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2014

I have been pondering lately why it is that entrepreneurial organizations seem to grows so rapidly. Oh, I know: Start-ups naturally grow a very high rate of growth merely because they are starting with very small numbers at the outset. The start-up that did $1,000 in business last year and is doing $50,000 this year, the firm had 5,000 percent growth rate over the current year. English: P & G's average rate of growth by decade

 

But that's not what I'm talking about.

 

I'm talking about the ability of many start-ups to grow rapidly in absolute dollars: $50,000 in year one; $1.5 million in year two; $22 million in year three, for example.

 

I contrast this with, for example, the 15-year-old company that's presently hovering around $25 million in revenues for several years. It is extremely unusually for such a company to make another dramatic leap of $20 million in any given future year.

 

What changes over the years as a company "matures"? What stops the dynamic growth?

 

Don't mistake this for an article you might read in the Harvard Business Review. I have not done reams of research and analysis. All my analysis comes from observing and comparing mature business enterprises with new, up-and-coming organizations with which I have worked over the last 25 or more years.


Entrepreneurs are forward-looking

 

One thing I see in all of the entrepreneurial firms with which I have worked is the simple fact that the CEO and the rest of the management team are virtually always focused on what lies ahead. They don't spend a lot of time analyzing the past.

 

They learn quickly from their mistakes and move on.

 

History-keeping is reserved for the accountant and the accounting staff. Not, yet, being needlessly "sophisticated," the executive and management team are not being confused and misled by cost accounting and fancy allocations of overhead to products or departments.

 

Entrepreneurial organizations immediate recognize and manage based on "Throughput"--which we define here according to Theory of Constraints: Throughput = Revenue - Truly Variable Costs (TVC).

 

On the back of a napkin over lunch, the managers can compute the Throughput for almost any opportunity they see on their horizon. Being able to make these simple and speedy calculations about Throughput (T) allows such firms to stay focused on the future opportunities that are likely to make the largest contributions to T with the smallest possible increase in Operating Expenses (OE).


Entrepreneurs don't see their organizations as "machines"

 

Most entrepreneurs are very close to their employees. They have built their organizations with people they trust--and, not infrequently, with people who trust them, in return.

 

Entrepreneurs and their management teams tend to treat their employees like real people.

 

They do not see these folks as interchangeable parts in a machine. They do not see the people who work for them like cogs and gears churning out profit (or, losses, as the case may be).

 

As a result of this difference in mindset, entrepreneurial organizations also tend to invite and even give significant credence to the ideas contributed by the workers--even those at the lowest levels in the operations. The workers, in turn, feel like they are valuable contributors to the enterprise's success.

 

Without ever intentionally setting up a POOGI--a process of ongoing improvement--the constant flow of feedback and ideas from virtually everyone in the organization, the company reaps the benefits of a de facto POOGI anyway. As a direct result, revenues and profits increase while operating expenses are held to a minimum.


Entrepreneurial organizations are constantly learning and improving

 

Another naturally occurring benefit of seeing the organization's employees as real people and valuing their input is that the company as whole becomes a learning and improving organism.

 

In the entrepreneurial firm, actions undertaken to "develop people" don't fall into generics where formal training, kaizen blitzes and formal certifications mark progress. In fact, "progress" is frequently not measured at all--but it is happening by leaps and bounds. Workers, managers and executives are constantly doing unofficial research to discover new approaches, new products,  or to innovate processes and procedures, and much, much more.

 

When companies begin to fall into "machine" thinking, management falls into the belief that the important thing is to control their environment by "solving problems." Managers and executives become focused on looking backward--at what went wrong yesterday--in order to try to prevent bad things from happening in the future.

 

In fact, they frequently are doing so much of this backward looking that they no longer have time to think about truly innovative things that might lead to great leaps forward in Throughput. When backward-looking and "machine" thinking take over, significant leaps forward in growth become very rare. Sometimes, such leaps become nonexistent until something changes.

 

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Nobody knows better than the people in your own organization what needs to change in order to take the next giant leap forward. They know, but frequently they don't yet know they know.

 

We say "they know" with the intent of pointing out that "the whole organization" likely has within it the kinds of "tribal knowledge" that can lead to the company's next breakthrough. But, the companies may not know how to help themselves, yet.

 

Helping companies unlock "tribal knowledge" for improvement in their own companies and, potentially, even improvement all across their supply chains is a great way to help other help themselves. It is the best way, we believe, to help companies restore their earlier vigor and refresh their bottom-line.

 

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Please let us know your thoughts by leaving a comment below or contact us directly--whichever you prefer.

I attended a conference recently where there were several hundred people in attendance. When lunch time was approaching, an announcement was made that went something like this:Floor indicator in the Otis elevator ...

"Lunch will be served in the third-floor atrium. (We were on the first floor.) You will find the elevator around to your left as you exit the auditorium. The elevator is pretty big--it holds about 25 people. The stairs will be on your right."

 

Now, not unsurprisingly, I discovered that the vast majority of the folks in attendance at the conference barely glanced at the elevator. Instead, they headed intuitively toward the relatively narrow stairs leading upward.

 

I was a bit surprised by the narrowness of the stairs leading up two full stories to the atrium. The stairs could only handle about two people abreast as they ascended.


Why did people turn to the stairs intuitively?


As I watched folks make steady progress up the narrow stairs, I could not help but ask myself: "What made the vast majority of folks in that auditorium turn instinctively toward the stairs, instead of taking the 'easy way' via the elevator?"

 

I think the answer to that question was simple.

