A Business Owner’s System Toolkit

A Business's DNA is its systems. The components that make it live. Here's the scoop.

What is a Business System?

A “System” is defined as “a set of things working together as parts of a mechanism or an interconnecting network”. In the context of business, things include Principles, Processes, People, and Technology. The link to the definition of interconnecting says these “things” must “connect with each other”.

Here’s what every ambitious (large or small) business owner must have in his/her/their toolkit to successfully build and grow a business.

Components of a Business System

A. Principles

Mission - Every business needs to have a reason for its existence. This is its Mission;

Vision - One needs to know where it is going. A business’ Vision articulates the ideal state that it wants to achieve; and

Values - These are the principles from which the organization will not stray (the curbs at the side of the road, and the “moral compass” from which it journeys) while fulfilling its Mission and achieving its Vision.

These are what connect the other 3 components of a business’ systems, its People, its Processes, and its Technology.

A must for any business owner’s toolkit.

B. Processes

Oxford Languages defines Processes as “a series of actions or steps taken in order to achieve a particular end”. Those things any business must do to realize its vision.

I like to split these Processes into two categories; Planning, and Execution.

PLANNING

Planning starts with an in-depth analysis of the things that need to be done BEFORE heading out on your journey. It entails a review of what’s ahead, and includes;

Gathering a list of things needed;
Anticipated stops along the way;
Impediments and challenges that can be expected; and
Timeframe for the journey.

The Process by which this is achieved is to create a project (or series of projects) to do this review. Broad categories for this review are:

Opportunity
Competitive Analysis
Value Proposition; and
Forecast Results.

Planning never stops. It happens in phases. Once the journey commences, it is imperative that the above conclusions be monitored, enhanced, replenished, and replaced as needed, remembering the Vision at all times.

EXECUTION

Hill_Street_Blues_Let_s_be_careful_out_there Execution begins when initial planning is completed. This brings to mind the well known pop-culture phrase

“Let’s be careful out there”

It states clearly when initial planning is done, and it’s time to execute on those plans.

As with Planning, Execution is best done by breaking what this means by key areas of the business that have differing tools, and expertise to be done successfully. The journey is clearly a team effort.

Categories I use are:

Product and/or Service Management
Marketing
Sales
Customer Success
People Operations
Finance

C. Reporting:

In 2005, when I began offering fractional CFO services, I applauded the direction that the first moving cloud-native offerings, like Salesforce, were heading. They opened the door to automating time consuming tasks, freeing up time for analysis and forecasting. In 2011, I noted that things started to get serious when mostly all data started to be collected digitally (“Big Data”) paving the way to greater analysis resulting in much more accurate forecasting capabilities. Technology has advanced rapidly since then, to today, where we have AI, where that’s like all of us have a 3rd arm AND our own research assistant.

What does this mean for reporting?

In my Article - FINANCIAL FOUNDATIONS, I speak about the importance for Relevant, Accurate, Timely, Understandable information.

These principles don’t only apply to a business’ finance data, they apply to all information gathered by its entire system. Just like the human body, which operates best when all of its systems show healthy results from key measures that have been developed by trained individuals, a business’ health can be tracked in a similar fashion. Often referred to as KPIs, they should be developed for all components of its systems.

Best Practice suggests that each component of a Business’ System should have 3 KPIs. More than this can cause confusion and even conflict among those chosen. Any business should be able to determine the 3 performance measures that best roll-up (the “key” ones) into measures which relied on will guide the enterprise along the road to success.

I’ve mentioned earlier that there are 7 categories of a System. This means up to 7 X 3 = 21 Execution KPIs:

These quantifiable measures indicate how well the business meets its declared goals for each category.

Plus 3 more aimed at the business overall, and usually formed as an aggregation of the (up to) 21 Execution KPIs. These report a business’ progress toward its Vision and adherence to its Values.

