Category Archives: Systems

The Second Sea Change

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As the organization moves from Startup to Go-Go, the second sea change occurs. The Startup always struggles with revenue. “Please find a customer to buy my product or service.” And, these first sales don’t even have to be profitable sales, because all the expenses go on a credit card, line of credit, whatever it takes to get the organization out of ground zero.

Every sale for the Startup is a one-off, tweaking the product or service to each individual customer. Those Startups that survive (make enough sales) find that as volume increases, they can no longer treat every sale from scratch, they must institute methods and processes. The struggle shifts from a revenue problem to a profit problem. The shear volume of the successful Startup becomes its biggest problem. A few unprofitable sales for the Startup becomes a staggering amount of red-ink for Go-Go.

And, profit becomes elusive.

The first sea change was a shift from organizing the work around the people to organizing the people around the work. The second sea change is a shift from organizing the work around methods and processes to organizing methods and processes into a system. It is only this second sea change where the organization begins to see its first signs of sustained profitability.

Back to Work Velocity

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Let’s get back to work. Unlocking the door and greeting your first customer feels positive, but is it enough to sustain?

As the business leader, more importantly is understanding the viability of your re-opened business operation.

Total Throughput
As operations resume, parts will come humming back, but in the background will be friction. This is not a game of spinning plates. One or two high performing departments won’t cut it, you have to look at total throughput. Restaurant kitchens always have output capacity, but throughput is constrained by the dining room. People only eat so fast, tables turn only so many time during a meal period.

Velocity
And, in the near term, dining room capacity will artificially be constrained by 75 percent. How fast does profit travel through your output system?

It feels good to open the doors, but there will be new constraints imposed that have to be accounted for in your business model. Those that survive will figure this out, now, and make appropriate adjustments.

Time to Re-think is Over

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The time to re-think is over. The time to adapt is now. Actually, never too late to re-think.

  • Employee shuttle buses will have spaced seating, one person for every six seats.
  • Employees will wear face masks, take the stairs and walk one-way around the office.
  • Lunchrooms will have only 25 percent seating capacity.
  • In-office meetings will still be virtual.
  • Larger conferences are canceled through 2021.
  • New budget lines for PPE.
  • Building admittance will see temp screening and self-declared wellness protocols.
  • Flying will be more rigorous than entering a building.
  • Shopping inside a store will see a transformed retail experience.
  • Cash and checks will disappear, in favor of touch-less (NFC) digital transactions.
  • Drive-thru shopping will see re-marked traffic lanes around stores.
  • Restaurants will shift from dining rooms to take-out and delivery.
  • Arena sports will yield to open-space sports.
  • Movie theaters may never re-open, throwing film distribution a curve-ball.

All of these things will impact your business model, the way your customers interact with you, the way team members interact with each other. Intrinsically, we are social animals who want to be together.

These permanent adaptations will seem clumsy at first, but permanent nonetheless. And the clumsiness will become practiced, and those among us who practice will become competent at a new way. And the new way will improve on par with the old way. And, we will wonder what took us so long to get over our resistance.

Emerge As a Better Company

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How will your business emerge as a better company?

What elements of your business need to be retired? What processes should be eliminated? Reminds me of Tim Ferris‘ five step program, with my extra credit step.

  • Eliminate what is not necessary.
  • Simplify what is over-complicated.
  • Combine things that should be done together.
  • Outsource those things that are not part of your core.
  • Automate (digitize) what is left.
  • (Extra credit) Employ humans to do only what humans do best.

This is a time to accelerate the steps. Perhaps, your business will emerge as a better company.

Multi-system Integration

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From the Ask Tom mailbag –

Question:
When you talk about the COO role, you use the words multi-system integration to describe its purpose. I understand silos, and you said we put the silos there for a reason. You said not to get rid of your silos, but to integrate them together. What does that mean?

Response:
Yes, as companies move from Adolescence to Prime, the silos will kill them without system integration. The COO role will necessarily focus on operations confronting two main system integration issues.

  1. What is the performance standard of the work output from each function (department, system, silo) as work moves to the next function? Each function has marching orders (from us) to be efficient, internally profitable. This necessitates an internal focus to the function. Many critical handoffs occur as work moves from sales through project management into operations. When there is a defect in the handoff, we may not discover the problem until we have poured concrete around steel. It is much easier to unwind in the handoff stage than the jackhammer stage.
  2. The other system issue relates to each function’s capacity for output. Without someone paying attention, easy for one system to outstrip the capacity of its neighboring system. This may manifest as a breakdown in communication, when the underlying cause is two internally focused systems, heads down not paying attention to the other functions around. Discussions of single system capacity rarely emerge below S-IV, much less the impact of one system onto another system.

One of the critical functions for the COO is to calculate the company’s operational (ops) capacity as operations is most likely to be the constraint in the midst of the other systems.

Alligators Take Over

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From the Ask Tom Mailbag –

Question:
I would love to get more information on how to beat back those Alligators! What happens when the Alligators are taking over?

Response:
This is where the role of the Manager becomes truly important. The people who do production work (Strata I) can only work harder. The people who make sure production gets done (Supervisor, Strata II) can only organize the chaos (also known as straightening the deck chairs on the Titanic).

