Business Maturity Index™
Gauging Your Success
By Manuel Palachuk
I do believe that any business needs a way to benchmark its overall maturity and I do not believe it is necessary for it to be relative to any other business. Of course if the measuring system you select can in fact help gauge your maturity relative to other businesses, especially if they are similar yours, then of course this can be a nice additional feature. But it all starts with the empirical question: Are we actually maturing as an organization? Its fair enough to say that if we can actually answer this question in any substantial way, the very next question will in fact be: How mature are we compared to other companies that do what we do? This then is where that previously mentioned “nice additional feature” comes in.
While developing my coaching system and the writing of my upcoming book Getting To The Next Level I recognized the need for such a measurement tool but have found nothing that suited my purpose. Most everything I came across touches on some aspects or elements of your business but there was nothing to take it all in and see the big picture across the many aspects of a business. As you may know I found it most common to find tools for measuring the financial health of your business and even your standings relative to other businesses with similar operations. But if you measure the maturity of any business solely on their financial strength and position I know you are missing a significantly large portion of that businesses true maturity indicators. In fact I propose that the financial strength is not even a factor in a business’s maturity. How they manage money and how their systems deal with finances, however, is.
The Initial Framework
Any business can be defined by, broken down into, and evaluated on a finite number of functions. I must first note that I prefer the term Value Aspect to Function as it is a more accurate term to describe the fluid and symbiotic working of a business versus the strict segmentation of processes that are performed routinely and the value they create. My list of ten Business Value Aspects that are used throughout my Coaching System and here in The Business Maturity Index are outlined below. They were derived from a careful culmination and evaluation of the business functions consistently used by leading business management masters over the last fifty plus years.
In my evaluation I found the standard list of commonly used business functions was adequate but it was misses a very specific value aspects of an operation that I find is significantly overlooked in the modern business of today. We do business very differently than ever before in today’s interconnected world. We do business and collaborate with suppliers, partners and clients all over the world as if they were right next door, twenty four hours a day. But we are horrible at communications and collaboration. For this reason I have called out an additional and specific Business Value Aspect: Communications and Collaboration.
One you have defined the Business Value Aspects you can call out the critical Success Elements each Business Value Aspect will be evaluated for. I have selected and detailed below the five most critical Success Elements for any Business Value Aspect based on my vast business experience and some very detailed research. Unlike the list of Business Value Aspects, the list of five Success Elements I’ve selected are completely subjective. That is, you could freely dispute and toss out any or all of them and replace them with your own list. You could expand the list or you could value weight the list but I have very specific my reasons for selecting them for use in my system.
I encourage you not to change the list of Success Elements but instead, read on, be open and receptive to my presentation, accept the list, and call me out on any Success Element you believe is inappropriate or irrelevant. I’m certain it would spawn a great conversation! If you do however elect to change the list in any way I do request you follow a few simple rules. 1) Each Success Element must be equally applicable to any of the ten defined Business Value Aspects. 2) A Success Element must not directly conflict in its definition with any of the ten defined Business Value Aspects. If you choose to weight one or more element you must ask very pragmatically: Why is it OK to weight this Success Element’s effect on the overall maturity of this Business Value Aspect?
Now that everything is broken down nicely into ten Business Value Aspects and each Aspect is going to be evaluated on five specific Success Elements we just need to decide how to evaluate them. Luckily the majority of our work has already been done making this the easy part. We will simply define and apply a Capability Maturity Model to each of our five Elements. What is a Capability Maturity Model? Without getting too much into the details, As early as the 1970’s the concept was conceived for bench-marking the maturity of processes and how well they are being actively adopted and accepted as culture with respects to the quality of products and services. As time moved forward large strides were made by Carnegie Mellon University while working with the U.S. Department of Defense. Suffice to say, there is now a universally accepted Capability Maturity Model that can be adapted to pretty much anything.
A maturity model is simply a structured set of levels which can express how well the processes, procedures, and best practices of an organization are becoming the “embedded as culture” behaviors that can reliably and sustainably produce the desired and optimum outcome. I like to consider it an expression of how well your company Culture and Compass have been adopted. This tools fits our needs well as it can be used as a benchmark for comparison and as an aid to understanding and growth throughout the organization.
