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Nigel Brooks Seminar

The Guide To
Business Leadership Development
Featuring:

● Enterpriship Disciplines
● Building Sustainable Advantage
From Vision To Value

THE BUSINESS LEADERSHIP DEVELOPMENT CORPORATION

The Center for Business


The CenterDevelopment
Leadership for Business 1
Leadership Development
These are the notes accompanying the Nigel Brooks Seminar entitled:
“The Guide To Business Leadership Development”

The seminar is currently offered in a three hour live session.

http://www.nigel-brooks-voice.com/thenigelbrooksseminar.html

http://www.enterpriship.com/Seminars/Seminars.html

http://www.bldsolutions.com/cbld/

The Center for Business 2


Leadership Development
If I could show a way to
jump start your
career or business,
and make it sustainable,
would that be
interest to you?
The Center for Business
The CenterDevelopment
Leadership for Business 3
Leadership Development
In this seminar,
I will discuss the
enterpriship disciplines,
and building
sustainable advantage
from vision to value...
The Center for Business
The CenterDevelopment
Leadership for Business 4
Leadership Development
● Enterpriship Disciplines
● Building Sustainable Advantage From Vision To Value...

Establishing the mindset; enabling action


The Center for Business
The CenterDevelopment
Leadership for Business 5
Leadership Development
Objectives
● Explain the process of building enterprises
leveraging the enterpriship disciplines:
entrepreneurship, leadership, and
management

● Discuss the notion of building sustainable


advantage

● Discuss the characteristics of a sustainable


enterprise
The Center for Business 6
Leadership Development
Benefits
● Better equipped for entrepreneurial,
leadership, and managerial decision making

● Improved understanding of people, process,


and product capabilities

● Stronger appreciation of sustainability in


business

The Center for Business 7


Leadership Development
You are...
● Entrepreneur/intrapreneur

● Lifestyle business enterprise owner

● Executive

● Manager

● Professional – administrative/technical

● Student
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Leadership Development
What are entrepreneurship and
intrapreneurship?
● Entrepreneurship is a competency required
to start, develop, and assume risk for an
enterprise

● Intrapreneurship is a competency required to


foster a culture of change within an
enterprise and keep it sustainable over time

The Center for Business 9


Leadership Development
What is leadership?
● A competency for setting direction that others
will follow...

● ...through influence

The Center for Business 10


Leadership Development
What is management?
● As a competency, the practice of directing
and controlling events and activities

● As a role, consists of those with authority and


responsibility for directing and controlling the
events and activities of the enterprise

The Center for Business 11


Leadership Development
Who is an entrepreneur
or an intrapreneur?
● An entrepreneur is an individual who
organizes, operates, and
assumes risk for an enterprise with the
intention of transforming innovative ideas into
products and/or services for a profit

● An intrapreneur within an enterprise is an


individual who takes the risk to transform an
innovative idea into value

The Center for Business 12


Leadership Development
Who is a lifestyle business
enterprise owner?
● An owner of an enterprise in a local
community – may be:

– Founding entrepreneur

– An active owner-manager

– A passive owner with a management team in place

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Leadership Development
Who is an executive?
● An executive is a member of the top line of
management of an enterprise with major
areas of authority and responsibility

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Leadership Development
Who is a manager?
● A member of the management team in either
an official or non-official capacity

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Leadership Development
Who is a professional?
● A qualified competent individual with:

– Knowledge in one or more functional areas

– Skills

◆ Personal

◆ Technical

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Leadership Development
Entrepreneurs – leaders
– managers
● Entrepreneurs are not necessarily good
leaders or managers

● Leaders are not necessarily good


entrepreneurs or managers

● Managers are not necessarily good


entrepreneurs or leaders

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Leadership Development
Enterprise
● Undertake for prize or cause

● Group of activities intended to produce


income organized as a:

– Business of any type or size

– Not-for-profit association

– Government agency
Non-profit enterprise has exemption for tax purposes
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Leadership Development
Upwardly mobile and lifestyle

The Center for Business 19


Leadership Development
An enterprise comprises
one or more entities
● Corporation (legal and business)

● Limited liability company (business)

● Partnership (business)

