6.2 Organizational Direction
What Business Are We In?
This section ‘What Business Are We In?’ was built from the lecture slides of Kathleen Rodenburg and the article of Michael Porter. This section was written by Michael Conway, a fourth-year student at the University of Guelph.
To identify which business an organization resides within, there are two key elements to consider. The first element an organization must identify is the features that its product or service provides. A feature is a physical or tangible component that enhances the value of a product or service. From a product perspective, we can look at an example like Nike. Nike sells running shoes; however, the key features of the shoes are components such as the weight, flexibility, quality of the material, and the design. From a service perspective, we can examine a company such as LinkedIn. LinkedIn provides its users with access to job postings, employer and employee information, the ability to connect with new people and promotional opportunities. Therefore, LinkedIn provides a variety of features including targeted advertising, online courses, career information, and much more.
While it is important to distinguish the different features a business provides, it is equally, if not more important to identify what benefits these features generate for the end consumer. A benefit is the advantage the consumer gains in order to accomplish their goal. For instance, Nike provides its consumers with the ability to run faster and more comfortably due to the different features it provides. LinkedIn provides their customers and consumers with a benefit since it allows them to effectively connect with a desired company or individual.
Identifying features and benefits help us answer the question ‘What Business Are We In?’. For example, for decades Blockbuster identified their business as being the ‘movie rental business’. However, as the external and macro-environment transformed, Blockbuster quickly began to lose significant market share due to the emergence of online streaming. This is because Blockbuster improperly identified the business in which they were in. When examining the features and benefits of Blockbuster, it is clear that the primary benefit Blockbuster provided its consumer was the ability to create an at-home entertainment experience. As streaming services such as Netflix emerged and provided a more convenient option, they quickly replaced Blockbuster in the at-home entertainment business.
What Are Our Objectives?
Your mission statement affirms what your organization is generally committed to doing, but it doesn’t tell you how to do it. After establishing why you exist as an organization, visionary companies set an organizational direction by identifying what business they are in, in terms of both consumer benefits, and by setting both short and long-term goals. In lecture we will dive deeper into ‘how to define a business.’
Goals are major accomplishments that the company wants to achieve over a long period. In order to challenge and manage an organization, SMART is an often-applied acronym that guides the development of goals. A SMART goal is one that is:
Specific: The who, what, where, when, why, and the which involved with the goal. Define the goal as much as possible with no ambiguous language.
Measurable: Can you track the progress and measure the outcome? How much, how many, and how will I know when my goal is accomplished?
Attainable: Is the goal reasonable enough to be accomplished? Make sure the goal is not out of reach or below standard performance.
Relevant: Is the goal worthwhile and will it meet your personal and your organization’s needs? Is each goal consistent with other established goals, plans, and timelines?
Timely: Your goal should include a time limit. It will establish a sense of urgency and prompt better time management.
Objectives are shorter-term performance targets that direct the activities of the organization toward the attainment of a goal. They should be clearly stated, achievable, and measurable: they should give target dates for the completion of tasks and stipulate who’s responsible for taking necessary actions.
An organization will have a number of goals and related objectives. Some will focus on financial measures, such as profit maximization and sales growth. Others will target operational efficiency or quality control. Others will govern the company’s relationships with its employees, its community, its environment, or all three.
Finally, goals and objectives change over time. As a firm reassesses its place in its business environment, it rethinks not only its mission but also its approach to fulfilling it. The reality of change was a major theme when the late McDonald’s CEO Jim Cantalupo explained his goal to revitalize the company:
“The world has changed. Our customers have changed. We have to change too. Growth comes from being better, not just expanding to have more restaurants. The new McDonald’s is focused on building sales at existing restaurants rather than on adding new restaurants. We are introducing a new level of discipline and efficiency to all aspects of the business and are setting a new bar for performance.”
This change in focus was accompanied by specific performance objectives—annual sales growth of 3 to 5 percent and income growth of 6 to 7 percent at existing restaurants, plus a five-point improvement (based on customer surveys) in the speed of service, friendliness, and food quality.
In setting strategic goals and performance objectives for Notes-4-You, you should keep things simple. Because you need to make money to stay in business, you could include a financial goal (and related objectives). Your mission statement promises “high-quality, dependable, competitively priced class notes,” so you could focus on the quality of the class notes that you’ll be taking and distributing. Finally, because your mission is to serve students, one goal could be customer-oriented. Your list of goals and objectives might look like this:
- Goal 1: Achieve a 10 percent return on profits in your first five years.
- Objective: Sales of $20,000 and profit of $2,000 for the first 12 months of operation.
- Goal 2: Produce a high-quality product.
- Objective: First-year satisfaction scores of 90 percent or higher on quality of notes (based on survey responses on understandability, readability, and completeness).
- Goal 3: Attain 98 percent customer satisfaction by the end of your fifth year.
- Objective: Making notes available within two days after class, 95 percent of the time.
Consider how SMART these goals and objectives are.