Business Systems and Processes.

The Systems Thinker Blog

What Is a Business Process, and Why Should You Care (A Lot)!

Ron Carroll

A business is made up of people, products, and processes organized to profitably find and keep customers. Many companies fail because owners and managers are unable to create effective business processes that accomplish this fundamental objective.

So, what exactly is a business process? And how can you create processes that will help your company achieve greater customer loyalty, profitability, and growth?

Business Process

Simple Definitions

There are business process experts who get deep in the weeds when defining a business process or trying to distinguish it from a business procedure or a business system. However, for entrepreneurs and owners of small to midsize businesses, a few simple definitions will suffice for our discussion.

  • Business Procedure – a sequence of actions taken to accomplish a task (emphasis on following steps in a specified order).
  • Business Process – a series of ordered activities that transform inputs into higher-value outputs (emphasis on transforming materials or information into a product or service).
  • Business System – a group of interacting, interrelated, or interdependent elements forming a unified whole (emphasis on related parts working together for a desired outcome).

A Process is Just a Recipe

As a business owner or manager, you may use these terms interchangeably. They are all business activities designed to produce a specific, pre-determined, and consistent result. They include your processes for marketing and sales, hiring and training employees, customer service, production, order fulfillment, accounting, and many more, some unique to your industry or company.

Business systems and processes—whether in the store, the office, or the workshop—are your unique recipes for getting work done. They are governed by the Law of Cause and Effect. The result (effect) of a business process is determined by the ingredients used (e.g., forms, checklists, materials, supplies, equipment, software, people, and so forth) and the procedure followed (cause). The only way to get a better process result is to improve the ingredients or the procedure of the recipe.

For example, when you carefully follow the detailed instructions of a chocolate cake recipe, you get the same result every time. However, we all agree there are chocolate cakes and then there are CHOCOLATE CAKES!  (e.g., Chocolate Thunder). They may go by the same name, but the unique recipe makes all the difference.

The same is true with your recipe for generating sales leads or hiring the best people. A little change in ingredients or procedures can give you far superior results!  

Correctly designed, your business systems and processes support the mission, strategy, and goals of your organization. While people may come and go, the successful recipes you have created remain constant. Furthermore, the better your recipes are, the greater the customer loyalty, profitability, and growth you will enjoy!

Simply put, 100% of your business is made up of systems and processes (recipes) that can be managed and improved by applying correct principles to fine-tune 1) the ingredients or 2) the procedures. There is no other way!

Three Types of Business Processes

Effective systems and processes are the essential building blocks of your company. There are three general types to consider:

  1. Management processes include planning, organizing, controlling, and leading—the activities for governing your business (e.g., developing strategy, management meetings, and board of directors or advisors).
  2. Operational Processes constitute your core business functions and create the primary value stream for customers (e.g., lead generation, sales, purchasing, production, order- fulfillment, shipping, and customer service).
  3. Supporting processes uphold and sustain the core processes (e.g., accounting, hiring, information systems, safety, and custodial).

Most business systems and processes are unique to your company (like fingerprints) and differentiate you from all other companies unless you are a franchise. They include sub-systems or sub-processes that focus on the details of your business activities. For example, a marketing process has a sub-process called lead generation, which has sub-processes such as print advertising, radio, social media, or a website. It is in the details—the sub-systems and processes—that profit dollars are made or lost!

Good business systems and processes have three primary purposes: 1) to attract customers, exceed their expectations, and transform them into loyal fans, 2) to eliminate operational waste and inefficiencies that rob profit and 3) to create differentiation and domination in your target market.

Michael Gerber, the author of E-Myth Revisited, teaches, “Organize around business functions, not people. Build systems [and processes] within each business function. Let systems run the business and people run the systems. People come and go but the systems [and processes] remain constant.”

Describing a Process: Procedure vs. Checklist

When the steps of a task are performed in a specific order, the term “sequential steps” or “procedure” is used. For example, in a furniture shop, you first cut the wood, then sand the wood, and finally paint the wood. Doing these three things in the right order is essential. Your finished product would be unacceptable if you painted the wood before you sanded and prepared it.

A flowchart diagram with boxes and arrows—indicating steps, decision points, branches, and loops—sometimes makes it easier to describe a multi-path process than does a written procedure. Using the furniture example, if the wood has a rough edge when it arrives at painting, your decision is to reject the wood and send it back to the preparation stage. There it is re-sanded and returned to painting. After painting, a branch in the process might also send different colors of wood to separate pallets for storage.

Business Flowchart Example

When the steps in a process can be performed in any order, a simple “checklist” is all that is needed. For example, your office custodian might empty the trash, dust the furniture, and vacuum the floor. However, it doesn’t really matter in what order the tasks are completed. Checklists are easy business systems that do not require flowcharts and can usually be created rather quickly.

Remember: While much thought, planning, and experimentation may go into developing a high-performance business system or process (see Your First Business Improvement Workshop), everything learned is eventually reduced to a single procedure or checklist that is used by the people who operate the system. Their responsibility is to follow that procedure with exactness until the system is improved. If you encourage and reward innovation, system operators will also drive the improvement process.

Processes Are for Customers

A primary purpose of your business processes is to provide value for customers—to transform information or material into something that customers want, and which meets their specifications and expectations. Customers can be those who ultimately buy your products or services; however, business processes also serve the similar needs of your internal customers (see Your Five Different Customers).

For example, in your business operations, the next step in a business process is the customer of the previous step in that process. In an assembly line, station two is the internal customer of station one. The order-fulfillment department is the customer of the order-processing department. The sales team is a customer of the advertising or lead generation team. Each “customer” in a chain of business activities looks for added value, and also wants their specifications and expectations to be met.

In addition, employees are important customers of the business. They too have specifications (e.g. work hours, wages, and benefits) and expectations (e.g., rewarding assignments and opportunities for advancement). Whether spoken or not, if you fail to meet their requirements, they will eventually go somewhere else. Good business processes support the learning and growth of your people and inspire their loyalty.

All of your business processes must deliver four basic things to its external and internal customers: 1) quality—low defects, does what is supposed to do, 2) speed—on schedule, meets deadlines, no delay, 3) low cost—high perceived value, competitively priced, and 4) pleasurable buying experience—no hassle, “killer customer care.”

Business Process Development

Learning how to develop good business processes is the Master Skill of the entrepreneur. All business functions—marketing, finance, and operations—fall within the scope of this single skill mastery. What’s more, the true value of your business is found in the maturity of its business processes—their ability to produce desired results consistently.  (How would you and others grade your current business systems and processes?)

