Business Systems and Feedback Loops Quiz

Four Processes of a Successful Organization

• Quantify: Understanding business involves knowing the numbers, conducting research, and comprehending the business itself.

• Innovate: Innovation is about changing business methods to achieve desired results.

• Standardize: Standardization eliminates choices, creating consistent processes.

• Add Value: Adding value means introducing something new and captivating to the market.

Understanding Systems

• A business is a repeatable process aimed at generating profit. Everything else is a hobby.

What is a System?

• A system is a structured method or procedure.

• A system comprises interconnected components functioning together towards a shared objective.

• The entirety of all systems within an organization forms its operations.

• Effective systems are essential for smooth operations.

Business Model Framework

• The framework includes interconnected segments: Operations, Organization, and Marketing.

• Key operational components are key partners, key activities, and key resources.

• Crucial elements of the organization section are Value Proposition, Customer Relationships, and Customer Segments.

• Marketing encompasses Customer Segments, Channels, and Customer Relationships.

• Cost structure, revenue streams, IT, Finance, and Legal are fundamental areas across all components.

What is a System (Organizational Systems)?

• Systems are the processes, procedures, and technologies used to manage resources towards organizational goals.

• Effective systems leverage core competencies.

• Core competencies are strengths that define a business.

Does the System Work?

• Systems should enable cross-departmental information flow for efficient decision-making.

• Technology should facilitate easy information sharing between departments and individuals.

• Management should regularly update systems according to organizational needs.

Does the System Support?

• Organizational systems should align with the strategic plan.

• Proper alignment means connecting and coordinating organizational objectives with the strategy.

• Accurate measurement of milestones is crucial for strategy achievement.

Purpose of a System

• Systems are designed to standardize processes for desired outcomes.

• Desired results should enhance value. Systems that don't are unnecessary.

Success Using Systems

• System development and improvement are central to successful business practices.

• Successful systems originate from successful processes.

Gall's Law

• A complex working system has evolved from simpler, functional systems.

• Systems built from scratch rarely function efficiently.

Start Simple

• Complex systems initially fail due to unpredictable interactions.

• Begin with the simplest, known components.

People vs. Systems

• Some problems necessitate personnel; others require systems.

• Healthy businesses rely on capable staff and effective systems.

Anatomy of a System

• Good system design requires framework understanding.

• Key aspects include system boundaries, steps/flow, and resources needed.

• A system has defined boundaries and actions, with automatic operation and resource utilization.

System Constraints

• Constraints limit system efficiency.

• Examples include factors like materials, time, and personnel in a system design, like an assembly line.

Systems Change

• Systems in operation are always evolving.

• Planning without considering change may be ineffective.

• Systems needing continuous improvement to stay viable are essential to survival.

Getting Started

• Systematize all business procedures and tasks to produce products or services.

• Use business core areas as the starting point, focusing on strengths.

• Business core competencies distinguish a company and boost its marketplace reputation.

The Systems Test

• Systems should support business missions.

• Scrutinize processes/systems that do not contribute to the company's mission.

• Evaluate why systems exist; if the answer does not tie to the core mission, eliminate these.

Developing Systems

• "In God we trust, all others bring data" - prioritize accurate data collection over belief.

Two Ways to Think

• Systems thinking analyzes whole systems and relationships.

• Reductionism breaks down systems into smaller components.

The Blind Men

• Illustrates that different perspectives/approaches reveal only parts of a complete picture.

More Than the Sum of Its Parts

• A system is more than a collection of disconnected elements.

• Its components must be coherently interconnected for the system to achieve its defined goals.

System Structure

• Systems evolve dynamically, not statically.

• This includes inputs, flows/outputs, stocks, and feedback loops.

What Can We Systematize?

• Address frequent, time-consuming, frustrating problems, and tasks outside core competency areas.

System Creation Steps

• Map out systems' inputs, resources, and outputs.

• Capture steps in an initial documentation and flowchart form.

• Develop SOPs (Standard Operating Procedures).

• Test and improve the system repeatedly.

System Creation Supporting Questions

• What happens in each system step?

• Why is each step necessary?

• Who is responsible for each step?

• When are each of these activities completed?

• How is each step accomplished?