As you will see shortly, the Capability Maturity Model (CMM) applied to each Success Element of a Business Value Aspect has been specifically customized for that Success Element. We cannot gauge the maturity of our Leadership the same as we gauge the maturity of our Knowledge Management. The terms and the scale are much different. But once we’ve defined the CMM for an Element, it is not changed regardless of what Business Value Aspect we apply it to. Again, the maturity of any Success Element is evaluated across all Business Value Aspects exactly the same.
The Model In Action
We have ten Business Value Aspects broken down into five Success Elements and each Success Element has a simple five level scale to represent the maturity of that element. Assuming we perform an honest and deeply introspective evaluation of each and every Success Element for each of all ten Business Value Aspects we will end up with a specific and realistic Maturity Level for each Business Value Aspect. If you were paying attention you should have noticed that there are 5 Success Elements and each has a scale of; from 1 to 5.
To keep things very simple and concise we will add together the Success Element totals for a given Business Value Aspect and divide the total by 5. The result is a single number between 1 and 5 that represents the Maturity Level for this Value Aspects of your business. Referring to our example, you could actually state that you have Maturity Level of 2.6 for the Communications and Collaboration Value Aspect of your business. Further, we will add the results for each of the ten Business Value Aspects together and divide by 10 to come up with our Business Maturity Index™. This is the overall cumulative Maturity Level of all Business Value Aspects.
I now refer you to the Business Maturity Levels represented in the graphic below. This is a widely accepted Competency Model for Business Maturity. Referring back to our example, you can confidently state that you have an overall Business Maturity Index™ of 2.76. Combined with the Business Maturity Level graph below you can benchmark your Business Maturity and if you like, even compare it to other companies regardless of their industry, products, or services.
You can find the fully functioning Self-Evaluation version of the Business Maturity Index™ right here. There is a Business Maturity Level graph at the top of the page for reference and you can even request a copy of the results be emailed if you’d like. 🙂
What I have proposed here is a straight forward method using a framework build from worldwide business and industry accepted standards for gauging an organizations overall business maturity. For my purposes this tool is a critical step in evaluating any business and deciding on what the Next Level looks like. In my coaching system I use a very customized Agile Project Collaboration Portal and it drives what I call the Business Agile Strategy Execution. For my clients benefit, the Business Maturity Index™ fits in nicely with the entire system. When we are defining their Business Roadmap and Strategy my clients can specifically tell that they are moving from Service Delivery 2.9 to Service Delivery 3.0. And this means their entire business is measurably Getting To The Next Level.
It know this system is highly subject to scrutiny and criticism but it is provides a much needed tool that fulfills my initial requirements and it can help any business benchmark their state and progress. I do believe it will catch on and as I mentioned, I will be using it in my coaching system. I will not get too much into the details of each Business Value Aspect and only so deep into the details about each of the Success Elements below because I will be detailing them in full in my upcoming book. Also, I don’t want this article to become any more of a short story than it already is.
I believe that any tool like the Business Maturity Index™ should bear the progressive Version # indicating its own maturity and so I will do so. At the time of this writing the Business Maturity Index™ is at Version 1.0. You will find the Version # just below the Business Maturity Index™ Calculator title. Please feel free at any time to strike up a discussion about the Business Maturity Index™. I would love the feedback and I always have time for people who are working on getting to the next level.
The Ten Business Value Aspects
As I mentioned earlier I will not be detailing each Business Value Aspect here. I do believe most are self=explanatory but I will make a few clarifications. First, I use the term Business Value Aspect versus Business Function specifically because Value Aspect more correctly describes the symbiotic relationship of the processes, procedures, and operations that are routinely performed throughout an organization to attain the ultimate mission. Mostly when planning and certainly when managing these function boundaries cause segmentation that restricts our ability to craft robust strategy.
Second, I must clarify the differences between the Business Value Aspects: Production Operations and Service Delivery. It is significantly different depending on whether your business is Service-centric or Product-centric. If you business is a Bakery or a Shoe Manufacturer these two are distinct and simple. As a Baker, your Production Operations is everything about making bread products. If your business is a Shoe Manufacturer, Production Operations is about making shoes. For both of these businesses the Service Delivery is about servicing the items you’ve sold including: Sales counter, repairs, replacements or returns, scheduling, etc.