Systems Thinking in Business

Below are ten characteristics of an effective, efficient, and even exceptional business system or process:

  1. The process is built with the customer in mind. (Does this business system or process help turn your customers into loyal followers by meeting or exceeding their expectations? Does it help your workers perform at their best and get top results, even when you’re not around?)
  2. The process represents “best practices” or your best-known way of doing something. (Are you getting less than 1% errors? Is the process as fast as it could be? Be honest. Is this the best you can do, or could you make the process better?)
  3. The business process is designed with one primary purpose (more than one purpose usually means that processes are wrongly combined).  In addition, the process has no unnecessary steps and little or no idle time between steps.  (Is the process stable, steady, and paced with sales orders and fulfillment? Are the process goals aligned with your company goals?)
  4. The system or process has an owner or team leader. (Who is accountable for and reports the results of the process? Is the person rewarded for exceeding performance standards or making improvements?)
  5. There is ongoing and updated documentation on how to execute the process properly, including the handling of details and exceptions. (Do workers fully understand the process and can easily repeat it with consistent results? Have you created a winning recipe?)
  6. The process is as simple as possible to get the job done, but not simpler. (Can you lesson complexity, customization, and exceptions in products and services? Can you reduce the physical path, clutter, barriers, and distractions? Can you drop unprofitable product-lines or services?)
  7. There is a sufficient focus on system details to eliminate most bottlenecks, inefficiencies, delays, mistakes, defects, and rework. (Every process has waste. Have you reduced it to a minimum? Do you accumulate defects for later handling or do you properly fix problems in the process as they occur?)
  8. The business system is not hampered by poor planning (lack of materials or labor) or stop-start work-flow as people switch between processes. (Are your workers losing productivity or making excessive errors caused by shifting assignments, multitasking, being “spread too thin,” or “wearing too many hats”?)
  9. The system has performance standards, and results are measured. (Are you “managing by the numbers” for maximum profit? Do you celebrate success?)
  10. Workers get ongoing feedback about system-performance and are recognized or rewarded for exceptional results. (Do people always know how they are performing in relation to the goal? Is feedback self-administered, and in real-time like a sporting event? Simple tip: To improve performance, increase the frequency of the feedback.)

Quality + Speed = Low Cost

By creating business processes that have minimal mistakes, defects, and rework (quality), you will reduce waste and increases process speed. By eliminating delay, downtime, and other speed bumps, you will boost sales throughput. This powerful one-two punch of quality and speed will give you the lowest possible operational costs and provide your customers with the greatest value.

Outstanding business systems and processes are the “magic formula” for success! Superior quality and speed are the “secret sauce” that will wow customers, boost profit, blow the competition away, and make your company remarkable!

Wrapping Up

Well-designed business systems and processes increase efficiency, accomplish objectives, and give customers what they want every single time. They are your answer to weak sales growth, customer dissatisfaction, poor performance/productivity, waste of resources, employee turnover, excessive costs, slow cash flow, low profit margins, daily frustration, and every other business problem.

Whether in the store, the office, or the workshop, developing effective business systems and processes begins with good system design. After creating a flowchart or checklist, and acquiring the components necessary to operate the system, you now focus on improving its quality and speed. Measuring system-performance provides feedback for making adjustments and improvements.

More specifically, each step in the process flowchart contributes value to the customer. The process generates output that meets quality standards, with no accumulation of rejects or rework. The workload is level, uses standardized tasks, and is paced with the input of sales orders. Bottlenecks that delay order completion are eliminated. “Speed bumps” such as clutter, poor layout, and downtime are minimized. Employees are well-trained and incentivized when possible. People and systems learn and improve from the ongoing feedback of process results.

So, what exactly is a business process, and why should you care (a lot)?

In the game of work, good systems and processes embody your distinctive business strategy. They are your means to increase customer value and product demand. They enable you to differentiate yourself in a crowded marketplace. They help you maximize efficiency for greater profit, more personal income, and the ability to share financial rewards with others. In addition to people and products, processes give your company a unique identity and place in the world.

Is it worth it to learn the Master Skill of system development? A thousand times, “YES”!

There is an art and a science to creating exceptional business systems and processes and growing a remarkable business enterprise. I invite you to check out the Box Theory™ Way today and discover our eCourse and breakthrough business-process software, specially designed for small to mid-size businesses.

Business Turnaround: 10 Threats that Can Kill Your Business!

Ron Carroll

Many business owners wait too long before facing the brutal facts that their business is in trouble. Then they discover—like a bug in a flushed toilet—it’s nearly impossible to escape the downward spiral.

Downward Spiral

We begin our business filled with hope and optimism. Before long, forces start into motion to test our grit. Getting sufficient sales and good employees is harder than expected. We face government regulations, slumping economies, cost increases from vendors, customers who pay slow or not at all, cash flow headaches, burdensome paperwork, tax pressures, unproductive workers, stiff competition, obsolete inventory, and constant customer demand for new and better products. (It wears me about just thinking about it.)

However, this is the profession we chose; the above challenges come with the territory. So, we suck it up, we adapt, we improve, and we work diligently to overcome the unrelenting forces trying to put us out of business.

Furthermore, not all problems we encounter are equal. Some have the power to kill our business if we fail to remedy those threats without delay. Our survival depends upon it!

Below are ten business killers that, if not addressed, can bring about the big flush and send your business spinning out of control and down the proverbial drain.

Sales Killers

  • Killer #1 Low Market Demand  – Your business and revenue model breaks down quickly when people aren’t very interested in buying your products or services. Perhaps your offering doesn’t solve problems or reduce pain as well as expected. Maybe it is getting old or outdated—running out of steam. Your message could be unappealing and doesn’t attract interest. Customers may be staying away because you don’t have a great reputation for delivering on your promise. Whatever it is, without sufficient product demand, you really don’t have a business.

    I remember when Blockbuster Video closed their last store—demand for rented movies moved to Netflix and digital delivery.  Question: What is causing the lack of demand for your product or service, and can you fix it?
  • Killer #2 Hard to Reach Target Market – Are you having difficulty finding an easy and cost-effective way to get your message in front of your ideal customers? Maybe they don’t have obvious hangouts for you to find them, or there isn’t an effortless way for them to find you. Do you have a bad physical location? Are you not easily found on the Internet? Could too much competitive noise be drowning out your message?  Is your reach to prospective customers about as effective as a billboard in the desert?

    Business philosopher Jim Rohn teaches how to be a master communicator: “First, have something good to say. Second, say it well. And third, say it often.” I repeat: Do you have a clear and cost-effective channel to deliver your message often to large numbers of people in your target market? If not, can you fix it?
  • Killer #3 Superior Competition – Your potential customers are always looking for the best deal, not necessarily the lowest price. If your competitors are bigger, better located, have superior products or services, provide better customer care, shorter lead-times, more knowledgeable salespeople, and so forth, you will lose business. It’s hard to get customers to beat down the door if you are second best, unless you do it like Avis Car Rental.

    “The phrase     ‘We Try Harder’ has gone down in advertising history as one of the longest-lasting and respected taglines (50 years). The origination of the slogan was not to create a cute gimmick, but instead, it was a business philosophy that every Avis employee adhered to. ‘We Try Harder’ helped Avis earn a reputation as one of the most admired businesses in the world.”

    You don’t have to be the biggest, but you must strive to make your business so good that people would be crazy to buy from anyone else. What can you do to inspire this kind of loyalty?
  • Killer #4 Undifferentiated Strategy – In this day and age, you have to stand out like “a purple cow in a field of brown cows” (Seth Godin). You must constantly promote your unique selling proposition (USP)—your main selling advantage. Perhaps you can be better, faster, or cheaper than your competition, or you can provide “killer customer care.”

    What makes some of the big boys stand out: UPS (logistics), COSTCO (value), Amazon (convenience/ease), Coldstone Ice Cream (quality), or Wal-Mart (low price). What compels YOU to buy from specific stores in your area? Follow the successful strategies of others.

    You must have some way of doing business that makes the customer remember their experience, feel that     WOW thing, and tell their friends. If you are like everybody else, then it is only luck that that determines your sales. What makes your business strategy —your game plan— a winner? Can you adjust your strategy to dominate a niche market?