● Individual sole proprietorship


(legal and business)

The Center for Business 20


Leadership Development
Enterprise characteristics
● Micro – professional

● Small – professional and commercial

● Mid-market – commercial and industrial

● Large – industrial and corporate

Definitions based upon number of employees,


revenue, and capital
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Leadership Development
Enterpriship
● Process of building enterprises with
sustainable advantage within a framework
of three related disciplines:

The Center for Business 22


Leadership Development
Enterpriship...(cont'd)
● Derived from the words:

– Management

– Leadership

– Enterprise

– Entrepreneurship

● Both an art and a science


The Center for Business 23
Leadership Development
Enterpriship...(cont'd)
● About the:

– Competencies of individuals

– Capabilities of enterprises

The Center for Business 24


Leadership Development
Enterpriship...(cont'd)
● Discipline:

– Field of study

– System of rules governing activities

● Competencies – knowledge and skills

● Capabilities – capacities and abilities

The Center for Business 25


Leadership Development
Enterpriship framework

● Characterizes attitudes and behaviors of


entrepreneurs and executives

– Entrepreneurs who start with nothing

– Executives who have to be intrapreneurial in order


to achieve sustainable advantage
The Center for Business 26
Leadership Development
Enterpriship framework...
(cont'd)

● Recognizes what entrepreneurs and


executives do best:

– Entrepreneurs – innovating
– Executives – leading and managing

The Center for Business 27


Leadership Development
What are art and science?
● Artistry is an occupation that requires both
knowledge and skills (competence)

● Science is a method for systematizing


knowledge

● Knowledge is information that has been


learned and retained

● Information is organized data (facts and


figures)
The Center for Business 28
Leadership Development
What is sustainability?
● Being able to provide for current generations
without damaging the ability of future
generations to provide for themselves

The Center for Business 29


Leadership Development
Sustainable enterprise
● Employs three criteria in all decision making
- are the mindset and intended actions
responsible:

– Environmentally?

– Economically?

– Socially?

The Center for Business 30


Leadership Development
What is sustainable advantage?
● Sustainable – being able to continue over
time

– Either by developing, enhancing, and


maintaining the current state

– Or by changing it

● Advantage – favorable, superior, beneficial

The Center for Business 31


Leadership Development
Building sustainable advantage
● Comprises the activities required to build a
position in the marketplace and
community-at-large

● From the creation of a vision to the delivery


of the resulting value on an ongoing basis

The Center for Business 32


Leadership Development
Building sustainable
advantage...(cont'd)
● Activities:
– Are responsible

– Meet both current and future needs

– Gain a beneficial position

– Achieve performance excellence

The Center for Business 33


Leadership Development
Beneficial position
● Aspirational advantage – loyal relationships
between employee, customer, supplier, and
investor constituencies because stated
values and enacted values are consistent

● Competitive advantage – position and


posture that offer better value than
competitors

The Center for Business 34


Leadership Development
Beneficial position...(cont'd)
● Collaborative advantage – suppliers or
customers in partnership dependently

● Cooperative advantage – suppliers or


customers in association independently

The Center for Business 35


Leadership Development
Performance excellence
● Doing the right thing, then doing things well

● Alignment

– Externally with constituencies


– Internally with stewards

● Exceeding expectations

The Center for Business 36


Leadership Development
BLD has a set of capabilities
for building enterprises
● Models ● Hi-Spot Review
● StratNet
● DueDiligencia
Methodologies
● HiPotentia

● HiProforma
● Tools ● HiPerforma
● Personal Styles
The Center for Business 37
Leadership Development
BLD packages its capabilities
● Individuals – Enterpriship BLDer

● Enterprises – Sustainable Advantage BLDer

– Framework

– Migration Path

Individuals as stewards in teams build enterprises


with sustainable advantage

The Center for Business 38


Leadership Development
BLD packages its capabilities...
(cont'd)
● A standardized, systematized, integrated
approach to business building for
entrepreneurs, lifestyle business enterprise
owners, executives, managers,
professionals, and the enterprises they serve

● From a start-up venture to a sustainable


enterprise (entrepreneurial to intrapreneurial
institutional)

