Improve your ROI in 2024 and beyond
If business was easy, then every business would be a success. It’s like having a recipe for never-fail-fudge, things can still go wrong that are outside of your control. However, if you have the recipe, do your research and plan, then you will increase your chances of success.
Our winning formula: ROI = SL2 + TP2
Our winning formula for business success is not strictly a formula, more of a recipe for success. When you want to improve your return on investment (ROI), consider these six key ingredients:
- strategy (S)
- leadership (L)
- learning (L)
- technology (T)
- people (P)
- processes (P)
When they work hand-in-hand, the return is far greater than their individual parts.
Always start and end with strategy.
Strategy is about planning HOW you are going to achieve your long-terms goals. Like chess you need to be thinking several moves ahead. In business it’s about keeping the big picture in mind, to ensure that everything you do in your business ties back to your vision, purpose and values.
Business strategy involves the whole of your business, and everything needs to be aligned. It doesn’t matter what framework you use, so long as you take a structured approach to thinking about all the components of your business before developing and refining your strategy.
Firstly, the business you’re in is determined by your vision, goals and values, and underpinning that is the culture of your business.
Business goals, values and purpose energise people and set direction, but it’s your culture – the shared values, beliefs and behaviour – that will determine and unlock your potential for success.
Secondly, whatever business you’re in, whether you are a for-profit or not-for-profit organisation, you need to do four things, not isolation but collectively: (i) create and communicate value, (ii) deliver value, (iii) capture value and (iv) sustain value i.e. sustain your focus on creating, delivering and capturing value over the long-term to achieve your business goals.
Thinking about these four, fundamental business objectives is key to developing business strategy:
- Creating value is about desirability. HOW you will make your products or services desirable and HOW will you communicate that to your target audiences in such a way that your product or service is more desirable then your competitors?
- Delivering value is about feasibility – utilising your key resources – people, processes and technology efficiently and effectively.
- Capturing value is about viability – making sure the numbers add up in the demand and supply equation including how you will finance or fund your business.
- Sustaining value is about making sure you can do all of the above, not just now but in the future. HOW you can future proof your business?
Our business model framework allows you to think about all the components of your business that are (mostly) within your control. They are all inter-related and need to be addressed within the context of each other and the external factors affecting the market you’re operating in.
External factors include market size and demand, competitors and the PESTLE factors i.e. political, economic, social, technological, legislative and environmental factors.
In summary, there is a lot to consider when developing and refining strategy and it’s more than likely that you will need to make some assumptions. For these reasons, strategy cannot be a one-off exercise. It’s a cyclical process. Once you’ve started implementing your strategy, you need to review it and assess whether your assumptions were right, what’s working and what’s not working and WHY.
You don’t need to measure everything – just measure what matters, so you can make informed decisions based on actionable insights.
Research shows that when projects are aligned with strategy, businesses are 57% more likely to achieve their goals. (PMI)
How do you align strategy across your business and when did you last review it?
Companies can survive with strong managers but need leaders to drive the business forward. Leaders articulate vision, drive decision-making and lead the way forward. They also inspire, motivate and empower teams, and bring their team with them on their journey. And most importantly, they celebrate success together.
“Leaders don’t force people to follow, they invite them on a journey !”. Charles S. Lauer
Also, remember, there’s not just one leader at the top. The larger your business, the more team leaders you will have who will each play their role in leading their individual teams and in turn will led by the figurehead of the business.
When leaders set direction and focus on team strengths, profits can increase by 14 to 29%. (Gallup)
How well can your team articulate your vision?
You can’t stand still in business – you must keep listening and learning. Every part of your business will benefit from a learning culture.
Learning comes from experience and continuously asking WHY, like a 2-year-old. Creativity comes from trying to solve difficult and complex problems or challenges, whilst innovation involves implementing those ideas to create value, and that’s why research shows it’s even more difficult to achieve than starting a business. The key lesson (no pun intended) is that you need to make time for learning, time for thinking and time to discuss new ideas.
Employees who engage in ongoing learning and development are more likely to be innovative, creative, and effective problem-solvers. They can apply their knowledge and skills to improve processes, develop new products and services, and identify opportunities for growth and expansion.
