BUSINESS FITNESS TEST

Business Fitness Test (BFT), is similar to the Health check-up of an individual. After a certain age, the Health check-up is advisable to be done every year. Equally, in our times, a Company should yearly perform a BFT, as a well-defined process and discipline. Companies age much faster in the 4th Industrial Revolution which has already started. Failing to respond may prove to be a showstopper.

In the words of Richard Branson: “These are not the times of Business as usual”

The collapse of the recent brick and mortar retail shop model, in the USA and Europe, is one of the noteworthy examples, of the tectonic changes that are affecting Businesses everywhere.
Digitization, automation, IoT, Blockchain and the like, are hot topics, yet most Companies think in terms of outsourcing them and not making them the organic part of the way that they will conduct business.
We are in the era of New Capitalism.

This is why a Business Fitness Test (BFT) is mandatory. It is rare that the changes in the business environment are perceived inside the Company in a timely manner. Moreover, we have observed that:

1. Few companies understand their own business model well enough, its inter-dependencies, its weaknesses and its strengths.
2. Internal bureaucracy, risk of unemployment and future uncertainty tend to preserve the status quo.

There are various ways that a Business Fitness Test (BFT) may be conducted, but the aim is the same. To diagnose how relevant is a Company’s current Business Model i.e. the way that a Company expects to make money, in its present and near future line of Business and to deduce what changes must take place for the Company to survive and grow, within the fast changing landscape of the present and emerging business environment.

The way we approach it in our Company, DVK Consultants, is the following:
We believe that a BFT, to be of value, must be made to measure, be swift, conducted within 4-5 weeks maximum, check all the KPIs of a Company and provide a report of no more than 10 pages, in which all the weak points of the Company under examination are listed, rationalized and justified, while the proposed actions are strictly prioritized.

At the outset of the Business Fitness Test (BFT), will query the fundamentals on which the current business model is based on, and forgotten in the historic organizational memory. Businesses can easily become hostages to their own success, looking to the past for the keys to their future.

We start by examining the business areas in which the Company operates and the areas relevant to them. We query if the specific sector has a future, what this future is and how relevant to it is the current Company’s Business Model.

Decision making in our times should not be based solely on internal KPIs e.g. a Company’s financials, quarterly reviews, annual plans. These data sets revolve around historical events which have already taken place in a Company’s life. They help to understand a Company’s past but do not pave the way to its future. Modern decision-making shifts attention to external KPIs, relating to competitors, clients, suppliers and other players within the ecosystem the Company operates and sometimes outside of it as well.

We assess products and customers, present and emerging. Customers’ needs change and ideally the products should lead, not follow the change.
Most Companies are attached to their products, they try continuously to improve them and dislike to abandon them. This is good while it lasts but stifles innovation. Present vested interests in the Products should not be a reason to keep them, past their prime.

All Companies have, by their nature, inertia. This dictates that, planning for a products’ replacement, must start just after its successful launching. What is the Product and Brand Architecture, Brand image, Communication & PR strategy, Consumer segmentation and Journey.

Then we move further to the internal functioning mode of the Company, whether it is analog or digital, whether decision making is data driven or experience “gut feeling” driven, querying the level and competence of Analytics use in Strategy and Tactics formation.
We assess the Data Strategy followed & Data Architecture.
The usual order in which Key Performance Indicators (KPIs) are examined in this phase are:

The Company’s Business Area
Examine Company’s capabilities in new or unexpected areas. Sectoral products and Customers both current and potential. What is the future of the current Business in view of its Industry or versus other macro events.

Decision Making Process
Examine the Decision-Making Process for Bias, Clarity, Speed, Degree of complexity and Coherence vs. the Strategic aims of the Company. Analyzing data is as much about the people driving the initiative as about the numbers themselves. Leadership decision making, should make a shift towards a more evidence-based approach on real-time analyses of external data. Hence a move from What we are doing to What the industry is doing and the extent to which we can understand and anticipate changes.

Company finances with emphasis on the Cash flow
In spite of the very low interest rates, a deep digital examination of the cash flow can point out hidden strengths and particularly weaknesses that are linked indirectly with the Business model.

The whole financial position of the Company when projected in the future, through a digital stochastic process, can give early warning of impending issues that must be addressed in the present.

Of particular importance are conclusions that will be drawn based on the expected market correction scenario.

Digitization Level & Potential
We attach a lot of importance in this part of the test.
We firstly examine the digital literacy of the Company as a whole.
We proceed with a roadmap to complete digitization by examining the Consumer Journey, the Customer Journey, the Supply Chain Journey, the Development Journey etc. In doing so we keep in mind of solving real business issues judged to be important vs. mindlessly introducing technology which may conceal the areas of much needed improvement.

Here it is why it is deemed important: When the 125-year-old GE, shifted to run as a startup to survive in the digital era, will your company remain static? You may read the relevant article in NY Times here.
When 50% of today’s Fortune 500 companies on the S&P 500 will no longer exist in 10 years, the phrase “adapt or die” takes a critical meaning for C-level decision makers.

Industrial Internet of Things (IIoT or Industry 4.0) application is able to digitize every single process, producing tons of Big Data, while A.I. and Business Intelligence need to be there to handle them automatically, providing real time insights & decision making. On the same time effective cybersecurity strategies should take place to minimize external risks.

Operational Process
Examine whether the organizational structure and the operating model and procedures followed, optimize the value creation capability of the Company.

HR
How up to date is the Management of the Human Capital of the Company.
Now that the routine part of HR work can be efficiently and economically digitized, the quantity of the employees in the HR dept. can be reduced but their quality increased.
Companies should be thinking along business ecosystems, platforms where they can leverage learning from every participant including their respective third parties.
Learning cannot be limited within the walls of an institution. This places higher demands on the HRM and upgrades the strategic role of HR.

It opens a whole new chapter on the profile of the people hired and talent management. Employees with flexible roles and fluid responsibilities, communicating with the same ease inside and outside the organization. An organization ever changing, ever learning ever adapting.

Supply chain & Warehouse Management.
Here again the whole journey is profoundly examined as it is usually burdened with some obsolete procedures from the past and more efficient solutions are available.
Our experts examine the above and any other, Company specific, KPI as unobtrusively as possible. Normally five experts working in succession are enough to have a very accurate Business Fitness Test (BFT).

Conclusion

–     Truly transformative businesses are never about the discovery of a great technology. –     Their success is based on a powerful business model. This is exactly what we have observed with Apple, Amazon, Uber etc. Therefore, having a fit-business should be of absolute priority in every Board.

The Business Fitness Test will result in:
Drastically improving the productivity & efficiency of the current business operations through application of pragmatic solutions, as well as,
Become the starting point of prioritized action of the top-leadership with regards to, the evolution of the current business model to its future, step-change, iteration, leading to transformation, necessary for the continuation and profitable growth of the business. This will be achieved through a set of, timely implemented action plans, based on a jointly agreed upon roadmap.

The difficult part starts after the submission of a BFT’s findings. The results are often disagreeable and upsetting. Very few executives can immediately accept that their products or processes must be changed. Top executives are surprised to be told, for instance, that the present level of digital literacy of the Company must be addressed, prior to further Digitization and that certain, long established, processes are obsolete or inadequate.

Very often Companies have an understanding/suspicion of their weaknesses but they try to “get on” as best they can at present, postponing key decisions until it is too late.

The Business Fitness Test (BFT) diagnoses weaknesses at an early stage before they are manifested by disappointing performances.

An early diagnosis of a problem may prove upsetting but a late diagnosis is a Post Mortem.