses on how a system’s constituent parts (in this case, business entities) interrelate. Traditional business plan analysis breaks down the components and documents them as if they are entirely separate elements. This creates an atmosphere of “all I have to do is complete this list of parts, and I will necessarily end up with a good plan.”

It does not matter if the plan is to start a new business or “fix” an existing one; we need a good comprehension of all the interconnected parts. New or a recent experience shows us that most people grapple with the following scenarios when it comes to creating a plan:

Unaware. We are either starting a new business and don’t know where to start, or we are in business and know things are bad, but we are not sure precisely what the problem is. We might see the general area the problem is in, but we aren’t sure exactly.

Problem-Aware. We are aware; we know what the problem is, but we aren’t sure what to do about it. We are not aware of our options.

Solution-Aware. We have an idea of what we are doing wrong and the solution, but we aren’t yet sure what the best option is to pursue a solution. We need a new or better model, but which one? How to choose?

Opportunity-Aware. We know there is an opportunity to be entrepreneurial or innovative but lack the methodology to get it right. We are looking for help but have not yet decided whom we will learn from.

Solutions thinking approaches can help as they are designed to:

Help in understanding the Big Picture

A product or service is more than a product. It is an integrated set of experiences. They all need to work together seamlessly. Does this solution work within a more extensive system?

Solve Real Problems

Problems do not occur in isolation. They usually are related to many other issues. Minor changes can produce significant results – not all areas of importance are immediately apparent.

Identify Patterns

Systems thinking is an approach to understanding why situations are the way they are and how to improve. Understanding the history of a situation may help identify a pattern and thus help define a solution.

Eliminate historical expansion

The best solution could be one that improves efficiency. It could be as simple as eliminating unnecessary processes.

To deal with the above, we traditionally think about the need for a business model document, and we tend to use this misnomer of “model” for what we do. But, in an increasingly dynamic and uncertain business environment, we need “Business Structures” through which we can Understand, Communicate, Change, Measure, and Simulate.

So why the word “structure” rather than a model? Simply because, for innovation and strategy, we need a framework structure to satisfy the left brain so that the right hemisphere has some boundaries. We are not looking for the impossible – an exact model of our business – but rather to analyze opportunities for expansion or change through which we can improve our business. And it needs to have a strategy and be systematic.

Business strategy is defined by capabilities (one’s own combined with partners) required to meet a market segment, a resource restriction, a product portfolio needs, or some financial restrictions rather than one dictated by a customer – a strategy for what you can (or will be able to) deliver to run a successful business. More than anything else, your capability will determine what strategy you must follow both now and as the market matures and changes. Therefore, a model does not exist – only a framework through which you can, and should, continuously examine options and their effect on other aspects of the business.

You will, at some stage, need a full-blown traditional business plan document because in the real world, banks, financiers, and business partners are traditional and think traditionally, and tradition says that is what you need to provide. But, to start with, you need an honest, complete exposure of what it will take for you to succeed – in a brief but comprehensive framework.

Why might you want to use a framework instead of a traditional business plan? Because the proper framework captures all the essential elements that history has shown to be necessary for a business – a history that goes back for thousands of years. And it needs to show their inter-relationships and dependencies whenever you add or change its elements. A framework should be both simple and elegant.

It can be as simple as one page or many depending on the type(s) of a product or service you provide. It should, however, be fractal – the same basic structure, however deep you want to go in your analysis. They, frameworks, can and should be normative, following historical business “rules.”

Business needs to provide a product or service to a customer set, and we need a plan by which we will do that, and we need some form of compensation. In simple terms:

What Markets, Resources, Products/services, and Finance will we provide?

And history teaches us we need a strategy, tactics, operations, and some form of overall control.

Strategy, Tactics, Operations, and Control.

If we put these together, we can get a matrix of not just these entities but a demonstration of how each interrelates with the other. If we label these intersections, we produce what turns out to be a complete map of what it takes to run a business. It’s a plan in a matrix format.

An example of a systems approach matrix framework is as follows:

	MARKET PLACE	RESOURCES	PRODUCTS SERVICES	RESULTS
STRATEGY	Market Planning	Resource Planning	Service Planning	Financial Planning
TACTICAL PLANNING	Market Development	Resource Acquisition	Service Development	Cost Management
OPERATIONS	Sales	Resource Operations	Service Delivery	Revenue Operations
CONTROL	Market Relations	Resource Control	Service Control	Accountability

Market Planning

While we, in this approach, do not start with this element, it is one of the most important. Who or what market segment are we going to sell to? It’s the first of the strategic aspects of our business, and if this is our main strength, could be the driving force behind our overall business strategy.

Resource Planning

However, if we are a new business counting on our expertise, we may use this to either drive or constrain the business. This is where we will draw up our business plan.

Product/Service Planning

This area of strategy obviously must tie in with our market planning as this is what we have decided is the product or service portfolio we will offer our customers.