Cloud-Native, Big Data, Automation, and now AI, allow for greater clarity (Understandable), faster turn-around (Timely), enhanced detail (Relevant), and single points of truth (Accurate).

While today’s digital world is impacting how and what can be measured, yesterday’s KPI’s still have relevance, it’s how they are measured that has evolved rapidly. Think of it like, now using GPS for guidance, rather than using a compass.

An illustrative, but not exhaustive, list of KPIs could be:

Organization - Wide:
- Net Promoter Score
  - Commonly regarded as the "Gold" standard for measuring customer experience
- Brand Value
- Growth (top and bottom line)
Product and Service Management:
- Product/Service competitive ranking
- Customer Enchantment with the Product or Service itself
Marketing:
- Brand Value (Brand Recognition X Brand Score):
  - Brand Recognition
  - Brand Score
- # of Quality Leads generated
- Enchantment Measures:
  - Customer Enchantment with the Marketing efforts
  - Marketing Employee Enchantment
Sales:
- #, ratio, and $ value of Quality Leads Converted;
- Enchantment Measures
  - Customer Enchantment with the Sales experience
  - Sales Employee Enchantment
Customer Success (after purchase support):
- Net Promoter Score
- Enchantment Measures
  - Customer Enchantment with the customer support experience
  - Customer Success Employee Enchantment
- Lifetime Customer Value (“LCV”)
People Operations:
- Aggregate level of Employee Enchantment
  - Measured by calculating a Savvy-Team Net Promoter Score
- % of work that is automated;
Finance:
- Financial Measures:
  - Organic Growth
  - EBITDA Growth
  - Sustainability:
    - Debt:Equity
    - Current Ratio

D. Wash, Rinse, Repeat:

With today’s tools, and the relevant data that is now available, there is no longer any excuse for any size of organization to not have all the above KPIs at their fingertips on a weekly, if not daily basis. To fail to do so, will most certainly have a dampening effect on the Sustainability measure.

E. Technology

Technological advancements have equalized the playing field between larger “enterprises”, and everyday privately owned businesses of any size and industry. Ambitious owners can now compete with large corporations in the level of effectiveness they can achieve from their Business Systems. Everyone can (and should) speak about their ERP System.

An ERP (“Enterprise Resource Planning”) System, is a “a type of software system that helps organizations automate and manage core business processes for optimal performance.”

Sounds good to me….

Larger software businesses have commandeered the phrase ERP for their own.

This is nothing but a marketing ploy to keep the private enterprises away from their heretofore private business playground.

A common misconception is that only an all-in-one system can be an ERP.

Not true

- A subscription to Office 365 by Microsoft, or Google Workplace in themselves can be ERP for certain types, sizes, stages of businesses.
- An ERP can consist of a variety of software solutions that link (either directly, or not) to each other like jig-saw puzzle pieces, providing a business owner the functions that enable the business’ processes to operate effectively to satisfy its Principles, and deliver on the Plan.
- The key here is that it’s the business’ volume and complexity that drives the systems necessary to execute. Finding that balance delivers the highest ROI for this/these key tool(s) in the toolkit.

Types of ERP Solutions:

- All-in-One (Examples are NetSuite, Dynamics 365, Epicor (for manufacturing), Sage Intacct, to name a few).
  - Very customizable, and comprehensive. Done right, these deliver every piece of the Tactical portion of a plan, while gathering the data necessary to report against Strategic Results expected, and alignment with the Business’ Vision.
- Jig-Saw puzzle, interconnected but independent solutions:
  - Quite often these represent systems that have deeper knowledge and experience in components of a Business’ tactical plan than an all-in-one system.
  - This expertise can often supplement a lack of experience of the “People” part of that business’ system, and provide it at a fraction of the cost that hiring this skill would entail.
  - Examples might be HubSpot (for Marketing and Sales), Zendesk (for Customer Service), Bamboo (for People Operations), Asana (for Project Management), Xero (for Finance), Shopify (for E-Commerce), Stripe (for payment processing) etc.
- (Microsoft 365 or Google Workspace) (+ an accounting software).
  - As I mentioned these may, in themselves, be sufficient to be an effective ERP for many businesses.

