I am one of those people that likes to look at complex problems from a very high, fundamentally simple perspective. If you can get a firm grasp of the basics, you always have a better chance of dealing effectively with the tactical details of a problem.

I have often pondered the basics of business and, as I wrote in a previous post about Peter Drucker’s writings, many organizations have not addressed, nor do they understand, their own business basics. The other day I was thinking out loud in my trusty Moleskine notebook and came up with this:

The top two level are straight from Drucker. The top level of the diagram Ongoing Operations means that the ultimate purpose of the enterprise is be able to meet customers’ needs in the future, i.e. the company needs to be sustainable. The second level Reasonable Profit, means that organizations do not exist to maximize profit, but rather to make the right profit to ensure the company’s existence in the future. Often profit maximization in the short-term actually hurts an organization’s long-term prospects.

So with an understanding of the top of the pyramid, let’s jump to the bottom and work our way back up. At the base are the fundamentals. There are three things that must be present if any organization hopes to survive.

• Business Plan - What is the underlying concept of the organization, what is its product/service and how it is delivered?
• Qualified Employees - Does the organization poses the requisite skills to deliver the business plan?
• Efficient Operations - Can you execute the plan within budget?

Though a solid foundation layer is a necessary condition to achieve the ultimate objective of Ongoing Operations, it is not, in and of itself, a sufficient condition. So we go to the next layer, Engaged Employees. Just because you have employees that are capable of doing the job well, does not necessarily mean that they will perform well. They need to be willing to exert their discretionary effort to achieve excellent results and discretionary effort comes from engaged and passionate employees, ones that believe in the organization and what it is trying to accomplish.

When you have Engaged Employees on top of a solid foundation you get Effective Operations. That means better R&D, better Production, better Sales & Marketing, all leading to better products and services. When you do it right you create Engaged Customers, people that want to interact with you. If you listen to your customers and they are listening to you, you have the opportunity to create and deliver value for your customers, and ultimately the customer’s perception of value is what it is all about. If they receive value, and you have done everything else right, you get to receive a Reasonable Profit and live to create value again through Ongoing Operations.

Whew!

OK, assuming you buy into the model…so what?

In future posts I plan on using this model to show how social media and connected enterprise initiatives can be effectively integrated into a business, and why you would want to.