This is the Profit Savvy structured roadmap to growing your business. Is only one of many, many possible roadmaps to growth. As we don't know your business, if should only be used as a tool to make suggestions to you that you can choose to incorporate into your business planning or ignore at this stage. It is a Yellow Belt (beginner) level program so anyone can feel confident they will be able to followit. As you get more experience, there will be Blue Belt (intermediate) material that will further assist you with growth.
We use the example of a flywheel for explaining how we structure the material.
The material in our Profit Flywheel series of articles is still under development. Stay tuned as it evolves.
Jim Collins in his "Good to Great" series of books, refers to the "Flywheel Effect". He uses the analogy of a massive Flywheel that is sitting stationary. We could use this to represent our existing business. Let us assume that its profit is not growing and therefore the Profit Flywheel is stationary.
By judicious application of force and plenty of lubrication on the shaft of the Flywheel we can gradually get it to spin. The most effort is required in these early stages but once the Flywheel begins to spin it can be made to spin faster and faster without doubling the amount of effort each time. And so it is with the DP365 Profit Flywheel!
There are likely 4 Primary subsystems that we need to progress in unison to get our Flywheel spinning:
- Dream It: think up the products and methods of obtaining the goal. (innovation and planning)
- Sell It: set up sales for the products that you have dreamed up. (sales & marketing)
- Make/Get It: either manufacture yourself or buy in from a wholesaler the products that you have decided to sell and which your sales team have orders for.
- Ship It: distribute the materials that you have produced to sales orders.
Each of these 4 elements or subsystems of your business need to move along in unison and be ready to lend their shoulders to spinning up the Flywheel.
Throughout Profit Savvy, there is a wealth of material relating to each of these areas. Using the search function, contents list and Knowledgebase categories will help you track down more information on any topic of interest.
Like any undertaking, there will be setbacks and other unexpected events. One of the main functions of a flywheel is to smooth out variation in the load it is attached to and provide enough momentum to get the process through the tough spot without losing much momentum.
We will walk you through the Profit Flywheel in a separate groups of articles under the general banner of A4
Secondary Support Subsystems
You may have noticed that we left out any mention of support services such as accounting, HR and IT in the primary systems discussion above. This was intentional. These are support services and contribute little directly to profit - which is the DP365 goal. In fact, they decrease profit by consuming money to provide the service.
Their function is to literally supply "support" to the primary systems of the business so that the business gets timely feedback (see Metrics article) and the necessary human resources to operate.
In many organisations, there is a tendency for the accounting element of the business to be one of the major policy constraints in the business. By insisting on various policies, the accounting function can slow down the profit growth of the business.
By making them subordinate to the primary production systems, secondary supporting systems can be tuned to make a very productive contribution to the smooth running of our Flywheel. A secondary supporting system ideally should not be expanded until it becomes a constraint on the further growth of the business. This is likely to be much less often than you might expect.
The onus should be on any manager who wants more resources allocated to secondary functions to prove that they have become a constraint. Remember Parkinson's Law (Parkinson's Law article) says that "work will expand the time available". Support systems may look busy but that does not mean they have become the constraint on further Profit growth.
Find the Constraints
In our series of articles about the Theory of Constraints (see TOC articles) we talk about the overwhelming impact that the (usually) one constraint in your business will have on the overall productivity of your business.
We talked about this in our Double Your Profit in 100 Days (DP100) strategy and again we make the same point in our DP365 strategy here.
In a factory, the single constraint is likely (and ideally) to be fixed. You do not want your constraint moving around all over the place because then you must find it the next time.
In DP365, your Top Down Business Plan will have identified all the various steps that need to be done and a due date by which they need to be done to keep the profit "train" rolling along.
Because there are several separate and subordinate systems that contribute to your overall profit goal (e.g. distribution, sales, marketing, accounting, HR) each of these systems is likely to have their own constraints. This is the one thing that governs (for example) increasing your sales. They will need to be carefully managed like any other constraint for that subordinate system to perform at its best.
It is pointless to focus on some element of a particular subordinate business system that is not the constraint as that subordinate system will not improve its productivity while the constraint is unattended. For example, there is no point in spending effort on getting more sales leads if the constraint is that you don’t have enough sales people to contact the leads that you already have.
These subordinate system constraints also need to be factored into the overall Business Plan.
We can think of our DP365 destination as the end in a work flow. We begin with what we have now and we have several different subordinate systems or branches (e.g. marketing, sales, production, distribution etc) operating in parallel and converging on the ultimate DP365 destination.
Each of these subordinate branches needs to be optimised in the light of the whole business to avoid wasteful over-production of their particular service. Because it is impossible to foretell the impact of uncertain events, we will inevitably have variation in the output from each of these subordinate branches, even when they are well managed.
TOC discusses this issue in a factory context and introduces such solutions as "Buffers" (see Buffer Management article) to ensure that the supply of a product never holds up the principal constraint in the workflow which in turn governs the ultimate DP365 destination.
In your Business Plans, care should be taken to build in appropriate Buffering for each of the necessary systems to achieve our overall DP365 goal.