The following list represents the Key Service Objectives (KSO) for the Appleton Greene Business Optimization service.
Profits and the required revenue to create these profits are two key measurements that indicate the health of any business. The challenge of any business is to achieve maximum profits from the revenue it generates. Profits are maximized when business capacity is fully utilized. In order for capacity to be fully utilized it must be balanced, meaning that the capacities of the sales, operations and finance functions are the same. Once these are in balance and capacity is fully utilized, incremental capacity increases can be made in each area to support profitable business growth. One of the most costly situations to any business is idle capacity. Excess capacity costs money, wastes resources and often creates workplace discontent. Most companies have excess capacity somewhere within the business and most companies have limited or constraining capacity somewhere within the business. The key to any profit improvement effort is to improve the processes that lead to the best, sustainable profit growth within a short period of time without creating a lot of disruption to current business requirements. The approach needs to grow the profits by making the whole business able to effectively reduce costs by making the processes within the business more efficient and to increase the capacity of the business to be able to handle higher revenue levels. Increasing revenue may increase the top line of a business but does not necessarily translate to increasing profits. In fact, focusing on just increasing revenue can create the opposite effect if profit improvement is not the driver behind the efforts to increase revenue. Improving profits through cost reductions alone can produce short term improvements but are limited when it comes to longer term business health. Again, the goal must be longer term sustainable profit improvement, and this has to come from a focused effort to improve both operating efficiencies and revenue.
One way to increase profits in a company is obviously to make that business more efficient so it produces higher levels of revenue at lower costs. This sounds very simplistic and intuitively apparent. However, before a business can operate efficiently the individual processes and systems within the business must be in sync and operating efficiently. In order to ensure that all processes and systems are in sync and operating efficiently, it is critical that each process and system operate effectively. Without first ensuring that a process or system is effective before making it efficient, the improvement effort will result in ineffective processes or systems simply becoming more ineffective. As processes and systems become more ineffective the business as a whole becomes more inefficient and costs go up and profits go down. The Business Optimization method forces people to look at the inner workings of a business. Looking at the inner workings of a business help people identify which processes or systems are missing and which are ineffective. After these are identified this method helps people develop and incrementally add missing processes and systems. It further directs efforts to first make ineffective processes effective and then make them more efficient. As more and more processes and systems are added or enhanced, the efficiencies of individual processes within a company improve. As these efficiencies improve so does the overall efficiency of the business. As the overall business operates more efficiently profits improve.
Another way to increase profits is to grow revenues. In order to grow revenues the business must have the capacity to produce the work required to achieve these revenues. Often times business owners or executives think that all they need to do is to produce more sales and profits will increase. This is not necessarily true, and in fact, the exact opposite often happens. In our model, a company is pictured as a series of connected sections of varying diameter pipe. The smallest diameter section is the bottleneck within the company. In order for a business to function properly, the amount of business that flows through the company must flow smoothly through the narrowest section. When flow is forced through a section that is too narrow, costs and operating disruptions go up. Waste, quality and delivery time issues, missed commitments, employee discontent, and the number of unsatisfied customers all increase. Therefore, in order to increase revenue properly and effectively, processes and systems within the business must be installed, enhanced or significantly changed in a way that gives a company the capacity needed to, not only effectively generate incremental revenue, but to generate this revenue in a way that produces incremental profits and business growth. To use the illustration of the above sections of pipe, each section must be close to the same diameter. If a section is too large, there is extra capacity in that part of the business and it needs to be better utilized by increasing the diameters in the other sections. If a section is too narrow, it is throttling back the entire business and its diameter needs to be increased. This is a continuous improvement process where the cost to increase capacity in one section is continually measured against the cost to maintain idle capacity in another and the impact the limiting section has on the overall business. Increasing revenues almost always is associated with increasing capacity somewhere within the business regardless of where the narrowest pipe section is located.
The heart and soul of any business is its people. Their skills in conjunction with the operating processes and systems are what create sales, produce and deliver products and services, and manage financial resources. The way employees are able to utilize their skills are seen in the way a business operates and the type of quality and service a company produces. When employees are restricted from properly using their skills, or they experience repetitive obstacles they become frustrated, anxious or angry. As frustration, anxiety or anger increase management time increases and focus is diverted away from the business of the business. Business performance suffers and customer satisfaction wanes due to quality and delivery issues. Almost always employee issues are caused by processes or systems that are missing, ineffective or inefficient. Employees are usually the best at seeing these issues because they experience them every day. Employees are a powerful resource and when involved can be made part of the solution creating a positive effect throughout the organization. The Business Optimization method involves employees at all levels throughout an organization. This develops shared visions and goals and creates teamwork and singleness of purpose with everyone involved. It is impossible to effectively manage people. Managers can only be effective at managing processes and systems. People are then managed by how they perform within established and defined processes and systems. Therefore it is critical that employees not only understand their role and where it fits within the business but that they become involved in the business optimization process. This way they become part of the solution as a team rather than part of the problem as individuals. When this happens, employee discontent significantly diminishes and business operations become smoother, more productive and easier to manage.
Leaders are essential throughout any organization. Effective leaders at the top of an organization create a positive vision, culture and direction that everyone within the organization can rally behind. Effective leaders in middle management positions create confidence and loyalty in the people within their department. Effective leaders within the rank and file of an organization create strong teams that effectively identify and solve problems. The Business Optimization method steers an organization through the process of setting visions, goals and strategies, and then identifying and solving constraints within a business so that goals are accomplished. As visions, goals and strategies are set, and as constraints are identified and solutions developed, people with leadership tendencies emerge throughout the organization. A focus of the Business Optimization method is to mentor and train these people so that they become effective at leading groups of people. Owner(s) or top executive(s), middle managers and supervisors, and rank and file employees all require a different level of leadership skills. Leadership is different than management. Leadership is making sure the ladder is against the right wall and management is making sure the ladder is against the wall right. Whether a person is guiding a whole organization or a process improvement team, good leadership is needed. Therefore, one of the longer term and sustainable benefits companies receive from the Business Optimization method is the identification and develop of leaders throughout the organization.