Business Systems and Processes.

The Systems Thinker Blog

How a Systems Thinker Solves Business Problems!

According to the dictionary, a problem is defined as a “question or difficulty needing a solution.” It can also be described as a “deviation from a norm or standard, or a gap between an existing and a desired state.”

My two-word definition for ‘business’ is “problem solving.” We spend our days trying to resolve customer problems, employee problems, marketing problems, financial problems, and operational problems—continually trying to create happy customers, greater profit, and a smooth-running organization.

Systems Thinking to the Rescue

Solving problems is the central task of our business life; it is the profession you and I chose! Most of our problems arise from a business system or process that is under-performing—lead generation, customer service, employee training, order fulfillment, and so forth.

However, Systems Thinkers have an advantage by seeing the myriad of business problems through a logical lens rather than an emotional lens. By focusing on cause-and-effect, problems are more transparent and solutions more evident. Systems Thinkers resolve problems and make decisions systematically.

Systems Thinking Solves Problems

W. Edward Deming, leader of the quality revolution of the 20th century, said that 99 problems out of 100 are caused by the system. Fix the system and prevent reoccurring problems. It’s that simple. (see Jay Arthur, email newsletter, 2/2010).

Most small-business owners and managers tend to be satisfied with short-term solutions and workarounds rather than finding ways to solve problems permanently. The workarounds sadly become the standard way of doing business.

Four Easy Steps

Got a problem? Solve it once and for all by following the steps of a Systems Thinker.

  1. Identify problems from personal frustration, customer or employee feedback, or performance data. A clear statement of the problem often points to its own solution. Avoid dwelling on the past, and blaming people or a lack of time or money. Instead, concentrate on resourceful new ways to improve results.
  2. Go observe the system or process first-hand and talk with people to understand what is happening. Use a 5-Whys Analysis to drill-down to the specific step in the process that is the root cause of the problem. (Hint: This analysis might uncover the source of the problem in a different but related business system)
  3. Involve the team in a discussion or improvement meeting to identify possible solutions and get consensus and buy-in. Assign clear responsibility for implementing the solution. Set a deadline for completion and review. Help workers understand how changes in the business system will benefit them.
  4. After the new system has stabilized, compare actual with expected results. Provide frequent feedback to workers about how the system or process is performing. Celebrate success. If results aren’t acceptable, repeat the steps.

Learn from the Best

Toyota Motor Company, the father of Lean Manufacturing, does the following if there is a quality problem on a car assembly line:

“Stop production, go see what is going on, ask Why-Why-Why-Why-Why to find the root cause, implement an appropriate countermeasure (not a workaround) to permanently fix the problem, verify the solution works (if not, repeat the 5-Whys Analysis), resume production, and finally, add the solution to the company’s body of knowledge” (Jay Arthur).

Problem-solving doesn’t have to be difficult if you use a systematic approach. Discovering inventive ways to mistake-proof your business systems and processes can be very rewarding. Dramatic financial benefits are possible!

What problem is really frustrating you or holding back your company? Follow the steps above and let me know about your innovative solution.

Related Article
Try the “5-Whys” Problem Solving Tool

Ten Qualities of Exceptional Business Leaders (Part 2)

Last week, I discussed five qualities of exceptional leaders I have observed over the years. Here are five more to consider. Incorporate these ten attributes into your leadership style and YOU will become unstoppable!

6.  Great Leaders are Great People.

Exceptional leaders are not only effective at accomplishing organizational objectives but along the way, they develop the noblest of human qualities and character. They genuinely care about their employees and customers, and gain loyalty by following the Bible admonition, “And whosoever will be chief among you, let him be your servant” (Matthew 20:27).

Great leaders are accessible, kind, fair, good listeners and communicators, and generous with others. They live the Golden Rule, treating people as they would like to be treated. They have impeccable integrity, good judgment, and act upon principles.

Leadership - The Golden Rule

Effective leaders are also disciplined and persistent in their search for excellence. Their demeanor is upbeat, confident, and occasionally inspiring. They remain calm in the face of adversity. They finish what they start. They lead by example.

Great leaders know that mistakes are a part of learning, and they readily admit their own. They praise people in public and correct them in private. They attribute success to factors other than themselves. However, when things go poorly, they look inward and take full responsibility. In his book “Good to Great,” Jim Collins describes the best leaders as having “a paradoxical mix of personal humility and professional will.” Exceptional leaders always put the organization ahead of their individual agenda.

7.  Great Leaders Empower Others.

Successful leaders surround themselves with the right people, sometimes more skilled or talented than themselves. They ensure people are a good fit for the organization’s culture and to their specific work assignment. Effective leaders “get the right people on the bus and the wrong people off the bus” (Jim Collins). They empower coworkers by giving them ownership of tasks, frequent feedback on performance, a moment to celebrate victories, and appropriate recognition or rewards.

Great leaders are highly visible and often mix with their people to listen and learn. They counsel with managers, staff, and even customers to gather “intelligence” and to share ideas and viewpoints. Employees and customers are treated like partners in an environment of trust and accountability. By giving power to others, great leaders empower themselves.