Cash Flow and Profit Killers

  • Killer #5 Not Managing by the Numbers – If you aren’t sure how well your company is performing or why you are losing money, you have a serious problem.  It is critical that you understand your leading and lagging indicators, the numbers that tell you where to focus your business improvement efforts.  Maybe you are in denial about what the numbers reveal. Remember, the longer you wait to address the problem, the worse things get, and the harder it is to recover. If necessary, find someone to help you understand what the numbers on your financial statements are trying to tell you.

    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.”

    Are you aware of the     numerical clues that expose the problem areas of your business operation? When you find the under-performing systems or processes that are causing those numbers, can you fix them?
  • Killer #6 Inadequate Margins – There are very few problems in an established business that can’t be solved with good margins—gross margin, operating margin, and net profit margin.  Avoid the temptation to be the lowest price in town unless you have a legitimate cost advantage or operate on a very high-volume business model. Instead, focus on giving your customers the best overall value and buying experience.

    To improve margins, you have to raise your prices, reduce the cost of your products and services, and/or lower your overhead expenses. Which solution is best for you to increase operating margins? Without adequate margins, you’re just working hard     for the fun of it.
  • Killer #7 Insufficient Working Capital – If not remedied, cash flow cancer is a deadly disease that will eventually kill any business. You have to have enough money to buy goods, cover payroll, and meet your monthly financial obligations. Borrowing money to do this is a bad idea if you have not resolved the underlying business killers discussed above. However, borrowing can be OK to support growth when you have good profit margins.  As you dig out of a cash hole, consider the tips in this article, “A Business System When the Wolf is At the Door.”

    Caution:     Beware of excessive inventory and accounts receivable that suck cash and make you feel poor even when you are earning a nice profit. Do you know where all your profit has gone? What can you do to move more of it into working capital? If you have little or no profit, you better focus on a lack of sales and/or insufficient margins—PRONTO!

Business Operations Killers

  • Killer #8 Lack of Innovation – If you are not coming up with new ideas for improved products, services, and business processes, you will be left behind. Your company will become stale, undifferentiated in your target market, and ho-hum boring.  Competitors that are innovating will surge ahead. Innovation is essential to stay on top.

    Business expert, Peter Drucker teaches, “A business has two purposes: marketing and innovation.”

    What new things could you do to draw more attention, serve customers better, and create higher quality and more efficient business operations? You have endless opportunities. Make innovation a part of your daily routine.
  • Killer #9 Weak Business Systems – Without good business systems and processes, you have a disorganized, seat-of-the-pants operation that is frequently in crisis mode (every crisis is a system breakdown). Putting out fires is your daily routine. There is never-ending frustration for customers and employees. It’s time to end the madness. What grade would you give your business systems?

    Good systems will increase sales, customer loyalty, advantage over competitors, and profit margins. They are essential to a smooth-running and prosperous enterprise. Every business turnaround I have been involved with required drilling down into the operations to find ineffective systems and processes with excessive     mistakes, inefficiency and waste.

    In a mature company with adequate product demand, reducing waste is the key to rescuing the business. What core systems in your organization drive its economic engine? What improvements could you quickly make?     Where might you turn for help?
  • Killer #10 Uninformed or Ineffective Management – Poor management can drag your business down in a hurry. You have to “get the right people on the bus and the wrong people off the bus” (Jim Collins, “Good to Great”). You need people who are Systems Thinkers (a learned skill), results-oriented, and who can help you create a culture of excellence.

    Furthermore, managers must be in-the-know about the challenges your company is facing. Tap into their unique talents and insights. And remember: good managers get the best possible results with the least amount of resources.

    Finally, a frequent cause for business failure is that owners and managers do not create     business systems and processes to effectively carry out the mission, strategy, and goals of their organization. Do you currently have top-notch people? Are YOU an effective leader?

Turning Your Business Around

When an established business enters hard times, it has a lot more staying-power than might be expected. I have seen companies struggle for years before going out of business or turning themselves around. They are able to live off of the good-will they have earned with vendors, customers, and employees. They find needed cash from shrinking inventories and accounts receivable. They get support and softened terms from banks and vendors.

Struggling business owners who exhibit high integrity, courage to face the truth about their challenges, and who forge ahead with pig-headed determination, are often able to swim upstream to safety. And everyone will be cheering them on!

However, you can’t just hope for a better day. You must have a game-plan to solve the killer problems we’ve talked about. You have to get real, and get going—AND THE FASTER THE BETTER!

In my experience, most attention should be focused on either of two things, getting more high-margin sales or eliminating inefficiency and waste. Simply put, you have to focus on the right things, drill down into the details of your business systems and processes, identify the weak links, bottlenecks, obstacles, and problems, and fix them. (See some examples of this.)

Hiring the right turnaround consultant might be helpful, but it is usually expensive and not always the best solution. Paying out more money that you cannot afford also adds to your burden and risk.

You know your business better than anyone else. Maybe YOU can do it! Becoming a Systems Thinker and following correct principles is the key to success. If you do it yourself—with your team— you will be forever stronger from the experience. You will become the master of your own fate.

Problem Solving: Zero In on the Root Cause and the Vital Few

Ron Carroll

Success in any business depends a great deal on how well you manage the details. I like to say the “dollars are in the details.”  However, many business owners and managers are overwhelmed by the minutiae of daily business life. They haven’t discovered where to focus attention to accomplish the most good for the least amount of time, effort, and cost.

Focus on most important details

So, what details in your business operation are most critical to success? The simple answer: those that propel you to achieve your business goals and those that obstruct you from reaching your business goals. Let’s focus on the latter.
Most operational details causing frustration and hindering results are not obvious; if they were, you could quickly fix them. So how do you uncover the obstacles, weak links, bottlenecks, waste, and delay buried in your daily business processes? More importantly, how can you spend your valuable time solving the most important problems—the ones with the greatest impact on customer satisfaction and your bottom-line profit?

The Root Cause

With business problems, we often tend to focus on symptoms such as excessive product returns or unproductive employees, and fail to discover the true source of the problem—the “root cause.”

By definition, a root cause “is the most basic cause that can reasonably be identified, and that management has control to fix. The fix will prevent (or significantly reduce the likelihood of) the problem’s recurrence” (Mark Paradies, TapRoot).

In a business setting, the job of the Systems Thinker is to drill-down and pinpoint the exact step within a business process that is under-performing and preventing expected results. Drilling-down is like looking through a microscope to examine the details and discover the underlying cause.

Keep in mind, however, that a symptom may have more than one cause. For example, lack of sales conversions from a website (symptom) may be from an overpriced product, a confusing sales message, or too many “hoops” for the customer to jump through in the buying process (causes). In addition, a single cause can create more than one symptom. An untrained worker could cause customer complaints and frustrated co-workers.

Finding the root cause of business problems is a skill that must be mastered by all business owners and managers. Understanding the Theory of Constraints will help you do just that. Once the true cause—the root cause—of a business problem is identified and fixed, all other dependent systems and processes are simultaneously improved.

Vital Few vs Trivial Many

When picking business improvement projects, it is important to prioritize and focus efforts where they will do the best good and help you achieve fast results. A few targeted improvements can be leveraged to create significant benefits for your organization.

In their book, “Six Sigma for Dummies,” the authors write:

“The law of the ‘vital few versus the trivial many’ comes from the work of early 20th century Italian sociologist and economist Vilfredo Pareto. You may also know his law as the 80-20 Rule, where twenty percent of the inputs in any system account for eighty percent of the influence on that system.

“Pareto determined mathematically that, while a great number of factors are connected to a given outcome, only a few carry the weight to change that outcome in a significant way. In a business, system, or process, a few key variables are the cause of most performance problems. When you look for leverage in business, you search for the minority of variables that provide the majority of power in solving problems in manufacturing, assembly, distribution, accounting, finance, customer service, and so on.