 

The majority of people quickly reasoned this out in their minds (although most, I'm convinced, would not have articulated it in this way):

  1. If I take the elevator, I will be spending far more time "waiting" than I will spend "making progress."
  2. If I take the stairs, I will lose less time in "waste" (waiting) and spend more time "making progress." Chances are I will get to my destination faster via the stairs than via the elevator.


Value-added time versus Non-value-added time

 

Elevators must carry people in "batches."

 

While the "batch" may be fairly large relative to the size of the group (in this case, ~25 out of a few hundred), it still means that substantial portion of time will be spent in "wait time" (non-value-added) versus "progress" (actually riding the elevator upwards toward the destination).

 

When transporting a large group of people in only one direction (up, in this case), more than half the time an elevator is working it is involved in non-value-added activity. It's only value-added activity is the upward transportation of the people toward their destination. Opening and closing the doors at each end of the elevator's traverse and the time required to reposition the elevator from the third floor to the first floor are non-value-added activity for the elevator's "customers," in this case.

 

On the other hand, the stairway, while offering transport toward the destination more slowly, operated in a continuous flow.

 

For those taking the stairs, there was no non-value-added activity. Every moment moved these folks closer to their destination. No time was wasted in the operation. Everything was value-added.


Now you see it...

 

When the difference between "batch" operations and "continuous flow" operations involves our persons and our personal time we become intuitively aware of the differences--the efficiency of the one and the inefficiency of the other.

 

However, we may very readily miss these very same principles at work in our enterprise's operations or our supply chains because it is goods or services moving or being impeded from progress and not our very selves.


Now you don't!

 

Interestingly, when the goods or services we produce spend (in many cases) more than 90 percent of their time in non-value-added queue time and wait time in our production or supply chain operations, we may not take note of it at all. We may not even consider how much better (read: more profitable, more productive) it might be if we could move closer to "continuous flow" than in these operations.

 

We may not give credence to such thoughts for no better reason than, "We've always done it this way," or because profits are "acceptable" at present levels. Never mind that both profit and cash-flow might be significantly improved if we were to consider the reduction of waste (non-value-added activity).


Take steps, not a giant leap, toward improvement

 

Perhaps we can't move to "continuous flow" operations immediately.

 

Maybe we just don't see a way to get there. But there may be incremental steps you can take.

 

Cut batch sizes in half starting tomorrow. Slash away at replenishment cycles in your supply chains. Base purchase agreements across your supply chain on the quantity of goods purchased over time--say, six months or a year--instead of the size of a single order (transport batch size). Then find ways to reduce the transport batch size and increase the replenishment frequency.


More toward continuous flow in any way you can

 

Begin doing, in your own operations and all across your supply chain, what you intuitively do for yourselves all the time!

 

Remember, almost every large store and shopping mall has both elevators and escalators--as do airports, for example. Yet, I dare say that better than 99 percent of folks in these venues intuitively take the escalators (i.e., continuous flow) instead of the elevators (i.e., batch operations). They recognize it is better, faster and more efficient for them while they may deny the same "better," "faster" and "more efficient" continuous flow to the goods and services in their supply chains.

 

What's wrong with this picture?


Now we see it; now we don't!

 

Let's start "seeing it" all the time.

 

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RDCushing

We make dreams happen

Posted by RDCushing May 17, 2014

Last week I attended my company's firm-wide meeting. It was a great event and we had some exciting presentations from leaders in various departments.   The North America Nebula 

But what caught my attention more than anything else was one line by Ed Monbourne, our CEO. Ed was describing what we do and what differentiates us from other firms in our industry. He offered several concepts, but nothing stuck out to me as much as this... 

We make dreams happen.

 

One of the things we find as we travel around to help small businesses is that far too many of them have been reduced to "holding on." The managers and executives in too many small to mid-sized business enterprises we meet have become content with a life of near-constant firefighting. They are happy if, at the end of the day, they have managed to restore normality.

 

Too often, these folks give little thought to any kind of ongoing improvement in their operations.

 

If they can make through the day and make an "adequate" profit--sometimes that means little more than breaking-even these days--these managers and executives are reasonably content.


Sadly, many of these business owners, executives and managers have stopped "dreaming" altogether. For others, their "dreams" have just become very, very small.

 

Nothing makes me happier in my role as a consultant than to spend two or three days with a small business and be able to leave knowing that I have been able to enlarge their vision and help them dream bigger. But, more importantly, I know that I have left them with tools and new thinking that will help make their dreams happen!

 

For me, that's what doing business is all about.

 

Frequently, by applying thinking tools and methods that have emerged from Lean and Theory of Constraints, we have been able to help management teams find "breathing room" through simple changes that can be applied in a day or two, but bring significant relief to undesirable effects (UDEs) with which the firm may have been struggling for years.

 

This simple relief from the day-to-day time, money and effort expended in firefighting gives the management team the opportunity to finally spend some time thinking about real improvement, not just restoring normality after the latest firestorm. If fact, if we have done our work properly, they will be thinking about how to create a POOGI - a process of ongoing improvement.

 

And, to tell you the truth, it doesn't really matter if the problem is internal (within the four walls of the firm) or external (in the supply chain), the principles are exactly the same. There's no "cookie-cutter" approach that works for every firm.

 

What works is helping the management team unlock "tribal knowledge" within their own organization and across their supply chains. Then, taking what they have learned, guiding them to apply what they have learned in the invention of their own solutions.


Yes, Ed Monbourne! We make dreams happen!

 

But first, sometimes, we just need to help the firms with which we work restore their dreams and recover from the day-to-day nightmare of hellish firefighting.

 

That's our real calling, isn't it?

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