Financial Planning

It does not matter if we are a business or a government entity; we still require a strategy that answers the question of revenue. Can we generate enough, or do we have a source to finance this business?

Market development

Unhappily, “provide it, and they will come” doesn’t work for most of us, so we must have a plan that addresses the market segment that we have decided to target and produce a set of tactics we think will encourage them to request our product or service.

Resource Acquisition

Our business plan should have defined the personnel, equipment, or facilities we need to provide our products, and this is where we need tactics to acquire these resources.

Product/Service Development

Usually, the most difficult to define in the framework as it shares the tasks with the tactics for resource acquisition. In general terms, this is where we need to deal with resources that are acting in partnership to deliver our portfolio.

Cost Management

Defining and handling our expenditures is the area that will make or break our ability to make a profit, so while it is a significant chore, it is vitally important.

Sales

We have defined our market segment and the tactics we will use to entice people to request our products and services, and here we need efficient mechanisms to handle our orders. Considered by many to be the exciting part of our business, the strategy of defining the market and how the customers find us, and place orders are usually the most neglected in market management. In the studies and audits, we have performed, the sales (taking the orders) are thought of as the most active area even though market segmentation is usually the weakest – it’s just not logical.

Resource Operations

Now we have orders we need to process them to deliver our products and services to our customers.

Product/Service Delivery

Match our orders to our customers and deliver what we have promised.

Revenue Operations

Get our compensation for our business.

Market Operations

Having defined our market segment, enticed them with our tactics, and received our orders, we must ensure that they continue to be synchronized or adjusted as needed.

Resource Control

Our ability to continue to execute our business depends on our ability to measure and control our resources – skill sets, materials, production, etc.

Product/Service Control

Is the customer satisfied? Are we adjusting our portfolio and partners as needed?

Accountability

It doesn’t matter if we are a business or a government; we are accountable to our constituents either by legislation or profitability.

Everything above results from a historical but successful approach to the fundamentals of conducting business. As such, it can be considered as a normative set of “rules” to be followed. Using the guidelines above, we can create a framework such as the one below:

	MARKET PLACE	RESOURCES	PRODUCTS SERVICES	RESULTS
Framework Matrix © L4 Frameworks	The markets that the business is in. The Customer Consumer.	Required to facilitate the process. The resources used.	The products delivered. The services delivered.	Reasons for producing the deliverable.
STRATEGIC PLANNING	A1     Market Planning	B1     Resource Planning	C1     Service Planning	D1     Financial Planning
The goals and objectives (raison d’être) for the business. “Doing the right thing.”	Goals and objectives for the market. Market strategies. Forecast sales. Market/Competitor analysis. What business are we in?	Goals and objectives for resourcing. Forecasting the resources to accommodate market demand. Business plan.	Product/Service Portfolio. Product/service research.	Business goals & objectives. Financial forecasts. Financial policies and procedures. Pricing policies.
TACTICAL PLANNING	A2     Market Development	B2     Resource Acquisition	C2     Service Development	D2     Cost Management
(Development)Creates the environment for the goals and objectives to happen. “Make it happen”.	Creates the environment to get A1 to A3. Communicates C1 to the customer. Develops market promotional programs.	Creates the environment to get B1 to B3. Acquiring and developing necessary resources. Inventory of components or raw materials.	Creates the environment to get C1 to C3. Development of products/services.	Expense management from acquiring and developing resources, products/services.
OPERATIONS	A3     Sales	B3     Resource Operations	C3     Service Delivery	D3     Revenue Operations
The line of business analysis. “Doing things right”.	The trigger (order) from a customer for products/services. Drives the profit line. Initiates action.	Processes the order. Provides the facilities. Assembles the resources. Facilitates production.	Deliver products/services to satisfy customer orders.	Closes the transaction. Account for/pay for.
CONTROL	A4     Market Relations	B4     Resource Control	C4     Service Control	D4     Accountability
The procedures for checking progress against standards. “Are we doing it right”?	Change control. Monitoring the mood of the customer. Market share. Audience rating.	Measure against standards. Maintains the resources. Tracks the resources. Quality assures resources. Utilization of resources.	Review of the deliverable. Post-delivery audit. Crisis resolution.	Business activity reports. Asset/liability reports. Reports on D2 and D3 against D1.

Don’t be deceived by the notion that the “plan” is just another set of named boxes with an obligation to fill them.

There is a systematic methodology for creating this framework and the entities that constitute your business. It starts with normative methods but goes through a logical and rational phase before introducing artificial intelligence to create the “ultimate” model if that makes practical sense.

Many CEOs have just used the basic framework by which to control meetings of senior management. It is an ideal “cheat sheet” by which to discuss entities in each framework cell and the repercussions for entities in each adjacent cell without any reference to what is typically a historical and political organization chart.

The approach to this systems thinking approach to a business plan is more fully discussed at www.L4frameworks.com.

Yes, “you can get there from here”; if you adopt the right approach.

Updated February 2022