8.  Great Leaders Develop Other Great Leaders.

Leaders are primarily teachers with an important responsibility to develop other leaders through instruction, mentoring, and example. They honor and lift others—and reduce their own workload—by delegating responsibilities to the lowest level of authority that can perform the task. They meet with people regularly to receive progress reports, offer feedback and encouragement, and promote continuous improvement. While effective leaders may often delegate, they never abdicate their responsibility for achieving expected results.

Only a leader can develop and empower another leader. The strength of the people around a leader determines his or her potential; the best leaders have a strong inner circle. Their lasting value and legacy come by creating a leadership culture, preparing the organization for change, and planning for a smooth succession. An organization’s success accelerates when it focuses on developing its leaders.

9.  Great Leaders are Always Learning and Renewing.

While some people have natural leadership talents, most become leaders through daily toil, experience, and self-education. The best leaders have an insatiable appetite for knowledge—the true source of power. They spend time reading what other leaders and experts have to say. They seek all truth that can deepen their understanding and broaden their vision.

Great leaders also spend quiet time in study, meditation, and creatively “working on the business and not just in the business” (Michael Gerber, “E-Myth Revisited”). They are unrelenting in their search for ways to improve the organization. They “understand that the only competitive advantage the company of the future will have is its managers’ ability to learn faster than their competitors” (Arie De Gues, “Royal Dutch Shell,” 163).

Exceptional leaders make time to plan, improve skills, and generally “sharpen the saw.” They gain renewal from frequent periods of rest, reflection, and recreation. Oswald Sanders said, “If a leader is wise, he will seize every legitimate opportunity for recuperation and recreation, or he will limit his own usefulness and ministry.” Great leaders are often ordinary people who invest in themselves daily.

10.  Great Leaders have “That Something Special.”

In addition to the above virtues, there is one more quality all great leaders have—that something special that sets them apart. It is different for each. It may be their contagious enthusiasm, their charismatic charm, or their quiet inner strength. Perhaps they possess one of the three great business talents: an uncanny ability to innovate successful new products or services, a talent for cultivating valuable relationships, or the ability to execute a business plan with high-performance systems and processes. Maybe the leader’s gift is to touch people’s hearts or to give them a new vision. Bob Galvin, former CEO of Motorola said, “The leader’s ultimate job is to spread hope.”

Consider this: “When someone else’s candle is lit, it doesn’t cause yours to go out. It just adds more light to the room. So, when you allow someone to shine, it doesn’t diminish you, it just makes the whole room brighter” (Author Unknown).

Maybe that is the special quality: great leaders realize that it’s not about how they shine; it’s about helping everyone else to shine and thereby making the whole company brighter.

Related Article:
Ten Qualities of Exceptional Leaders! (Part 1)

Ten Qualities of Exceptional Business Leaders

The true measure of leadership is influence—nothing more, nothing less” (John, Maxwell, “21 Irrefutable Laws of Leadership”). Without influence, a person cannot lead. Regardless of who has a title or position, the leader is the person that commands attention. Great leaders earn trust and respect as they emerge from the “refiner’s fire” with competence, character, and a pattern of success. The culture, values, and quality of an organization are always a reflection of its leaders.

Business Leader

Below are ten qualities I have observed in exceptional business leaders.

1.  Great Leaders have Clear Vision and a Passion to Succeed.

John Maxwell said, “The leader finds a dream, and then the people. The people find the leader, and then the dream.” In successful organizations, leaders have a clear vision, mission, and objective. Their singleness of purpose drives them forward through obstacles and challenges, and frequently beyond their comfort zone. They have an incurable passion to succeed and seek to become the best in their field. They know where they’re at, where they want to go, and they work daily to get there.

Great leaders are prepared to pay the price for success. Failure is not an option. The higher their position within the organization, the greater the sacrifice they are willing to make to achieve success. “The right [leaders] will do everything in their power to build a great [organization], not because of what they will get in terms of incentives and compensation, but because they simply cannot imagine settling for anything less. Their moral code is ‘excellence for its own sake’” (Jim Collins, “Good to Great”).

2.  Great Leaders have a Specific “Game Plan.”

Effective leaders always have their eye on the goal. From clearly understood organizational strengths, weaknesses, opportunities, and threats (SWOT Analysis), they plan their unique strategy—or game plan—to compete in a crowded marketplace. Great leaders focus their goals and action plans on the vital few things that produce the greatest results. They patiently and methodically pursue their objectives, adapting to change, persevering through hardships, and proactively turning problems into opportunities. They know their customer and employee expectations and work systematically to surpass them. The written strategy statement describes their “best-known way” of achieving the mission and vision of the organization.

3.  Great Leaders Create a Culture of Discipline and Excellence.

The culture of an organization has an enormous influence on performance. Great leaders value effective business systems, habits and patterns of discipline, commitment to results, and accountability at every level. “A culture of discipline involves a duality,” says Jim Collins. “On the one hand it requires people who adhere to a consistent system; yet, on the other hand, it gives people the freedom and responsibility within the framework of that [business] system.”

