Maximizing Organizational Performance: 7 Key Questions

Leaders are often charged with "making the organization perform better." That's an incredibly difficult mission unless we understand what an organization, especially ours, is and how it works. Only then can we diagnose organizational problems and make improvements.

This is a pretty long, nerdy post, so here's the tl;dr for those in a hurry, and for those who need a little taste to prove the read is worth it.

If you're trying to make an organization perform better, start by asking (just) seven questions. I think you'll make sense of your biggest problems pretty quickly:

1. Value Proposition: What do we create that other people are willing to sacrifice something (i.e., pay) for?

2. Market: Who cares about what we have to offer?

3. Capabilities: What are the handful of things we really need to be good at to create something of value?

4. Go-to-Market Systems: How will we engage with our market?

5. Resource Capture Systems: How does the organization get the resources it needs?

6. Collective Action Systems: How will we work together to turn our capabilities into something of value?

7. Investment Systems: How will we develop the capabilities that matter most?

8. Making organizations better is hard, but it doesn't have to be complicated.

Leaders are often charged to “make the organization perform better”. That’s an incredibly difficult mission unless we understand what an organizations, especially ours, is and how it works. Only then can we diagnose organizational problems and make improvements.

This is a pretty long, nerdy, post so here’s the tl;dr for those in a hurry, and for those that need a little taste to prove the read is worth it.

If you’re trying to make understand and organization and help it perform better, start with asking (just) seven questions. I think you’ll make sense of your biggest problems pretty quickly:

1. Value Proposition: What do we create that other people are willing to sacrifice something (i.e., pay) for?

2. Market: Who cares about what we have to offer?

3. Capabilities: What are the handful of things we really need to be good at to create something of value?

4. Go-to-Market Systems: How will we engage with our market?

5. Resource Capture Systems: How does the organization get the resources it needs?

6. Collective Action Systems: How will we work together to turn our capabilities into something of value?

7. Investment Systems: How will fwe develop the capabilities that matter most?

Making organizations better is hard, but it doesn’t have to be complicated.

The Seven-Part Model of Organizations

So, what is an organization?

I'd propose that an organization, at its simplest, is only made up of seven components:

• Value Proposition

• Market

• Capabilities

• Go-to-Market Systems

• Resource Capture Systems

• Collective Action Systems

• Investment Systems

If we can understand these seven things about an organization, we can understand how it works and consequently make it perform better. There are certainly other models and frameworks for understanding organizations (e.g., McKinsey 7-S, Business Model Canvas, Afuah Business Model Innovation Framework) which serve specific purposes - and I do like those.

This seven-part model of organizations is the best I've been able to produce which maintains simplicity while still having broad explanatory power for any organization, not just businesses. Each component of the model answers an important question that an organization leader should understand.

The seven parts (Detail)

The first three parts of the model are what I think of as the outputs - they're the core foundation of what an organization is: a Value Proposition, a Market, and a set of Capabilities.

Value Proposition: What do we create that other people are willing to sacrifice something (i.e., pay) for?

The Value Proposition is the core of an organization. What do they produce or achieve? What is the good or the service? What makes them unique and different relative to other alternatives? This is the bedrock from which everything else can be understood. Why? Because the Value Prop is where the internal and external view of the organization come together - it's where the rubber meets the road.

It's worth noting that every stakeholder of the organization has to be satisfied by the Value Proposition if they are to engage with the organization: customers, constituents, shareholders, funders, donors, employees, suppliers, communities, etc.

Market: Who cares about what we have to offer?

Understanding the Market is also core to an organization because any organization needs to find product-market fit to survive. This question really has two subcomponents to understand: who the people are and what job they need to be done or need that they have that they're willing to sacrifice for.

It's not just businesses that need to clearly understand their Markets - governments, non-profits, and even families need to understand their Market. Why? Because no organization has unlimited resources, and if the Value Proposition doesn't match the Market the organization is trying to serve, the organization won't be able to convince the Market to part with resources that the organization needs to survive - whether that's sales, time, donations, tax revenues, or in the case of a family, love and attention from family members.

Capabilities: What are the handful of things we really need to be good at to create something of value?

Thus far, we've talked about what business nerd types call "product-market fit," which really takes the view that the way to understand an organization is to look at how it relates to its external environment.

But there's also another school of thought that believes a firm is best understood from the inside out - which is where Capabilities come in.

Capabilities are the stuff that the organization has or is able to do which they need to be able to produce their Value Proposition. These could be things like intellectual property or knowledge, skills, brand equity, technologies, or information.

Of course, not all Capabilities are created equal. When I talk about Capabilities, I'm probably closer to what the legendary CK Prahalad describes as "core competence." Let's assume our organization is a shoe manufacturer. Some of the most important Capabilities probably are things like designing shoes, recruiting brand ambassadors, and manufacturing and shipping cheaply.