If however your in a Service-centric business such as Heater Repair or IT Computer Services, it can get a little confusing. I will preface with this question: Are you creating something that will require service or are you delivering the service of that thing? Your Production Operations is the build out of a unit (Heater or Server) before it is delivered. It is nearly everything related to the scope and delivery of a project and can also include the project hours for everyone involved. Your Service Delivery is the administration of service for all those things the client purchased and needs maintained. It usually includes your Service Manager, Service Coordinator, and the majority of your service delivery staff. It is all the support your client needs for all those things you built or set up for them.
This implies that your higher level engineer team and the design function of their job is part of Production Operations while the Tier Three support function they provide to help your service team is Service Delivery. You could also think of it this way; in the service industry time is your widget. If you are creating a need for the widget or creating some thing that gets widgets sold out the door (a project) it’s Production Operations. If it’s just delivering the widgets, maintain the things you’ve sold, its Service Delivery.
Although the Business Value Aspects listed here are in what I believe to be a specific priority order there should be no misunderstanding that not one aspect can be either, done without, ignored, or otherwise neglected. You must have balance and symmetry in the operation of your business or you will be running lopsided and you will not get to the next level. The failure of even one Business Value Aspects to properly mature will keep your entire organization from getting to the next level. It is a physical impasse and is always revealed upon scrutiny.
Communications & Collaboration
This Value Aspect of your business focuses on all functions and activities related to Communications & Collaboration throughout the organization.
Finance & Accounting
This Value Aspect of your business focuses on all functions and activities related to Finance & Accounting throughout the organization.
This Value Aspect of your business focuses on all functions and activities related to Human Resources throughout the organization.
This Value Aspect of your business focuses on all functions and activities related to Marketing throughout the organization.
This Value Aspect of your business focuses on all functions and activities related to Organization Infrastructure.
Procurement & Logistics
This Value Aspect of your business focuses on all functions and activities related to Procurement & Logistics throughout the organization.
This Value Aspect of your business focuses on all functions and activities related to Production Operations throughout the organization.
Research & Development
This Value Aspect of your business focuses on all functions and activities related to Research & Development throughout the organization.
This Value Aspect of your business focuses on all functions and activities related to Sales throughout the organization.
This Value Aspect of your business focuses on all functions and activities related to Service Delivery throughout the organization.
The Five Most Critical Success Elements of Each Business Value Aspect
Here are the five most critical Success Elements of any Business Value Aspect, again in priority order. The five Success Elements are detailed here only to the extent necessary for you to grasp the overall idea. I will make one note about the last two Success Elements and address any idea you may have of either eliminating or replacing them. The last two Success Elements are “Six Sigma” and “Lean” and they have a greater significance than most will recognize.
Six Sigma and Lean represent the Yin and Yang of your organizations Continuous Incremental Improvement. They are present and manifested in EVERY organization whether you believe it or know it or not. It is only the naming and clarifying of a structure protocol and formality that gives one the impression that they are only for big companies or do not exist in every corner of every entrepreneurial endeavor around the world. As you will read shortly, these two address a single end result but from two opposite sides. This is why I refer to them as the Yin and Yang of Continuous Incremental Improvement.
Yin is the quiet mind and active body while Yang is the quite body and active mind. Both are ever present, it is only if you chose to develop them. I suppose the best and most accurate correlation is to consider Six Sigma and Lean as the two most prominent options for creating anything, such as a piece of art. Six Sigma is building up something from nothing but only ever selecting actions and materials that will give value. A painting for example. Lean is starting with something and then only removing materials that do NOT give value while having the discipline to refraining from actions that also would NOT give value. A sculpture for example.
Now, you can replace Six Sigma and Lean with two items you find to be significantly more relevant for your industry as a whole or your organization by itself but you must follow the rules outlined previously or your entire index will be skewed. I highly suggest you adopt the idea that these things exist and are tangible even if it means accepting that your company is very immature in these elements.