“There are more factors, contingencies, and dynamics to manage than possible when trying to break through to new levels of performance and success. The natural tendency is to try and manage and control every detail, but this is a slippery slope. The trivial many will bury you in a pile of unnecessary cost, trouble, worries, wasted energy, and valueless action. No one, and no company, has the luxury or reason to manage all the details. Instead, the right path is to manage only those that are critical to producing the outcomes you desire. Focus on the inputs that really matter. All the rest, leave alone unless they become significant” (Craig Gygi, Neil DeCarlo, Bruce Williams, 39).

Getting to Work

Focus on the vital few details that will provide the biggest bang for your buck. What systems and processes can you improve that will help you reach company goals? What can you fix to eliminate roadblocks, waste, and inefficiency? What improvements will provide the largest financial payoff? How can you reduce frustration for customers or employees? What tweaks can you make quickly and inexpensively?

Once you pinpoint the vital few areas to focus on—your priorities—the best way to drill down to the root cause is by asking the right questions to the right people—a 5-Whys Analysis.

And please don’t forget, The Box Theory™ Way—software and methodology—is also the best tool around to help you identify the root cause of problems and elevate your business systems and processes for high-performance results.

Theory of Constraints: 6 Limiting Factors to Your Business Success!

Ron Carroll

Every businessperson with a vision of where they are going, and specific strategies and goals to get there, will face obstacles or barriers that hinder them from achieving success. Frequently, when confronted with solving problems or making improvements, business owners or managers feel overwhelmed. They lack the time, money, or resources to correct the problems they are experiencing. They often feel like their hands are tied, and they don’t know where to begin.

Hands tied when solving problems

You can start by confronting the brutal facts about your business operations—the problems that are staring you in the face. For example: from customer or employee complaints, discouraging financial or performance reports, or just plain gut-level frustration, you have a general idea of your weaknesses and challenges. As discussed earlier, these symptoms are the result of unhealthy and under-performing business systems and processes.

In 1984, Dr. Eliyahu M. Goldratt, in his book The Goal, introduced the Theory of Constraints (TOC), a management philosophy based upon the application of logic and scientific principles, to help organizations achieve their goals. The principles of TOC will provide you the shortest distance between two points—where you currently are, and where you want to go.

What Is the Theory of Constraints?

The Theory of Constraints is based upon the assertion that: “Every real system, such as a business, must have within it at least one constraint (limiting factor). If this were not the case then the system could produce unlimited amounts of whatever it was striving for, profit in the case of a business. . .” (Dr. Eli Goldratt).

In other words, every business operation has something inhibiting it from reaching its full potential.  Some condition exists that limits sales or production output. This limit or constraint determines the maximum capacity of the system. By removing or improving the single constraint, the system is elevated to a higher level of performance.

Below are six types of constraints that can hold back an organization. The solution to your problems can be found in any or all of them; some may overlap.

  1. A Logical Constraint – Faulty thinking or assumptions can block success (e.g., believing people are the problem when ineffective systems—hiring, training, and so forth—are the real problem).
  2. A Process Constraint – The output of work processes is reduced by a weak-link or bottleneck in the process (e.g., work piled up in an in-basket; inventory waiting to be processed).
  3. A Physical Constraint – Physical components of a process often have limitations (e.g., the capacity of a machine; available space or time; capability of a person; physical obstacles such as clutter or travel distance, and so forth).
  4. A Self-inflicted Constraint – A company’s culture, rules, or policies can have a detrimental effect on results (e.g., lack of accountability, not hiring older people; sticking with the “sacred cows” of work practices).
  5. A Personal Constraint – Personal traits of an owner or manager can hinder performance (e.g., disorganization, procrastination, perfectionism, indecision, fear, incompetence, lack of time, or failure to face problems). Do you have any beliefs or behaviors that are holding back your business?
  6. An External/Market Constraint – Obstacles can exist that you have no control over (e.g., market size; customer attitudes; competition; the economy). You can often adapt to these external constraints over time by adjusting your business strategy.

As with a medical diagnosis, the symptoms of a business problem don’t always point directly to the cause of the problem. In fact, most of the time, the problem you experience is not the real constraint. Just as a cough is only a symptom of an unhealthy system within the body, the pain or frustration you feel about your business is likely the effect of a deeper problem. Some constraints (e.g., physical) are more apparent than other constraints (e.g., logical).

Consider this: While there can be a variety of problems within a business system, only one step of the process at a time is the constraint on the entire system—the weak link and true cause of restricted output.

You can only improve the results or output of that system by eliminating the weak link or elevating its performance. Time, effort, and money spent to strengthen the other links in the chain—the other steps in the process—will not improve the system output. The weak link governs the performance of the whole system!

Bottleneck of a Process

 (Answers: Step 4; 14 per hour)

Once you have strengthened or elevated the weak link, another link or step in the process becomes the weakest and may deserve your attention. Thus, by always focusing efforts on the weakest part of the system, you get the maximum benefit from your business improvement efforts.

Because only a few core systems or processes drive your business results—and each has just one constraint at a time—you can now focus your energy on the few problems that really matter the most. Make the necessary improvements and then tackle a new constraint. Watch your business take off!

Theory of Constraints: Performance = Full Potential – Constraints

Throughput

The Theory of Constraints assumes that a system has a single productivity goal. The challenge is to increase the output, or “throughput” of the system by managing the constraint that blocks your ability to reach that goal.

For example, the throughput of a marketing and sales process is measured by the dollar-value of orders written. The throughput of a production system is the dollar-value of products shipped. For a business as a whole, the measurement of throughput is the final cash collected from the sale of its products or services.

Many company owners mistakenly think they need to optimize all of their business systems and processes (logic constraint). They often measure individual processes and reward performance independent of overall business results.

Surprisingly, the improvements in quality or efficiency, as important as they are, do not always lead to a corresponding improvement in total throughput. In fact, an optimized system or process can create a negative effect on the next system in a line by overwhelming it with too many inputs.

Improving any but the weakest step within a process creates excess output that piles up in front of the weak step, often called a bottleneck. Bad things happen when work piles up, when you overfeed a process. Don’t create any more inventory or work-in-process than is necessary to maximize throughput!

Remember: The key is not just to eliminate the bottleneck-step of a particular system, but to elevate any complete system or business activity that constrains the throughput of the entire business. All of your core business systems and processes must work in synchronization to achieve the optimum result. While efficiency and cost-cutting are important, the best measurement of real improvement is increased throughput—revenue and profit.

In my experience with small businesses, insufficient sales are usually the major constraint on the throughput of the business. No matter how efficient the operation, without a steady flow of sales into the pipeline, the output is always disappointing.

By the way, your cost of goods plus overhead expenses create a monthly sales break-even point for your business. Throughput should cover those costs as early in the month as possible. You only make a profit on orders shipped after you reach the break-even point!

TOC in Action

Kid’s Korner manufactures and distributes a unique line of children’s furniture and accessories through five retail stores located in shopping malls. Owners want to double annual sales from three to six million dollars without the cost of adding more stores. They also want to preserve the margin in their product by staying in the retail market. They decide to put their available resources into Internet marketing.

The first constraint the owners face is that not enough people visit their sorry website. They hire a person skilled at search engine optimization (SEO) and Google Ads to improve online traffic. With more people coming to the site, their constraint is now the low percentage of visitors who become paying customers.

