Enterprising deductions

The complexity of simplicity

Over complicating things is something intelligent business leaders do all the time. Every business leader has a tendency to add complexity, to various areas of their operations, to the degree that their personal knowledge in that particular area increases.  A deepened level of understanding naturally leads us to ponder what makes the (whole), (greater than) the (sum of its parts). It shifts the focus toward segmentation, like taking apart a clock and focussing on how each individual piece contributes to making it tick.

With deeper levels of knowledge and understanding we get this desire to isolate and optimize each individual part of whatever we are involved in. (i.e. Our companies’ strategy {overall or department specific strategy}, a new marketing methodology, different leadership concepts, our companies logistics, the different elements of our cost structure. etc.)

Expanding core knowledge/understanding and executing what we’ve learned is not a bad thing by any means. It fact it’s absolutely vital for success! But the law of diminishing returns is in full effect concerning the amount of complexity we incorporate and the level of optimization we can expect to achieve.  Economies-of-scale naturally bring new layers of complexity but the key to sustainable success is developing systems where complexity “levels-out” after a certain point. (Similar to the old adage “missing the forest by focusing on the trees”, in that it’s possible to miss the overall point sometimes when we are so focused in one particular area.) For the sake of a business’s longevity there should be a plateau in the level of complexity before any slowing of growth!

Now, obviously, a larger business, or a rapidly growing business, requires a more complex and segmented strategy than that of a small “Mom & Pop” business. But still, size is not an excuse to have an overly complex business structure!

For example:

A lawn-care company that grows from a 2 employee business with 20 customers to a 12 employee business with 200 customers would obviously benefit from (or rather NEED)  a more robust logistics strategy. But a company that grows from a 200 employee business with 3,000+ customers to 400 employees and 6,000+ customers shouldn’t require any added complexity.

Smart companies realize that (optimization capabilities) are finite and the benefits from focusing on optimizing diminish at a certain point. So, since smart companies/people realize that complex thinking has a limit to the amount of benefit it renders, they develop systems to account for future complications & potential problems. This then allows for a balanced approach to optimization and scalability.

The most effective business leaders comprehend the different complexities of their operations and the intricacies of their distribution channels and financing structure but, they don’t fall prey to the “trap of over-complicating”. They can explain their business model and strategy with ease; they have software, HR systems, marketing/sales systems, and business development systems that break-down the massive complexity of their business into (semi) simple & comprehensible manuals. It’s like a painter constructing a master piece, all the different colors and strokes on his canvas look un-purposeful and convoluted at first, but once he’s finished the completed work becomes so utterly simple to see and appreciate. That’s how successful businesses look; a series of complex inner workings that deliver an easily comprehended and very holistic end-product/service.

I love Warren Buffet‘s take on complexity (as it pertains to education):

“Business schools reward difficult complex behavior more than simple behavior, but simple behavior is more effective.”

So in summation:

A certain level of business acumen and insight is beneficial in developing greater efficiencies in your business but be careful not to get caught up trying to “reinvent the wheel” in every aspect of your business. Deeper knowledge should obviously lead to better business performance but understand that even though the most successful businesses have extremely complex systems, they are seamlessly executed to deliver utter simplicity in their end-product. Think about McDonalds, Starbucks, Apple, Salesforce, Tesla. Or B2B companies in industries you probably don’t even think about (unless you’re in one) like automation services, collection & disposal services, pharmaceutical companies, the list goes on. A company with thousands of employees and millions of working parts can deliver a seemless service as simple as cheeseburgers from a drive-through.:-)

So, are you engaging in productive strategic action or are you over-complicating things simply because you can?

 

 

Why are assumptions so important?

ASSUMPTIONS_PIC

Every potential business idea and project has a list of assumptions that must prove true for it to be a success. For example lets say you are a marketing manager for an industry-leading company and the company has decided that it needs a complete brand re-fresh. The  company hasn’t questioned the status quo in years, despite the competition aggressively innovating and stealing market share. It is now forced to address the competitive landscape and take an introspective look at what can and should be done differently to regain its position in the marketplace.

The decision has been made that it needs to re-brand itself  by running a fun hip marketing campaign, sprucing up the company logo and forming partnerships with high-profile companies in different industries that have mass-market appeal. The decision to go this direction is where the crucial aspect of assumptions comes in. For you, the marketing manager, it is helpful to know the assumptions that were made that led to this company-wide directional shift. Why are we assuming that our branding is the the issue?

Assumptions are a critical part that determine a projects fate. Assumptions are essentially the external conditions that must exist for a projects logic to be valid. They are the external forces that a company cannot directly influence.

One major assumption made in our example company is: “Our business is loosing market-share because of our brands perception”. Is this a valid assumption? It may very well be, the only way to know is to set up a structure to manage assumptions from the beginning.

Here is a three-step framework for managing assumptions:

1. Identify key assumptions in the beginning of a project. What conditions must exist to prove your logic on success? How will others cooperate? What else must happen for us to succeed?