In a culture of discipline, great leaders face the brutal facts when performance is lacking, and continually seek innovation and improvement. They pursue the best over the easiest. Leaders cultivate a high degree of trust, respect, cooperation, and partnerships with employees, vendors, and customers. They unite leaders and managers at every level to create an organization that is “greater than the sum of its parts,” aligning individual and team performance with the organization’s strategic objectives.

Generalized solutions, seat-of-the-pants operations, and employee discretion are replaced with detailed procedures, performance standards, and accountability. A culture characterized by “Results Rule!” discipline (Randy Pennington) is one of high-energy and a can-do spirit that values the contribution of everyone in the organization.

4.  Great Leaders are “Systems Thinkers.”

Effective business systems and processes are the essential building blocks of a successful organization. Great leaders view well-designed operational systems as the primary means to increase efficiency, accomplish objectives, and give customers what they want every time. They are the solution to frustrations, waste of resources, poor performance, and other daily problems.

Within a culture of discipline, great leaders pull together their talent and resources to create business systems and processes that consistently produce desired results. They understand that innovation and continuous improvement of business processes drive all growth and profit.

Great leaders are strong marketers and seek to develop high-performance marketing systems. They use accounting and financial data to measure the effectiveness of their internal business operations. The best leaders recognize that only when every critical system is fulfilling its purpose and delivering intended results, will the organization prosper. The daily work of great leaders is to inspire and guide the development of vital systems and processes within the organization.

5.  Great Leaders Measure Performance and Arm Themselves with Data.

Exceptional leaders sometimes make decisions based on intuition and experience; however, they continually seek facts and data about the organization. They are always aware of their key performance indicators (KPI’s) and if they are achieving targeted objectives. The best leaders hold everyone—including themselves—accountable for measured results.

Great leaders know precisely what customers want and what competitors are doing better. They value the opinions of others but rely on hard data to affect change within the organization. Effective leaders understand the principle that “When performance is measured, performance improves. When performance is measured and reported, the rate of improvement accelerates” (Thomas Monson, business and religious leader).

Next week, I will discuss five more qualities of outstanding business leaders.

Related Article:
Ten Qualities of Exceptional Business Leaders (Part 2)

A SWOT Analysis Will Reveal Your Best Business Strategies!

The SWOT Analysis, developed in the 1960s at Stanford University, is a strategic planning method used to evaluate the Strengths, Weaknesses, Opportunities, and Threats involved in a project or a business venture. It considers internal and external factors that are favorable and unfavorable to achieve the business objective.

SWOT Analysis

Early Greek philosophers summed up the desired results of this process in two words, “Know Thyself.”

Consider the following questions as you identify the Strengths, Weaknesses, Opportunities, and Threats of your organization:

What are your Strengths?

What are your business or selling advantages?
What do you do better than anyone else?
What is making you the most money?
What unique or low-cost resources do you draw upon?
What do others see as your strengths?

Consider your strengths from an internal perspective, and from the point of view of your customers. Remember, your strengths are only those areas in which you truly out-perform others. If your competitor’s delivery time is just as fast as your delivery time, then fast-delivery is not a strength, but a market requirement just to be competitive.

What are your Weaknesses?

What are you avoiding?
Where do you lack resources?
What obstacles are in your path?
Where are you losing money?
What needs improvement?
What do customers or employees complain about?

Do other people see weaknesses you don’t see? What are your competitors doing better than your company? If your customer service needs an overhaul, if your delivery time is too long, if you have a lot of returns or customer complaints, face the brutal facts now and go fix the business systems or processes that are hurting your performance.

What are your best Opportunities?

What new trends or emerging markets have possibilities?
What product or service niches are your competitors missing?
What strengths could you turn into opportunities?
What are some new needs or desires of your customers?
How could you take advantage of new technologies?

New opportunities can come from changes in technology, markets, government policy, social patterns, population profiles, and lifestyle. Exploiting your strengths or overcoming weaknesses can also provide you with new opportunities. Look for ways you can become the best solution for your ideal customer. Remember, your target market is the only market you care about.

What are the Threats to your organization?

What barriers are in your way?
What internal or external conditions threaten your organization?
Are competitors getting stronger or more aggressive?
Do you have serious debt or cash-flow problems?
Do you have weak business systems or processes?
Is the economic climate hurting your sales and growth?
Could changing technologies or government regulations threaten you?

You must identify your threats in order to prepare for their possibility or to avoid them altogether. Remember that every business goes through up-and-down cycles. When you are up, market pressures are at work to level the playing field by bringing you down. Never become complacent. Never stop improving!

In the Zone, I have provided worksheets to stimulate your thinking and to perform a SWOT Analysis of your company. You may want to analyze your competition as well. Ideally, you will match your strengths against market opportunities that result from your competitors’ weaknesses or voids.

A SWOT Analysis will illuminate your business strategies that have the most potential. Take an hour or so to do this important exercise.

The Art and Science of Creating Exceptional Business Systems!