The owners hire a professional copywriter to improve their message and add an irresistible offer of free shipping. To their surprise and excitement, product sales start to take off! Sales throughput, however, does not increase as expected. They soon discover the next constraint, their inability to fulfill all the orders on a timely basis. The company adds another person to their bottleneck shipping department, and the problem is solved; sales throughput goes up.

The results from the website continue to exceed the owner’s expectations, but now they can’t keep all of their products in stock—a new constraint to overcome. For example, they have a line of lamps that come in twelve different styles. Production is hampered because they must break down and set up the production line for each style.

A review of sales data shows that four lamp models account for 75% of their lamp revenue (see 80-20 Rule). They make a difficult decision to trim the models to four. A miracle occurs! While they lose a few sales, production is much more efficient and the throughput on lamps dramatically increases—overall business throughput also jumps.

Lamp production has improved enough that sales again become the constraint for this item. The owners decide to take advantage of the productivity and warehouse the excess inventory. This proves to be a costly decision. It ties up needed cash. Demand drops drastically on one of the stocked lamps, and a production flaw, not caught during the inventory buildup, causes a significant amount of rejects and waste.

The owners revise their strategy and begin to pace lamp production with sales—no inventory buildup of potentially obsolete items, no cash sitting on shelves, no hidden production flaws. They discover that more profit is made when sales and production flow through an evenly paced business system.

By applying the Theory of Constraints, the owners of Kid’s Korner focused on the critical systems and processes that would increase throughput and help them reach their six-million-dollar goal.

While you may have a different business model, these TOC principles also pertain to your company.

Now, go find the constraints—weak links, bottlenecks, obstacles—that are hindering the throughput of your business!

Employee Productivity: 7 Tips to Harness the Power of Urgency!

Ron Carroll

With some people (like owners and managers), everything seems to be urgent, pressing, dire, critical, serious, or top-priority. With others—employees who are laid-back, casual, carefree, lackadaisical, or even unconcerned—nothing is urgent.

In business, a general sense of urgency is a good thing, but it usually doesn’t happen automatically.

My mother recently fell and broke her pelvic bone. She recovered in a rehab facility. Never-ending patient demands at the care center kept staff on-the-run all day long. Urgency, and the resulting productivity, is built into the culture. The business owner just smiles as he watches people scurry around getting their work done.

The Power of Urgency to Increase Productivity

You may not be so lucky. Most owners and managers have to be more creative to infuse their company culture with a sense of urgency. If done successfully, however, the payoff includes motivated employees, happy customers, lower costs, and increased profit.

An Example of Urgency

When I was a young man going to college, I worked for a company that had a “hot product.” We were three weeks behind in production and shipping. Customers were constantly calling to have us trace their order, thinking it must be lost. A picture hung on the wall with a chimpanzee dressed as a shipping clerk. To a customer over the telephone, the chimp declared, “Trace it! We haven’t even shipped it yet.” That was our story.

Every shipment was urgent to prevent orders from being canceled. One day, I decided to pack an extra twenty cases of product and process a few more orders after my regular shift was over. It took me another twenty minutes. Continuing each day, I packed an additional hundred cases in the week and about 450 cases in the month. My shipping buddy decided to join in, and we completed nearly a thousand extra cases during the month for our employer. It was urgency that drove us to it. (And truthfully, we wanted to avoid being yelled at by angry customers or a grumpy-pants boss.)

Bad Urgency vs. Good Urgency

The urgency that comes from “putting out fires” is not good. It is the result of poor planning and execution of business operations. This kind of urgency is very stressful and a real downer for everyone.

However, when the energy is properly harnessed, urgency can elevate business performance and produce amazing results (motivated employees, happy customers, lower costs, and increased profit).

Simply put, urgency will increase productivity and accelerate the sale of goods and services. Employees are motivated by a sense of accomplishment (and sometimes incentive pay). Customers love to receive products fast. Higher sales-throughput enables a company to reach its break-even point earlier in the month, and that sends profits soaring. Everyone wins!

Dos and Don’ts

Before you try to introduce urgency into your business operation, keep in mind there is a RIGHT WAY and a WRONG WAY to go about it.

Here are three things you don’t want to do to add the element of urgency:

  1. Don’t set goals to motivate people that are unrealistic. Goals that are too hard to reach kill motivation and cause resentment (especially when there is a financial incentive involved).
  2. Don’t skip steps in a proven business process. Skipping steps such as a preparation step or a quality-control step for the sake of urgency will create problems that nullify any gains.
  3. Don’t turn up the speed on the conveyor belt. People can only work so fast and still maintain quality. Efficiency is better achieved by eliminating speed bumps and system busters than by pushing people beyond a reasonable work pace.

Now, here are four legitimate things you can do to create a sense of urgency:
  1. Let customer expectations drive the urgency. Tell customers you have next-day shipping or one-week lead time, or a specified completion date. Employees will do what it takes to fulfill the company promise.
  2. Set daily, weekly and/or monthly goals. Speed and urgency naturally increase as people get closer to a deadline. For example, employee productivity accelerates to meet a shipping goal by the end of the week (e.g., number of boxes, orders, or dollars). It is a good idea to post results and hold people accountable for achieving the stated goal.
  3. Create financial or other incentives. Self-interest is highly motivating for most people. A good incentive system—financial or otherwise—will lift employees, speed processes, and drive down unit costs.
  4. Declare an emergency. This infusion of urgency can only be used once in a while and should be substantially true (e.g., you may lose an order). Proclaiming an “emergency” too often is an indication of weak management. Declaring emergencies that are not real is like the boy who cried, “Wolf.” The plea for help will eventually be ignored.

Keep in mind: a high-level of urgency cannot be sustained. People have peaks and valleys of energy and productivity. They can’t stay in top-form all day, every day. You have to accept that. However, you can have higher and longer-lasting peaks and shorter-shallower valleys by adding one or more of the urgency triggers described above.

Where Do You Start?

Infuse the power of urgency into the weakest of your core processes for selling and delivering products and/or services. Watch as surrounding workers and processes catch the fever. Keep an eye out for the physical bottlenecks that may be holding people back, and elevate those constraints.

Oh, and one more thing: kick your business into high gear with Box Theory™ products.

Great Customer Service: 50 Quotes From People Who Know! (slideshow)

Ron Carroll

We can’t learn too much about our customers—who they are, where they hang out, how they think, and what they want. Most of us don’t have enough customers and would like to get more.

Stating the obvious: Happy customers translate to more sales. Increased sales enable your business to hit the break-even point earlier in the month. After reaching the sales break-even point, profit margins go up dramatically. With more profit, everything gets better, and you have a prosperous enterprise.

Are your customers as happy as they could be? Do you have “killer customer care?”

Four Things Customers Want

Customers all want the same thing—the best deal they can get on their desired products and services. They want high-quality. They want it fast or on time. They want it at a good price. And they want a pleasurable buying experience.

Bad Customer Service

Photo credit: WordPress.com

Learn from the Experts

Many lessons have been learned over the years about how to serve customers well. The slideshow below will provide you with some great insights. These profound statements are from people who truly understand the principles of customer care:

Walt Disney
Sam Walton (Walmart)
Mother Teresa
Ray Kroc (McDonald’s)
Bill Gates
Mahatma Ghandi
Zig Zigglar
Steve Jobs
J. C. Penny
Benjamin Franklin
Dale Carnegie
Aristotle
Stephen Covey
John F. Kennedy
Albert Einstein
and others

Your Customer Care System

Keep in mind, the informative statements you are about to read won’t help your business one bit unless you incorporate them into a business system or process. There is no other way!

