Business Systems and Processes.

The Systems Thinker Blog

Five Myths about Business Systems!

Ron Carroll

Many business owners and managers use the word “system” from time to time, but don’t really understand its full implication. Of those business owners who do understand their importance, very few get around to implementing effective business systems in their organization. Why is that? Let’s dispel five myths that might be holding you back.

5 Myths about Business Systems
  1. Systems are for larger companies – It is true that many big companies use system improvement methodologies like Six Sigma, Lean Thinking, the Theory of Constraints, and others. The application of these techniques enables them to be more responsive to customers and more profitable. However, true principles apply to organizations of every size. Your business can profit in the same way by using many of these powerful system-building strategies to cut costs and improve the customer experience.
  2. Systems cost too much money and take too much time – Developing business systems and processes do require a front-end cost and time commitment. However, the cost is much less than the waste and rework that result from not having good systems. Building effective systems is the best use of your time and money, and the most important business activity you can be engaged in. Good operational systems pay for themselves many times over!
  3. The primary purpose of systems is to be better organized – Becoming organized, and doing things in a “systematic” way is always good and will improve any business. However, the real power of systems is taking waste out of the business—eliminating defects and delay—by improving system quality and efficiency. Building good business systems is a learned skill that transcends just getting organized. It is the Master Skill of the entrepreneur and one of the most important business talents you can develop!
  4. “My company runs smoothly; I don’t have much waste” – While many successful companies run reasonably well, most business owners do not see hidden waste and fail to recognize many opportunities for improvement. Owners and managers often “don’t know what they don’t know.” Once you begin to see your business as a Systems Thinker, previously unseen opportunities become crystal clear. You will discover many new ways to remove waste and inefficiencies, please customers, and put more money in your pocket!
  5. Systems are for production and manufacturing processes – We’ve all seen the hum of systems in a manufacturing operation; we don’t as often think about systems in the office or the retail store. However, your business—whatever type—consists entirely of systems and processes—lead generation, hiring, accounting, customer care, purchasing, and the list goes on. Principles of quality, efficiency, and measurement apply as much to the office as they do to a production line. Every business system is subject to the principles that govern success. Learn those principles and your organization can immediately achieve higher levels of performance.

Best Medicine for a Sick Economy

Some people believe that systems are a good thing, but not necessarily essential—WRONG! Effective business systems are vital to every organization! They will dramatically improve your customer loyalty, profitability, and growth, especially during a sluggish economy.

Don’t just work in your business. Start working on your business (Michael Gerber, E-Myth Revisited). In my humble opinion, the best tool for this task is Box Theory™ Software.

Whether you want to start, grow, fix, or franchise your business, creating effective business systems and processes is the only way to do it right.

Models for Exceptional Business Systems!

Ron Carroll

Nature provides the perfect model for any business organization—systems working together in harmony to give its customers (you and I) the essential products and services required to sustain life.

The solar system provides light and warmth. Weather systems and ecosystems supply ongoing food and water. Our bodies give us many years of service thanks to eleven continuously operating internal systems—digestive, nervous, circulatory, muscular, and so forth. Each of these systems is responsible for a very specific result, and each must perform consistently to maintain the health of the body.

Throughout history, man has adopted similar patterns to solve problems and meet challenges. In a typical city, for example, we find highway systems, water systems, sewage systems, energy systems, and lighting systems. We often forget about these incredible systems until one is down.

System Failure

Just after the devastation of Hurricane Katrina, in New Orleans, a headline on the cover of Time Magazine said simply, “System Failure!”

Better Systems – Better Business

The great companies of our time have all built their success around innovative and powerful business systems and processes:

  • McDonald’s restaurants introduced a system of fast and convenient food. They’ve now built over 35,000 stores worldwide that systematically produce the same menu utilizing low-cost labor.
  • Federal Express created a revolutionary system to deliver packages overnight by redistributing from a central hub.
  • COSTCO sells merchandise at cost—plus about 12% for administration—and makes its profit on a system of membership fees.
  • Walt Disney amusement parks have rides (fun systems) that move large numbers of people quickly and efficiently to prevent long waits. The parks are also immaculately clean. Disney has thousands of systems that give customers a happy and memorable experience.
  • Amazon.com is an Internet system that provides the most inexpensive, easy to evaluate, convenient to buy, and complete selection of products found anywhere.
  • Wal-Mart has built an unmatched logistics system that efficiently moves vast quantities of merchandise to and from regional warehouses all over the world.

