Where do you start to improve business performance or change how you do business? The first step is to understand the full scope of what is taking place in your business. For many businesses things just “happen”; agreements are entered into, documents are signed, and intellectual property is developed in the “vacuum” of “the business”.
For these businesses, the activities and the issues, the risks and the opportunities are filtered through a glass that is half full. The motivations and “what is in it for the other guy” are sublimated to the immediate needs and pressures of running the business day-to-day. For some the issues may never materialize into real threats. For others, it seems to be inevitable that the glass will be tipped and its contents spilled across the market table.
A Matter of Trust, A Practice of Verify
Having an optimistic outlook and belief in the people you do business with is important. However, it needs to be accompanied by an In-God-We-Trust, All-Others-We–Verify-(and-document)” practicality. It is important in any relationship to believe in positive outcomes; it is also necessary to prepare for when relationships go awry.
Handshake deals are a good place for a beginning. They, too, need to be documented; however, to be sure everyone understands the terms and conditions, the relationships, the risks, and the rewards. The more complex, the more potential, the more important the deal, the greater the need for defining the “who, what, where, when, and how much”.
Business Analysis – What It Is
Business analysis is looking across the organization and creating a comprehensive picture of the relationships, deals, and commitments the organization has made – from handshakes to formal agreements. This analysis takes the individual threads of activities and weaves them into a fabric to reveal the pattern, texture, flaws, warp and weft of the business.
Business analysis is necessary to insure that the activities of the organization are cohesive. The warp and weft of the business fabric reflect the financial performance and strategic goals. Without an understanding of the fibers making up the fabric, then the business will not have full capability of action. Further, businesses which do not tend to the weaving, find that the edges will quickly fray and put the entire operation at risk.
Analyzing the business requires an integrated approach for review:
- Legal agreements – written and verbal
- Intellectual property, rights, and development
- Funding covenants
- Capitalization structure
- Financial results
- Business systems
- Management controls
- Strategic plan
- Business plan
- Marketing plan
- Sales and business development activity
- Human resources
Business is a Process
Every business is a process made up of activities. The activities are how financial performance is achieved or missed. These same activities determine whether or not a business builds and retains its assets (tangible and intangible) or whether those assets are subject to claims by other parties.
A business, especially an early stage technology one, is vulnerable when maintaining the balance between moving activities forward (deals, technology, etc.) versus taking the time to dot all the i’s and cross all the t’s. The handshake deals and verbal agreements, as well as the misuse of terminology and lack of documentation, can create significant impairment of intellectual property and other assets.
The Person versus The Company
There also seems to be a tendency not to recognize that a person working for an organization may or may not have the ability to waive claims or provide resources without cost to you. The person you deal with may have the best of intentions, but the business they work for may have justifiable claims if that person is expending resources to further your intellectual property (technology). Keep in mind that few for-profit entities are going to giveaway resources (cash, equipment, time, expertise) to another for-profit entity. They want something in return.
Begin with the assumption that there will be cost of some sort in exchange for services. Working from that assumption, the business analysis needs to capture the implications and the impact – operationally and financially. Business analysis gets to the heart of each business issue and the ripple effects it can create in other areas.
The Sum of the Parts
A business is more than the sum of its parts. It is the interconnectivity of the parts that create the competitive advantage and the success of a business. Looking at a single element or component of a business in isolation cannot fully disclose the scope and magnitude of an issue.
Financial performance is a result of processes and activities. It is a reflection of what has and hasn’t happened. To improve performance and build value in the business, you must be able to analyze the business across functions, deals, time, activities, and processes.
Copyright ©2006 F.O.C.U.S.™ Resource, Inc.