We’d all probably agree that diversifying your company’s product lines or service offerings is a good idea, but there’s also a risk that accompanies multi-product/multi-service business models. It can be become incredibly challenging to maintain a clear view of what’s working (or not) when it comes to individual products/services, so it becomes harder to make well-informed, targeted decisions. That’s where Strategic Business Units come into play.
The concept of Strategic Business Units (SBUs) centers around the idea that each product or service should operate as its own “business,” so to speak. The SBU model has helped countless Fortune 1000 companies transform into significantly higher producing and more profitable organizations.
The Core Concepts of Strategic Business Units
Have you ever tried to identify the exact amount of company resources an individual product or service used last month – including those from the sales, marketing, human resources and accounting departments? Do you know the ratio of what’s being expended versus what each product/service is bringing in? Don’t feel bad if you’re scratching your head; most business leaders don’t know.
Here’s how you can start leveraging the power of Strategic Business Units.
- Create Businesses Within the Business. Using the SBU concept, each product/service becomes its own unit within the company. This means it has its own management structure, business goals and revenue targets.
- Empower Leadership. Each SBU should have its own leadership – a competent individual who is responsible for the unit’s successes and failures. This leader also becomes a valuable liaison between his/her individual unit and the company.
- Define Product/Service Categories. Assess each of your offerings based on the 4 Categories of Products/Services. You may find that some of them are simply wasting resources and should be abandoned as soon as possible.
- Implement Business Planning 101. Every unit should have its own strategic plan – beyond that of the company. After all, the business strategy of a thriving product/service line should be very different than that of a struggling one.
- Build Synergistic Pairings. Each unit can then be grouped with others that share similarities – like common characteristics/features, markets or customers – in order to maximize resources.
- Insist on Independence. As stand-alone units, each SBU can then be measured by its own profitability. The ultimate goal is to require each unit to function independently of others, without the financial support of the company’s Cash Cows.
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