Did you realize when you got into business that your primary purpose is to be a “business engineer”—one who plans, constructs, and shrewdly manages an organization (online dictionary)? Your daily task is to develop people, products, and processes in an exceptional way to profitably find and serve customers.

Like fingerprints and snowflakes, there are no two businesses exactly alike. Each is a unique reflection of its owners and managers—YOU and your team!

Businesses are like Snowflakes

An engineer uses technical skills coupled with imagination and creativity to produce something of lasting value. Likewise, you are the mad genius who will create a business model that provides the products and services uniquely suited to your target market—a business so well executed that you can one day sell it for top dollar, replicate it in other markets, or have someone run it for you.

Your entire organization is made of interdependent systems and processes, each working together to accomplish your business objectives. In a typical day, you design, develop, oversee, monitor, and evaluate all the systems and processes that make your organization run smoothly, create value, and generate a profit.

Growing a good business is both an art and a science.

Art and Science

The art of business development is to create products and services that provide the best solution for your customers and to develop an organizational structure and culture that help your people reach their full potential. You are constantly innovating to make people, products and processes better, faster, stronger, more efficient, of greater value, and more remarkable than ever before.

While innovation can be a new invention, technology, or business concept, most often it will consist of incremental improvements at the detail level of your business systems and processes. It is this right-brain activity that gives your organization a different fingerprint than all others—what separates you from the crowd. In time, your business can become an inspired masterpiece!

The science of business development is the application of laws, principles, and best practices to attain predictable and consistent results. It includes the Law of Cause and Effect, improvement methodologies such as Six Sigma, Lean Thinking, and the Theory of Constraints, performance standards, measurement, and other means for achieving operational excellence.

This disciplined and systematic approach comes primarily from the left-brain, and it is what your business has in common with other successful organizations—what enables you to efficiently produce quality products and services, please customers, and earn a healthy financial return.


Most people do not excel at both left-brain and right-brain activities. However, if you bring a team of people—with a variety of skills and talents—into weekly business improvement workshops, you will uncover the best ideas and solutions for your organization (consider this whiteboard method).

Your goal is to attract and keep customers by creating a company that is brilliantly distinctive and operationally exceptional. Attention to your core business systems and processes can make that happen and give you a memorable brand.

Improving Business Systems Can Reverse Cash Flow Cancer!

In my business career, I’ve experienced cash-flow problems several times and have suffered vicariously with many of my accounting clients. Not having enough money to pay bills, hire people, or add equipment can be very distressing. However, the extra cash you need to properly run your business is available—if you know where to look. Don’t let a chronic cash shortage put your business on life support!

Diagnose Cash Flow Problems

Inadequate cash flow is usually the result of weak business systems or processes that fail to produce a profit or that keep working capital tied up too long. However, it is more than just a symptom of under-performing systems. Like cancer, insufficient cash flow leads to a breakdown of one system after another until it eventually kills the business.

A Symptom and a Cause

Inadequate cash flow is both a symptom and a cause of system breakdowns.

Poor cashflow is a symptom of:

  • Unprofitable operations.
  • Inadequate margins; break-even is reached too late in the month.
  • A pricing system that doesn’t recognize true costs, or competes on low price.
  • Labor expense that is high due to worker inefficiencies.
  • Excessive waste, defects, product returns, or rework.
  • Slow collection of money owed; noncollectable bad debt.
  • Poor inventory management (too much inventory/slow turns/obsolescence).
  • Business growth and expansion that exceed financial resources.

Poor cash flow causes further system breakdowns because:

  • Owners divert business development time to cash-management headaches.
  • Important systems are scaled down or eliminated such as marketing, product development, or accounting.
  • Money is borrowed at high-interest rates, further eroding profits.
  • Heavy system busters are introduced such as start-stop work-flow, downtime, unpleasant work environment, and so forth.
  • Worker motivation drops, along with personal and system performance.
  • Employees quit, especially if payroll is delayed; less-experienced people replace them.
  • Owners can no longer hire the best people and the right people.
  • Credibility is lost with vendors, bringing tightened terms (C.O.D) and soured relationships.
  • A growing buzz in the marketplace labels the company, “in trouble.”

Diagnose the Root Cause—And Fast!

It is not uncommon for business owners to mortgage the farm, borrow money from relatives, get a bank loan, or take some other drastic measures to keep the sick patient alive. (Our family once sold a rental house to meet one payroll). However, if owners and managers do not diagnose the root cause of cash-flow problems, it is likely the patient will continue to weaken and eventually die anyway. The longer you wait to begin the healing process, the more difficult the cure becomes.

When poor cash flow causes enough system failures that the business can no longer attract customers or keep them happy, the organization will go into cardiac arrest!

If your company is experiencing slow cash flow, under-performing business systems are the culprit. Could the ailing system be in marketing? collections? pricing? inventory management? operations?

The strong medicine of daily improvement to your vital business systems and processes will soon have you in the pink. Don’t delay another day!

Turn Dust-Gathering Procedures into Business Systems that Wow!