Conclusion

• Systems are vital for transforming struggling businesses into successful ones.

• Systematize all aspects of a business in an effort to improve efficiency.

Technology and Data

• Detail how business systems can be supported by technology.

How Will Your Business Use Technology?

• Discuss how technology supports business processes.

BMGC & Technology

• Outline how different business areas (marketing, operations, finance) use technology.

Within Your Business Goals (Technology Goals)

• Outline steps to integrate technology for business system support.

Approach (Four Principals)

• Prioritize people to determine processes.

• Ensure data accuracy and integration.

Systems Approach: Data (Determine People and Process First)

• Process and people should inform and dictate technology choice.

People and Process First

• Determine the necessary resources/steps within a business process.

People, Process, and System

• Technology is most effective when it aids people who run processes for desired customer outcomes.

Example Process Problem

• Explain that technology should support process, not vice versa.

System Development (Think Backward!)

• Prioritize understanding the desired outcomes (outputs).

• Work backward to identify necessary inputs and processes to generate these outcomes.

Systems Approach: Data (Authentic)

• Use relevant systems and technology, matching the business' needs perfectly.

Objective (Authentic)

• Ensure that systems/technology align with stated business goals, functions, and deliverables.

Picking the Right Solution (Understanding Software Design)

• Analyze value proposition and features of competitor software.

Systems Approach: Data (Integrated with Other Systems)

• Systems should interact and coordinate well with other functions within the business.

Example (CRM Needed)

• Illustrate how data silos can create issues between departments.

CRM Implementation

• Describe how a customer relationship management system integrates with various aspects of the business.

Systems Approach: Data (Accuracy)

• Accuracy is paramount in data handling and utilization.

Accuracy (Garbage In)

• Focus on reliable data sources when designing systems.

• Use data to drive business decisions (Business Intelligence).

Accuracy (Organization First)

• Organize data appropriately with tables, rows, columns in order to help understanding.

• Help consistency and clarity, standardizing data fields, in order to reduce ambiguity. Training packets should cover data terminology in detail in order to increase understanding.

Review (Four Principles)

• Outline the four principles for designing data-related systems.

Growing Business Problems

• Highlight common issues encountered as a business grows.

Key Performance Indicators (KPI's)

• Define KPIs as crucial elements for assessing system performance.

Identifying KPI's

• Identifying appropriate KPIs depends on core business processes.

Good KPI's

• Good KPIs are standardized, measurable, and well-defined.

• KPI's should also support easy growth and reporting.

Lead vs Lag KPI's

• Leading indicators predict future performance.

• Lagging indicators show past performance results and outcomes.

Balance

• Effective organizations monitor both leading and lagging indicators for balanced business health.

• KPI mix should include a balance between leading and lagging.

Apply Perspective

• Recognize that data interpretation requires applying real-world insights and business knowledge.

What Do We Allow to Drive Us?

• Senior staff is integral to understanding how measurement impacts employee/organizational behaviors/performance.

• Focus less on financial measures, instead, improving processes like cycle time or defect rate, will in turn affect financial outcomes favorably.

The Balanced Scorecard

• A strategic planning and management system that organizations can use to align business activities to the vision.

• Organizations can move ideas into action, achieving their long term goals by leveraging this system.

• Using a balance scorecard is like having all the dials and indicators from an aircraft cockpit so there's a comprehensive understanding of performance without over reliance on a single factor.

Continued Engagement

• Suggest additional resources for in-depth understanding of the concepts.

Questions?

Backup Slides

Complex System Understanding

• Businesses need to understand their place in a larger system — the environment/ecosystem.

• Businesses operate within larger ecosystems and must adapt to a changing environment.

Remember This Simple System

• Illustrate the concept of maintaining a desired state through system controls.

Feedback Mechanisms

• Feedback loops exist in all systems; recognizing the kind(s) is key to effective understanding of the system.

• Feedback is important for maintaining processes within a system, like the amount of water in a tub.

Feedback Mechanism

• Illustrate mechanisms for maintaining processes within a larger system.

Economy System

• The economy is a system with reinforcing and balancing feedback loops.

Building Business Systems

• Diagrams demonstrate how capital stock and revenue change over time.