In my last blog, The Differences Between Simple and Complex Opportunities, I described simple and complex ways we can work to close our profit gaps. Here, I describe 9 universal cells that reside within our fields of opportunities. These cells hold gateways for navigating to BestPossible levels of achievements.
Below is a typical field of opportunities partitioned into planning horizons.
Strategies set guidelines for tactical maneuvering in advance of operational action. Operational planning is for improving the way we get things done. While always important, operational planning (doing things right) offers less bottom-line advantage than optimal strategies and tactics (doing the right things).
Next comes tactical planning—this is where we maneuver within the near term (e.g., next month, next quarter) to best implement our current strategies.
Strategic planning is most important and typically offers the greatest bottom-line advantage, yet is the least prevalent in companies that have yet to start their journey to BestPossible.
Within all three planning horizons, we have opportunities for profit improvements within and among their three primary business functions:
Procurement – We have opportunities for sourcing and acquiring better resources including capital, services of employees, vendors, materials, space, and equipment.
Production – These are opportunities to add greater value through the use of better internally and externally available production capabilities, and for innovative research and development of better offerings.
Sales – Here, we are talking market opportunities that allow more rewarding use of procurement options and production capabilities.
Note that the sales segment is larger than the other two. For most industries, optimal mixes and volumes of sales liberate opportunities for more profitable procurement and production.
By interlacing planning-based opportunities with these three universal business functions, we get nine cells of opportunity for profit improvement. Although individual cells contain simple opportunities to independently improve earnings through better execution, much bigger gains can come from optimally balancing the three cells of a given row of the table below. For example, strategic adjustments within and among cells 1, 2, and 3 will have the most highly leveraged effects on long-term profits.
Tactical maneuvering within cells 4, 5, and 6 offers the best avenues for early advances. Here, optimal adjustments of procurement, production, and sales activities within current strategies will leverage existing production capabilities for major profit improvements.
Although very important, operational planning usually offers less leverage for profit gains than strategic and tactical planning. Cells 7, 8, and 9 are where we focus on getting the job done as well as possible.
The better we execute, the more we gain from our tactics and strategies. That is why BestPossible profits come from keeping all nine cells in optimal balance.
The more we get to know our fields of opportunities and the contents of these nine cells, the better we become at putting our time and resources where they will do the most good. Because opportunities are literally endless, they can be overwhelming for decision makers. For this reason, we often miss the best while going after the most obvious.
It’s important to know that while low-hanging fruit may be tasty and quick, the ripest and sweetest is higher up – and today’s technologies make safe ladders readily available.
They allow us identify, prioritize and harvest the best of our opportunities on an ever-rewarding journey toward BestPossible.
Stay tuned to learn more.