Yesterday, I was talking with a user of Box Theory™ Gold software. He told me how Systems Thinking and Box Theory™ have turned him into a keen observer and critic of the business systems he encounters as a buying customer. At a recent visit to a restaurant, he and his wife were able to easily spot numerous ways the business could improve. This kind of exercise builds Systems Thinking muscle. I highly recommend it for improving your own business.

Metaphorically speaking, Systems Thinkers not only see the hands on the clock that tell the time of day, but they see the gears and springs in the background that cause the clock to keep perfect time throughout the year.

Transparent System

So let’s look beyond the surface at the gears and springs that really make a business system or process “run like clockwork.”

Transform Boring Procedures into Magical Systems

Once I spent a few minutes (very few) watching a television program called, “Dancing with the Stars.”  I was fascinated by its power to illustrate the potential of effective business systems.  Here are my brief observations.

A short video clip showed dancers in sweats rehearsing laboriously to music from a boom-box. The only components of the practice session included the dance partners, music, and a dance routine or “procedure.” The scene was nothing anyone would care to watch for more than a few minutes. The routine was like many small-business systems—loosely structured, focused mostly on procedure, full of mistakes, and not something to get very excited about.

The dance itself could never hold the attention of an audience—the customer. As a television program, it would be a guaranteed flop. However, on the night of the broadcast, this rather mundane dance procedure becomes a high-drama and engaging “system” that excites and entertains. The following added components help to bring about this transformation.

  • Dazzling sets and costumes
  • Popular music
  • Celebrities paired with professional dancers
  • Behind-the-scenes interviews and stories
  • A cheering crowd
  • Professional judging, scoring, and candid evaluations
  • Viewer participation, call-in votes, social media buzz
  • Recognition of winners and losers, trophy chase, substantial cash earnings
  • Weekly advertising that builds anticipation
  • Can you name other system-building components?

Now it’s these “little” things that make all the difference. They change a basic dance procedure into a compelling and even addictive entertainment system—a system that keeps millions of viewers glued to their television sets week after week. This well-executed business system attracts customers and makes money—big money. And YOU can do the same in your target market!

When television programming styles or genres are copied—“So You Think You Can Dance”—they are sometimes described as following a formula. And, of course, a formula is really just a system that produces a predictable result. Vast fortunes have been made by simply following a formula or “recipe” for success.

Consider this “Dancing with the Stars” Review:

The “Dancing with the Stars” season is a wrap and what a season it was! Before the dazzling finale, we were treated to many weeks of shoes flying, stars crying, pros stumbling, and an ever-changing leaderboard! The hits kept coming (as did the misses) as the stars rehearsed hard and danced harder in pursuit of the coveted Mirror Ball Trophy.”

Dancing Couple

When people start talking about your business—its core products and services—with this kind of enthusiasm, you’ve got a winner. The essence of every great business system is found in the details, the system components that excite and delight both customers and employees. With a little imagination (the art) and powerful system-building principles (the science), you too can create a remarkable business!

I invite you to learn this breakthrough skill so you too can start “dancing with the stars!”

Related Articles:
The WOW Factor: Six Ways to Supercharge Your Business Systems! (Part 1)
The WOW Factor: Six More Ways to Supercharge Your Business Systems! (Part 2)
Business Systems vs. the Misunderstood Operations Manual
Boost Your Business Profit by Adding the Fun Factor!
Does Your Business Have a Double McTwist 1260?

Box Theory™ for Small Business—Create High-Performance Systems!

In recent posts, I have discussed the basic principles found in the widely used business-improvement methodologies of Six Sigma, Lean Thinking, and the Theory of Constraints. This article will focus on the Box Theory™ Way, and why it is the best solution for small and mid-size companies.

All four improvement methodologies seek to create a business culture that produces high value for shareholders, customers, and employees. These strategies also have several common objectives.

  • Respect individuals and their power to make a difference
  • Continually improve people, products and processes
  • Eliminate waste to reduce cost and increase value
  • Develop a culture of discipline and excellence
  • Build long-term value into the business

Like its three big brothers, Box Theory™ is driven by a compelling principle the Japanese call “kaizen”—the ongoing, systematic, incremental improvement in the way things are done. However, Box Theory™ integrates the other three often complex and expensive business process management (BPM) techniques into a simple, intuitive, and low-cost solution for small-business owners.

Origin of Box Theory™

As an entrepreneur for over forty years, I have learned the value of having effective operating systems and processes. Early one morning, while considering the vital role of business systems for my accounting clients, I was inspired by a concept now known as Box TheoryTM. It is a simple statement with profound implications. I explain it fully in my eCourse, Box Theory™: Double Your Profit with High-Performance Systems and Processes.”

Box Theory

The Box Theory™ Way allows any organization to be viewed through a lens that magnifies operational details, revealing the root-cause of problems and clear solutions. It is based upon enduring principles found in Nature. The more I work with Box Theory, the more elegant it becomes as if God revealed one of his secrets for creating and managing the universe. I have not yet discovered its full potential!

