A system is a network comprised of COMPONENT PARTS—including people—and their CONNECTIONS. Every part contributes its own unique qualities and capabilities for which it was specifically chosen. Parts contribute to other parts, thus creating many RELATIONSHIPS and DEPENDENCIES.
In other words, one part cannot function without the help from one or more other parts, and each individual part owes its reason for being included in the system to its unique ability to contribute to the success of one or more other parts. No part serves its own needs.
WHY DO WE NEED A SYSTEM?
We create and use systems because we don’t want having to invent the wheel every time we are called upon to create a product or deliver a service. This shows that systems are created for the realization of a very unique and specific PURPOSE.
The SUCCESSFULNESS of a system is measured as a function of its:
- EFFECTIVENESS—the extent to which a system can fulfill its intended function. This is what buyers and users experience when interacting with a system—do the products and services measure up to their promises; do people get enough bang for their buck. Effectiveness determines how well users like your products and services, thus determining the likelihood they’ll buy from you again, or even recommend you to others.
- EFFICIENCY—the amount of manpower, time, materials, resources, energy, and ultimately how much money is spent on producing and delivering a single product or service. This is an internal matter since it affects your profitability. Buyers couldn’t care less about your efficiency.
Successful systems are characterized by the PREDICTABILITY of their outcomes or results. Outcomes become more predictable once you start increasing uniformity by reducing variation in:
- Tolerances from one product or service to the next, and in the
- Processes that produce and deliver these products and services.
BASIC PRINCIPLES FOR PRINCIPALS
It should be obvious by now that a system is a MEANS to an END—a singular, unique, and integrated vehicle for the realization of a very specific purpose.
Succeeding at the realization of that unique purpose is thus a function of the system’s DEVELOPMENT—the continual improvement of its capability and capacity to realize the purpose for which it was designed, structured or organized, implemented or operated, maintained, and managed. There is a clear CAUSE and EFFECT relationship between system development and more predictable business outcomes.
HIJACKED BY SPECIAL INTERESTS AND BUSINESS EDUCATORS
Dr. Albert Einstein said Perfection of means and the confusion of ends seem to characterize our age. This quote describes the root causes of PREDATORY CULTIVATION of our modern systems, and business systems in particular.
There should be no disagreement about a system’s need to be CULTIVATED—its design, structure or organization, implementation or operation, maintenance, and management need to be fostered in order to prosper.
However, business system cultivation has been HIJACKED by special interests, with the unfortunate collaboration of influential thought leaders among business educators. Together, they ARGUED why businesses are believed to exist—their raison d’être, or purpose.
They instilled the notion that executive decision makers have a fiduciary responsibility towards shareholders. That’s exactly what caused the Financial crisis of 2007–2008. Home owners were pawns in a scheme to make money for shareholders.
FORM FOLLOWS FUNCTION
Any system takes the FORM―is designed, structured or organized, implemented or operated, maintained, and managed―according to the FUNCTION it is intended to fulfill. Hence, form informs us of the system’s function, and one wouldn’t confuse, for example, a two-seater sports car for a city bus, nor a hospital for a hotel.
Any system derives its justification to exist―its raison d’être, or purpose—from the VALUE it creates for the benefit of a specific target audience. Without a specific target audience in mind, without any particular people to serve, systems serve no purpose at all.
Special interests and influential business educators argue that the justification for, or purpose of EVERY for profit business is to “Make Money.” Their argument is blatantly false because only two businesses in the United States of America have a stated purpose of “making money”. These are the Bureau of Engraving and Printing―a government agency within the United States Department of the Treasury―and the United States Mint. They print banknotes and mint coins. Notice how form follows function.
All other businesses must earn the money they desire by exchanging goods and services, which is called Net Sales, or Accounts Receivable, but not “Inventory of money made.” And, their business practice had better be legitimate.
Question: How bad is it to confuse the purpose of one’s business system? How does it corrupt your decision making processes when measuring success against profits instead of buyer/user satisfaction?
Answer: You commit PREDATORY CULTIVATION on your business system! Instead of fostering system development, you undermine your system’s capability and capacity with the intention of saving money. In other words, you actively degrade the system’s ability to create value, with which to attract buyers/users, that generates income.
Since Profits are calculated by subtracting Cost from Income, you can increase profits by increasing Income, and reducing Cost. Both options have the potential for predatory cultivation when the objective is to GROW the business—to increase the system in form and size. Predatory cultivation reduces a system’s effectiveness, hence its attractiveness, perceived value, and thus its profit margin.
There are countless BEST PRACTICES that promise to increase efficiency and by implication increase profitability. Most of them aim to reduce the cost of labor. One way or another, this results in a lack of employee engagement, one of the most frequently heard complaints from employers. People who are not engaged don’t really care, make mistakes, don’t alert supervisors when something goes wrong, which reduces quality, creates unnecessary waste, calls for rework, and increases warranty claims. Demotivated people are not loyal, which increases employee turn-over, which increases the cost of hiring and training, while annihilating corporate memory and expertise. In short, these Rob-Peter-to-Pay-Paul efficiency measures are likely to costs more money than they promise to save.
Alternatively, the cost of labor can be reduced by becoming more CAPITAL INTENSIVE—replacing people with machines. This requires serious investments, which increase cost, whereas the production process becomes more dependent on people who operate and maintain those machines.
Decision makers tend to compensate for a loss in effectiveness—pleasing paying customers—with more marketing efforts such as advertising, and promotional discounts or rebates, which increases cost.
Another best practice for growing the business—boosting income—is to increase one’s customer base by acquiring rival businesses. Such investments increase cost whereas perceived scale advantages tend to disappoint, especially when it becomes evident that mutual computer hardware and software are incompatible, and need to be replaced. These expenses increase a business’ debt-to-equity-ratio, which increase lending cost.
DOING WHAT IS RIGHT
Confusion regarding the purpose and justification for designing, structuring or organizing, implementing or operating, maintaining, and managing a business system, initiated the development of best practices for the perfection of individual means separate and in isolation of the system as an organic whole.
To use Motorsports as an analogy, you cannot expect to win race after race and become World Champion by systematic undermining of your vehicle’s capability and capacity. No one thinks it’s a winning strategy to make purchase decisions based on the lowest price available, saving cost by maintenance deference and skimping on safety measures, or hiring a lowly qualified crew. Similarly, who would suggest perfecting individual component parts without considering how they fit together, communicate, or interact with each other, in order to improve performance of the vehicle as an organic whole?
If you wouldn’t commit predatory cultivation on a race car, then why would you do it on your business system, even if those solutions are touted as a “Best Practice” by business educators, consultants, executive coaches, or your peers?
Doing what is right—continual development of your business system’s capability and capacity—is profitable, sustainable, while respectful of humanity. It’s a true and tried GOOD business practice.
To read more, get a copy of my book The Root Cause: Rethink Your Approach To Solving Stubborn Enterprise-Wide Problems.