These companies, and many others, have built their fortunes on one or more remarkable business systems that serve customers better than anyone else in their target market.

Your New Business Model

Once you put on your System Thinker’s hat and closely examine your organization, you will discover something special you can do to differentiate your business from all others. Look for ways to impress and delight customers. When you discover your true business purpose, systemize it. Create a new business model. Make the world a better place!

Customers Demand Four Things from Your Business Systems!

Ron Carroll

The “Voice of the Customer” (VOC) is a phrase from Six Sigma that means the opinions and needs of your customers are being considered as you develop your products and services. In other words, the customer’s desires are always foremost in your mind. Do you frequently ask yourself, “What is the voice of our customer?” “What do they really want from us?”

Customers are always looking for companies they can trust. They reward those that meet or exceed their expectations and allow the others to fail. Everything about your business—advertising, cleanliness, return merchandise policy, courtesy and knowledge of employees, product selection, location, delivery time, and so forth—is what matters to them. NOT JUST LOW PRICE! Your entire business is your product, and it must sparkle. When it does, you become the “best deal” to your target customer.

What is critically important?

Each customer contact is a moment of truth, a time when a relationship is either made or broken. From the customer’s point of view, certain things are “Critical to Quality” (CTQ). You must meet customer CTQ specifications or expectations precisely, or you will lose their business.

In a previous life, I had a business that manufactured framed art. We also contracted with large companies like American Greetings to make small-framed gift items. On one occasion, we shipped 5,000 plaques to a major distributor of religious books and gifts. To our shock, the customer called to report that the inspirational message on the plaque contained a misspelled word. The word “privilege,” was printed as “priviledge.” Neither our company nor theirs caught the mistake. They shipped the product back, and we remade the 5,000 plaques. From the customer’s point of view, the product did not meet specifications. (We split the cost of rework.)

At another time, we had a hot product—silhouetted trees printed on glass and set against recessed background prints.

Sunset Silhouette

This item blew out the doors of our retail customers. We manufactured around the clock but could not keep up with the demand. Our shipments got further and further behind. Some customers canceled their orders because we failed to meet delivery expectations.

After you learn from the voice of the customer what is critical to quality in their minds, you must ensure that your business systems and processes help you deliver on your promise. Nothing can be left to chance. When you win the trust of customers, they will become raving fans.

Four Customer Expectations

Remember this: All customers want four important things from your product or service.

  1. High-Quality – No defects; does what it is supposed to do; as good or better than the competition.
  2. Speed – On schedule; meets deadline; no delay.
  3. Low Cost – Good value; competitively priced; occasional bargains.
  4. Pleasurable – Good buying experience (clean store, knowledgeable salespeople, etc.); “killer customer care.”

While you are in The Zone tomorrow, quickly list what is critical to quality for your customers. Consider the four criteria above. Then find a way to enhance your business systems and elevate your product or service beyond your competition. Your customers will love you for it, and reward you handsomely!

Three Kinds of Business Waste Robbing Your Profit!

Ron Carroll

A Systems Thinker can’t help it; he or she sees waste everywhere—a scrap heap at a construction site, uneaten food piled on plates at a buffet restaurant, waiting time in a hospital emergency room, out of control government bureaucracy. Waste is part of life. However, excess waste can drive you out of business.

Like a bad steak, most small businesses are riddled with fatty waste!

The most important thing you can do to improve your business operation—to please customers and increase profit—is to reduce the waste buried in your business processes. This includes the office, the store, the workshop, and the factory.

So, let’s identify the different types of waste and keep your hard-earned money from going down the drain.

Don't let your hard-earned money go down the drain

What is Waste?

There are three improvement strategies incorporated into the Box Theory™ methodology and Box Theory™ Software. Each looks at your operation in a little different way. However, they all provide valuable insight for identifying the waste within your business systems and processes—production, customer service, hiring, marketing, and so forth.

