By Damani Short
Focus on Fundamentals of Business
At the start of 2022, many business leaders find themselves staring down the barrel of change. They’re dealing with challenges related to inflation, turnover, worker shortages, and persistent supply chain issues, to name a few. The thing is, change is always happening, and so businesses are in a constant state of change; most of which have multiple transformation initiatives underway and/or in the pipeline.
Most of the organizations we engage with remain focused on addressing key business fundamentals, including the following:
- Modifying their production and distribution footprints along with a sourcing overhaul
- Enhancing their product development pipeline
- Embarking on any number of customer experience initiatives
- Driving a pipeline of margin improvement projects
- Addressing service levels and fulfillment
- Expanding into new markets
At Lexico, we position ourselves to help address these and other situations by making sure core fundamentals remain front and center in our clients’ thinking. A key driver behind this approach includes collaborative workshopping, teaching by doing, and accumulating quick wins early in the transformation journey. These approaches help executives learn a new lexicon, develop new muscles, and bolster their confidence early in their ability to win together.
What are Fundamentals?
Fundamentals in business refer to the basic principles and key elements that are essential for the success and sustainable growth of a business. These fundamentals provide a solid foundation for business operations and decision-making. While the specifics may vary depending on the industry and context, some common fundamentals in business include:
- Vision and Mission
- Strategy
- Value Proposition
- Market Analysis
- Business Model
- Operations and Processes
- Financial Management
- Marketing and Sales
- Human Resources
- Adaptability and Innovation
These fundamentals are interconnected and collectively contribute to the success and growth of a business. They provide a framework for making strategic decisions, managing operations, and creating value for customers and stakeholders.
6 Most Important Business Fundamentals
Modifying their production and distribution footprints along with a sourcing overhaul
This enables companies to adapt to changing market dynamics and gain a competitive edge. By optimizing their operational footprint, businesses can achieve cost efficiency, reduce transportation costs, and minimize inventory holding expenses. Such modifications enhance supply chain resilience by diversifying sourcing options, mitigating risks, and ensuring continuity of operations. These strategic adjustments allow businesses to respond to evolving customer demands, improve responsiveness, and capitalize on emerging market opportunities. Ultimately, these fundamental changes contribute to increased profitability, operational efficiency, and long-term sustainability.
Enhancing their product development pipeline
This fosters innovation, drives growth, and maintains a competitive advantage. By continuously investing in research and development, businesses can introduce new and improved products or services to meet evolving customer needs. A robust product development pipeline enables companies to stay ahead of the competition, expand their market share, and capture new opportunities. Additionally, it allows for diversification, the exploration of new markets, and the ability to adapt to changing industry trends, ensuring long-term success and relevance in the marketplace.
Embarking on any number of customer experience initiatives
Embarking on customer experience initiatives is a critical business fundamental as it directly impacts customer satisfaction, loyalty, and overall success. By prioritizing the customer’s journey and consistently delivering exceptional experiences, businesses can differentiate themselves from competitors. Customer experience initiatives can involve enhancing communication channels, personalizing interactions, streamlining processes, and improving post-purchase support. These initiatives not only foster customer loyalty but also drive positive word-of-mouth, repeat business, and customer advocacy, leading to increased revenue and sustainable growth.
Driving a pipeline of margin improvement projects
Driving a pipeline of margin improvement projects is a crucial business fundamental as it focuses on enhancing profitability and financial performance. By continuously identifying and implementing initiatives to increase margins, businesses can optimize their cost structure, improve operational efficiency, and maximize revenue generation. These projects can include activities such as supply chain optimization, process automation, pricing strategies, and cost control measures. By driving margin improvement, businesses can strengthen their competitive position, invest in growth initiatives, and ultimately achieve long-term financial sustainability.
Addressing service levels and fulfillment
It is important to directly impact customer satisfaction, loyalty, and brand reputation. By ensuring timely and reliable delivery of products or services, businesses can meet customer expectations and build trust. Addressing service levels involves optimizing processes, inventory management, and logistics to minimize delays and errors. Fulfillment efficiency contributes to customer retention, positive reviews, and word-of-mouth recommendations, leading to increased customer loyalty and sustainable growth in a highly competitive marketplace.
Expanding into new markets
Expanding into new markets is an important business fundamental as it opens up opportunities for growth, diversified revenue streams, and reduces dependency on a single market. By entering new markets, businesses can reach a larger customer base, tap into emerging trends, and capitalize on untapped market potential, ultimately driving long-term profitability and business expansion.
Recognizing and Addressing Friction
It’s easy for an organization to get caught up in friction when change threatens to shake up its culture, or alter the way people work. Even if people and teams are excited at first, positive energy can wane. Suddenly, a change initiative can bog people down, especially if employees feel like you’re forcing them to do things differently.
This can create a wide range of emotions and responses. Suddenly, people may start operating from a place of fear, afraid that if they don’t go along, they’ll lose their place in the org chart. While fear can be a powerful motivator, it’s not the best way to sustain engagement and ultimately, change over the long run.
In one recent engagement with a global industrial manufacturer, the client hit points of friction at two distinct stages. The first came early on, well before the heavy lifting started. At this phase, the client was simply trying to adopt a new way of thinking.
After an acquisition, they exceeded the billion dollar mark. While their top line continued to grow, they weren’t seeing improvement in margin performance. Through an extensive business assessment, we helped bring visibility to the fact they had widely varying operating processes and systems. With that in mind we assembled eight of the most influential VPs from around the globe and set out to develop enterprise value streams. We built multi-year roadmaps within each value stream rolling up to an enterprise roadmap integrated across those value streams. A lot of the upfront work required learning a new lexicon and collaborating cross-functionally and globally; both of which were largely foreign. With 2,200 professionals spread around multiple countries and time zones, it was clear that they were geared towards working in silos, and weren’t too keen on building new collaborations.
To address this early friction, we spent a lot of time on ‘the why’ and facilitated cross functional, global working sessions which allowed these leaders to ‘learn by doing’. As it stood, senior leaders had targeted ‘improving communication’ as one of the initiative’s goals. We needed to take what we heard from the C-suite, and translate it to teams in ways that meant something to them. That way, they could put this information to use. To do so, we used examples that were relevant to their day-to-day operations. This smoothed out a number of tension points, and helped to create the team-wide confidence we were hoping for.
The second round of friction came later, after we’d entered the heavy lifting phase. By now, we were in the midst of developing a common way to look at their value stream, assess their maturity, and complete a roadmap for the future. This time, the friction was less about people, and more about the calendar: their budget cycle was coming up. The project lead faced a mandate: complete the roadmap such that investments were in context of the roadmap, or their investment requests were disqualified from funding consideration.
Having ironed out the earlier friction, and created confidence through small wins, we were able to turn this time-based pressure into fuel that pushed the initiative forward. We kept visibility on this pressure point high by letting org leaders know what was at stake. In the process, this helped to galvanize teams toward hitting the milestones that they’d dedicated so much time and effort toward achieving.
Conclusion
Very few businesses take on change purely because it seems like a good/right thing to do. Often, leaders feel like they have no choice, or that their choices have gotten down to one of two options: change, or die.
In this reality, moments of friction will happen—there’s simply no getting around it. What matters more is how leaders and teams respond to friction when it happens, no matter where it comes from, or when it arrives.
When you keep your business fundamentals at the center of your thinking, and focus on building small wins at every step, big challenges become more manageable, and teams that may have never had contact before suddenly galvanize around a shared purpose.
Lexico partners with executives to realize the value and outcomes that their transformation work is intended to deliver. Tell us about the changes you’re facing in 2022, and find out how we can support your initiative.