Sustainable business models

Performance Management typically helps organizations set goals, create plans on how to reach those goals, monitor execution, analyze any differences, and provide strategic feedback through management reporting. All those tasks aim to create focus on strategic goals, and make sure all parts of the organization are aligned.

But how do we know these are the right goals? We don't really know; most people focus on reaching the goals, not really questioning them. And are the strategies we devise sustainable in a changing market? How will our strategy lead to long term success, way beyond the goals of the coming period? Will our business model still work in 3-5 years? Do we have a sustainable business model?

In short, sustainable business models add value to their stakeholders, and are rewarded for that, which helps adding more value. A virtuous cycle. Non-sustainable business models are focused on extracting value from their environment. A zero sum game. Performance management will have to evolve in dealing with these questions, too; but in the meantime, here are a few pointers to see if you have a sustainable business model.

Signs your business model is sustainable:

 

• Your mission statement describes what you achieve for your customers.
• If middle management is asked what the most important goal is, the question is answered with something like "making good shoes" (or whatever it is the company produces).
• Senior management sees market share and shareholder value as a reward for the value they have created for all stakeholders.
• Profit is a win/win situation.
• The key questions of performance management in your company are: how do we optimize our performance, how can our stakeholders contribute to our performance even more, and what do I contribute to the success of my stakeholders?
• Continuously focused on reconciling conflicting objectives of stakeholders, "The Power of the AND."

Signs you may be doing fine today, but could be in trouble tomorrow:

• Your mission statement says you want to be the biggest, largest, fastest most innovative provider that has operational excellence and knows exactly what all customers want.
• If middle management is asked what the most important goal is, the response is "making money."
• Senior management sees market share and shareholder value as a goal to reach.
• Profit is a zero sum game: my profit is your loss.
• The key question of performance management in your company is: how do we optimize our performance?
• Continuously focused on making quick decisions on how to solve problems, "The Tyranny of the OR."

frank