Below is a brief description of each type of waste you should be trying to eliminate:

  • From Six Sigma – Waste is the variation from acceptable standards or customer expectations—the defects and delay in your business processes. How often do people make a mistake, causing loss of time and materials? Do you keep the mistakes and rework in your operation under one percent?
  • From Lean Thinking – Waste is any step in a process flow that does not add value and ultimately benefit customers. Can you spot idle time, rework, unnecessary movement or handling, the build-up of inventory, and so forth? Stop doing the things customers don’t want to pay for (if they knew)—and things you shouldn’t spend money on either!
  • From Theory of Constraints – Waste is the constraint—a weak link or bottleneck—that limits product going out the door. What person, piece of equipment, or step in a process is bogging things down and preventing maximum throughput of sales and service? Focus on the weakest step in the process and elevate its performance. Hint: It’s usually a system problem, not a people problem.

Waste creates frustration, drives up costs, and can even threaten the very existence of your company. I see waste everywhere. Most of it is subtle and goes undetected by business owners. Most of it is also preventable. A water faucet releasing one drop per second wastes over 2000 gallons in a year. What can you do to plug the leaks in your organization?

Get More Green and More Greenbacks!

The “green movement” is all about eliminating waste. Every business—your organization included—should become green. If you don’t need to do it for the environment, do it to create happy customers, higher profits, and an efficient, smooth-running business operation.

Walk around and observe your business through the eyes of a Systems Thinker. Look for defects and delays, over-flowing in-baskets, unnecessary effort, bottlenecks, and other system busters. Consider the customer complaints you have received. Then go make the necessary improvements and reap the abundant rewards!

A Unique Type of Business System!

Ron Carroll

The holidays are upon us, and with them come many traditions celebrated around the world. What are some of your holiday traditions?

In the United States, we have a Thanksgiving tradition to celebrate the Pilgrim’s first harvest after arriving in the New World in 1621. It is a day of gratitude and thanksgiving.

My thirty-five-year-old son plays “turkey football” every Thanksgiving morning with his high school friends. Many people serve the customary Thanksgiving dinner, watch the Macy’s Thanksgiving Day Parade, or observe the customs from their family background or culture?

Turkey Feast

Traditions are Systems

When you repeat any activity because it gives you good results, you have created a system. All family traditions are systems put in place to produce expected happy results. Great families create, borrow, or pass down traditions from one generation to another.

This summer, our family set up an outdoor theater in the backyard to show family videos that I’ve created over the years. Everyone had a great time laughing and remembering the good old days. We decided to make it an annual tradition.

What are Your Business Traditions?

Good businesses also create traditions that customers or employees enjoy and anticipate with eagerness. My employees loved pizza days to celebrate success. Some businesses have dress-down Fridays, a summer picnic, or a holiday party. My son-in-law rents a theater for his customers just before the public showing of a blockbuster movie. Companies often have traditional sales promotions that customers look forward to—sidewalk sales, dollar days, and midnight specials.

These are all business systems. They are anticipated. They are fun. They get results. They become more popular over time. Traditions strengthen the bonds between the company and its customers or employees. They energize people and foster creativity and excitement.

Good traditions will set your company apart in the marketplace and add pizzazz to your business culture.

Next time you are in the Zone, consider starting one new business tradition. Better yet, invite a secretary or a small committee to come up with some ideas.

Once you implement a good system, it is a marvel to watch it consistently accomplish exactly what you planned!

And don’t forget the always appropriate tradition of expressing gratitude. There is much to be thankful for. Wouldn’t you agree?

Four Stages to Becoming a Systems Thinker

Ron Carroll

One obstacle—above all the rest—prevents people from becoming System Thinkers and experiencing massive improvements to their business. PEOPLE DON’T KNOW WHAT THEY DON’T KNOW!

Becoming a Systems Thinker is a process based upon a learning model referred to as the “four stages of competence.” Take a minute to ponder these four stages as they relate to you and your organization.

