Improving Your Business Using a Systems Approach
Every business is a system that forms part of a wider system, often simply called the operating environment. The current operating environment is extremely competitive and dynamic, and is characterised by increasing globalisation, increasingly sophisticated technology and improving access to information, knowledge, and many product and service alternatives. Businesses – especially small businesses with little capital to squander - therefore need to be flexible and responsive to rapidly changing circumstances just to survive. Understanding your business system can help you become aware of the forces at play, improve your bottom line, improve your products and services and control your costs.
The External Operating Environment
To successfully run a business, you need to understand the context in which your business operates. This consists of two main elements:
Your industry "system" is composed of competitors, customers, suppliers, stockholders, creditors, trade associations/official bodies, employees (and perhaps labour unions), special interest groups and the community. In particular, you need to be aware of, understand and act upon the following key factors:
The broader operating environment is composed of general economic trends and forces that operate on all businesses, including social and cultural forces and perceptions, government(s)/political forces, economic forces, technological forces and regulatory forces. In particular, you need to understand the legal and regulatory requirements of your industry – the rules of the game. These include:
A SWOT (Strengths, Weaknesses, Opportunities and Threats) Analysis is an effective and simple tool for capturing and collating this information and developing strategies based on the results to take advantages of strengths and opportunities and reduce or eliminate weaknesses and threats. Further information may be found in Paul Dillon’s accompanying article Opportunities to Succeed.
Your Own Business
Your own business, which forms a part of the wider operating environment, is its own internal system. By looking at your business as a system, you can better understand your capability, your costs, any variations and where you can really add value. This system is comprised of two main elements:
Small businesses, quite rightly, focus most of their attention and energy on primary processes – working out what your customer wants or finding new customers for your products, creating your products and services, sales, marketing and distribution. After all, this is what pays the bills.
However, it is also important to have a good grasp of your support processes and management system and how these impact on your business – or, more simply, how you organise and use your resources to become productive; the stuff that you do to stay in business.
Business processes and support processes are two sides of the same coin. Good business processes turn your vision into something tangible you can sell, which makes a difference to your customers, and thus generates income or the results you desire. Good support systems promote business efficiency in terms of time, expense and less complexity, thereby lowering costs.
A good starting point for improving your internal business processes is to ask the questions in the above section on competitors, customers and suppliers about your own business. One of the simplest ways you can begin improving your support processes is to pick one and work out how to do it better. Everybody works within a system, but improvements are only made when people work on the system. It is an axiom of the business world that sustainability results from the right combination of consistent, continuous improvement and "revolutionary" innovations that result in paradigm shifts.
One place to start is to look at how and on what you spend your time. Time is often a small business’ greatest resource – spend it wisely. Look at what you do within your business. Ask yourself: do your activities directly relate to, or directly support, achieving your business goals? Can you group activities more effectively? Keep a record of what you spend your hours on, study it and consider whether this pattern supports you and your business. The results may surprise you.
For example, set aside one block of time each week to deal with administrative issues such as invoicing, banking, paying bills, doing the books etc. rather than doing it piecemeal. Likewise, divide your day into blocks to, for example, make cold calls or any business calls as a group. Schedule uninterrupted time for doing business and meeting clients, or for product development and creative brainstorming. Set times for working with partners, for personal or staff training and development that improves your expertise and so on. In this way you will make the most of your time and use it more effectively instead of stopping and starting. Make an overview plan of your month, a more detailed plan of your week, and plan your day. This helps you to both focus on achieving your goals and to be less vulnerable to sudden demands and knee jerk reactions.
Similarly, take a look at your procurement processes, supply requirements and distribution processes. Consider your selling patterns and work out what your needs are in terms of ready stock or other supplies to hand. Are there ways to minimise this? After all, supplies purchased and sitting around is "money" not working for you. Can you take orders differently, eg through the Internet, and then purchase supplies as they are required? This may reduce your own unnecessary expenditure as well as eliminate the need for a "show room" or "shop front." What are your supplier’s distribution times, your production times and your customer’s requirements? Can you use this lag and overlap? Are there economies of scale? What are your alternatives in terms of supplies? What can you substitute to achieve the same result?
Remember, this does not have to be complicated or time consuming. If you keep most of your products, designs, ideas, client, supplier and business records on computer, backing-up this information once a month is a very simple way of protecting your business from disaster.
Be consistent. Standardise your systems and processes. This may be a requirement of your industry, or a standard such as quality certification, or just doing things that support your business systematically, continuously and consistently. Most importantly, keep good "books" (financial records) and study your costs, including your outgoings and incomings. Identify your cost centres and use this as an indication of where to begin to work on your business. If you understand your costs, and how they vary, you may be able to limit them.
Identify your income centres and work on keeping these – this is the core of your business and keeps the doors open. Most business is repeat business or new customers coming to you. Only when these are satisfied spend time finding new customers and breaking into markets, as this usually does not generate as good a return.
Support Processes or SystemsPrimary or Business Business Outcomes & Processes Success
Improved Efficiency & Cost Reduction
Useful Business Principles
Finally, I would like to leave you with a set of international best-practice business principles for you to consider that may be helpful:
For more information or assistance in implementing any of these ideas you can email Andrew Whitehead at email@example.com. Andrew is a management consultant and business analyst with 9 years experience in the both private and public sectors. His primary focus is on the development of small business.
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