Practical lessons in business stand the test of time
By David Waters, Managing Director CHIS and PrimeCare Insurance
IBISWorld, a leading business information analytics firm, has published the thinking behind their top practices for corporate success. When the company conducted an analysis of international enterprises several years ago, the research group found the world's best organisations commonly pursue similar practices … all of which remain surprisingly relevant today.
Practice #1: Embrace specialisation.
"Focusing on a single industry is absolutely critical for businesses wanting to dominate in an increasingly global marketplace," explained IBISWorld's Jason Baker.
"Gone are the days of dipping a finger into every pie, you will achieve much better growth by pursuing regional and global networks. Do one thing fantastically well, rather than numerous things satisfactorily," he advised.
Practice #2: Choose a position and stick with it.
It doesn't matter if you are a major, niche or ultra-niche player in your field.
"This is essential for companies to secure a safe industry share in their chosen area," he says. The four positions likely to earn high returns are: major (25-75 per cent of industry revenue); niche (5 per cent of industry but more than 50 per cent of an industry segment); ultra niche (1 per cent of industry but 'owning' a product category in the industry); and exotic (0.1 per cent of industry but 'owning' a product group).
Practice #3: Intellectual property (IP) and research and development (R&D) should be valued above all other assets.
"Whether or not your balance sheet reflects the fact, your IP is the heart of your venture - and it should be the core activity around which all else revolves."
In order to free up resources to focus on IP and R&D, IBISWorld believed successful businesses must outsource all non-core activities. "To secure competitive advantage and accelerate innovation, it is imperative companies outsource the management and operation of non-core activities," said Baker. "This allows them to focus on growth, expansion and business development, adding flexibility to an organisation."
Once businesses have made this leap, he says it's much easier for them to rapidly react and response to the needs of a fluctuating marketplace - whether speedy expansion or downsizing is required.
Practice #4: Avoid ownership of hard assets.
These might include land, buildings, equipment, debtors and stock is another practice of thriving corporations, with Baker describing hard assets as "lead in the saddlebag".
Increasingly popular methods for freeing up capital to direct towards IP and cash strength include using securitisation, operating leases, and factoring instead of asset-ownership. It is equally important to make sure you do not pass financial problems down to future generations, so do not agree to upward only rental reviews - these rental agreements need to be done in line with the current market trading position.
Never has the old adage "it's not what you know but who" been more true, said Baker, with businesses being encouraged to create virtual corporations. "Draw upon networks, franchising and strategic alliances to minimise staff numbers and costs, while maximising reach and revenue," he said.
Practice #5: Plan outside-in, rather than inside-out.
"It's important to first understand the external business environment, before developing your own structure, strategy and management."
Practice #6: Develop a unique organisational culture.
Not surprisingly, attracting and retaining good people is critical, with IBISWorld recommending companies strive to develop an organisational culture featuring equal opportunities, mutually agreed codes of conduct and a shared vision.
Practice #7: Stand-out leadership.
"Senior management should lead an organisation before they manage it. It can be lonely at the top, but ultimate decision-making is not democratic. In fact, leadership is the opposite of management - its focus is external, rather than internal," Jason Baker explained.
Other best management practices include: valuing leadership over management, simplifying operations, developing achievable visions, sound business financing, encouraging staff self-development, embracing the borderless world, and becoming an information-intensive organisation.
How can we help?
It can sometimes be a little overwhelming for any business owner to look too closely at their operations. And in many cases, 'fresh eyes' are needed to pick up the things we have simply become used to over time and no longer notice. A key point here is that even small adjustments in even just one or two areas can save you money … sometimes a lot of money.
This is one area where PrimeCare Insurance and CHIS can be of enormous value. Proactive risk management not only improves your business, but also maximises your time to manage and develop your business and improve your competitive position - it can also enhance your business's image, reputation and even valuation.
Our team of specialist consultants share their experience in the care sector to help you look objectively at your business and put the right protection measures in place for your situation. Most importantly, their straightforward approach will assist you with implementing some of techniques outlined above to reduce and manage your exposure.
So before your next renewal is due, give us a call and let us show you why we're the UK's leading care-service insurance broker, and how we can help ensure you too stand the test of time.
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