2. Analyze and test the key assumptions. How important is this assumption to the project’s success or failure? How valid or probable is the assumption?

3. Act on the assumptions. Determine if it is a reasonable risk to take. What are some ways you can influence the assumptions? Who is in control of the assumption? Can you make the assumption irrelevant?

When you start a project make sure you list the assumptions that require it to be successful. This kind of strategic thinking opens your mind and deepens your understanding of all the possible variables that can impact your outcome.

What long-held assumption do you have concerning success? Simply clarifying them may help you decide if your basing everything off in-valid assumptions or, it can confirm you are headed in the right direction.

There is NO such thing as Management Strategy….Think Marketing!

Your management strategy is really a marketing strategy. The method your product or service is delivered to the customer is a crucial part of your marketing plan but in reality the “how” you go about delivering value is constructed in your management strategy.chess

Your operations manual includes the processes, activities and behavioral guidelines that makes your company run. The content of the operations manual should only consist of fine-tuned and up-to-date information. After processes and systems have been tested and tweaked to determine efficiency they are boiled down to checklists and documented in your manual as “how we do things here”. How these systems are implemented is your management strategy…or is it marketing strategy?

Defining roles and responsibilities and organizational structure is part of management strategy. (more specifically under “organizational strategy” but it still falls under management strategy)

Putting the right people in the right roles is management strategy.

Establishing the employee code of conduct, determining dress code, empowering customer service and sales staff with top-notch training and giving them the best tools to succeed is all part of your management strategy, but…

in all actuality, this is the cornerstone of your marketing strategy. After all if one of the “4 P’s of marketing” is “product” and the customer experience is based on the systems established by the management strategy then isn’t your management strategy really just part of your marketing strategy? Management strategy is intended to produce a Marketing result. You want happy, empowered and well-equipped employees delivering your brand message. A company’s culture and brand perception is delivered by its employees, working within the constructs of the system developed in the management strategy.  Hence Management Strategy is essentially part of the marketing strategy.

The reason for the writing of this post and the hyper-focus on this seemingly insignificant detail of strategy classification is due to this trend I’m spotting concerning people’s opinion on the scope of marketing  in relation to the management and overall company strategy. In this internet age “marketing experts” are making  “marketing strategy” synonymous with “online strategy”. And management experts/consultants try to segment everything to make it fit into a nice little easy to understand frame-work even at the risk of inaccurately portraying the true flow,  and the underlying cause & effect relationships that make a business engine run.

Determining and understanding those things that contribute to the success of your business is vitally important. Knowledge is power.  The deeper your understanding of what specific things, why those specific things, and how those specific things are connected the better prepared you will be to make wise decisions concerning your company’s future.

The Entrepreneur “cheat sheet”

entrepreneur
If you are looking at creating a new business, expanding your current product offering, or looking to take your business into completely new markets then you should have an answer for these 4 questions:
1. Is there a market need? Do your due diligence to determine if there is adequate profitability potential in regards to Michael Porter’s Five Forces of Industry structure: current competitive landscape, price sensitivity of customers, threat of completely different products or businesses entering the market, bargaining power of the suppliers you use to deliver value and the threat of even more competitors entering due to low barriers of entry.
2. Do you have the competency to deliver? Make sure you have a solid strategy detailing exactly how you will deliver value. Make sure you have the business acumen to generate critical insights  through a step-by-step assessment of not only your current business environment but also the general direction of what the future environment might look like.
3. Do you know what resources to allocate to make your plan actionable? Resources in a current business can be (physical assets and financial resources) intangible items like: (brand, culture and reputation) or intellectual property like: (knowledge, competency or skills.) Know what different activities you can do that the competition is not or similar activities your can do in a different way than the competition. Understanding what resources to leverage, and where, gives you the ability to implement an action plan that executes an effective strategy.
4. Do you have passion or some desire for this project? Passion helps to protect us from rejection and push through obstacles. Having passion turns the volume down on critics and naysayers and gives an extra boost of energy to keep pushing when circumstances aren’t great. If you are competent and have identified the correct need but don’t have passion you may succeed but the environment you create for yourself won’t be optimal.

Stop trying to be good at someone else’s strength!