Review the slideshow. Make notes. Then, go apply some of these profound principles to elevate your customer-service systems today.

Business Startup: Your First Business Systems and Processes

Ron Carroll

Starting a new business is both exhilarating and downright scary. Every new business owner has a story to tell about the early days.

When I was a young man, my father sadly passed away from cancer at age forty-one. He had a life-insurance policy of $30,000. My mother felt he would want my brother and me to have this money for a new business venture we were considering. Craig and I were pretty naïve back then and did not realize how likely it was we would lose it all. Fortunately, our startup manufacturing business landed a big customer and could leverage that income to get the ball rolling.

However, Craig and I were not only youthful and naive about the perils of starting a new business, but we were clueless about how to create a fully-functioning and profitable business operation. We jumped in, started making and shipping products, and enjoyed a short honeymoon. Then the harsh day-to-day business realities began to settle in.

Danger Ahead for Business Startups

The Game of Business

We discovered it was not so easy to keep customers, employees, vendors, bankers, and landlords happy all the time. We realized that the more we sold, the more our accounts receivable and inventory grew, keeping us cash-poor. We learned that we needed to make a high-quality product every time and all the time, and that we had to watch every penny in the process. Given the many variables, unexpected costs, and things that went wrong, making a profit turned out to be a tricky proposition.  At the end of the month, we took home a meager paycheck and wondered, “Where has all the profit gone?”

Craig and I didn’t understand the importance of creating business systems, or the underlying principles for making them efficient and effective (8 Characteristics of Good Business Systems). We spent our day putting out fires and stumbling around to improve the operation. Eventually, some rudimentary systems emerged, and we began to learn how to play the “game of business” (see Grade Your Business Systems).

As a new enterprise—one that expects to have people, products, and processes—you must give attention to creating fundamental business systems and processes such as those described below. Some should be developed before the business roll-out, while others can be created and refined during the first year.

  1. Systems to Acquire New Customers:  marketing, lead generation/advertising, sales, website/SEO/social media
  2. Systems to Get Good Workers and Teams:  hiring, training, compensation/incentives, safety, employee policies, performance evaluations/recognition
  3. Systems to Make and Deliver Products and Services:  production, order fulfillment, shipping and receiving, customer service, inventory management
  4. Systems to Manage Money:  accounting, payroll, purchasing, credit/collections, tax/compliance, cash management
  5. Systems to Support the Above Systems:  facility management, computers (IT), housekeeping, security, maintenance, office management
  6. Systems to Improve the Business:  product/service development, business systems development, business improvement workshops.

Good Business Systems Make All the Difference

Getting off to a good start with effective business systems and processes will produce consistency, confidence, and accelerated sales growth; it will put you on the fast-track to earning your first profit.

New customers will love you because good systems:

  • Help you meet and exceed their expectations
  • Provide a great buying experience
  • Give customers the “best deal”
  • Increase consistency, quality, speed, and reliability
  • Help you become a standout in your target market

(Customers will see you as organized, credible, and professional.)

Employees will thank you because good systems:

  • Make job expectations clear
  • Reduce training and supervision
  • Improve productivity, quality, safety, and cleanliness
  • Elevate job satisfaction
  • Reduce employee turnover

(Employees will see you as a great company to work for.)

Your business will reward you because good systems:

  • Maximize your income and ROI to make a profit sooner
  • Eliminate chronic frustration and excessive costs
  • Reduce dependency on people who come and go
  • Build long-term value into your business
  • Enable you to eventually sell, replicate, or have others run it for you

(Stakeholders will have confidence in your Leadership.)

Don’t Do What I Did

Starting and running a new business is high-risk. You have to work on the business as much as you work in the business (Michel Gerber, “E-Myth Revisited”). That means creating effective, efficient, and even exceptional business systems and processes.

Don’t do it like I did. Do it right, and right from the beginning.

Quite frankly, the Box Theory™ Way—the methodology and software—is the best tool available for business startups. It will get you organized, develop your Systems Thinking skills, and help you learn the Master Skill for creating growth-producing, customer-pleasing, waste-removing, profit-boosting business systems and processes. And, it will pay for itself almost immediately!

Please take a minute and check out the Box Theory™ Products. It may be the most important thing you do today.

And One More Thing:  Don’t become one of the dismal statistics that describe the failure of most business startups. Even good business systems and processes won’t save a company with low market demand, insufficient working capital or profit margins, superior competition, an undifferentiated strategy or value proposition, difficulty reaching the target market, or ineffective management. These conditions—if not remedied—can kill a new business, so proceed with caution!

Business Improvement: Shut Down Your Fix-it Factory!

Ron Carroll

At the root of most business problems is some form of waste, either defects in products or services, or time-wasting delay. This is what causes customers to go to competitors. This is what raises costs and erodes profit. This is what ultimately drives owners out of business.

Every product, service, or transaction-based business has two “factories” running simultaneously according to Jay Arthur, author of Small Business Guide to Six Sigma. The “Main Factory”—where you focus most of your energy—produces goods and services for your customers just as planned.

The second factory is less noticeable. It is the “Fix-it Factory,” which cleans up all the mistakes, rework, breakage, returns, scrap, and other problems of the Main Factory. This dark underbelly of the business primarily deals with defects and delays. Every business has a Fix-it Factory that consumes human and financial resources. You might be surprised by the cost of running your Fix-it Factory!

Shut down your fix-it factory

Waste is Expensive

Most small-business owners do not face the brutal reality of waste in their business. However, experts estimate that the average small business has at least 3% waste (Jay Arthur). Many have more. Some have much more!

For a company with one-million dollars in sales, 3% waste amounts to $30,000 in cost. This expense, however, is not paid out of revenue dollars, but is paid out of profit dollars! If the company’s net profit before taxes is expected to be 8%, or $80,000 dollars, 3% waste would reduce the profit to $50,000.

Stated another way, the company has to sell nearly $400,000 more to replace this $30,000 loss in order to achieve the desired profit level. (I don’t want to depress you, but it actually gets worse because there are additional costs to handle the waste.)

Do you realize what I just said? Every waste of time or material comes directly off your bottom line. In this example, waste of 3% of sales translates to nearly 40% in lost profit!

Mistakes are Prevalent

How often have you purchased a product or service and had something in the transaction go wrong? For the last ten years, I have been telling my wife that it seems like half of our purchases have one problem or another.

For example, several years ago our financial services company was teaching workshops to educate our customers on the development of effective business systems and processes. When putting together our little workshop facility, I had to buy a variety of equipment, furniture, and accessories. Here’s what happened:

I purchased eight high-back chairs for the lobby that arrived with the wrong fabric. I had a wall-to-wall counter built that was one-eighth of an inch too long and had to be returned for trimming. The paint came off ceramic candy dishes when removing the price labels. I ordered new blinds for five windows. Four of the blinds arrived together, but the installer had to make a trip back to install the fifth blind. I bought special narrow conference room tables that came with the wrong style legs. The company graciously remade the tables, but this was particularly annoying because it delayed our kick-off date. In the second batch, one table had a large dent in the top. In addition, the skirting on the tables didn’t stay attached so we removed them altogether. The audio-visual person put the ceiling speakers in a different place than I requested. I didn’t make him move them, but it always bugged me.

These common mistakes cost the vendors most or all the profit from my business. However, this is only part of the story. The Fix-it Factory erodes profit in another way. You see, I may never do business with some of these vendors again; they caused me too much aggravation. Worse yet, I may tell other people about my bad experience. It is apparent that the overall cost of 3%-mistakes can be quite enormous!