Stages of a Butterfly
  1. Unconscious incompetence – You don’t know what you don’t know. You are blissfully ignorant of your deficiency or do not believe that System Thinking is relevant. You don’t realize the remarkable benefits of effective business systems and processes. You haven’t a clue how to develop good business systems and probably haven’t had any desire to do so. You likely have a seat-of-the-pants operation, with rudimentary systems and processes created out of necessity by workers.
  2. Conscious incompetence – Maybe you read E-Myth Revisited by Michael Gerber, or my newsletter, and a light bulb came on. In daily life, you notice conversation or news reports regarding “good systems” and “bad systems.” You now realize your deficiency—that perhaps Systems Thinking is important, and you need to learn this skill to reach your business goals. However, you’re not sure where to begin and how exactly to create effective operational systems and processes. You make a commitment to learn more
  3. Conscious competence – You begin to gain new knowledge. Systems Thinking requires conscious effort, and creating effective business systems can be challenging at first. With ever-more practice and experience, the process becomes routine and your confidence grows. You become proficient at the MASTER SKILL of the entrepreneur.
  4. Unconscious competence – Systems Thinking is now easy and instinctive. You’ve had so much practice with developing your business systems and processes that it has become “second nature”—a habit! You perform the task without conscious effort or difficulty. You are alert to “cause and effect,” continually refining your systems to solve problems and improve business performance. Without thinking, you teach and show others the way of a Systems Thinker.

Become an Unconscious-Competent Organization

We are all “unconscious competent” at such things as reading, typing, driving, and perhaps some sports skills. Are you ready to turn your business into an unconscious-competent organization?

By developing effective business systems and processes, your company will operate at peak performance even when you are not around. You can take time off, or get someone to run the business for you. After all, an unconscious-competent organization runs on autopilot. It has finally become the business you envisioned.

Decide what stage of Systems Thinking you are at and press forward to the next stage. Experience the awakening and exhilaration that come as you take each important step. Believe me, I know. I’ve come through the process, just like you will!

Check out these related articles:
Are You a Systems Thinker?
10 Values of a Systems Thinker!
Systems Thinking Can Double Your Sales!

Measuring Your Business Processes Pays Big Dividends!

Ron Carroll

In 1891, a British scientist named William Thompson, also known as Lord Kelvin, said, “When you can measure what you are speaking about, and express it in numbers, you know something about it. But when you cannot express it in numbers, your knowledge is of a meager and unsatisfactory kind.”

“Managing by the numbers” replaces your gut feelings and opinions with business intelligence. It provides the seeds of solutions to problems and is the basis for making vital and well-informed decisions. You can know the financial impact of a decision before you ever spend a dollar. Good decisions will save or earn you far more than the cost of acquiring data and information. So don’t skimp!

Measurement Drives Process Improvement

Renowned business authority Peter Drucker counsels, “You cannot manage what you cannot measure.” Michael Dell, of Dell Computers, adds, “Anything that can be measured can be improved.”

Consider this: Your business activities are always generating numbers, regardless of whether you pay attention to them. These activities are the daily systems and processes that create sales, deliver products, train employees, service customers, and so forth. An effective accounting system will organize those numbers to produce a wealth of relevant information for you to make important decisions and profitably run your company.

Manage by the Numbers

Your accounting system may tell you to hire a salesperson, and what your new break-even point will become. It may tell you to discontinue an unprofitable product line, buy another piece of equipment or raise product prices, and by how much. You will benefit from knowing the optimum inventory level you should stock, or what sales increase to expect from additional advertising. Numbers are the language of business improvement!

Measurement Drives Accountability

Remember this: The essence of “accounting” is not “counting.” Yes, you should know your sales for the month, your bank balance, or how much money you owe vendors. However, the true purpose of accounting is to create “accountability.” Each of your business systems and processes is accountable for a planned result.

Ask yourself:

  • Is my lead generation system producing the expected number of sales opportunities?
  • Does our quality control system keep waste under 1%?
  • Is my employee incentive system boosting productivity?

Counting, or bookkeeping, is an overhead expense of doing business. However, measurement with accountability is an investment that pays big dividends!

If you are not a numbers person or don’t have a numbers person in your organization, get one now! In this highly competitive world, you have to stay close to the numbers to be successful. Start by measuring your core systems and processes, the ones that help you find and keep customers, and most influence your profitability.

I’m convinced that managing by the numbers is an essential business process with a big payoff! I hope you are too!

10 Reasons Why Your Business Systems Fail!

Ron Carroll

Poor performance and frustration within an organization are symptoms of broken systems or processes. A law of physics (entropy) states that all things, including business systems, naturally tend to break down over time.

You will periodically need to repair, improve, or elevate a business system—or components used by the system—to a higher level of functioning. For example, the carpenter struggling to cut wood could sharpen the saw blade, buy a new blade with carbide tips, or even replace the saw with one that has a more powerful motor. Each solution takes him to a higher level of performance.

