Why I Wrote the Book on Comprehensive Business Analysis

The book is called 'Blueprint for a Quantum Leap: A Comprehensive Business Analysis Guide'. It will be completed on or around 12/15/2014. Sort of a Christmas Gift for myself. 

I did it mostly for the same reason that many non-fiction writers did. I desperately needed this book for my everyday work, but it was not available. No one has written it yet. So I had to do it myself. Ditto for the new – and radically more efficient - comprehensive business analysis and strategic corporate reengineering methodology. That I needed no less desperately.

The idea of this book first came to me almost 20 years ago – in the fall of 1996, when I just got a job as a corporate analyst in the corporate finance department of Vienna-based Creditanstalt Investment Bank (CAIB). At the time rated as the best in Central and Eastern Europe.

I worked primarily on private placement projects. On the sell-side, of course; and mostly with active investors. In fact, almost exclusively with active direct equity investors.

Active investors are called ‘active’ because after making a direct equity investment (buying a minority stake) in a company, they work together with management (and company founders) to make a quantum leap in company performance. And, therefore, in its financial value. And then sell it at a huge profit – either at IPO (initial public offering) or to a strategic buyer.

To maximize the amount of money they get from selling their shares to a financial investor (or to sell the minimal stake to raise a certain target amount), companies usually hire a financial advisor – an investment bank with experience and expertise in private placements. In many (if not most) cases, without assistance from a financial investor, a company will not be able to raise money from financial investor at all.

To facilitate a successful private placement (and, therefore, to earn its commission), a financial advisor (and, therefore, its corporate analysts) must uncover and measure a full potential of their client for making a quantum leap in corporate performance and financial value.

And dutifully and convincingly present this potential in a financial model and in information (or ‘investment’) memorandum that has to accompany this model. Which requires accurate description of both ‘AS IS’ (current) and ‘TO BE’ (desired) visions of the client company. And development of ambitious but realistic transition plans (from ‘AS IS’ to ‘TO BE’) – financial and operational. 

Obviously, these plans then will be implemented jointly by company management and active investors (the latter serving mostly as strategic financial and management consultants).

To do these three jobs, the investment bank and its corporate analysts need the optimal (i.e., most efficient) methodology and tools. Unfortunately, the ones that I had (and that did not change) much in the 20 years since then, were far from being ‘the most efficient’.

I was well-trained – both in my MBA program at the University of Texas at Arlington and by CAIB – in this Corporate Analysts Training Program – and did a good job but I always had this nagging feeling that I could have done more. In fact, much more. If I only had the right methodology and tools. And continued feeling the same after I left CAIB to become a freelance consultant specializing in corporate restructuring and financial value maximization.

I could have done more. I could have uncovered more (in fact, much more) opportunities and potential for maximizing corporate performance and financial value of my target companies. I could have helped my clients make a significantly bigger quantum leap in corporate performance and shareholders’ value.

I could have helped them to get more money from private placement of their shares for the same minority stake or sell a smaller stake for the same target amount of equity financing. And I could have helped active private equity investors to make more money and get a higher return on their investments.

If I only had the right methodology and tools. Because in this business (or in practically other business, for that matter) it is not enough to work hard. You also have to work smart and be efficient. Which requires the most efficient methods, tools and technologies.

What was wrong with available technologies? What were the deficiencies of the methods, tools and technologies that I used? There were many (quite a lot, actually), but all of them essentially boil down to four:

1.      Not transparent enough. With available tools and technologies, not everything important in the business entity could be made visible during the realistic time allowed for a comprehensive business analysis. Which obviously caused missing important opportunities for radically improving corporate performance – both of individual corporate objects and of the whole company. Because the latter requires maximizing (1) performance of each corporate object – product, brand, asset, functional unit, etc. and (2) the synergy between objects – how well they work together.

2.      Not structured enough. ‘Classic’ CBA results in two documents – financial model (MS Excel workbook which includes several worksheets – often a lot of them) and an information or investment memorandum – which is an MS Word file with essentially a linear structure. Due to inherent limitations of human mind (the proverbial ‘7 ± 2 rule’), none of these two documents (and even their combination) allows the decision-maker to see and grasp the whole picture. Thus, he or she can see only ‘bits and pieces’ of the whole and thus simply can not make the best decisions – due to the lack of comprehensive knowledge about the business entity required for best decisions.

3.      Not measurable enough. Available technologies do not allow to develop a comprehensive system of corporate KPI which values must be optimized to maximize the corporate performance and financial value. Which therefore leave much (in fact, a lot) to be desired.

4.      Not manageable enough. For the three abovementioned reasons plus the lack of the ‘common business language’. Each functional area in a business entity (marketing, IT, finance, accounting, operations, etc.) speaks the same ‘language’, which makes it (a) very difficult and time-consuming to perform a CBA and (2) also very difficult (sometimes downright impossible) to make professionals from different functional areas work together towards the same corporate objective – maximization of corporate performance and shareholders’ value.

You can maximize only what you can manage. You can manage only what you can measure. And you can measure only what you can see. Available tools and technologies perform poorly in the last two ‘departments’, which lead in poor (sometimes, very poor) performance in the other two. Which, obviously, is unacceptable in our brave new world of cutthroat competition and the resulting corporate performance requirements.

To remedy these deficiencies, I developed a radically new methodology for comprehensive business analysis and strategic corporate reengineering (SCR). In other words, for making the quantum leap in corporate performance and financial value.

I called this technologies Business Description Language (BDL). BDL is an object-oriented language that takes care of four abovementioned problems. I will cover BDL in more detail in Part I – on comprehensive business analysis methodology.  

It takes care of the transparency problem by identifying all corporate objects whose performance needs to be analyzed and maximized to maximize overall corporate performance and financial value. It takes care of the structuring problem by… well, structuring these objects into a system of corporate objects maps that make it possible for a decision-maker to see the whole corporate picture.

BDL takes care of the measurement problem by identifying all KPI for each corporate object and structuring them into a KPI Scorecard (KPIS) for the object in question. In addition to KPI, BDL allows to attach to every corporate object CBA (1) questions used to analyze the performance of this objects and (2) all object-related corporate documents – via links or preset queries. The latter allows – as a bonus – to develop a truly comprehensive corporate knowledge base.

BDL takes care of the management problem by (a) solving the abovementioned three problems and (b) by providing the common business language for all three stages in your quantum leap: (1) CBA, (2) SCR and (3) kaizen. I will cover in detail all three stages and the corresponding BDL roles in Part I – on comprehensive business analysis methodology.

Why spend 20 years developing and perfecting a new methodology and tools for CBA and SCR? Well, for starters, it is a research project – in the science of corporate management technologies; and I was trained and molded as a scientist. Trained by a school that at the time was one of the best in the world in training scientists. And what scientists do? They do scientific research.

Second, Professor Urin was very persuasive in his insistence that I must do something big and valuable for the science. Global science. I knew almost right away that there is no way in the world I could do it in physics or math, but corporate management was a totally different story. And I hope (actually, I am quite confident) that in Part I, I will convince you that, indeed, BDL is highly valuable for the science and practice of corporate management.

Why write a book then? Well, this is the issue of deliverables. New technologies need to be expressed (implemented) in some kind of deliverables. With corporate management technologies (which in my case double as knowledge management technologies), there are only two kinds of deliverables possible – a book (magazine article is too small for that) and a software product. So I did both (I will cover the latter in the last chapter of Part I).

How do I want to create value with this book and my software product? What do I want to achieve?

I want every business and ultimately, every organization (government, NGO, etc. – these also can profitably use my technologies) in the world to be the most and the best they can be. Operate at their maximum performance, which requires them to use resources available to them – financial, material, human, etc. – in the most efficient way. And every their employee to do the same.

I firmly believe that the only problem, the only serious impediment to both individual and corporate prosperity is the highly inefficient (most studies indicates that in most cases it stands at around 5-10% at best) utilization of resources available to them.

And that to solve all problems that plague mankind – economic, political, social, etc. – we need to develop and deploy the most efficient technologies for utilizing these resources to generate the maximum possible amount of aggregate value – financial, functional and emotional. And spiritual – for whom it matters. Now, that would be quite a quantum leap.   

By developing my software product and writing this book (and thus making my technologies available to every manager, investor, consultant, educator, etc. willing to use them) and by providing an inspiration and drive to learn and use these technologies, I hope and intend to make a significant contribution to this quantum leap. And I also believe that time has finally come for these technologies to be developed, described, disseminated and used.

As simple as that. So help me God.