The Center for Business 39


Leadership Development
Enterpriship model

Establishing
Enabling
the
action
mindset

Establishing Building
order relationships

The Center for Business 40


Leadership Development
Background quotes
● Earl Nightingale - “we become what we think”

● Frank Feather - “think globally, act locally”

The Center for Business 41


Leadership Development
Individuals apply the Enterpriship
model to enterprises
● Four activities that guide entrepreneurship,
leadership, and management

● Basis for all other models, methodologies,


and tools that transform ideas into results

● It forms the “credo for success”

The Center for Business 42


Leadership Development
Individuals apply the Enterpriship
model to enterprises...(cont'd)
● Translate mindset with models...

● ...into action with methodologies to achieve


momentum...

● ...through relationships...

● ... with order...

● ...to get results (profit, value-added, wealth)


The Center for Business 43
Leadership Development
Related to the
Personal Styles model

The Center for Business 44


Leadership Development
Four Personal Styles
● Challengers – who appreciate action and
adventure

● Causals – who appreciate creativity and


relationships

● Stabilizers – who appreciate law and order

● Visionaries – who appreciate innovation and


understanding
The Center for Business 45
Leadership Development
Enterpriship model application
● Monetize ideas by being able to:

– Build markets, products and/or services, and


infrastructure

– Communicate effectively:

◆ Entertain
◆ Inform
◆ Convince
◆ Persuade

The Center for Business 46


Leadership Development
Enterpriship model application
...(cont'd)
● Turn chaos and uncertainty into law and
order

● Add structure to unstructured situations

● Implement:

– Global-to-local
– Holistically
– Future-oriented

The Center for Business 47


Leadership Development
Maslow's Hierarchy of Needs

The Center for Business 48


Leadership Development
Paradigm shift

The Center for Business 49


Leadership Development
Change response cycle

The Center for Business 50


Leadership Development
Adoption cycle

The Center for Business 51


Leadership Development
From vision to value

● Mindset and action for change:

– Causing change

– Acting as a consequence of change...

– ...thus causing further change


The Center for Business 52
Leadership Development
Establishing the mindset/enabling the action:
Framework For Building Sustainable Advantage

The Center for Business 53


Leadership Development
Establishing the mindset:
Framework For Building Sustainable Advantage

The Center for Business 54


Leadership Development
Governance disciplines

The Center for Business 55


Leadership Development
Governance disciplines...
(cont'd)
● Stewardship – the responsibility for the
performance of an enterprise and the delivery of
value to constituencies

● Strategy – the beneficial positioning of an


enterprise in the marketplace so as deliver value
over time

● Structure – the enabler of relationships between an


enterprise's infrastructure, products and/or services,
markets, and constituencies that deliver value

The Center for Business 56


Leadership Development
Stewardship

● Stewardship – the responsibility for the performance


of an enterprise and the delivery of
value to constituencies

The Center for Business 57


Leadership Development
Stewardship competencies

The Center for Business 58


Leadership Development
Entrepreneurial role
● Stewards transforming innovative ideas into value
for the enterprise and its constituencies

The Center for Business 59


Leadership Development
Entrepreneurial role...(cont'd)
● Adaption based upon feedback

– Tuning

– Standardizing

– Integrating

The Center for Business 60


Leadership Development
Stewards
● Stewards include management and
associates (supervisors and staff)...

● ...collectively administering the affairs and


protecting the assets of the enterprise

● Every employee is a steward if they share


the values, mission, and vision of the
enterprise

The Center for Business 61


Leadership Development
Leadership role
● Setting direction that others will follow to achieve
results

The Center for Business 62


Leadership Development
Leadership role...(cont'd)
● Self motivation – developing enthusiasm for an
innovative idea and/or commitment to values

● Aspirational leadership – establishing the mindset


for communications

● Inspirational leadership – communicating and


building relationships with others

● Establishing an environment for team motivation


Relationship and negotiated agreements
between leaders and followers
The Center for Business 63
Leadership Development
Self motivation
● Positive attitude