The mission and purpose of Box Theory for small business is to help owners dramatically increase customer loyalty, profitability, and growth by elevating the performance of their vital business systems and processes.

Systems are Your Building Blocks

To understand Box Theory™, it is important to recognize the basic nature of a business with its underlying structure of systems and processes.

In short, every business consists of people, products, and daily processes organized to profitably find and keep customers.

A business system is a procedure, process, method, or course of action designed to achieve a specific outcome. Its component parts and interrelated steps work together to accomplish an operational objective. Creating effective business systems is the only way to attain results that are consistent, measurable, and ultimately benefit customers.

Business systems, such as lead generation, customer care, hiring, purchasing, production, order fulfillment, and many others unique to each company, are the essential building blocks of a successful and profitable organization. Every facet of a business—in the workshop, the office, the retail store, or the factory—consists of systems that can be managed and improved by applying correct principles. The Law of Cause and Effect governs all system results.

Systems are the Building Blocks of Your Business

Good business systems increase efficiency, accomplish objectives, and give customers what they want every time. They are the solution to weak sales growth, low profit, dissatisfied or too few customers, waste and inefficiency, underperforming employees, excessive costs, poor cash flow, and daily frustration—every business problem! Effective systems and processes make products and services better, faster, and cheaper.

Many small-business owners have rudimentary systems haphazardly created by employees, and which change as workers come and go. These low-grade systems are not documented, measured, or steadily improved. In Box Theory™, detailed procedures, performance standards, and accountability replace generalized solutions, seat-of-the-pants operations, employee discretion, and everything else that might be left to chance. Good business systems reinforce, “This is how we do it here (until we find a better way)!”

Michael Gerber, the author of E-Myth Revisited, advised, “Organize around business functions, not people. Build systems within each business function. Let systems run the business and people run the systems. People come and go but the systems remain constant.”

Creating effective business systems is both an art and a science. It requires creativity and innovation as well as logic, organization, and discipline.

Good systems pay for themselves many times over, and the larger the company the greater the benefit. In fact, says Ken Stork, former president of the Association of Manufacturing Excellence, “If you need a new process and don’t install it, you pay for it without getting it [in waste and inefficiency].”

Small business owners should not dismiss process improvement methods as the exclusive domain of large companies. Developing—or overseeing the development—of effective business systems and processes is the Master Skill of the entrepreneur.  All business functions—marketing, finance, and operations—fall within the scope of this single skill mastery. The real value of a business is found in the maturity of its business systems—their ability to consistently produce desired results.

The Box Theory™ Way

Box Theory™ is patterned after systems in our natural world—solar systems, ecosystems, weather systems, human body systems, and so forth. Through time, man has wisely followed the systems model to solve problems and advance to new plateaus. A few examples include farming systems, energy systems, highway systems, and Internet systems.

In nature, all matter is made up of molecules. Molecules are made of atoms, and atoms are composed of atomic particles (protons, electrons, and neutrons). Modern science has discovered quarks inside the atomic particles. And more recently, physicists have mathematically proven that even smaller energy strings are the basis of everything in our universe (String Theory).

Likewise, Box Theory™ is a methodology and software that breaks business functions down to manageable systems and subsystems, the “boxes” of a procedural flowchart. For example, a typical marketing system box will have a subsystem box called lead generation. The lead generation system could have lower-level subsystem boxes such as direct mail, telemarketing, or radio advertising. In Box Theory™, system and subsystem boxes form the framework of all business activities. These boxes cascade down the organization chart with ever-increasing specificity and detail.

Box Theory Flowchart

Problems and profits are uncovered in the low-level boxes of an organization’s core systems and processes.

Improvement efforts, using the basic principles of Six Sigma, Lean Thinking, and the Theory of Constraints, are applied to a company’s vital systems and processes to elevate their performance. The Pareto Principle—the 80-20 Rule—suggests that 20% of system boxes account for 80% of business results. The Box Theory™ Way prioritizes improvement projects to get fast results with the biggest payoff.

When applying Box Theory™, seven high-performance attributes are potentially associated with a business system. Each attribute is a quality that improves the output of the system. Thus, you can elevate the performance of any system—or box—by taking steps to increase the number of its high-performance attributes. For example: If the business system has an owner with accountability, it will achieve far better results than a system without an owner. This attribute and six others are discussed in the eCourse.

As with Six Sigma, Lean Thinking, and the Theory of Constraints, a primary purpose of Box Theory™ is to remove waste from the business. Each methodology views waste from a different perspective. In Box Theory™, waste is simply an underperforming box—a business system, subsystem, or step in a process that is a weak link or bottleneck, fails to add value to customers or is characterized by excessive defects, delay, or deviation from standards.

Prioritization + Focus = Fast Results

There are only two ways to get better results from any business system. Improve the procedure, or improve the component parts used in that procedure (including people). To improve an individual system or process, Box Theory™ focuses on six essential areas—process, components, people, quality, speed, and measurement.