The role of the Manager (Strata III) is to analyze what is causing things to be overwhelming and out of control. This is system work.

Stop and think. What is the cause?

The most useful tool I know of is a long roll of butcher paper (available at any restaurant supply store). Roll it out and tape it on the wall. Create a flow chart of the essential steps necessary to do the work that is required. We are talking circles, boxes and triangles connected by arrows, cause and effect. Step One, Two, Three and Four. Then, for each step, ask why we are doing that? Is that in line with our senior purpose?

This exercise will expose unnecessary steps or activities that simply do not add value to the process. Get back to the fundamentals, do only those things that are truly essential.

Draw flames around the hotspots, the burning platforms. Are instructions clear, is there a hand-off missed? This is system work.

Don’t Fix the Defect

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“But, it’s like pulling teeth to get them to change the way they have been working. They get started, but after a couple of days, things are right back to the way they were before.” Matt sighed one of those Manager’s sighs. “I just wish my team was more disciplined.”

“Matt, discipline is nothing more than routine. Discipline isn’t harder than any other way of getting things done; it’s just not what you are used to.”

I spied a workroom on my way in. It was a small room with some simple tools and a work bench, good lighting. It was where people took things that needed fixing. Not broken things, but rather, product defects. The seam on the unit didn’t line up quite right; there was a burr on an edge. Rather than documenting the defect and looking for a solution, the team had, over time, assembled this little “fixing” room.

“Tell you what, Matt. Hide the tools and put a padlock on the room.” I could see his eyes grow wide. “Then, have a meeting and tell everyone that the fixing room is off-limits for 21 days. During that time, have meetings twice a week to talk about the new defect-documentation process. After 21 working days, you should have a new routine. Discipline is just a different way of getting things done.”

Matt was nodding, “So, after 21 days I can take the padlock off the fixing room?”

“No.”

Pulling Bad Product

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“We have a problem with consistency,” Donna said. “I think everything is going okay and then boom, we get hit with a warranty event that uncovers a whole batch of bad product. I have two people doing random inspections prior to shipping. Still, mistakes get through. I might have to add more inspectors, check everything, just to keep bad product off the shelves.”

“What do you do with the bad product?” I asked.

“Well, we can’t sell it and we can’t melt it down, so we throw it away,” replied Donna.

“Do you use bad product to isolate the problem production area?”

“Oh, we know the three areas where we have problems, but rather than pull bad product in three places, I thought it best to inspect just before shipping, so we can pull all the bad product at the same time, no matter where the problem occurred.”

I winced. “Donna, is the purpose of Quality Control to pull bad product, or to identify the problem and fix it? Consistency doesn’t come from pulling 3 percent of your production. Consistency comes from fixing your system.”

What Changes About the Work?

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What will be the nature of work?

As we adopt technology into the enterprise, what will change about the work? Those who sit in my workshops know that I define work as – decision making and problem solving? What will be the nature of decision making and problem solving as we embed technology into our internal production systems?

Production Work (S-I)
Physical robotics are already creeping in to production work (S-I). Robots are most often adopted into physical work that is repetitive, requiring precision cuts, punctures, bends, dipping, pouring, lifting. Robots are also useful in production environments where human involvement is uncomfortable (cold, heat) or dangerous (hazardous exposure). As companies adopt robotics and other technology, what changes about production work? What decisions are left for humans?

Supervisory Work (S-II)
And, what of supervisory work (S-II)? Typical (S-II) tools are schedules and checklists, the role is accountable for making sure production gets done, on pace and at standard spec. If we can sense most critical items in a production environment, with precision, in real time, what decisions are left for humans? As companies adopt technology, what changes about supervisory and coordinating work?

Managerial Work (S-III)
And, what of managerial work (S-III)? Typical (S-III) tools are work flow charts, time and motion, sequence and planning. The role is to create the system that houses the production environment. Most sub-enterprise software (as opposed to full enterprise software) is simply a transaction system that records transaction activity through a series of defined steps. Most computer software contains embedded rules that enforce a specific sequence of task activity. If most systems are designed around software systems, what decisions are left for humans? What changes about system work?

Executive Management Work (S-IV)
With a concentration in Ops (COO), Finance (CFO), Technology (CTO), the essence of executive management is functional integration. Most enterprise (full enterprise) software is designed to integrate end to end functionality across the organization. It contains hooks that communicate from one function to the next, with a plethora of configurations possible depending on the desired integration. If functional integration is controlled by enterprise software, what decisions are left for humans? What changes about functional integration work?

These are not idle questions.

Check Your System

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Gerard was puzzled. By chance, the night before, he ran into Nancy, a former employee, at a local restaurant. The conversation was cordial, but surprising to Gerard. At her new company, Nancy was responsible for a competitive product that was kicking butt in the marketplace. When Gerard terminated Nancy for not reaching her goals, he felt she was a marginal contributor with a big “L” on her forehead. Now, she was in charge of a development team at another company that was eating Gerard’s lunch.

Gerard explained to me that after Nancy’s termination, he had two more managers fail in the same position. His complaint was that he just couldn’t find good people. Now, he was puzzled.

Success is determined, not only by the person in the role, but also by the circumstances and systems that surround that role. Before you terminate someone, be sure to check your system. If your system is broken, the next hire will not fare any better than the person you are currently pushing out the door.