● Ambition

● Confidence

● Commitment

● Self-assessment

The Center for Business 64


Leadership Development
Aspirational leadership
● Values and guiding principles

● Mission – statement of purpose

● Vision – an inspirational statement of a future


state (reasonably achievable) within the
context of a longer-term aspiration (dream)

● Value proposition – statement of benefits and


differentiating features
The Center for Business 65
Leadership Development
Inspirational leadership
● Attracting and acquiring

● Expanding breadth and depth

● Maintaining

● Retaining or retiring

● Focusing

The Center for Business 66


Leadership Development
Motivating others
● Influencing the motion to action

● Enabling followers to motivate themselves

The Center for Business 67


Leadership Development
Team motivational leadership

The Center for Business 68


Leadership Development
Transformational and
transactional leadership
Macro level Micro level

● Power-centric
● Empowering

The Center for Business 69


Leadership Development
Appointed and emergent
leaders

The Center for Business 70


Leadership Development
Managerial role
● Applying resources to activities to achieve results

The Center for Business 71


Leadership Development
Managerial role...(cont'd)
● Organization

● Execution

● Evaluation

● Adjustment

The Center for Business 72


Leadership Development
Organization
● Confirming scope, objectives, and goals
(budget, schedule, and quality)

● Assigning people to tasks

● Securing facilities and equipment,


and materials and supplies

● Training

The Center for Business 73


Leadership Development
Execution
● Communicating with the team and sponsors

● Assigning and accomplishing tasks

● Solving problems

● Handling exceptions

The Center for Business 74


Leadership Development
Evaluation
● Monitoring the earned value in terms of
scope, objectives, budget, schedule, and
quality

● Assessing the people

● Assessing the facilities and equipment,


materials and supplies

The Center for Business 75


Leadership Development
Adjustment
● Tuning (scope, objectives, budget, schedule,
quality, resources)

● Taking corrective action for future


performance

The Center for Business 76


Leadership Development
Strategy

● Strategy – the beneficial positioning of an


enterprise in the marketplace so as deliver
value over time
The Center for Business 77
Leadership Development
Strategy
● Long-term statements of direction – typically
three-to-five years out or more, with short-
term initiatives as necessary from point of
departure to point of arrival one-to-three
years out

● Supported by information technology


strategy, tactical plans, operational plans,
financial plans, business plans for financing,
and budgets
The Center for Business 78
Leadership Development
Strategy...(cont'd)

- Market-driven: goods producing or service providing


- Production-driven: product-driven or service-driven

The Center for Business 79


Leadership Development
Hi-spot review
● High level strategic plan for opportunities and
threats – quick situation assessments and
direction setting

● Mini strategic plan, initiated on an unplanned


basis to determine a response to
unanticipated events, ideas, or activities, that
impact strategy – may result in repositioning,
restructuring, or reengineering

● Supported by due diligence efforts


The Center for Business 80
Leadership Development
Price/cost

The Center for Business 81


Leadership Development
Position in the marketplace

● Value-added or commodity
● Custom or mass produced

The Center for Business 82


Leadership Development
Position in the marketplace...
(cont'd)
● Geographic – local, regional, national,
multinational (within nations),international
(between nations) global

● Demographic

● Psychographic (frequency, recency, value)

● Centers of excellence

The Center for Business 83


Leadership Development
Narrowing the gap

● Cost
● Differentiation

● Focus

The Center for Business 84


Leadership Development
Vertical integration

The Center for Business 85


Leadership Development
Horizontal integration

The Center for Business 86


Leadership Development
Business plan for financing
● Subset of strategic plans aimed specifically
as a focused succinct presentation to
potential investors

● Sources of financing include:

– Private debt – lifestyle enterprises


– Private equity – upwardly mobile enterprises
– Public debt and equity – publicly traded upwardly
mobile enterprises

The Center for Business 87


Leadership Development
Business plan for financing
...(cont'd)
● Format can be used for internal budget
requests or to external investors

● Tell a story

● Elevator pitch (30 seconds)

– Problem
– Solution
– Name
– Affiliation
The Center for Business 88
Leadership Development
Business plan for financing
...(cont'd)
● Presentation

