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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?

 

 

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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.

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?

10 steps to create a SCALABLE business

10 steps to create a scalable business (Adapted from the principles presented in the book Nail it then Scale it by Nathan Furr)
business-plan-picture
  1. Identify a monetizable problem.
  2. Addressing the core needs of the target market develop a specific/focused solution.
  3. Create a very rough prototype that addresses the specific needs of the intended customer.
  4. Continually adapt the prototype based on customer feedback. The prototype should constantly be evolving based on feedback from those who will be buying the product/service.
  5. Develop the “go-to-market” strategy with the prototype findings and with thorough industry analysis.
  6. Soft launch on a lean budget.
  7. Measure and validate intiial pricing and adjust if necessary. Tweak the financial model and get a firm grasp of the economics of the business.
  8. Document all data and procedures to make checklists and establish the system. (collect customer info, develop database, document all procedural efficiencies, establish marketing metrics, test ad campaigns and the most effective portals to deliver the marketing message through and have detailed daily, weekly and monthly Profit and Loss statements)
  9. Once the core systems model is developed constantly reevaluate the offering based on continual learning from the customer.
  10. Rinse and Repeat. (Either scale the business or use this process to pursue the next venture)

Notice the repeating theme?… KEEP THE CUSTOMER INVOLVED!

Business ventures go astray, some early-on some later, when they start creating offerings or adding features they “think” customers will want. Don’t fall prey to this common business mistake, solve the customer’s “job-to-be-done” not yours.

What do you spend more time thinking about..

What do you spend more time thinking about.. the clothes you put on in the morning or the action steps you need to take to maximize the profitability of your business?
If we are honest with ourselves we will admit that there are long periods of time that we get stuck on auto-pilot, (thinking only of the short-term tasks to be accomplished and ignoring the long-term goals and vision) and we probably do give more cognitive thought to what we are going to wear each morning.
Lets start focusing less on the image we want to convey and more on the results we need to produce. Aim to be competent and effective, always learning. Exude effort to action steps that produce results rather than worrying about the quantity of your effort. Doing two hours of work that actually generates revenue is far better than slaving away for countless hours all week putting out urgent yet unimportant fires. Stop doing for the sake of doing. Take time to put daily “tasks” into the context of profitability.
Ask yourself “What is the purpose of the task I am doing?”,  “Can I have someone else do this?”, “Will this effort directly result in a more lucrative future or am I simply appeasing my self-imposed “hard-working” image by being busy?
Wealth not only favors the bold but favors the effective as well. The road to wealth doesn’t necessarily require efficiency but rather effectiveness. Efficiency is important but if you are not doing the right things then you are simply a great time manager. Effectiveness is doing the right things despite how long it takes. In business, efficiency is like a turbo booster when paired with effectiveness because after you nail the right “what” and the right “how” you can then maximize your daily output.
If you can’t measure the results of your actions you will be forced to measure “how much” work you do and “how long” it takes to do it. Acquiring currency is not about how much you work or even how efficient/productive you are. Money is acquired by knowing where to find it and executing on a strategy to attain it, that’s it!
Business culture puts much more emphasis on the process than the results but in the grand scheme of things focusing on “what” you are doing before answering “why” will lead you down a life path of busyness for busyness sake.
Hard work and persistence are crucial elements in entrepreneurship that is an obvious fact. I am not saying you won’t need to put your nose to the grind stone and work your butt off for periods of time but just keep the purpose of your work in the forefront of your mind. Let’s stop wasting valuable brain matter on which watch to wear with which shirt and which color pants and concentrate our effort where it matters, accomplishing our goals.

Unrealized Potential Sucks!

Is there anything worse than unrealized potential?

It would almost be easier, mentally, to have no potential than a boat-load of potential and never see it realized. This goes for people with potential as well as business opportunities. Since business is my focus I will be referring to the latter.

Potential is what forms partnership, solicits investors, and triggers the release of dopamine in our brains which gives us that optimistic feeling that “we could be on to something huge”. Potential is what every entrepreneur seeks, they keep grinding with the hope that the future has something better in store for them than the present. Entrepreneurs pursue ventures that have a great potential return on investment and this “potential” (ROI) is what they seek to measure to determine if the payoff will be worth the effort.

Essentially all business deals come down to the assessment of their potential. Those that can spot potential where it is not evident and those that can spot it, before “the herd”, will be successful. That is why unfulfilled potential is the absolute worst! You think every scenario has been thought of yet, somehow, one negative option slips through the crack and kills a lucrative deal. It’s those deals that are a complete win-win for both sides that are the hardest to stomach when they don’t go through.

In life and business there will be ups and downs, peaks and valleys, ebbs and flows, that is a fact. The deepest valleys, which are the most difficult to get through, are the ones that started with the most potential but for one reason or another were never able to be realized. But bouncing back from unprofitable deals is a major key to success. The faster you can “get over” a perfect deal gone bad and correct course the closer you will be to your next breakthrough!

I know it hurts to have that perfect deal slip through your fingers, possibly by no fault of your own, but you must learn what you can from the situation, dust your feet off and move on to the next deal… Your future success depends on it!

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