Research shows that the results pay off. For every $1 spent, the return was $4.53. In other words, it can boost performance by 353%. (Accenture)
How does your business make time for learning and exploring new ideas?
Technology is an enabler – it helps you to do things more quickly or efficiently and things that perhaps you can’t do yourself.
Every business needs to embrace technology, including AI, so you don’t get left behind. Remember, AI is just another tool.
Sometimes it’s easy to visualise the benefit and what your return on investment will be. For example, it’s quite easy to imagine, at least for those of us who are tech savvy, how a project management system such as Slack will save us time, or a CRM system or a password management system. However, even tech savvy people often don’t like change and that’s often a key reason why technology implementations fail. Even with a sound business case, you may need to overcome resistance. To do that, have tech champion to lead the way and bring the team on board by communicating the plan as early as possible. Then follow up with training and support.
Sometimes you need to invest a lot in technology, and it can take time to see a return on your investment. Amazon is a good example. They went from online bookseller in 1995 to being an online retailer and more. They have always invested in technology, but their first profitable year was 2003. Their commitment to investing in technology has led them to be one of the most successful companies in the world today.
When implemented well, technology can improve productivity and increase economic gains by 20 to 50% (McKinsey).
How do you embrace new technology in your business? Who are your tech champions?
People are key to making businesses more productive and more profitable, but that only happens when they are empowered and engaged in the business.
You need to invest in your team. As Richard Branson said, “Customers don’t come first, employees come first. If you take care of your employees, they will take care of your customers.”
In addition to being more present and productive, engaged employees are more attuned to the needs of customers and they are more observant of processes, standards and systems.
When taken together, the behaviours of highly engaged businesses result in a 23% difference in profitability. (Gallup)
If you don’t look after your employees, you may find them wanting to leave. A good example of this is Amazon. Against a backdrop of social and employee pressure to improve working, Amazon has now changed its vision from, “being the earth’s most customer-centric company” to “being the best employer on earth”. Now that’s going to take some time, but fortunately they have vast resources. The Amazon leadership realised that if they were to gain a competitive advantage or prevent a competitive threat (or both), then they would need to invest in and create value for their employees.
How do you invest in and engage your team?
Every business has processes e.g. sales, marketing, delivery and customer service. Their efficiency and effectiveness can have a huge impact on your ultimate profitability and the return on your investment.
Whilst some processes can be automated, invariably there is a level of human interaction and at that point people need to know what to do and how to do it. Documentation and training can help, so long as it is up to date and easy to follow.
Effective business processes are the key to repeatable success and can result in productivity benefits of 30 to 50%. (Forrester)
A good example of a business realising that they had a problem and fixing it, is Airbnb. As you may know a couple of friends wanted to earn some extra cash by renting out air mattresses on their apartment’s floor to people visiting a local conference and wanting a cheaper option than hotels. They created a website and had lots of listings and plenty of website traffic but not enough bookings. They asked themselves ‘why?’.
They soon realised that hosts were not very good at taking quality photos, so they got a camera and persuaded local hosts to let them take photos of their properties and upload them to the website free of charge. Within a month, sales had doubled, but they didn’t stop there.
Whilst it was feasible to hire photographers in other key locations, it wouldn’t be feasible to do that in out of the way locations, so instead they produced a guide and FAQs and on how to take enticing, high quality photos with a mobile phone. In addition, they set up easy to use registration forms for the hosts to list all their amenities, so that travellers could get a real feel for what to expect.
And they didn’t stop there either. They reviewed the whole customer journey and set up refund policies and processes for dealing with conflict, ensuring that travellers feel safe making their booking through Airbnb.
Another process they have implemented well is their referral programme. It’s simple for both parties to use and when version 2 was launched it increased daily signups and bookings by 300%.
How effective are your processes? Is there room for improvement?
Our winning formula in action
As we said at the beginning, always start and end with strategy. Plan strategically, operate efficiently, measure what matters and action insights so that your business is more successful, scalable and saleable. But remember, strategy alone is not the secret to success. You need good leadership, a learning culture and an action plan, so people know who will do what and when and why.
If you need support with any aspect of the strategic planning cycle or bridging the gap between strategy and execution, do get in touch in touch with our team. We can be part of the process to guide you, be your sounding board, or help implement your plans.