Sharpen the Saw Blade

Stand back for a moment and look at your under-performing system. Have you made any faulty assumptions? It is possible that your understanding of either the problem or the solution is wrong? You may need to re-examine your logic, or perhaps drill-down to find the root cause of the problem; the apparent cause is frequently incorrect.

Discover the Cause of System Failure

Below are ten possible reasons for the breakdown of business systems or processes in your organization:

  1. Managers do not have sufficient customer or worker input during the system development process. (You haven’t listened carefully to what your customers or employees want or need. Ask again!)
  2. The system is not in writing or lacks clarity, ownership, measurement, or reporting. (Your business system is haphazard, ever-changing, and passed on by word-of-mouth. Get it formalized!)
  3. The process is slow or produces too many defects, both of which drive up costs. (Your system or process suffers from poor design, inadequate training, or lack of measurement and feedback. Take steps to eliminate defects and delay!)
  4. The system is overloaded and cannot handle the demand. (In-baskets are full or things are stacked up, waiting to be worked on. Increase the capacity of the system. Eliminate the bottleneck!)
  5. The business system lacks focus. It is too broad, far-reaching, or complex. It has more than one purpose or objective. (Divide the system into smaller and more manageable subsystems. Reduce and simplify!)
  6. The system is dependent upon other processes that are not performing well. (Use a “5-Why Analysis” to identify the true source of the problem; then go fix it first!)
  7. Data and feedback are used to punish people rather than to improve performance. (Most problems are your fault for not creating a good system in the first place. Provide effective training. Look first for faulty business systems, not faulty people!)
  8. The new system or process is not carefully deployed. (Workers lack preparation or training. They don’t have the desire to discontinue the old process or the patience to let the new process succeed. They may fear change or worry about having their performance measured. Deploy new systems or processes with preparation, sensitivity, and encouragement. Let people know what’s in it for them!)
  9. Information about system performance is based on gut feelings or bad data and does not reflect the true condition. (Your gut is good at sensing a problem, but not so reliable at diagnosing the problem. Get the facts—MEASURE!)
  10. Managers avoid facing the brutal facts about system failures. (Confront the truth about problems that emerge from personal frustration, customer complaints, or financial data. Get real, and get going!)

Do This Now

Tomorrow, while in the Zone, think about the most frustrating part of your business. What system or process does that frustration point too—lead generation, customer service, collections, production—or perhaps a more specific subsystem? Then, consider the ten-reasons-for-failure described above to identify the source of the problem. You will quickly discover where to focus your improvement efforts.

Transform Your Business into a Culture of Excellence!

Ron Carroll

Your entire business is a system. The recipe for an excellent organization includes the right people, a good plan, the will to excel, a philosophy of continuous improvement, and high-performance business systems and processes. The resulting culture produces an organization with lasting value—one that you can sell, replicate/franchise, or let someone run for you.

Culture of Excellence

 

Creating a culture of excellence is like creating a brand; it takes some time, but when it catches on, it is quite remarkable! Transforming your organization, Mr. or Ms. Business Owner, is your number-one task. It is the Master Skill!

In describing great companies, Jim Collins said:

“The best companies never transform to greatness in ‘one fell swoop.’ There is no single defining action, no grand program, no one killer innovation, no solitary lucky break, no miracle moment. Sustainable transformations [to greatness] follow a predictable pattern of build-up and breakthrough. Like pushing on a giant heavy flywheel, it takes a lot of effort to get the thing moving at all, but with persistent pushing in a consistent direction over a long period of time, the flywheel builds momentum, eventually hitting a point of breakthrough” (Good to Great).

This transformation to greatness—becoming a culture of excellence—requires steady dedication to the development of effective business systems and processes. There is no other way!

What is Your Culture?

An organization’s culture includes its values, goals, behaviors, language, organizational structure and relationships, ways of talking, dressing and interacting, traditions and rituals, logos and symbols, technologies, processes, and methods for improving behavior and performance. Like snowflakes and fingerprints, no two business cultures are the same.

I’ve seen business cultures of oppression and fear, cultures of disorganization and chaos, cultures with high frustration and turnover of people—all reflecting the values and leadership style of owners and managers.

