Successful strategies…Successful goals!
To achieve your biggest of business goals is much like any other major accomplishment in life…you need to plan and strategize.
You must resolve two purposeful issues: First…identify the predominant Key Performance Indicator (KPI) this is what Jim Collins calls the “Profit/X.” Remember it’s the crux of your business model and what drives your economic engine. Second…what is your Big Hairy Audacious Goal (BHAG)? This long- range goal that you will align your KPI with.
So what profit is the ”x” in your business to help you achieve your goal?
Your profit/x is a strategic metric…how you choose to make your money. This ratio is a critical influence in your financial engine. And when you make decisions about how to spend money (which products to launch, where to open new locations, how many people to hire), you should be directed by asking how it maximizes your profit/x.
As you consider what your Profit per X might be, there are some essential questions to ask:
- What is your industry’s typical target?
- What products and services drive your top line?
- What costs are critical to profit that you can control?
- What “units: (X’s)” would you want more of?
- What “units: (X’s)” can you improve that your competitors are not focused on?
The question Jim Collins proposes in Good to Great to assist you with this purposeful metric is “If you could pick one and only one ratio – profit per x (or, in the social sector, cash flow per x) – to systematically increase over time, what x would have the greatest and most sustainable impact on your economic engine?”.
Making yourself identify one denominator by answering the above question will offer awareness into what drives your economic engine.
What makes this well-thought-out metric so useful is that it is so specific to your business and to your company.
As a reminder on what your BHAG criteria should be, remember it needs to be:
- 10-30 years
- Challenges you to greatness
- Supports your business fundamentals
Keep in mind, your BHAG drives you and your strategy. It should be challenging enough so that you are not sure how you are going to reach it, yet you need to be patient and steadfast to achieve your goals.
The truth is that identifying your BHAG has a great aspirational and motivational momentum. Being clear about what you want to achieve and placing a benchmark somewhere in the future propels growth.
Your BHAG can be just as challenging to get as Profit per X and it does not come quickly.
Keep in mind, the most successful businesses that I’ve known have had a strong BHAG. It produces better results because it inspires, drives ambition, and provides a healthy challenge to achieve combined with a fervor for the purpose of the business.
The whole idea of a BHAG is that it’s an exciting goal that inspires you to figure out how to achieve it.
What is your company’s BHAG?
[themecolor]Dave Baney is the founder and CEO of 55 Questions, LLC. We work with successful top executives with a driving ambition to crush their competition. We help CEOs and Entrepreneurs improve alignment, communication and accountability throughout their organization. [/themecolor] http://www.55questions.com
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