Due to the complex nastrengthsture of business it is natural that business owners and management teams do not have all the answers or competency for every situation thrown their way. The skills it takes to start a company from nothing and build it to a multi-million dollar a year business  are not the same skills that it takes to run and maintain a mature business.  Some founders have the ability and desire to build, grow and maintain their business for many years but most do not, so the board of directors brings on a CEO with a skill-set more appropriate for the shift in landscape. This really brings to light the fact that we should be spending our time increasing our natural strengths. If you don’t already, carve out time each day to focus on what you are truly good at and think about how you can best leverage that strength. Entrepreneurs and founders have a specific set of skills (although most would hardly consider an entrepreneur’s skill-set as “specific” but  certainly different from others) that help them create something out of nothing. Corporate Executives  and managers that run mature companies with massive budgets have entirely different responsibilities and thus different skills. We should seek to expand our level of expertise but not try to re-construct our DNA. Be the best YOU that you can be! Once your really hone-in on what you are naturally awesome at you can start putting an action plan together to translate thoughts into actions, and ultimately start proactively executing in your strengths.  You may even have strengths you don’t even know about. Ask your friends, family and co-workers what they think you naturally excel at. They may see subtle things in you like: being a good listener, diffusing stressful situation, always staying positive, being an encourager, or simply that you are a fun person. Talking to friends about what you naturally excel in is a great way to learn more about yourself and be encouraged. If you are a good listener spend time each day, or at least 3 times a week, proactively seeking people to talk with for the sheer purpose of listening. You would not believe how much this will benefit you and the people you speak with because most people don’t care to discuss for the purpose of learning or even interest they just want to be heard. Maybe you find that you are good at encouraging people. Just being aware of your strengths will now make you more likely to use and grow in them. Seek out people to encourage. If you are a fun person think about all the spontaneous ways you can be fun with people. Send them something in the mail, show up at someone’s office, plan a random weekend trip with friends, just do things that will grow your natural ability. Doing so will bring a whole new level of satisfaction into your life. No matter how bad or good things are going when you are operating in your natural strengths you will be more content and live a far less stressful life, I guarantee it! I conclude with one of my favorite quotes attributed to Albert Einstein: “Everyone is a genius. But if you judge a fish by its ability to climb a tree, it will live its whole life believing that it is stupid.”

But I don’t feel like it…

   feelings
The world of business creation is extremely exciting yet terrifying at the same time. Entrepreneurs go through ups and downs during every phase of a start-up. The funny thing about how our brains work is that just when entrepreneurs should rationally feel the most tentative they are usually the most optimistic. The reason for this is explained by the release of dopamine in our brains. We feel excited and pumped up when we think of what could-be. The reward center of our brain lights up with the anticipation of success but not the actual achieving of success. The promise of future happiness or success, not the direct experience, is our brain’s strategy to keep us hunting and creating.
              This anticipation of success is not necessarily a bad thing in fact it is a great way to spur action. There are so many obstacles to overcome in creating any business that it helps to have temporary blinders. Where would we be if it weren’t for the innovators and creators that attempted the “impossible” and succeeded? In fact this anticipation of success mechanism in our brain is what built this country. The thought of what could-be creates intense desire and even a level of anxiety to make our dream a reality.
            The key factor separating would-be entrepreneurs or dreamers from those that actually realize their dream is in persistence. Persistence is pushing forward even when you don’t feel like it. Once the excitement and adulation period wear off the persistent keep moving forward despite not feeling motivated to do so. The key is to build a behavioral plan of action for yourself that establishes proactive habits that will take over when you no longer feel excited about what you are doing.
           What types of habits can you create that will keep you perpetually moving toward achieving your goals regardless of how you feel?

Insights: the surefire way to get “out of the box”

Insights are the product of two or more pieces of information combined in a unique way, they are the bridge connecting experience to expertise.

Insights are the key ingredient for every successful entrepreneur because it leads to new ways of doing things like:

  • Spotting social and economic trends early on
  • Re-engineering components of an old business model
  • Taking a business model from one industry and applying it to another
  • Getting the right people in the right roles
  • Questioning the status quo (With more context comes deeper core understanding)

Taking the understanding one has for a certain area and applying it to another totally different area is the number one driver of innovation. The insights of inventors and businessmen have ushered us into new landscapes throughout history that people (at the time) never thought possible!

Think Henry Ford and his revolutionary assembly line techniques. Think Johaness Gutenberg’s invention of the printing press that combined elements of oil-based ink and agricultural screw presses. Think Apple’s iTunes that put everyone’s entire music library into an easy to use devise, the iPod. (not quite the impact of the printing press but you get the point)

The next great innovation and hugely successful businesses are merely an insight away. And the beauty of it is that everyone has insight whether they know it or not.

To leverage what you know the first step is to be aware. It seems obvious but most people are not even cognitively aware of their experiences and the significance they can have if applied appropriately. The second step is to start exploring other ideas, industries, practices and people. Start looking outside of yourself. Meeting new people is the easiest way to instantly gain insight on your own insight! With each new contact you meet you begin to see the uniqueness of your personal experience and knowledge. This then leads way to creating an entirely brand new context for your experiences.  The third step is to create an environment of learning. Whether for a business or personal it is important to garner feedback and create a system to measure learning capacity.

Remember you can develop and even strengthen your ability to gain insight. Your experience no matter how small or insignificant you think it is can be leveraged to your advantage! Get outside the box and start making connections with the unfamiliar. Billion dollar empires have been built on uncomplicated insights. Just take what you know and apply it elsewhere!

What are you doing to gain more insight?

%d bloggers like this: