What Business Are You In?

by Jay Deragon on 06/11/2012

If you ask most executives what business are they in the likely answer will be an attempt to describe their product or service. The reality is everyone is in the same business but they fail to recognize what business they are in.

Many would  say that it is their products or services that set them apart from the competition. Others would say it is their performance, market share and some would say their strategies is what create the differential.

Most of the top global firms have a vision, mission and strategy yet none of those things define the business they are in.  The biggest struggle of any business is to define the business. Without that definition one cannot achieve a clarity of purpose or address the root cause of the one issues that drives the business.

The Duh Moment

Over the last ten years it seems that organizations are awakening to the value of soft issues that have the greatest impact on performance. Soft issues refer to “culture or human resources”, you know the kind of things that nobody seems to understand and they have an extremely difficult time measuring. Yet an organizational culture has significant impact on performance.

As Prof. James L. Heskett wrote in his latest book The Culture Cycle, effective culture can account for 20-30 percent of the differential in corporate performance when compared with “culturally unremarkable” competitors.  Committed and engaged employees who trust their management perform 20% better and are 87% less likely to leave an organization, resulting in easier employee and management recruitment, decreased training costs and incalculable value in retained tenure equity. In addition, analysts indicate that the financial performance of publicly-traded companies on the 100 Best Company List consistently outperform major stock indices by 300% and have half the voluntary turnover rates of their competitors.

Organizational culture is the collective behavior of humans that are part of an organization, it is also formed by the organization values, visions, norms, working language, systems, and symbols, it includes beliefs and habits. To avoid understanding it and deny its impact on performance is like saying you don’t need air to survive. Without it you won’t.

Duh is when we get the blindly flash of the obvious which we should have known all along. The business that everyone is in is the people business. People create products, processes, services, relationships and commerce. To think that there are actually organizations engaged in the marketplace that miss this fundamental truth is a sad commentary on the evolution of leadership and management thinking.

And we wonder why organizations don’t understand the value and subsequent impact social technology has on business. Duh!



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