The shoe company probably also has to do things like buy pens and pencils - so sure, buying office supplies is a Capability of the firm, but it's not a core Capability to its Value Proposition of producing shoes. When I say "Capabilities," I'm talking about the "core" stuff that's essential for delivering the Value Proposition.

Finally, we can think of how Capabilities interact with the Value Proposition as an analog to product-market fit, let's call it "product-capability fit." Aligning the organization with its external environment is just as important as aligning it to its internal environment.

When all three core outputs - Value Proposition, Market, and Capabilities - are in sync, that's when an organization can really perform and do something quite special.

In addition to the three core outputs, Organizations also have systems to actually do things. These are the last four components of the model. I think of it like the four things that make up an organization's "operating system."

Go-to-Market Systems: How will we engage with our Market?

How an organization "goes to market" is a core part of how an organization operates. Because after all, if the product or service never meets the Market, no value can ever be exchanged. The Market never gets the value it needs, and the organization never gets the resources it needs. A good framework for this is the classic marketing framework called the 4Ps: Price, Product, Place, and Promotion.

But this part of the organization's "operating system" need not be derived from private sector practice. Governments, nonprofits, faith-based organizations, and others all have a system for engaging with their Market; they might just call it something like "service delivery model," "logic model," "engagement model," or something else similar.

The key to remember here is that go-to-market systems are not how parties within the organization work together; it's how the organization engages with its Market.

Resource Capture Systems: How will the organization get the resources it needs?

Just like a plant or an animal, organizations need resources to survive. But instead of things like food, sunlight, water, and oxygen, and carbon dioxide, organizations need things like money, materials, talent, user feedback, information, attention, and more.

So if you're an organizational leader, it's critical to understand what resources the organization needs most, and having a solid plan to get them. Maybe it's a sales process or levying of a tax. Maybe it's donations and fundraising. Maybe for resources like talent, it's employer branding or a culture that makes people want to work for the organization.

This list of examples isn't meant to be comprehensive, of course. The point is that organizations need lots of resources (not just money) and should have a solid plan for securing the most important resources they need.

Collective Action Systems: How will we work together to turn our capabilities into something of value?

Teamwork makes the dream work, right? I'd argue that's even an understatement. The third aspect of the organization's operating system is collective action.

This includes things like operations, organization structure, objective setting, project management approaches, and other common topics that fall into the realm of management, leadership, and "culture."

But I think it's more comprehensive than this - concepts like mission, purpose, and values, decision chartering, strategic communications, to name a few, are of growing importance and fall into the broad realm of collective action, too.

Why? Two reasons: 1) organizations need to move faster and therefore need people to make decisions without asking permission from their manager, and, 2) organizations increasingly have to work with an entire network of partners across many different platforms to produce their Value Proposition. These less-common aspects of an organization's collective action systems help especially with these challenges born of agility.

So all in all, it's essential to understand how an organization takes all its Capabilities and works as a collective to deliver its Value Proposition - and it's much deeper than just what's on an org chart or process map.

Investment Systems: How do we develop the capabilities that matter most?

It's obvious to say this, but the world changes. The Market changes. Expectations of talent change. Lots of things change, all the time. And as a result, our organizations need to adapt themselves to survive - again, just like Darwin's finches.

But what does that really mean? What it means more specifically is that over time the Capabilities an organization needs to deliver its Value Proposition to its Market changes over time. And as we all know, enhanced Capabilities don't grow on trees - it takes work and investment, of time, effort, money, and more.

That's where the final aspect of an organization's operating system comes in - the organization needs systems to figure out what Capabilities they need and then develop them. In a business, this could mean things like "capital allocation," "leadership development," "operations improvement," or "technology deployment."

But the need for Investment Systems applies broadly across the organizational world, too, not just companies.

As parents, for example, my wife and I realized that we needed to invest in our Capabilities to help our son, who was having a hard time with feelings and emotional control. We had never needed this "capability" before - our "market" had changed, and our Value Proposition as parents wasn't cutting it anymore.

So we read a ton of material from Dr. Becky and started working with a child and family-focused therapist. We put in the time and money to enhance our "capabilities" as a family organization - and it worked.

Again, because the world changes, all organizations need systems to invest in themselves to improve their capabilities.

My Pitch for Why This Matters

At the end of the day, most of us don't need or even want fancy frameworks. We want and need something that works.

I wanted to share this framework because this is what I'm starting to use as a practitioner - and it's helped me make sense of lots of organizations I've been involved with, from the company I work for to my family.

If you're someone - in any type of organization, large or small - I hope you find this very simple set of seven questions to help your organization perform better.

Making organizations better is hard, but it doesn't have to be complicated.