The DNA of an organisation is the Business Idea
Starting entrepreneurs begin with identifying and developing a favourable idea with the aim to market it successfully. The Business Idea has been born. Even when an organisation grows larger, this will remain the core to which an organisation can trace back its competitiveness. But the world changes, so from time to time a re-evaluation of the Business Idea is necessary. Which new opportunities do occur? Which threats should be countered? Strategy development based on dialogue sets the direction leading to better exploitation of the Business Idea and new options to strengthen it further through innovation.
VBM Partners uses the Business Model Innovation method in workshops for jointly mapping, evaluating and innovating business models in a visual way. A business model describes the rationale of how an organisation creates, delivers and captures value, which contains the further details of a Business Idea. Edward Koops is co-creator of the‘Business Model Generation’ book.
Value-Oriented Management (VOM) is a management process focused on pro-actively creating value for all stakeholders, using the Business Idea as a central concept. VOM gets the flywheel going by means of innovation and change, which will result in a better exploitation of the Business Idea in the market, delivering favourable financial results.
VBM rests on four pillars:
Ø Strategy Development: gives direction and priorities to organisational development
Ø Business Case Development: helps to discover and evaluate the value of ideas and market opportunities
Ø Portfolio Management: helps to select the best investment proposals
Ø Performance Management: gives insight in the realisation of benefits and the performance of projects, programmes and operational processes
The Value-Oriented Innovation (VOI) process covers the first three pillars and starts with developing a strategy and identifying of ideas. These should be evaluated, after further development, on their potential to create value for the organisation. Valuation of ideas begins in an early stage, but not necessarily using a Business Case. At the end of the development phase the Business Case should be ready indeed in order to make a decision to implement, preferably in connection with other initiatives requiring funding.
Portfolio Management supports management in making a good comparative assessment of value and risk and in monitoring that the Business Case is being realised. Using Benefits Realisation Management the benefits should be monitored. This is important for successful implementing programmes, because it enables you (temporarily) to make a distinction between performance resulting from running the business and performance resulting from changing the business.
The vision of VBM Partners is supported by research from Cranfield School of Business suggesting that critical to successful execution of change is the need to be better able to align, filter and prioritise change initiatives. Having a good clear business case allows organisations to better develop a prioritised change portfolio. This change portfolio needs to be understood and agreed by the leadership team. In order to get a realistic business case, in order to get an agreed change portfolio requires openness and honesty and actually shared values across people within an organisation.
VBM Partners has based her methods for Business Case Development and Benefits Realisation Management on the Managing Successful Programmes (MSPTM) framework, initially developed by the Office of Government Commerce (OGC) in the United Kingdom. A Business Case is developed using a so-called Benefits Map. This is a cause-effect diagram that shows how solutions contribute to strategic goals, i.e. cash flow. A Benefits Map is made in a workshop together with all stakeholders.
Innovation is necessary during economic upswings and economic downturns to strengthen the competitiveness of your organisation. When business results diminish, less money will be available for innovation, which heightens the necessity to make a good selection and set the right priorities. Applying VBI makes sure that your organisation executes the right projects delivering the highest value and that you keep track of the realisation of the planned benefits.
VBI makes sure that new initiatives are stimulated, developed and evaluated throughout your organisation. On the one hand specialisation is beneficial for internal efficiency, but on the other hand it can lead to compartmentalization and rigidity, such that your organisation will have insufficient capacity to adapt and be successful in the future.
Integral Performance Management
Given the big amounts of money and effort involved in innovation and change in many organisations, it is needed to manage these aspects separately, however in coherence with the existing business.
Integral Performance Management (IPM) gives insight in the total performance resulting from ‘Running the business’ and ‘Changing the business’, in such a way that it is clear if the strategic goals will be reached and whether this is due to meeting the agreed innovation and change goals or to other factors that drive the business. The Value-Oriented Management (VOM) framework is complete if operational performance is being measured and evaluated based on value as well.
Performance Management does not halt after reporting. A good Business Review results in focused actions to improve results. This can be the start of new initiatives entering the ‘Changing the business’ cycle. In this way both cycles are closely connected to each other.
If circumstances require this, Cost Reductions may be needed, but in general this will not result in higher competitiveness. Operational Excellence and investing in Business Growth & Innovation will deliver higher benefits after some time. So working on ‘Changing the Business’ is essential, with Value Based Innovation as a driver of success!