Walmart Gets It

Walmart is relentless at cutting waste from their business. For example, they have distribution centers as large as twenty-four football fields, with up to nineteen miles of conveyor belts. Many trucks are simultaneously loaded at the docks and dispatched to regional stores. Now get this! Walmart measures the efficiency of its loading operation by how much space there is between boxes traveling down the conveyor belts. If the boxes are touching each other, the maximum number of boxes can be loaded. The space between the moving boxes is actually “waste” or inefficiency, and it increases the cost of every unit of product on the conveyor. This kind of attention to detail is what makes Walmart so successful.

Mistakes and waste are a common occurrence in every company. The typical customer-purchase has many choices, options, and variables, amidst a complex array of promises, processes, and paperwork. Consumer demand for new and improved products and services—never-ending change—puts pressure on maintaining quality. The turnover of people in the workforce reduces overall competence. Holy cow, no wonder so many mistakes are made! It’s not surprising that we go around frustrated with employees we think have messed up, or mumble when customers take their business elsewhere.

Cut Waste to Survive and Prosper

The truth is that times have changed. To survive, small-business owners of today must accomplish the seemingly impossible. They must squeeze out every possible defect and delay from their business operations. They must execute with consistency and exactness. Every part of their business must be systemized to reduce costs and eliminate customer dissatisfaction.

Here’s the deal. You—the business owner—are in control. It is up to you to create a “culture of discipline” (Jim Collins, Good-to-Great) and drive the waste out of your business. If it’s not important to you, it won’t be important to others. Make it a top priority!

I invite you to begin turning your business into a “house of order.” Develop effective business systems and processes that will shut down the Fix-it Factory. Start working on the business and not just in the business (Michael Gerber, E-Myth Revisited). You can do it, and I will show you how!

Solve Problems and Prosper with Exceptional Business Systems

Ron Carroll

The essential task of every business owner or entrepreneur is to overcome daily problems, obstacles, and challenges in the quest to serve customers better and make a profit. I want to discuss some of the specific challenges faced by small-business owners, and then drill down to the underlying causes of those problems. This will also lay a foundation for understanding the solutions offered by the Box Theory™ methodology.

Solve Problems with Better Business Systems

The Small Business Challenge

The Small Business Administration reports that over 500,000 businesses are born every year and about the same number die. Of startups, 33% are no longer in business after two years, and 50% are gone by four years. (SBA Frequently Asked Questions).

The Box Theory™ Way can prevent you from becoming one of these dismal statistics, behind which are broken dreams and financial devastation.

As entrepreneurs, we all start with a similar vision. We want to be independent and earn more income than we might earn by working for others. We have an idea, talent, or product we hope the marketplace will demand. Sometimes we borrow money from family, mortgage the house, or risk everything to “live the dream.” Then, like every other entrepreneur, we discover that owning a business requires all the intelligence, discipline, and hard work we can muster. To start, grow, and sustain a successful company is likely to be the most difficult thing we ever attempt.

From day one, unrelenting forces begin to work against us. We face slumping economies, cost increases from vendors, customers who pay slow or not at all, government regulations, increasing taxes, unproductive employees, stiff competition, insufficient sales, obsolete inventory, cash flow headaches, never-ending demand for new and better products, and many other challenges.

If you haven’t had some of these brutal experiences yet, it’s only a matter of time. They will come with changing market conditions, government leadership, and business cycles. So be prepared.

I believe it takes as much skill to be a business owner as it does to be a medical doctor. The difference is this: Doctors prepare for ten to twelve years before starting their medical practice. Most entrepreneurs learn on the fly, resulting in critical errors and frequent casualties. The requirements of continuous learning, self-discipline, and long hours are no less for a budding entrepreneur than they are for a doctor. Are you willing to pay that kind of price?

Your Primary Purpose

A business enterprise is made up of people, products, and processes organized to profitably find and keep customers. Companies are in trouble from the get-go when they face superior competition, low market demand, under-capitalization, difficulty reaching their target market, undifferentiated strategy, ineffective management, or a weak revenue model. Assuming those things are in order, the most likely reason for failure is that owners do not create business systems and processes that effectively carry out the mission, strategy, and goals of their organization.

As an entrepreneur, your primary purpose is not to sell, make products, or provide a service, but to be the chief architect of your entire business enterprise.

On a typical day, you design, develop, oversee, monitor, and evaluate the systems and processes that make your organization run efficiently, create value for customers, and produce a healthy profit. If you want to be an artist, machine operator, sales agent, or technician, you should get a steady nine-to-five job. Building a business is a different vocation altogether. If you don’t have the personality, skill-set, or desire to do this, you should get a partner or hire someone who does.

Your primary role as a business owner is to get the best people you can on the team, create innovative products for your target market, and develop operational excellence (systems and processes) that will attract and keep customers. When you can do this profitably, you will have the foundation for a lasting company.

Customers buy from companies that serve them best. Without concern, they allow all others to fail. It is how the customer feels about your business as a whole that matters most. Everything about your operation—advertising, cleanliness, courtesy, and knowledge of employees, return merchandise policy, product selection, location, delivery time, price, and so forth—is what they are choosing. As chief architect, your entire business is your product, and it must be exceptional throughout. When it is, YOU become the “best deal!” Creating effective business systems and processes will make your organization exceptional, and keep your customers coming back again and again!

Problem Solving

Let’s dig a little deeper. Do you run a perfect business? If not, what problems would you like to eliminate? What parts of your organization need to improve? What obstacles must you overcome? What is eating away at your profit or preventing you from reaching your full potential?

Your business weaknesses and problems will surface from three primary sources:

  1. Customer or worker feedback/complaints
  2. Financial reports and performance data/brutal facts
  3. Personal frustration/symptoms of deeper problems

You will experience frustration when there are recurring events over which you feel little or no control—problems that can often be eliminated by installing an effective system.

How many of the business problems, obstacles, or frustrations below do you have?

Customer or Worker Dissatisfaction
* Our customers complain about quality or timely delivery.
* Our customer service is not as good as it could be.
* We don’t have customer loyalty or get the re-orders we expect.
* Our competitors are taking business from us.
* Orders are processed incorrectly; too many returns.
* We can’t seem to hire or keep good people.
* Our people aren’t productive or motivated.

Financial Indicators
* We don’t have accurate or timely financial information.
* We don’t know our true costs.
* Profit is lower than it should be.
* Accounts receivable collections are too slow.
* The company has missed filing deadlines or tax deposits.
* Cash flow is poor, hard to manage, and stressful.
* Labor costs are high.
* We don’t have enough working capital for needed people, equipment, or inventory.

Other Frustrations
* We don’t have enough sales.
* Our advertising isn’t working.
* The business is unorganized and chaotic.
* I’m the only one who can do some of the work.
* There is too much waste and inefficiency.

Every day, these and other frustrating business problems take hard-earned money out of your pocket. Amazingly, they all reflect the same underlying problem—a problem that you can easily fix!

Start, Grow, Fix or Franchise

Each business is unique and at a different stage of development, with different goals. However, every business owner is either trying to start, grow, fix, or replicate their business. Effective business systems and processes play a major role in each of these endeavors. Box Theory™ methodology and software can also help you in the following ways.

When you start a new business, you build everything from the ground up. You create and organize all your business systems and processes to produce sales, deliver products and services, and accomplish your mission, strategy, and goals. The Box Theory™ Way is a unique “system” to help you lay that critical foundation and get results that will impress customers right from the start.

