Business Strategy

What is Organizational Health?

Organizational Health

“Organizational Health is how many successful companies develop and maintain a sustainable competitive advantage - It is a value multiplier” - Andrea Sotgiu Managing Director Lavan

Let’s define a few, perhaps obvious things before we delve into organizational health, but important to distinguish the true value of business health.

Business Essence

A business doesn’t exist unless it develops value, a dependable distribution channel(s) to capture client demand, and a monetization process to sustainably support operations capable of reliably delivering on promises.

Value Creation

There are 3 main approaches or combinations a business can adopt to deliver value and succeed; 

Cost, producing similar quality products or services at lower costs to competitors, selling at the same price for higher market profit margins or lower price to undermine competitors.

Differentiation, creating uniquely desirable products and services and or a Niche offering a specialized service/product and charging a premium price. Positioning is focused on design, quality, new product/service innovation, development, and branding rather than outsourcing, efficiencies, cost reductions and process innovation.

Every company must develop enough value to have at least one advantage to successfully compete in the market. An edge can be achieved over competitors in two fundamental ways;

External Changes

Taking advantage of external changes such as political, economic, socio-cultural and technological factors that affect a company’s external environment - PEST

Internal Changes 

Internal changes drive value through an ability to perform activities that deliver a product or service differentiation, and or do so more cost effectively. Usually, superior differentiation and customer value will be the result of many interrelated activities and strategies used. The best combination of them should be used to pursue sustainable differentiation advantage. Producing goods at lower costs than the market price and or delivering superior products or services is the essence of any sustainable business.

Operational Excellence

Ultimately operational output is the result of execution which relies on leadership to develop product, process and people. How well people and business strategy align is the essence of Organizational Health. The technical side of the business, strategy and associated activities must work well with the adaptive, people side.  

The traditional support activities of M Porter’s value chain like Information Systems (technology) R&D, and Management are highly important drivers for differentiation advantage.

A clear appreciation of capabilities, how well you perform across the activities that combine to deliver desirable customer solution is essential. There are myriad tools and frameworks to determine how well you compete including; 5 forces, SWOT, PEST and variations that have inspired operating frameworks like OGSM - Objective, Goals, Strategy and Metrics. The primary activities of VCA; inbound logistics, operations, outbound logistics, marketing, sales, and service are at the heart of value creation. Lean processing and efficiencies enable cost reduction and competitive pricing. Value add components enable market penetration and or increased margins. Used well they reveal competitive advantages or disadvantages to help a strategist Identify the best sustainable differentiation.

Data, Analytics drive actionable insights across the entire value chain

In a digital world companies need to utilize technology, knowledge, computational power and access to data, whilst recognizing that insights are the new business currency.

The Concept of Health in business

Many company leaders possess the ability to develop the technical side of a business. They develop and tweak strategy, evolve new business models and new capabilities. They are comfortable in the cerebral side of the business equation - defining aspirations, where to play how to win, capabilities, and performance systems - to try and stay ahead of their competition. They spend much of their time levering those drivers, and falling short in the other, greatly influential side of the equation, where adaptive challenges are met by leaders creating a proven process to optimize talent and workforce productivity. To this end managing the forces of workforce (dis)engagement - Job fit, team dynamic, manager effectiveness and culture that directly impact business outcomes is paramount. Identifying and aligning people and business strategy is crucial to driving high-performing teams and gaining a competitive advantage. Lifting the performance of a workforce cannot by delegating to an HR department. It's all leaderships responsibility, and HR leaders are integral to a cohesive leadership team. The whole team executes collectively, succeeds and fails collectively.

Like all aspects of a business, data can and should drive actionable insights throughout the entire value chain including our most value resource- people. Awareness delivers opportunity for an edge. Information leads to insight enabling better, faster decision-making, but also importantly, an opportunity and ability to recover from any mistakes. Errors from inaction are more expensive than those from action. Leaders know they have to take risks to move the dial. Bold leaders develop cohesive teams who lean into this discomfort, and enjoy personal and professional growth from their collective courage. Those that don't prioritize organizational health eventually struggle as  is how their competition creates differentiated value and a sustainable advantage to win in the long run. 

Organizational Health can only happen effectively through appreciation of the ideology and a commitment to disciplined implementation and practice management.

Organizational Health Behaviors – Habits

Business is perhaps the ultimate team sport, and in healthy organizations leaders prioritize team effectiveness, working to ensure  individuals place team results ahead of all else to win.

Similarly to sports, businesses are often outplayed, and lose to less talented, but more cohesive and organized companies. Organizational health is elusive, but it's immediately recognizable.

As captured in the film Moneyball - a true David and Goliath story of deep pockets versus frugal resources - that captures the undeniable advantages of data, analytics and strategy enabling a side with among the lowest payroll to go on an historic unbeaten run purposefully by unconventionally recruiting and driving matchups to win!

Business is no different. Data collection and analysis provide actionable insights . A cohesive leadership develops high performing teams, incorporating people data to help achieve common goals that result from key behavioral principles.

Leadership is cohesive; they earn trust, engage in healthy conflict,  collectively buy-in and commit to what the team backs, and hold each other accountability for results that matter.  This intentional leaderships cascades throughout the company.

Leaders in these companies clearly articulate their vision, values and what they're trying to achieve. Their core values authentically carry behavior, and align to objectives actively representing the principles of the organization. They are integral to all aspects of culture and operations, including hiring. They prioritize the workforce, align talent and business strategies, divest control and see their people shine through achievement. They harness the passion of their people, energy, creativity and full capacity towards aligned goals balancing accountability with compassion. Their resources row in the same direction and great things happen. 

Signs of organizational health are no politics, or confusion, great moral, productivity and low turnover. In healthy organizations’ management, operations, strategy, and culture work well together. People in healthy companies trust and learn from one another, identify issues and recover faster from mistakes. They are more effective at solving problems and make better decisions, faster. Healthy organizations get smarter and better at execution over time. They achieve results closer to their full performance potential and gain a clear advantage. They do not suffer from the inefficiencies plaguing companies with poor health such as - politics, lack of clarity, apathy, ego, employee disengagement, and limited accountability, where behavioral misalignment and inconsistency are their downfall.

Strategy doesn’t typically fail in formulation. It fails most often through implementation, the execution in the trenches, when people don’t have the necessary skills or attitude to perform. Accountabilities are not held, so fail. The where you are going is not effectively turned into the how to support and achieve the goals to drive the results necessary to deliver desired outcome(s).

Where to begin

It is helpful to start with the end in mind, and begin with the vision. A company’s vision shines a light on aspirations, strategy illuminates a path to achieve them.

We have a complete set of simple concepts, practical tools, data science solutions that have helped hundreds of organizations and entrepreneurs get what they want from their businesses. Organizational and data diagnostics provide an evidence based view of your companies operational deficits enabling a roadmap for engineered improvement.

The application of data science for actionable insights underpins our approach. See why becoming insight driven is critical to a companies future and how Data science as service - DSaaS can help you accelerate that journey.

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