Glossary: the terms behind the checks

This glossary defines the terms the onestepright checks and articles use. Each entry says what a term means in two or three plain sentences and links to the page that goes further.

The method

Stages of Excellence

A Stages of Excellence assessment places a business's actual practices on a five-stage scale, from the weakest practice to the strongest. For each practice, the respondent picks the sentence closest to what happens. More in What is a stages of excellence assessment?.

The five stages

Each practice sits on one of five stages: lagging, basic, competent, advanced and leading. One observable sentence describes each stage, so a respondent can place the business without outside help. More in the method page.

Practice

A practice is one thing a business does, described at five stages. A check asks about twenty to thirty practices, grouped into five or six areas. More in the method page.

Health check

A health check is a Stages of Excellence assessment of one area of a business, such as pricing or strategy. A business check takes about ten minutes, and the report opens on screen at the end.

One step right

One step right is the next stage up on a practice. The report names the two or three moves that would take the business there, each with what the next stage looks like.

One stage left

One stage left is a finding that recurs in pricing and strategy reviews. A leadership team, in good faith, places its business one stage above where the evidence puts it. More in One stage left.

Benchmark

A benchmark compares a business's answers with those of similar businesses, anonymised and pooled. A comparison appears once enough similar businesses have taken the check. More in how a benchmark release works.

Cut

A cut is the group a benchmark compares against. It can be a sector, a revenue band, a country or an answer to one of a check's questions. More in how a benchmark release works.

Pricing

Price waterfall

A price waterfall traces the path from a product's list price down to the pocket price. Most of the deductions along the way never show on the invoice. More in What is a price waterfall?.

Pocket price

The pocket price is what the business banks after every discount, rebate, allowance, payment term and freight concession. In most businesses, nobody can say what a given customer's pocket price is. More in What is a price waterfall?, and the calculator on the tools page.

Pocket margin

Pocket margin is the pocket price less the cost to serve and the product cost. It shows whether a customer is profitable. It often comes out negative for customers everyone assumed were fine.

Realised price

Realised price is the price the business gets after discounts and rebates, across its sales. The gap between list price and realised price is where pricing work starts. See what a point of it is worth on the tools page.

Cost to serve

The cost to serve is what it costs to serve one customer: freight, small-order handling, technical service, credit and collection, and the extra sales calls. It differs widely between customers.

Price setting and price getting

Price setting decides what to charge: list prices, increases and contract terms. Price getting decides how much of that price the business keeps, through discount control. More in What are the stages of excellence in pricing?.

Discount authority

Discount authority says who can give price away, and by how much. The weakest version on the pricing grid reads: "Discounts are approved by whoever the salesperson asks." More in Whoever the salesperson asks.

Price elasticity

Price elasticity measures how much volume a business gains or loses when it moves its price. It is measured against the price the customer compares with, usually the price they last paid. More in How do you understand price elasticity?.

Price-rise breakeven

The price-rise breakeven is the volume a price rise can lose before it costs profit. One number sets it: the contribution margin. More in Price-rise breakeven, and the calculator on the tools page.

Negotiated, posted and trade pricing

These are three pricing situations with different questions. Negotiated prices are agreed customer by customer. Posted prices are set for the customer to take or leave. In trade pricing, a retailer sets the shelf price. More in Which pricing problem do you have?.

Strategy

Strategy

A strategy says how a business will reach its goals and what it will give up on the way. A list of goals with no choices attached is something else. More in A vision is not a strategy.

Vision

A vision says where the business wants to be. Businesses that have written one often believe they have written a strategy. They have written its first line.

Enacted strategy

The enacted strategy is the pattern in where the money, the people and the leadership's attention went over the last few years. The document on the shared drive is the stated strategy. A strategy review starts from the gap between them. More in What is your strategy, actually?.

Momentum case

A momentum case projects where the current course lands the business in five years if it does nothing new. The last three years' actual trends drive the projection. It shows the gap between where the business is heading and where it says it wants to be. More in What is a momentum case?.