– Management team

◆ Roles and responsibilities


◆ Qualifications

– Enterprise overview

◆ Position within the industry


◆ Values
◆ Mission
◆ Vision
◆ Value proposition
The Center for Business 89
Leadership Development
Business plan for financing
...(cont'd)
● Presentation...(cont'd)

– Needs opportunity

◆ Situation in the marketplace


◆ Complication that makes the situation difficult
◆ Problem to be addressed
◆ Solution to be offered by the enterprise

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Leadership Development
Business plan for financing
...(cont'd)
● Presentation...(cont'd)

– Markets and market segments

◆ Size and growth potential


◆ Evidence of growth and awareness
◆ Position in the supply chain

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Leadership Development
Business plan for financing
...(cont'd)
● Presentation...(cont'd)

– Products and/or services

◆ Value and benefits


◆ Functions and features
◆ Differentiators
➢ Distinctive features
➢ Proprietary functions

The Center for Business 92


Leadership Development
Business plan for financing
...(cont'd)
● Presentation...(cont'd)

– Research and development

◆ Capability
◆ Intellectual property
◆ Protection
◆ Feasibility study results
➢ Proofs of concept
➢ Prototypes

The Center for Business 93


Leadership Development
Business plan for financing
...(cont'd)
● Presentation...(cont'd)

– Competitive strategy

◆ Advantage
◆ Competition
◆ Barriers-to-entry

The Center for Business 94


Leadership Development
Business plan for financing
...(cont'd)
● Presentation...(cont'd)

– Business and revenue/profit models

◆ Product pricing and projected and forecasted volumes


◆ Cost of products sold
◆ Operating expenses
◆ Operating profit

The Center for Business 95


Leadership Development
Business plan for financing
...(cont'd)
● Presentation...(cont'd)

– Marketing strategy and action plans

◆ Channels
◆ Alliances and partnerships

– Operations strategy and action plans

◆ Insourced activities
◆ Outsourced activities

The Center for Business 96


Leadership Development
Business plan for financing
...(cont'd)
● Presentation...(cont'd)

– Marketing strategy and action plans

◆ Channels
◆ Alliances and partnerships

– Operations strategy and action plans

◆ Insourced activities
◆ Outsourced activities

The Center for Business 97


Leadership Development
Business plan for financing
...(cont'd)
● Presentation...(cont'd)

– Financing strategy and action plans

◆ Amount of financing required and for what purpose


◆ Schedule of total financing and investor rounds

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Leadership Development
Business plan for financing
...(cont'd)
● Presentation...(cont'd)

– Financial plan

◆ Assumptions
◆ Projections and forecasts
◆ Milestones for key events and accomplishments
◆ Constraints
◆ Risk factors
◆ Contingencies

– Investment opportunity and exit strategy


as supported by term sheet
The Center for Business 99
Leadership Development
Business plan for financing
...(cont'd)
● Term sheet:

– Amount of financing requested

– Description of ownership interest

– Deal structure

– Capital structure of the enterprise

The Center for Business 100


Leadership Development
Business plan for financing
...(cont'd)
● Term sheet...(cont'd):

– Sources of funds

◆ Amount of financing raised to date in prior rounds

◆ Amount of financing anticipated in future rounds

– Uses of funds

The Center for Business 101


Leadership Development
Business plan for financing
...(cont'd)
● Other items that may be required

– Due Diligence package

– Private placement memorandum

– Registration statements

The Center for Business 102


Leadership Development
Structure

● Structure – the enabler of relationships between an


enterprise's infrastructure, products and/or services,
markets, and constituencies that deliver value
The Center for Business 103
Leadership Development
Structure

The Center for Business 104


Leadership Development
Infrastructure

The Center for Business 105


Leadership Development
Process model

The Center for Business 106


Leadership Development
Duplicable principle
● Enterprises generate wealth through scale
through the duplication of processes that are:

– Predictable
– Repeatable
– Measurable
– Trainable

● Scale leads to mass production; custom


production is hard to scale unless
prefabricated components are used
The Center for Business 107
Leadership Development
Function model

The Center for Business 108


Leadership Development
Governance function
● Ultimately responsible for the enterprise and
accountable to the
shareholders/partners/members

