Hey folks! Today I want to talk some about how to improve business processes. I’ll cover the mental model that I use any time I’m trying to improve a process.
Improving business processes and systems is how you get more efficient, and that efficiency is going to help you save time, save money, get more out of the existing things that you have, and ultimately be able to scale and grow your business the way that you want to grow it.
The Mental Model
This mental model is going to apply to any system or any process in any business. It doesn’t matter what that process is doing. It doesn’t matter what your business does.
This is one of the great things about systems thinking. When you use systems thinking, systems have the same attributes and that means you can apply the same tools to fix them regardless of what the systems are doing.
This mental model consists of three words to remember. It’s a model that’s so important that I wrote a chapter in my book just about this mental model and these three words.
Those words are
This is how you should be thinking about improving the processes that you have in your business. Keep them in that order: eliminate first, consolidate second, and automate third.
Let’s go ahead and talk through these one at a time.
The first item, eliminate, is exactly what it sounds like. It’s about going through your process and looking for things that shouldn’t be there.
Many times this is in the form of waste; things that you’re doing that you don’t need to do that are providing no value to your business and aren’t helping you make money or are costing you money.
Waste can come in many different forms in your business. It can come in the form of wasted time, wasted money, or wasted resources.
One common area where waste is created is when you change things in your business. This is one of the to look at when evaluating processes. If you have recently changed anything in your business, start there looking for things that are no longer producing value due to the change.
Oftentimes, when a change is made, some of the existing process steps or artifacts that we’re using in the business become obsolete because of the change that we’ve made.
We don’t always take the time to identify all of those wastes and clean them up. You need to think not just about the immediate consequences of a change but think through what are the second and third level consequences. This can help you identify where you might have waste in your existing processes and systems.
Let’s go through a real-life example. I was working with a business and going through general process improvement, and one of the things that came up was a collection of reports around accounting that was taking a fair amount of time each week.
They had one person that was spending four or five hours every week just creating these reports.
There was some initial confusion about what the report was really for and so I started asking the questions.
I was told that the owner used them so I reached out to her. She told me the reports aren’t used anymore by her but there is a manager she hired that the reports are made for now.
Next, I went and I talked to that manager.
The manager said that the owner used to use the reports, but when the manager started, he made a couple of adjustments and now there’s software that does a bunch of things differently and the reports are obsolete for his purposes but the owner surely still used them.
So you see, they made this change when they brought somebody in. This was the first change and then that person made additional changes. Those additional changes then changed meant the reports weren’t adding any value.
These reports that were still being generated were no longer needed, but nobody took the time to identify that and go back and adjust or eliminate making those reports.
I had the business eliminate the report creation from the process and we were able to stop that person from spending four or five hours a week generating these reports that nobody was using anymore.
The next word in the mental model is consolidate.
Consolidating is also exactly what it sounds like. You have things in your business that come from different sources. These things are relatively the same thing, but they are generated in different ways. That creates an opportunity for you to consolidate processes.
What do I mean by things? Here are some examples.
Many businesses have multiple ways that they get leads.
Sales don’t always come from one channel. You might have four, five, six, or even more channels that create sales for you that are all coming into your business.
You’ve got expenses from different sources. You might have software expenses from software vendors. You might be using Fiverr for contractors creating expenses. You might have employees that generate expenses. You’ve got payroll. All of these different expenses are very similar, but they’re coming from different sources.
Another example is product ideas. You have product ideas that you have in your head as a business owner. You have product ideas are coming from your employees. You have ideas that are coming from your Customers. All of these different product ideas are very similar but coming from different sources.
Consolidating is about first identifying the thing. What is this thing that we have in our business that we want to try and consolidate?
Then you answer the question of, “What are the different sources that create this thing?”
Then it’s a matter of bringing those things together in a way that you can manage that thing, for most of its lifecycle, as a single thing.