  1. Process – Effective systems—in the office, the store, or the factory—are well designed, smooth running, evenly paced, and use standardized procedures. They seek to eliminate idle time, mistakes, unnecessary movement, bottlenecks, downtime, and work-in-process or inventory buildup. You make money when the system-flow is stable, steady, and sustained (more like the tortoise than the hair in the children’s fable).
  2. Components – A system must have all the necessary components to function properly such as checklists, forms, scripts, reports, brochures, equipment, software, supplies, tools, equipment, people, and other resources. Missing or poor-quality system components are a major weakness of most small businesses.
  3. People – Respect for people is paramount. They are the most important (and often the most expensive) system component. Put the right people in the right job with effective training, trust, empowerment, and accountability. Well conceived business systems leverage ordinary people to produce extraordinary results.
  4. Quality – Good systems must have minimal mistakes, waste, and rework to keep costs down. Products or services are delivered as promised, and free of defects. They meet or exceed customer specifications and expectations. Any quality considerations that are critical to the customer must be critical to the business owner, or the customer will go elsewhere.
  5. Speed – Efficient business systems have short lead-times and high throughput by squeezing delay, bottlenecks, and “speed bumps” out of the process. They run fast enough to deliver on schedule or by deadlines. Speed creates higher employee productivity and work satisfaction, increased capacity for sales, faster invoicing and cash flow cycles, lower costs, and happier customers who will buy again.
  6. Measurement – Renowned business authority Peter Drucker says, “You cannot manage what you cannot measure.” Continuous measurement and worker feedback guide all process improvement. Determine what measurements drive the “economic engine” of your business. Establish process measures that let workers know every day how they are doing in relation to business goals.

By applying the six areas of focus, a Box Theory™ organization will:

  • Meet and exceed customer expectations, solving customer problems quickly.
  • Turn customers in raving fans with consistency, quality, speed, and reliability.
  • Create clear job descriptions and performance expectations for employees.
  • Reduce employee training and supervision, and dependency on people who come and go.
  • Create high job satisfaction and reduced employee turnover.
  • Dramatically increase productivity, quality, safety, and cleanliness.
  • Reduce waste and inefficiency, and thereby lower costs.
  • Improve cash flow and profit.
  • Build long-term value into the business to eventually sell or replicate.

Box TheoryTM Gold Software Tool

The Box Theory™ method of breaking down a business into its interrelated systems and subsystems—the boxes—is incorporated into a robust software tool that guides every step of System Thinking and process improvement. With Box Theory™ Gold software, an organization can do the following to elevate its performance:

  1. Maintain an Organization Blueprint—mission, values, strategy, goals, and structure—that serves as a foundation for building all business systems and processes. System goals can be aligned with the larger company goals; people and systems push together to accomplish the vision of the organization.
  2. Identify and define every major system and subsystem necessary to run an organization. Begin by developing or improving systems that provide the biggest financial payoff.
  3. Create, flowchart, organize, manage, document, store, and print everything pertaining to the organization’s systems and processes. This library of “the way we do things here” becomes a valuable asset, allowing the business to be replicated in new markets, sold for top dollar, or run without the hands-on involvement of the owner.

Box TheoryTM Gold is a complete and indispensable tool for managing the many details of an organization. It is as important to system development as QuickBooks is to accounting. Box Theory™ Gold is the best way for small-business owners to work on their business, not just in their business (Michael Gerber, E-Myth Revisited), and get results in half the time!

Culture of Excellence

“An organization’s purpose and goals set the direction. Measures focus the energy on the outcomes. Processes create habits, and habits drive the culture. You can teach skills and concepts. You can even create momentum (and a few smiles) through inspiration. But investing in skills and inspiration is a waste of money if there are no processes to reinforce your purpose and principles. The creation and continuous refinement of work processes is a mandatory practice in the Results Rule! organization, regardless of the industry” (Randy, Pennington, Results Rule!, 111).

The Box Theory™ Way helps business owners create a culture of discipline and excellence—a culture that includes the right people, a good plan, the will to excel, a philosophy of continuous improvement, and high-performance business systems and processes.

Culture of Excellence.png

A Box Theory™ organization exists when people work individually and collectively at their maximum potential—even when the owner is not around. A culture of excellence will provide the highest value for shareholders, customers, and employees.

Get Started Today!

Box TheoryTMis an actual statement of theory rooted in Natural Law and fully described in the eCourse. It applies to all business-building activities and every type of organization. Box Theory™ is the practical application of knowledge, principles, strategies, and best practices to develop high-performance business systems, and to create exceptional organizations. It is the premier “system” to start, grow, fix or franchise any business.

Box Theory™ Gold software is also a revolutionary new tool designed specifically for small and mid-size companies. It is simple and easy to learn. The software program promotes Systems Thinking and business development skills, using powerful process-improvement techniques. Once you try Box Theory™ Software, you’ll never go back to the old way of doing business.

As the marketplace evolves, the bar is constantly rising. Organizations have to get better at what they do every year to in order to survive and prosper. A decision to learn the Master Skill of developing effective business systems and processes is one of the most important a business owner can make. I invite you to become a Systems Thinker today and let me show you a new and better way—the Box Theory™ Way.

