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Decoding Business Models and Overcoming Corporate Myopia

Delving into the intricate world of business dynamics, AMR Industries unveils a thought-provoking exploration of business myopia. Analogous to a visual impairment where objects in close proximity are clear while distant ones remain hazy, corporate myopia emerges when arbitrary, disjointed decisions are made, ignoring the pivotal facets of business models and key performance indicators. Today, we unravel the significance of comprehending business models and key performance indicators, delving into the origins of this trend.

The Yesteryears Perspective:

In days gone by, two distinct camps occupied the business realm: the salespeople and the financiers. Sales focused on revenue and the quantity of units sold, while finance honed in on profit margins and the equilibrium between income and expenses. Yet, the tale concludes with a sobering reality: companies that viewed the business through different "lenses" in their management approach suffered market losses.

Sales failed to deem customer retention and brand experience vital, while finance made biased decisions by exclusively considering metrics within their purview. In hindsight, these talented individuals lacked the tools to detect seemingly insignificant changes that would later prove consequential.

The Epoch of Shift:

During this era, quite distinct from the present:

  • The internet was absent.
  • Credit cards made their debut.
  • The stock market was soaring.
  • Disposable incomes surged.

Some companies began applying alternative management strategies and philosophies, seizing opportunities that continue to resonate today. Toyota stands out as a prime example, competing fiercely with American cars of the time. Others, such as Disney, pioneered the concept of user experience that we are familiar with today.

This I dub as "Business Myopia." It's the time when apparent abundance blinds us to our business's decline, leaving us perplexed about the reasons behind it.

The Myopia's Manifestations:

The adage "you get what you measure" rings true. Countless companies adopted a concept devised by Robert Kaplan and David Norton: the "Balanced Scorecard," an approach still employed that has revolutionized corporate management.

The concept was simple: a performance dashboard that balanced financial metrics with all other factors crucial to a company's success.

OKRs, KPIs, North Star Metrics – do these sound familiar?

These concepts are rooted in the Balanced Scorecard, and they are particularly associated with the realm of Digital Businesses. Google is often attributed with popularizing these strategic management approaches.

The Current Landscape:

Fast forward to today:

  • Global recession looms.
  • Disparity in purchasing power is pronounced.
  • Competition is fierce.
  • Talent turnover is high.
  • The pace of business is relentless.
  • Traditional businesses are digitalizing.
  • Digital businesses are diversifying.
  • Ad space grows costlier.
  • Microcommunities and social networks abound.
  • Hyper-personalization is on the rise.
  • The ambiance feels like an extraterrestrial visitation, an AI age.

In reality, progress only emerges when actions are taken. No one learns to ride a bike without getting on and pedaling.

Initially, begin – whether in Excel, Google Sheets, or a robust system. Put your metrics somewhere, educate your workforce on your business model, and engage in meaningful dialogues with your team about them. Embrace risk responsibly, make decisions with incomplete information, and as you refine metrics, nurture an organization responsive to them.

Nuggets of Wisdom:

  • Choose a North Star Metric.
  • Retaining and fostering customer loyalty is more cost-effective than perpetually seeking new clients.
  • Your Lifetime Value (LTV) and Customer Acquisition Cost (CAC) should be ingrained across the organization.
  • Opt for well-considered annual challenges; time is finite.

Lastly,

Remember that within your company – regardless of size or nature – everyone should comprehend the logic of your business model. This substantially contributes to internal culture, providing insight into the "why" and "what for." This cultivates strategic thinking across every role in the organization.

And you, dear reader, what are your thoughts on this matter? Let's embark on a dialogue of strategic enlightenment.

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