How Can Structural Diversity Add Business Value?
Individuals may often drive businesses. But in order to build true value, a business needs systems and procedures. Also, an over-reliance on a small number of key customers or a limited number of suppliers leaves companies prey to structural weaknesses, which drag down their business value.
Personalities, Processes and Dependencies
If a business has people in key roles but the personality, rather than the process, drives things, then this is an area of potential vulnerability. For example, in sales, if customers are buying from a person, rather than from the business, what happens if that person is no longer there? The same can apply to other areas of business activity, such as marketing.
To build and retain business value, a company need to be able to demonstrate that it is structurally sound. This means having scaleable processes in place that are not dependent on the personalities involved, but rather on the roles they fulfill.
When it comes to customers, over-reliance on a single base, or limited number, can result in a reduction in business value. The question to ask is, how is the business getting paid? If it is overly dependent on a limited of income sources, or even a single source, then it is vulnerable.
Similarly, with the supply chain, if this involves a dependency on a single supplier, or few suppliers, then what happens if the supply chain is disrupted, or the supplier increases charges? In essence, the business value is at the complete mercy of external decisions and changes.
Diverse Structural Solutions
Cementing value requires optimising independence. True independence requires flexibility and adaptability. In practical terms it means having structures and procedures in place that ensure a business will run regardless of who is in place running it.
It also means that approaches to the customer-base and supply chain need to be more adaptable. Can the business have wider appeal, and can it draw from a bigger pool of suppliers?
Value building requires looking dispassionately at how a business works, identifying its structural weaknesses, and finding ways to remedy them.
Uscita Solutions have produced a guide for you to discover more about Structural Weakness, and 7 other Drivers that can improve the value of your business. To download your copy of this guide, please click here.