If your company is growing, you face hazards of a different kind. Many organizations fail because they grow too fast. The primary problem is that existing systems and processes cannot meet the increasing demands. They begin to break down. Customers become unhappy. Cash flow dries up. Frustration begins to dominate daily life. An organization experiencing rapid growth can be at risk of collapse unless it re-orders itself to a higher level of performance. Box Theory™ enables you to elevate your systems and processes to accommodate the otherwise exciting increase in demand for your products or services.

The majority of business organizations have a great deal of hidden waste, most of which can be prevented. Half-baked business systems and processes rob business owners and stakeholders of thousands of dollars every year. Box Theory™ methods enable managers to fix broken or ineffective business systems, getting them to run smoothly and profitably.

Finally, if you have any ideas about franchising your business or replicating it in other markets, the most important thing you can do is systemize it like a McDonald’s Restaurant. When you buy a franchise, you are primarily buying tested and proven business systems. Systemizing is the essential requirement to replicate any organization. Box Theory™ software will enable you to create a business model that can be used repeatedly to multiply your financial opportunities.

By now, I hope my point is crystal clear. Business owners frequently fail because they do not create effective systems and processes that profitably find and keep customers. Additionally, most do not realize the underlying waste of time and materials that seriously erode profit and prevent them from meeting the high expectations of their customers.

By understanding that effective business processes are the essential building blocks of a successful and profitable organization, you can now embark upon a journey of systematic improvement.

The Box Theory™ Way will enable you to eliminate the most common problems that small and mid-size business owners face:

  •  Weak sales and growth
  •  Customer dissatisfaction
  •  Waste and inefficiencies
  •  Underperformance and turnover of people
  •  Poor cashflow
  •  Low profit
  •  Over-dependence on owners

Systems Thinking is a concept that will change the way you run your business. Effective business systems are the logical and practical solutions to your daily problems, and they are just waiting to be discovered!

Box Theory Business Systems: A Journey of Discovery

Ron Carroll

When I started my business career fifty years ago, life was much simpler. The rules for running a successful company were also simpler. Customers were glad to get products and services and didn’t fret the details too much. All of that has changed. Customers now have many choices and very high expectations. If companies do not execute with precision, the customer silently vanishes.

Today, you shouldn’t start a business unless you have fire in the belly, a drive to be the best at what you do, and a willingness to pay the price for success.

I retired from my accounting and consulting practice a few years ago—and truthfully—I just wanted to rest for a while. My entrepreneurial career left me with some battle fatigue and a diploma from the school of hard knocks.

However, in the last few years of my career, I stumbled onto something—something quite amazing—that now gets me out of my rocking chair each day.

I am somewhat of a quiet accountant type, not prone to a lot of hype. I like plain truth. In fact, I am a seeker of truth and have little patience for the bloated advertising and misinformation that fill our digital world. I wrote an ebook, Box Theory™: Double Your Profit with High-Performance Business Systems and Processes, that contains many truths that are little-known but essential for business owners to understand. I’m going to give it to you for free. Please keep reading.

In The Beginning

Several years ago, I began to teach my accounting clients how to use financial statements to pinpoint the under-performing areas of their business. This led to an interest in business systems and processes that grew into a passion. I eventually developed a two-day workshop that generated a lot of interest.

One evening while vacationing in Carlsbad, California, I watched a program on the Discovery Channel entitled, “String Theory—the Theory of Everything.” I was intrigued to learn that scientists now believe that very tiny strings of energy, far beyond our ability to see through a microscope, are the foundation of all matter.

Do you remember from chemistry class that matter is made of molecules, molecules are made of atoms, and atoms are made of atomic particles (protons, electrons, and neutrons)? Since I took chemistry, they have discovered quarks inside the atomic particles. Now, physicists have mathematically proven that these energy “strings” are the basis of everything in our universe.

It struck me that big things in our world contain important small things, which are made of even smaller things—all interdependent. If anything goes wrong with the smaller thing, the effect is felt all the way up the line. Cancer cells can destroy an organ. Organ failure will shut down a system within the body. And a system shutdown can cause the body to die.

The concept reminded me of a poem quoted by Benjamin Franklin in Poor Richard’s Almanac.

For want of a nail, the shoe was lost,
For want of the shoe, the horse was lost,
For want of the horse, the rider was lost.
For want of the rider, the message was lost.
For want of the message, the battle was lost.
For want of the battle, the kingdom was lost.
And all for the want of a horseshoe nail.

Often, we don’t realize the influence that seemingly small things have on events and outcomes in our lives. This includes our business. Consider this:

For want of a minute, a phone call was lost,
For want of a call, a conversation was lost,
For want of a conversation, a relationship was lost,
For want of a relationship, an order was lost,
For want of an order, the revenue was lost,
For want of the revenue, a business was lost.
And all for the want of a minute to make a phone call.

This poem won’t be published anytime soon, but you get the idea. In business, we must pay attention to the details—the small things that affect the important things.

Consider for a moment what you are reading right now. The alphabet is a system of twenty-six symbols or letters used for communication. By arranging the letters in a certain order, I create words with meaning. By grouping words together, I can form a sentence that expresses a complete thought. Several sentences form a paragraph. Linked paragraphs create a complete story. Letters, then, are my building blocks for writing this article. If they get out of order, I will fail to communicate with you. How I arrange the letters is what sets me apart from all other writers.

Drilling down on a written document might look something like this:

Cascading Boxes Writing Diagram

 The big idea from this is that we live in a world of systems, the components of which are smaller systems and subsystems, all working together for the good of the whole. Important activities are going on at every level down to minutest detail. To improve the outcome of a higher-level system (sentence), you must fix or improve the flaws of a lower-level system (words or letters; e.g. misspelled word).

One day in a business improvement workshop, I was flowcharting a system on the whiteboard—creating boxes for each step with the arrows between. In a momentary flash, I realized that an entire organization is made of flowchart boxes that are connected, and, which influence one another. In the days that followed, the concept of Box Theory™ emerged, a unique way of looking at the structure of any organization.

Box Theory™ has taken me on a journey of discovery far more important than I ever imagined. It has literally changed my life, not just my business career. I have a new and inspired view of the world—how things work together and affect each other—that makes it possible to see solutions to problems clearly and quickly, and how to improve any task or process for maximum results. It’s really quite extraordinary!

My Gift To You

My purpose for writing the Box Theory™ ebook is to give business owners and organization leaders a new way to look at their business—in high-definition—that will enable them to compete in a crowded and unforgiving marketplace. Box Theory™ is not weird science, but natural and intuitive. It is not based on strange new techniques, but upon rock-solid and proven principles that are used every day by successful organizations (see more about Box Theory™).

Truthfully, Box Theory™ is the way you already do things, without realizing it. Now, your effort will be planned, systematic, and far more effective. You will have a powerful “system” for creating your business systems.

The timeless truths that you learn in this course will provide the foundation for a life-long business career. Perhaps like me, you will see the application of Box Theory™ in every aspect of your life.

… Fourteen years have gone by since writing this article and I have now retired. As a gift to all my business friends, you can now get my ebook and Box Theory™ Gold software (for Windows PCs only) absolutely FREE. No strings attached. Download the product here.

My only hope is that with this powerful information you will become a Box Theory™ enthusiast and practitioner, and can create a truly remarkable business enterprise!

Just Retired
Gone Fishing
Your Lucky Day

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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Quotes about Business Systems

So, What Exactly is a Business System?

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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