Let’s get specific with an example to help you understand that. Let’s talk through expenses. For this example, you’ve got a couple of employees so you’ve got some payroll expenses. You’ve got software expenses where you’re paying software vendors for software that you use in your business. You’ve got materials expenses because you create a physical product. You have contractor expenses because you outsource some of the work that you’re doing.
All expenses and now have similar characteristics but they’ll come in different ways with slightly different information.
You’ve got a payroll expense that comes out of your payroll software or your payroll service that generates an email that’s got some summary information.
You’re getting emails from the different software vendors that you use all of those emails look a little bit different and have slightly different information. A bill from one vendor might have significant expense details while another is just a summary.
Similarly, for Materials and Contractors, you’ll have various expenses that will come to you in different formats even though they are all just expenses.
What happens is you have individual end-to-end processes to manage each one of these different flavors of the invoice. With consolidation, you want to make your expenses look the same with the info you need to manage your business.
Now, after you’ve consolidated at the very front, you can manage all of those expenses the same way. You don’t have to do different things to different invoices based on the source of where they came from.
Consolidation is about normalization. Normalizing information is to take information about expenses or any other category of similar “things” that comes from different sources. It all looks a little bit different, but you put a system in place to consolidate all of that and to normalize that information so that it all looks the same.
Then you can just have one process to manage all your expenses. It doesn’t matter where they come from and doesn’t matter what they look like. Ultimately, you’ll be able to normalize them and have just one process to manage those expenses instead of different processes for each of the different types of expenses that you have.
Last, let’s talk through automate. Automation is really about technology. It’s about introducing technology into your business to remove manual processes and to make things happen in a way where nobody has to touch anything. You have technology doing the work for you.
It’s really important that you make this last. I can’t tell you how many times I go and talk to a business and they just want to start with technology. It happened all throughout my corporate career as well.
“Let’s go buy some software and it will solve our problems.”
Software will not solve many of your problems other than automation. It will make manual processes into automated processes.
The problem is if you have a really bad process and you automate it, you still have a really bad process.
Automation technology is not going to make your processes better. It’s going to automate them and you might be able to do different things with software when you install it, set it up, and configure it, but you have to do the process work first to have real improvements.
If you want to be really efficient you have to do the process work first.
Technology is expensive and it’s time-consuming to implement and if you automate first, and then you go and try and make your business more efficient in other ways and you try and eliminate or consolidate now the technology that you’ve built is no good anymore.
It’s got problems because you’ve changed the underlying business processes that the technology is supporting so now you have to go change your technology again, which means you have to spend more time and money hiring consultants to come and do the tech work for you. If you’ve got tech staff that you employ, you’re going to have to have them spend their time and it’s just completely wasted so automate last.
The other important piece to that is, especially with a new system or process, you’re going to be doing a lot of rapid learning about what’s right and what’s wrong. When you start manually, it’s very easy to make adjustments to the process.
If you’re doing “A” manually and you wanted to do “B” instead, you just stop doing A and start doing B. It doesn’t cost you any money. You don’t have to configure anything or change anything.
You just stop doing A and start doing B so when you’re getting your process right and trying to fine-tune them, it manual is better at first, because it’s going to allow you to make those adjustments and get your process optimized before you incur any costs related to technology.
That’s it for today. Again, this mental model will help you to improve your business processes and systems. Any time you’re looking at how you can make things better, think about eliminating things that aren’t adding value or are helping you get to your desired outcomes. Think about consolidating “like” items in a process or system and process them the same way after you’ve normalized them. Lastly, automate and remove manual work so that the technology can do the work for you.
If you’d like to improve your ability to improve processes in your business, my book is a great place to start. It’s available on Amazon either in paperback or Kindle formats and is free on Kindle Unlimited.
As I said at the beginning I have a chapter dedicated to this concept. It fits very well in a broader process improvement program and it will help you address the right things in the right order to make your processes more efficient, more effective, and more productive.
If you’re looking for extra guidance on how to apply this or other tools in your business, you can book a 15 minute call with me for $95 here.
If you have a bigger need, please email me and we can discuss how I can best help you Optimize for Outcomes.