– Board of directors/partners/members

– Chief executive officer/partner/member

The Center for Business 109


Leadership Development
Culture is the consequence of
governance

● Values and guiding principles form the basis for decision making
● Values form the basis for behavior because they describe management's system of beliefs

● Guiding principles set standards for behavior and provide directives for what is expected

The Center for Business 110


Leadership Development
Administrative functions
● Enterprise – support for planning and policy
development and performance
measurement, investor and public relations,
government affairs, brand management,
community relationships, real estate,
philanthropy, ombudsman, internal audit

● Legal – regulatory compliance and


protection, litigation

The Center for Business 111


Leadership Development
Administrative functions...
(cont'd)
● Finance – borrowing, financing, investing,
credit extension, insurance, accounting

● Human Resources – employment,


compensation, training, development

● Information Technology – analytical and


operational systems

The Center for Business 112


Leadership Development
Operational functions
● Research and Development – innovation,
program and project management,
engineering: markets, products and/or
services, infrastructure

● Operations – procurement, manufacturing (or


equivalent), distribution

● Business Development – marketing, sales,


service
The Center for Business 113
Leadership Development
Managing growth

The Center for Business 114


Leadership Development
Employees and stewards

The Center for Business 115


Leadership Development
Business units

● Centers of excellence
● Utilities

The Center for Business 116


Leadership Development
Product lines/market segments

The Center for Business 117


Leadership Development
Business constituency model

The Center for Business 118


Leadership Development
Capabilities

The Center for Business 119


Leadership Development
Capabilities...(cont'd)
● People – aptitude and proficiency

● Processes and functions – effectiveness and


efficiency

● Products and/or services – features and


benefits

The Center for Business 120


Leadership Development
Capabilities

The Center for Business 121


Leadership Development
People

The Center for Business 122


Leadership Development
People...(cont'd)
● Physiology – with respect human function

● Sociology – with respect to product and/or


service usage

● Politics – with respect to respect to decision


making for planning and policy development

● Philosophy – set of guiding principles for


practical activities

The Center for Business 123


Leadership Development
People...(cont'd)
● Psychology – with respect to understanding
the behaviors of:

– Employees
– Customers
– Suppliers
– Investors
– Regulators
– Competitors
– Community-at-large

The Center for Business 124


Leadership Development
Relationships
Four stages of development

Four stages of connection

The Center for Business 125


Leadership Development
Capabilities

The Center for Business 126


Leadership Development
Process/function model

The Center for Business 127


Leadership Development
Plants and Branches

The Center for Business 128


Leadership Development
Program/project management

The Center for Business 129


Leadership Development
Performance measurement
● Financial

– Key indicators

◆ Value
◆ Profitability
◆ Liquidity
◆ Leverage
◆ Activity
◆ Solvency

The Center for Business 130


Leadership Development
Performance measurement...
(cont'd)
● Financial...(cont'd)

– Measures

◆ Revenues, costs and expenses, profits

◆ Gains

◆ Cash flows

The Center for Business 131


Leadership Development
Performance measurement...
(cont'd)
● Non-financial

– Key indicators

◆ Quality/defects
◆ Satisfaction/complaints
◆ Compliance/violations
◆ Competence
◆ Market share
◆ Turnover
◆ Capacity/utilization
◆ Productivity/efficiency

The Center for Business 132


Leadership Development
Performance measurement...
(cont'd)
● Non-financial...(cont'd)

– Measures

◆ Market penetration
◆ Product usage
◆ Time-to-money
◆ Cycle time

The Center for Business 133


Leadership Development
Performance measurement...
(cont'd)
● Sustainability

– Accidents
– Anti-pollution
– Safety
– Welfare
– Recycling

The Center for Business 134


Leadership Development
Key questions
● Which issues, events, and activities should
be prioritized as high, medium, and low, and
why?

● Who and what needs attention now, and


why?

● How should plans and policies be deployed


and executed?