Leaders in Business Systems

I’ll keep this section of the Article up to date with select businesses that I’ve found to be worth checking out and following. Here are 3 such businesses:

HubSpot:
- HubSpot started as an online marketing tool, inventing the term “Inbound Marketing”.
- Since then it has grown to be a market leader in the CRM space. While doing so, it recognized the need for a business’ systems to embrace the entire customer experience from initial research (online search), right through to post purchase relationship enhancement.
- With the current school of thought that the single most important KPI for any business is “Customer Enchantment”, HubSpot just may be the single most important tool that any business should have in its business’ systems
Slack:

- MITSloan has featured Slack in its topical article "Leading with Generation KPIs" for being innovative in its systems which are aimed at tracking the total customer experience.

Adidas:
- Adidas is highlighted as well in the MITSloan article for organizing its business systems around the Customer. An executive there indicates:

"This reengineering required not just fundamental process change but a profound rethinking of the company’s culture."

- Even though Adidas is a product oriented company, its focus is on the Customer experience, of which product enjoyment clearly would be a large contributer, but not the only one. Its #1 KPI whcich their systems are geared to tracking is Net Promoter Score

Don’t let the size of the business fool you. Even if your business is smaller, read about them, adopt what they’re doing to your specific business and its vision. You now have the tools to do this.

As I’ve said many times before, and will say many times again, with data now being digital, and the powerful tools at our fingertips, any business of any size can play in the same sandbox as the older kids, maybe even more effectively and nimbly.

Future Trends in Business Systems

At the core, future trends in Business Systems will start from this paradigm shift - Business Systems must be developed for a digital world rather than digital strategies being developed for the Business’ Systems. It used to be that the business side of a company would lay out its strategies and then loop in the IT team to talk about technologies for executing those strategies. Technology is now an integral part of all aspects of a business so strategies themselves will change to address the impacts.
Things like digital collaboration have all but overtaken classic “walking down the hallway” or “meet around the watercooler”, or “got a minute” knocks on your office door to get information, advice or approval from a coworker.
Businesses of any size, if they haven’t already, must invest significantly in tools such as Slack or Microsoft Teams and Google Meet or Zoom, including integrating data and business intelligence into those environments. It’s the new way of sharing data.
Measuring the effectiveness of a business’s Systems is changing too. What this means is that, when assessing the effectiveness of its systems, a business needs to look at sentiment, rather than classic metrics such as “Did I make the employee and/or the customer happy?” to “Do they feel good with how they’re interacting?”
Automation:
- A baseline target should be to automate a high percentage (say 75%) of the company’s transactions. The more this happens, the more a business’s colleagues’ time is freed up so that they’re working on the most important things. It enables them to help discover and deliver better products and solutions to customers faster than ever before.
Advanced Analytics:
- With their core training in analysis, Finance leaders can be at the forefront of this necessary component.
- More advanced finance leaders will think in terms of digital strategy and look for opportunities to apply technology to advance all of the strategic aims of their organization. They know and understand the limitations of the “black box” that is AI and Machine Learning and can delve deeper into a model’s explainability, developing and accessing techniques and tools that can explain how models reach their results. This will provide leap-frog competitive advantage.
Single Sources of truth:
- Due to the exponential growth in the size and complexity of data, any business hoping to grow must have a clearly defined strategy guiding the collection and management of, and access to, this rising volume of data — Business Systems need to ensure that this is the case.
Everyone Must Have Analytical Skills
- To survive in today's data rich world, every person in a business must know what the business is trying to achieve and why, but also some analytical skills to interpret how what they are doing and achieving for the business is contributing to those goals and targets.

Resources and Further Reading

My favourite source for academic research on topics like these is the MITSloan Review. Here are some links to some informative resources: