What Is a Business Compass and Why Is It Important?

Back in 2011, I read an article in the Harvard Business Review magazine entitled “The Power of Collective Ambition” (by Douglas A. Ready and Emily Truelove) that introduced a concept called the Business Compass.

The business compass is a simple diagram that shows very clearly what your business does, why it does it and how it will get it done.

The diagram brings together into one integrated picture the organization’s Vision, Mission, Values, Strategic Goals and Operational Priorities, Brand Promise and Leadership Behavior. It provides extreme clarity for anyone who is wondering what the organization is all about.

After reading the article, I applied the concept to the business I was running and was impressed with the focus that it brought to the organization. A diagram of the model and the definition of its components are described below. You can download the Business Compass Visio template from the Business Tools page.

How Do You Measure Success?

What is the most important indicator of success in your business or organization? What is the most important indicator that your business or organization is in trouble? Are there single indicators or multiple indicators that need to be monitored? Do you know the answers to these questions? Are the indicators clear to you and clear to everyone in the organization?

Every organization needs to have key health indicators defined clearly with specific goals and strategies set around them. Without this clarity your business or organization is like a person running a race blindfolded. The runner might be running hard but they don’t know where they are going, they can’t see what is in front of them, where the finish line is or what obstacles they may have to avoid or overcome to win the race. It would be a futile situation without any hope of success. Yet this is exactly the situation your organization is in when it does not have clearly defined indicators that illustrate where it currently is, where it is going and what it may need to overcome to be successful.

There are many standard business measurements that every business should be monitoring. Things like; employee safety, revenue, cost, gross profit, SG&A, operating profit, cash flow, long term debt, cost of debt, DPO, DSO, ITO, etc. Monitoring and controlling indicators like these are critical to ensuring that your organization stays healthy. However, I am not necessarily referring to these indicators. I am referring to the indicators that differentiate your organization in the marketplace.

For example,