The Center for Business 135


Leadership Development
Capabilities

The Center for Business 136


Leadership Development
Products and/or services

● Consumables and durables


● “Service-oriented” products

The Center for Business 137


Leadership Development
Product management cycle

The Center for Business 138


Leadership Development
Channels

The Center for Business 139


Leadership Development
Capital utilization

The Center for Business 140


Leadership Development
Natural capital
● Anything related to the environment used by
an enterprise

● Original source of all raw materials, including


air, soil, and water

● Misuse of natural capital damages the


environment

The Center for Business 141


Leadership Development
Human capital
● Characteristics of individuals that enables
them to be economically productive
including:

– Confidence
– Competencies

◆ Functional knowledge
◆ Technical skills

– Experience
– Commitment
The Center for Business 142
Leadership Development
Intellectual capital
● Knowledge that gives an advantage that
must be protected

● Derived from people, and manifested in


processes and/or functions, and in products
and/or services

● Protected through copyrights, patents, and


registration of service and trademarks

The Center for Business 143


Leadership Development
Financial capital
● Financial capital

– Equity

– Long-term debt

● Equity (ownership by investors)

– Assets (opportunities – owed/owned)

– Less: liabilities (obligations – owe)


The Center for Business 144
Leadership Development
Financial capital...(cont'd)
● Financial capital (invested capital)

– Investment

– Operating

● Additional sources of operating capital –


advances, borrowings, credit extensions,
short-term loans

The Center for Business 145


Leadership Development
Financial capital...(cont'd)
● Capitalization

– Book value of equity of an enterprise plus the fair


value of its long-term debt

– Classification of a cost as operating or investment


capital as opposed to charging as an expense

The Center for Business 146


Leadership Development
Financial capital...(cont'd)
● Financial capital (invested capital)

– Investment

– Operating

● Working capital

– Current assets

– Less: current liabilities


The Center for Business 147
Leadership Development
Financial, managerial,
and regulatory reporting
● GAAP verus UNICAP
(expense versus capitalization)

● Full absorption versus variable direct costing

● Standard costing versus activity-based


costing for direct/indirect, fixed/variable, and
controllable/uncontrollable expenses

The Center for Business 148


Leadership Development
Equity
● Equity

– Capital stock

◆ Paid-in
◆ Additional

– Retained earnings

– Other comprehensive income

– Less: treasury stock

The Center for Business 149


Leadership Development
Comprehensive income
● Comprehensive income

– Net – realized

◆ Gains on sales of investment assets

◆ Operating – revenue less cost and expenses

– Other – unrealized

The Center for Business 150


Leadership Development
Operating income
● Operating income

– Net revenue

◆ Gross revenue
◆ Less: discounts, allowances, and returns

– Less: costs and expenses

The Center for Business 151


Leadership Development
Revenue
● Dividends (from investments)

● Fees

● Interest

● Rents

● Royalties

● Sales
The Center for Business 152
Leadership Development
Costs and expenses
● Cost and expenses

– Cost of revenue

– Operating (selling, administrative, and general)

◆ Asset-related
◆ Employment-related
◆ Service-related

– Income tax

The Center for Business 153


Leadership Development
Cost reporting
● Period

● Job/project

● Process

● Cost of production

● Product

The Center for Business 154


Leadership Development
Cash flow
● Net cash increase

– Cash provided by operating activities


– Less: cash used by operating activities
– Cash provided by investing activities
– Less: cash used by investing activities
– Cash provided by financing activities
– Less: cash used by financing activities

● Earnings before interest, income taxes,


depreciation, and amortization
The Center for Business 155
Leadership Development
Economic model

The Center for Business 156


Leadership Development
The language of value
● Value – worth and/or useful (relative term)

● Wealth – abundance, having cash flow to


support a lifestyle

● Income – financial gain over time creating


wealth as capital for reinvestment

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Leadership Development
Language of value...(cont'd)
● Possibilities – what can be achieved within
the capabilities of resources that are
available or can be acquired

● Assumptions – assertions and propositions


about the past, present, and future

● Probabilities – likelihood of outcome

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Leadership Development
Language of value...(cont'd)
● Supply

– Increases result in price decreases


– Decreases result in price increases

● Demand

– Increases result in price increases


– Decreases result in price decreases

The Center for Business 159


Leadership Development
Language of value...(cont'd)
● Exchange – the process of offering an item and
receiving another of the same or similar value

