The Connected Viewpoint: The business as a system

You know, you never want to mess with your little toe. You never want to break it or smash it into a table leg, because aside from how badly it hurts, you can’t imagine how big of an impact it can have on your whole body. I did that one day, and everything about my walk changed until it healed. Favoring the foot changed my posture, my posture changed my gait, and my gait started to get crooked. If I would have let it go without seeking medical attention, I am sure I would have had long-term back issues. Chiropractors understand this simple reality very well. The body is an engineering marvel with systems and capabilities that can compensate for the loss of effectiveness with any member of it. This compensation for loss is necessary to keep the body continuing to do what it needs to do. You must address the root cause of an issue to return the body to stability and balance.

This is also the reality of business.

A business is a system of processes, people, and principles that swirl in a never-ending dance around buildings and equipment. Make an input here, it comes out over there. Impact one element of the system, and others must adjust and compensate. Solving problems in a business environment requires an understanding of the entire system and a method to manage all the interrelated parts.

This explains why executive leadership today is so challenging. Unless you realize the connectedness of the elements of your business, solutions to problems can impact parts you didn’t intend to and knock it off balance. If you want to make changes that stick, and produce positive results, you need to consider them in the context of the business as a system. You must consider it all connected.

For the more than 15 years that ArchPoint has been helping clients, we have learned that any company (or consultant) can focus in on solving a tactical issue. The problem with this approach is that it does not consider the entire business system. It is easy to solve a sales issue, until you realize that it is really a marketing problem. People often attempt to solve problems as if they are isolated issues, disconnected from the rest of the business. Therefore many solutions do not deliver the desired result and cannot be sustained.

The key to developing an effective, lasting business-level solution to an issue involves two critical steps:

  1. Assess the problem from a systems perspective.
  2. Map the way the company delivers value to the end user (the value stream).

Applying a business-level systems assessment

Assessing the system should be the first step in the diagnosis of any business problem. The assessment should cover three main areas within the business:

  1. The company’s mechanisms for generating business (growth)
  2. The company’s means of turning materials/resources into products/services (productivity)
  3. The company’s means of employing its human resources (people)

These three areas make up the bulk of the activities within any business and data should be used to determine organizational health in each of these three areas. It may sound like a lot of extra work to a busy executive, but time spent here will not only uncover the true root causes of the problems but reveal the best ways to solve them.

Understanding the value stream

The next powerful tool in the arsenal of executive management is the “value stream map”. You would be surprised how many companies (great companies, in fact) that do not fully understand how and where value is created. This does not mean they have not been or will continue to be successful, but that their success is in spite of some missed opportunity. The value stream allows us to understand the fundamentals of our business model and make changes that solve the issues where they start.

When the value stream is not considered, solutions designed inevitably impact the flow of value creation and can potentially make it worse for the customer. For example, adding a step to the design process can slow down the delivery of the product to market. Without having a firm handle on the entire value stream, the problem can simply move from upstream in the process to downstream with the customer.

Building the value stream map has additional benefits in helping every member of the team understand how their role fits in the overall process of creating customer value. The map can then be used to define clear roles and responsibilities, build a detailed set of metrics by process and function, and predict how changes in one part of the value stream will impact the parts downstream. This is another great tool for making change stick.

The Leader’s dilemma

The leader’s dilemma is to ensure that changes made actually solve the problems and produce results that the business needs. Change requires an iterative approach because the applied solution can easily move the issue to somewhere else in the value stream. Desired results can remain elusive until we fully understand how the organization’s business model actually works. As leaders, we must ensure that the changes solve the problem, and without a firm systems perspective, we are likely to just move them around or replace one bottleneck for another.

The Consultant’s advantage

For the consultant, the dilemma is similar but more adequately addressed by objectively considering both ends of the business model (the systems assessment and the value stream map). It is this objectivity in viewing both the assessment and the value stream that gives the consultant an advantage when both tools are employed.

Clearly, consultants can offer solutions that do not fit what the company needs, even though they are commonly prescribed solutions that have been applied successfully in other places. A better approach to solving a business issue is to assess the business as a system and then map the value stream before jumping in and designing a solution. It might cost you more up front but in the end, you will not only get a better-quality solution, but one that fits so well, it will last.

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