Where to play

Where to play is the choice of which markets, segments, channels and geographies a business will compete in, and which it will leave alone. The diagnosis starts by breaking the market into segments that differ in profit. More in Where to play.

How to win

How to win states why customers in the chosen segments choose the business over the alternatives. Answers come in two families: the same thing at lower cost, or something different that customers will pay for. More in How to win.

Three horizons

The three-horizons framework sorts a business's initiatives by what they are for. Horizon one defends today's profit, horizon two builds the next core, and horizon three creates options beyond it. More in the three-horizons framework.

Strategy on a page

A strategy on a page is one sheet that records the choices a business has made. It names the problem, where the business will compete, why customers will choose it and the first few moves. More in Creating a good strategy on a page.

Wind-tunnelling

Wind-tunnelling runs a strategy through three or four plausible futures and asks, in each, whether it survives. The output separates the moves that hold in every future from the ones that need a trigger. More in Wind-tunnelling.

Strategy archetypes

The strategy archetypes are five recurring patterns of failure: the Dreamers, the Machine Without a Map, the Analysts, the Gamblers and the Drifters. Each has its own first move. More in The five strategy archetypes.

Capability gap

A capability gap is a capability the strategy needs and the business does not have. Nobody has named it, so nobody has funded it. More in Capability gaps.

Corporate strategy

Corporate strategy answers three questions for a group: which businesses to own, how much capital and attention each gets, and what the centre adds. A business-unit strategy answers how to win in one chosen market. More in Corporate versus business-unit strategy.

Corporate centre

The corporate centre sits above a group's businesses. At one end it owns them, funds them and reads their results. At the other it writes their plans and takes their big decisions. More in the roles a corporate centre can play.

Run-rate

The run-rate is what the business would earn if current results carried on for a year. Growth above the run-rate needs a named cause. More in Tracking strategy benefits separately from the run-rate.

Deals

Exit readiness

Exit readiness is whether a business could go through a buyer's due diligence today and come out with the price it hoped for. Checking it early leaves time to fix what the buyer would find. More in What is exit readiness?.

Integration readiness

Integration readiness is whether a buyer can run the integration after the deal completes. That is a separate question from whether the synergies exist. More in What is integration readiness?.

Due diligence

Due diligence is the buyer's investigation of a business before a deal. Commercial due diligence tests the market, the customers and the plan. More in four checks you can run yourself.

Revenue synergy

A revenue synergy is the extra sales a buyer expects from combining two businesses, such as selling each side's products to the other's customers. Acquisition cases often assume it and seldom test it. More in Five things your revenue synergy is missing.

Consolidator's trap

The consolidator's trap is buying a rival in a shrinking market and pricing the deal as growth. The deal can pay on the way down when the case is priced for the decline. More in The consolidator's trap.

Vertical integration

Vertical integration means doing for yourself what a supplier or a customer used to do, such as a brand opening its own shops. It costs a lot, it is hard to undo, and it pays in few situations. More in When vertical integration makes sense.

Joint venture

A joint venture is two businesses putting money into a new company and owning it together. It sits at one end of a line of arrangements that starts with buying from the cheapest supplier. More in the continuum of joint venture relationships.

The deal scale

The deal checks answer each question on five levels of evidence: red flag, doubtful, unproven, supported and proven. The top answer needs a yes and the evidence for it. More in the deal checks.

Organisation and delivery

Spans and layers

Spans count how many people each manager manages. Layers count the levels between the top of the business and the people who deal with customers. The calculator on the tools page counts both.

Sales-force sizing

Sales-force sizing works out how many salespeople the accounts need. Take the accounts worth calling on, multiply by how often each needs contact, and divide by the calls one rep can make. The calculator is on the tools page.

Delay cost

Delay cost is what a week of slippage costs a programme: its annual value divided by fifty-two. The calculator on the tools page works it out.