I’ve also seen cultures characterized by enthusiasm and loyalty, stewardship and accountability, mutual respect and trust, systemized and professional operations, where people love coming to work—all reflecting the values and leadership style of owners and managers.

Culture Determines Success

Thomas Watson Jr., former CEO of IBM said, “The basic philosophy, spirit, and drive of an organization have far more to do with its relative achievements than do technological or economic resources, organizational structure, innovation or timing (Randy Pennington, Results Rule!, 8).

Surround yourself with “disciplined people who engage in disciplined thought and who take disciplined action” (Jim Collins). When your people are working individually and collectively at their highest potential—even when you are not around—you will have created a remarkable organization.

YOU are the leader, and you set the pace. It is up to you to break through to a high-performance culture, a culture of discipline, a culture of excellence—the natural consequence of creating effective business systems and processes.

So spend an hour in the Zone today, and begin reaping the benefits tomorrow. Every day you wait is costing you money, and much more!

What is Your Remarkable Business System?

Ron Carroll

Yesterday I got a large mailer from a company called 3-Day Kitchen & Bath. The name of the company says it all. These folks promise—and deliver, I might add—a remarkable service in the eyes of their customers. As Seth Godin said, they “stand out like a purple cow in a field of brown cows.”

Fast Business System - Kitchen Remodel

From a System Thinker’s point of view, all they did was change the ordinary kitchen remodeling procedure to an extraordinary new remodeling system—and then built an entire business around it. They achieved the kind of results we are all looking for.

  • The offer (in the business name) is a powerful magnet to attract new customers.
  • The service leaves customers delighted and amazed.
  • The three-day job-efficiency pushes costs down and profits up.
  • Customers are eager to show and refer their friends.
  • The quick job-cycle creates abundant cash flow.
  • The company owns its market niche.

3-Day Kitchen & Bath performs the same remodeling tasks as traditional construction companies. You may not be able to see a difference in the finished job; however, there is a huge difference in the way the work is accomplished!

The company pre-plans the job down to the last detail and purchases all materials before construction begins. They have a specialized crew that can install cabinets, countertops, flooring, appliances, and so forth. They work extra hours on the three critical days. At the end of the third day, as the paint is drying, they pick up their check and say good-bye to their thrilled and grateful customers.

What Business System Can You Innovate?

3-Day Kitchen & Bath challenged the normal method of kitchen and bathroom remodeling. They asked, “How can we perform this service so fast that our customer’s primary objections to remodeling—completion time, construction mess, and inconvenience—are totally eliminated. They figured out how to do the seemingly impossible, and turn it into a daily routine!

Increasing speed significantly beyond market norms is one secret to having a remarkable business system. One-Hour Photo did it. Federal Express did it.

Twenty-five years ago, an enterprising group in our community decided to build a basic split-level home in twenty-four hours. I drove by and watched for a while. It was an incredible sight!

Years later, I suggested to one of my home-building customers that they create a system for completing a standard home in thirty days from the time of customer purchase. They said it couldn’t be done, and barely survived with conventional methods in a competitive market.

Ah, But It Could Be Done!

You have to think outside the box and question common practices. Sometimes, you have to do things that are hard to do. Most often, you have to elevate your core business systems or processes to something remarkable.

“Dare to be great!” When you do, you can achieve similar benefits as 3-Day Kitchen & Bath. Review them again. Consider the business system or process you could change to shake up your marketplace.

Remember: It’s all in the SYSTEM!

Related Article:
Fast Business Processes Increase Profit—7 Strategies To Boost Speed!

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It's time for me to focus on other things. Many hours and dollars have gone into my software and written materials over the last fourteen years. Now it's time to give back. This is not a gimmick. There is nothing to buy. I give it all to you for free. If you use the software and apply the principles, you can create a remarkable company. See Below. Have fun!

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Video: "All Wealth is Based Upon Systems"

Michael Gerber, "E-Myth"

Michael Gerber

"Organize around business functions, not people. Build systems within each business function. Let systems run the business and people run the systems. People come and go but the systems remain constant."

All wealth is based upon systems - 4 Big Ideas 1 Short Video

W. Edwards Deming, Total Quality Management

W. Edwards Deming

"If you can't describe what you are doing as a process, you don't know what you're doing. . . . 94% of all failure is a result of the system, not people."

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