Guiding organizations by value amidst uncertainty — Business & Business Owner
Business, business entity and a business owner from a value perspective
Defining Business from a value lens
When change is the order of the day with chaos & confusion being the norm, how to keep your head up, make incremental improvements while keeping the long term story and meaning intact?
These are the questions that would come around for anyone who is trying to setup a team or an organization from the scratch while the expectations are high. The burden seems to be weighing more, crushing the ability to decide and move forward. Problems are aplenty and constraints appear out of nowhere. But, amidst all these, the one who is focussed on the end goal would always triumph.
This article is a multi-part series where, we will explore how to find that focus and create a story by using “value” as a guiding principle to shape all things around us.
Part 1: What is a business from value perspective?
Part 2: Starting point: Vision and Mission
Part 3: Value, Value, Value! — Different perspectives of business, employees and end customers
Part 4: Defining KPIs and creating order from chaos
Part 5: Summary
Let us get started!
While discussing about organizations, let us look at some common definitions of terms:
Business: Activity of buying and selling goods and services
Business Entity: Organization created by an individual or individuals to conduct business, engage in a trade, or partake in similar activities
Business Owner: An individual or group who owns and operates a business, small or large, with the aim of deriving profit from its successful operation.
All of above seem quite evident and concise. But, they definitely are not precise due to over-simplification. These are definitions of “What is X?”, but does not answer the important question of “Why does X exist?”. For that, we need to get a little philosophical.
What is a Business Entity?
The fundamental reason why a business exists is because it facilitates value exchange. It brings people and organizations together through process and technology thereby acting as the melting pot for value exchange between those who create value, those who consume it and those who transform it.
A business is an activity of exchanging value between creators and seekers.
In most of the cases, the primary means of exchange seems to be money. But, there can be businesses that have relations that are not directly based on money. Example: Facebook’s relationship with you is not primarily driven by money. But, its relation with advertisers is its core business model. So, in this context, what exactly is a business?
A business entity is one that organizes the effort of facilitating value creation and exchange between various actors with an overall aim to create a net positive value for its owner.
Note that the above definition of business entity is not constrained to monetary value. Often it is a combination of monetary value and economical / indirect benefits. Going beyond business value, recently, about 200 CEOs of top US firms came together and declared that shareholder value generation is no longer the main focus of publicly listed companies. A business also has responsibilities to create tangible values for customers and society as a whole.
The above illustration lays out a general business activity from the perspective of value generation, organization, communication and exchange.
Who is a business owner?
Now, let us focus the attention of a business owner which many of us owning a team or a business is aspiring too. It is very valid to imagine a team as a business entity within a larger setup. Again, with the modern era of freelancers, contractors, investors etc., almost everyone can be a business owner. But, what is a true business owner? If you own a business, but the business can’t function without you, then are you a true owner of the business? Until you can remove yourself from the daily activities of business, you are still a self-employed person than a business owner. If the founder of an entity is still involved in it’s day-to-day activities, they belong to the group of “self employed” than a “business owner”.
A business owner is one who is enjoying the return of investment that they had put in to create the business entity and achieved break even in terms of ongoing investment vs return.
Until the return of investment happens without significant involvement, they are not a true business owner. Hence, the primary objective of an aspiring business owner is to setup a true business entity that is self sustained. To do that, they need to figure out the business, it’s true purpose in the ecosystem and finally delegate their work to the leadership team.
The graph above illustrates this aspect as a journey of a founder. As activity increases in the startup it is crucial for founders to focus on delegation to create a self-organizing and self-sustaining business entity. The level of delegation naturally would increase as the founders and leadership team become more aligned on the value proposition and understand the role of their business.
What means success for a business?
“Success is the creation of value — economic & social benefits and outcomes that serve a purpose for the people they are intended to help, while maintaining profitability in accordance with a set of values that the organization subscribes to.”
In other words, the simple objective of a business entity is to create value and extract value from the setup. Evidently, success is a natural outcome for a well positioned value proposition. But in practice, getting a balanced value proposition becomes extremely difficult to formulate and get alignment across the board.
Another measure of success is the ability for a business entity to survive and exist. Only during tough times we will differentiate between money guzzlers and value generators. It is the latter that will survive the testing times. But, how do we know if we are value generators? For that, we need to start putting together success metrics that we can objectively measure and track. This brings us back to define the fundamental objective for their business — the reason for its existence in an objective way. A business owner will need to define who their customers are, what their business would do for them and how their business can make money through the relationship. But, each aspiring business owner will need to work within their constraints.
There is always a limited budget for a limited time and so is the patience of the sponsors & VCs. It is vital to get the balance right from the start and the expectations set.
In the next part, we will delve into actions: what is the starting point and how to ensure alignment between leaders by defining a clear vision and mission
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While you have a lot at hand during initial stages, prioritization through a first principles scientific approach will be key. Have a look at my other article in this subject:
About the author
Shyam is the Head of Data for Global SmallHolder farming solutions at Yara. He had helped multiple businesses with their data, analytics and data science strategy. While being a hands on data scientist himself, he strongly puts the focus towards data foundations and value generation rather than jumping the gun on data science.
Shyam has built multiple tech & data teams from scratch in startups as well as large corporates. He is passionate about delivering value & impact to business by building capable teams enabled by right process & technology.
Please feel free to contact Shyam if you want more information or have an open conversation on setting up your business, department or a team.