● Price – the exchange value offered by the


seller for an item or earned based upon an
accepted bid

● Cost – the exchange value bid by the buyer for


an item or incurred when accepted – the value
that must be given up to acquire an item

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Leadership Development
Language of value...(cont'd)
● Quality – the perceived value of an item by a
prospect or customer at premium or discount
from market price or value, based upon:

– Value proposition
– Abundance
– Convenience
– Scarcity
– Risk
– Minimal defects

The Center for Business 161


Leadership Development
Value pie

The Center for Business 162


Leadership Development
Value pie...(cont'd)
● Employees – fair compensation and a safe
environment in exchange for loyalty and
productivity

● Customers – quality and value in exchange


for loyalty and timely payments

The Center for Business 163


Leadership Development
Value pie...(cont'd)
● Suppliers – loyalty and timely disbursement
of payments in exchange for quality and
value

● Investors – returns above the cost of capital


in exchange for commitment

The Center for Business 164


Leadership Development
Innovation investment model

The Center for Business 165


Leadership Development
From mindset to action...

The Center for Business 166


Leadership Development
Enabling the action:
Migration Path For Building Sustainable Advantage

The Center for Business 167


Leadership Development
Entrepreneurial enterprise
● Not yet fully established as a going concern

– Venture – start-up/early stage

– Committed to becoming an ongoing concern

The Center for Business 168


Leadership Development
Institutional enterprise
● Established

● Becomes an ongoing concern as an


intrapreneurial enterprise innovating
internally

● May acquire entrepreneurial enterprises to


innovate

● Striving to be a sustainable enterprise


The Center for Business 169
Leadership Development
Enterprise lifecycle

The Center for Business 170


Leadership Development
Entrepreneurial and institutional
enterprises

The Center for Business 171


Leadership Development
Three waypoints of
entrepreneurship

The Center for Business 172


Leadership Development
Three waypoints of
intrapreneurship

The Center for Business 173


Leadership Development
Features of the migration path
● Ongoing concern

● Established – founded, stabilized, permanent

● Permanence – ability to generate income on


an ongoing basis

● Change with in permanence – stability within


an environment of change

The Center for Business 174


Leadership Development
Ongoing concern
● Does not intend to discontinue activities...

● ...and has the competence and commitment


to:

– Operate indefinitely and will not become inactive,


seek bankruptcy protection, or liquidate its
assets
– Earn profit
– Finance operating and investing activities
efficiently and effectively
The Center for Business 175
Leadership Development
Ongoing concern...(cont'd)
● Fosters the entrepreneurial mindset through
intrapreneurship, and avoids business-as-
usual

● “Ongoing” fosters both rational and emotional


factors; “going” concern is defined under
GAAP

The Center for Business 176


Leadership Development
Sustainable enterprise

The Center for Business 177


Leadership Development
Sustainable advantage

The Center for Business 178


Leadership Development
Recap
● Explain the process of building enterprises
leveraging the enterpriship disciplines:
entrepreneurship, leadership, and
management

● Discuss the notion of building sustainable


advantage

● Discuss the characteristics of a sustainable


enterprise
The Center for Business 179
Leadership Development
Further reading

The Center for Business 180


Leadership Development
Websites
● www.bldsolutions.com/cbld

● www.nigelalbrooks.com

● www.enterpriship.com

● www.etailia.com

● www.understandingpersonalstyles.com

● www.individualcompetencies.com
The Center for Business 181
Leadership Development
You are now a:
● Master of enterpriship

● Prepared to build sustainable advantage


from vision to value

The Center for Business 182


Leadership Development
● Enterpriship Disciplines
● Building Sustainable Advantage From Vision To Value...

Establishing the mindset; enabling action


The Center for Business
The CenterDevelopment
Leadership for Business 183
Leadership Development
The Center for Business 184
Leadership Development
Nigel Brooks Seminar

The Guide To
Business Leadership Development
Featuring:

● Enterpriship Disciplines
● Building Sustainable Advantage
From Vision To Value

THE BUSINESS LEADERSHIP DEVELOPMENT CORPORATION

The Center for Business


The CenterDevelopment
Leadership for Business 185
Leadership Development

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