Leadership and Staffing
This Success Element addresses the concept of “First who then what” as introduced by Jim Collins in the book: Good to Great coupled with the concepts of Autonomy, Mastery, and purpose introduced by Daniel Pink in his book: Drive. This Success Element strongly determines how well the organization mission, vision, culture, and compass are adopted from the top down. The maturity of our leadership and staff also strongly effects our ability to successfully cultivate talent from within.
If we do not have a mature team (leaders and followers), we will not get the desired results of our grand plans. e.g. Selling the organization roadmap and strategy to our own people let alone being able to execute on them. We strive for Leadership and Staff that possess emotional intelligence and are mature in their understanding and mastery of each Business Value Aspects as this as these are the true determinants of our ability to leverage knowledge and actualize operational philosophies.
- Level 1 = Chaotic – Yea, we’re very mature. We’re all adults here! - Relative to this Business Value Aspect, our people have low competence but high commitment, our leadership is mostly oriented toward instructions for the task versus development of the person. Overall we have low autonomy, mastery, and sense of purpose.
- Level 2 = Aware – We recognizes the importance of having the right people - Relative to this Business Value Aspect, our people have growing competence but low commitment, our leadership is mostly oriented toward coaching staff and selling the company culture. Overall low autonomy, medium mastery, and a developing sense of purpose.
- Level 3 = Enabled – We recognizes the significance of Autonomy, Mastery, and Purpose - Relative to this Business Value Aspect, our people have high competence but a varying commitment, our leadership is mostly oriented toward supporting and sometimes still participating in work. Overall developing autonomy, high mastery, and a developing sense of purpose.
- Level 4 = Managed – We actively invest in the cultivation of our leadership and talent - Relative to this Business Value Aspect, our people have high competence and high commitment, our leadership is mostly oriented toward delegating and organizing work. Overall strong autonomy, high mastery, and strong sense of purpose.
- Level 5 = Optimized – We have a robust people process and we create our own success - Relative to this Business Value Aspect, our leaders possess emotional intelligence and they develop staff effectively through coaching, mentoring, development programs, and learning projects. Our staff largely posses both the internal and external core competencies required to demonstrate their ability to develop, grow, and self-nurture for sustainable success. Overall high autonomy, mastery, and sense of purpose.
This Success Element addresses the creation, maintenance, and dissemination of Explicit and Tacit knowledge within the organization and when necessary, outside the organization. Although KM should be a core competency of any organization it is often significantly segmented and each Business Value Aspect has a KM maturity that is usually relative to the maturity of the other Success Elements of that Business Value Aspect.
This Success Element includes (but is not restricted to): Processes (Internal & External), Policies, Standards, Procedures, Best Practices, Documentation, Training, and Learning.
- Level 1 = Chaotic – Yea we have some notes on this somewhere! - We’ve documented a few critical things relative to this Business Value Aspect but the documentation process and quality depends greatly on heroics and effort of a few key people.
- Level 2 = Aware – We’ve got a place to put everything and everybody’s on board - We recognizes the importance of Knowledge Management relative to Business Maturity and we have our own fledgling system in place that endears this Business Value Aspect.
- Level 3 = Defined – Documentation is what we do! - We largely utilize the resources provided by management to drive our maturing Knowledge Management system relative to this Business Value Aspect.
- Level 4 = Managed – Knowledge is power and we’re getting stronger every day - Leadership lives up to the accountability assigned by management. We do our part to have a significant impact on the resulting Knowledge Management system relative to this Business Value Aspect.
- Level 5 = Optimized – We leverage our retained knowledge for competitive advantage - We fully participate in the organizations mature and robust Knowledge Management system and strive for continuous improvement relative to this Business Value Aspect.
Roadmap and Strategy
This Success Element addresses the future plans, goals, metrics, and cross function alignment for a given Business Value Aspect. Although there should always be a top level master Business Roadmap and Strategy, we must ask: are the components relative to this Business Value Aspect mature and future looking (to the extent possible) for 6 months out, 1 year?, 3?, 5? Are the goals and metrics set out for this Business Value Aspect (Think Balanced Scorecard) in realistic alignment with each of the other Business Value Aspects that they should be to create success, growth, and value?
- Level 1 = Chaotic – Who needs a map? - Hey, we just do whatever it takes to get though the day to help pay the rent and keep the lights on. We’re not really clear on how this Business Value Aspect would be address in a Business Roadmap and Strategy.
- Level 2 = Aware – We see the forest for the trees - We recognizes the importance of having plans for the development of this Business Value Aspect, just as other, specifically called out in the overall Business Roadmap and Strategy.
- Level 3 = Defined – We know where we are - We have general language in the overall Business Roadmap and Strategy that address the most critical goals and metrics relative to this Business Value Aspect and we’re committed to keeping our progress in line with all the other Business Value Aspects.
- Level 4 = Managed – We know where we’re going - We have specifics called out in the overall Business Roadmap and Strategy that address every important goals and metrics relative to this Business Value Aspect and we’re driving our success in near lock-step with all the other Business Value Aspects.
- Level 5 = Optimized – We know how we’ll get there - We have specifics called out in the overall Business Roadmap and Strategy that addresses every important goals and metrics relative to this Business Value Aspect and we’re driving value in lock step with the other Business Value Aspects.
Continuous Improvement (Six Sigma)
This Success Element addresses the continuous improvement of every relevant process through statistical process control. There are many incarnations of statistical process control but Six Sigma is called out here because it is the predominant model used in the majority of fortune 500 companies today. Six Sigma uses measurement and metrics to refine a process with the ultimate goal of driving out defects, variability, and reducing cycle times. The end result product or service, provide evidence of the improvement through increased value and/or a higher margin. Six Sigma requires an adoption of its principals and methods as companywide culture embedded as habit and demonstrated as discipline.
- Level 1 = Initial – Six Sig-Wuh? - The concept of controlling the production or delivery processes to continuously improve them is common knowledge but it’s not recognized as an entire philosophy that can drive value and profit relative to this Business Value Aspect.
- Level 2 = Aware – We’ve done the math and Six Sigma is the answer! - We recognizes the importance of what Six Sigma will do for us and we know we need to adopt a philosophy of controlling processes in this Business Value Aspect just as in any other.
- Level 3 = Defined – We’re actively adopting the concepts - We have a fledgling system in place and we largely utilize the resources provided by management to drive our maturing Six Sigma methodology relative to this Business Value Aspect.
- Level 4 = Managed – We have Color Belt and we know how to use them - Leadership lives up to the accountability assigned by management and we do our part to drive progress and solidify the Six Sigma philosophy relative to this Business Value Aspect.
- Level 5 = Optimized – We have Black Belts and 6 Sigma is what we do - We fully participate in the organizations mature and robust Six Sigma system and strive for continuous improvement relative to this Business Value Aspect.
Continuous Refinement (Lean)
This Success Element addresses the relentless pursuit of creating the highest value products and services by focusing on the reduction or elimination of waste in all aspects of the business. There are many incarnations of production waste management that considers the expenditure of resources in any way other than the direct creation of value of the end product or service to be wasteful. The modern version of Lean is called out here because it is the predominant model used in the majority of fortune 500 companies today. The Lean philosophy is to either stop or do not start doing anything that does not directly add value to what the customer is willing to pay for. It requires an adoption of the Lean principals and methods as companywide culture, embedded as habit and demonstrated as discipline.
- Level 1 = Initial – We like our steak lean! - The concept of expending no more resources than required to produce the desired results (products or services) is common knowledge but it’s not recognized as an entire philosophy that can drive value and profit relative to this Business Value Aspect.
- Level 2 = Aware – Lean methods would be very good for our health! - We recognizes the importance of what Lean will do for us and we know we need to adopt a philosophy of managing waste in this Business Value Aspect just as in any other.
- Level 3 = Defined – We’re building out our Lean toolbox - We have a fledgling system in place and we largely utilize the resources provided by management to drive our maturing Lean methodology relative to this Business Value Aspect.
- Level 4 = Managed – We have a toolbox and we know how to use it - Leadership lives up to the accountability assigned by management and we do our part to drive progress and solidify the Lean philosophy relative to this Business Value Aspect.
- Level 5 = Optimized – We think Lean, we are Lean - We fully participate in the organizations mature and robust Lean system and strive for continuous improvement relative to this Business Value Aspect.