Related Articles
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Lean Thinking for Small Business–Add Value!
10 Values of a Systems Thinker
Business Systems 101 Video Webinar (17 min)

Lean Thinking for Small Business—Add Value!

“The value decade is upon us. If you can’t sell a top-quality product at the world’s lowest price, you’re going to be out of the game” (Jack Welch, former CEO of General Electric).

Toyota Motor Company, the father of Lean Thinking and Lean Production is one of the world’s most successful and profitable companies. Lean Thinking has evolved over generations as a method to achieve ever-increasing value for customers. Like Six Sigma and the Theory of Constraints, Lean Thinking is an important business improvement philosophy and strategy that should be familiar to small-business owners.

Two guiding principles stand as the pillars of Lean Thinking. First, respect people by creating a culture of learning and growth, high morale, safety, and constant encouragement to challenge the status quo. Second, develop an unrelenting focus on improvement that delivers the best-quality products and services in the shortest possible lead-time, thus providing maximum value to customers while driving down waste and cost.

Lean Thinking

Respect People

Lean Thinking puts people before products and services. For example, a new Toyota production plant starts training and developing people two years before they begin manufacturing. Respect for people includes employees, supply partners, and customers. (Customers are not just external, but also the next person or process in a stream of operational tasks.)

By tapping into the wealth of experience, talent, and creativity of “ordinary” employees, you can create extraordinary business systems and processes. Trusting and empowering small teams will encourage continuous improvement of products, services, and business operations.

Companies grounded in Lean Thinking educate all employees about “process improvement.” Managers are home-grown and proficient in Systems Thinking and process-improvement strategies and skills. They are hands-on masters of their work domain, and personally teach it to others on the team. Managers get out from behind their desk and go where the work is performed to see problems with their own eyes, build relationships of trust, foster teamwork, and help their people find solutions.

Add Value

In Lean methodology, any business activity or step in a process is said to be “value-added” if it ultimately benefits the customer, and they would be willing to pay for it. The only steps that add value are those that transform raw material or information into something the customer wants. Some activities are “value enabling,” such as accounting, purchasing, and human resource. These activities are necessary to support the operation of the business. Everything else is waste that should be kept to a minimum. Typically, 80% of what is done in a business process is non-value-added. Only 20% would get customers to open their wallets.

For example, providing a customer with information about a product is value-added because it increases their personal knowledge. Handling a customer complaint is non-value-adding because no one wants to pay for problems. Installing kitchen cabinets is a value-added service. Making a return trip to replace a defective drawer handle is non-value-adding. Customers don’t want your mistakes to increase their cost, directly or indirectly!

Lean is about doing more with less. It is based upon the premise that anywhere work is being done, non-value-added waste is being generated that should be minimized or removed.

Reduce Waste

Value-adding tasks in a process create a “value stream.” Tasks that do not add value to the customer are considered Muda, the Japanese term for waste. They include such things as:

  • Idle time, downtime, and waiting around
  • Unnecessary handling, motion, movement, transport, walking, or redundancies
  • Incorrect processing that creates defects, fix-it work, inspection, and redoes
  • Overproduction, accumulation of work-in-process, and storage of inventory
  • Setup, repair, checking, counting, reviewing, approving, finding, and so forth

These activities add cost to your product or service. For example, a step to “touch up” furniture scratched in a store delivery system should be eliminated by counter-measures that would prevent the scratches in the first place.

Taiichi Ohno, Toyota executive, describes it this way: “All we are doing is looking at the timeline from the moment the customer gives us an order to the point where we collect the cash. And we are reducing the timeline by reducing the non-value-adding waste” (Toyota Production System, 1988). In a Lean company, everyone develops an “eye for waste.”

Continually Improve

Kaizen—the Japanese term for continuous improvement—is a mindset and practice that encourage teamwork, standardization, mastery of the process, experimentation to find better ways, comparison to baseline accomplishments, incremental and ever-evolving change, and the ongoing improvement of results. It asks the question, “How can I do this better?” Kaizen is a quest for perfection!

Below are Lean Thinking principles that apply to many business processes. Remember, only the right process will produce the right results!

  1. Value is added by the physical or informational transformation of raw material into something the customer wants and will pay for.
  2. Developing people and partners also adds value. Treat partners and suppliers as an extension of your business. Help them grow, develop, and improve. Build stable and trusting relationships.
  3. Continuously solving root problems drives organizational learning. Errors are opportunities for improvement.
  4. Problem-solving is 20% tools and 80% thinking.
  5. Learn-by-doing is most important; training is second (80% hands-on, 20% classroom). The best method is training followed by immediate doing, or doing followed by immediate training.
  6. Create small teams (5-6 people) and let them challenge themselves and the status quo to evolve their own practices and improvements.
  7. Make decisions slowly. Seek ideas and consensus from all of those affected. Implement decisions rapidly, but with caution.
  8. Design business systems and processes to achieve a continuous flow. Increase productivity and quality by avoiding big batches and stop-start hand-offs. Do not let material, parts, and products wait in line.
  9. Standardize tasks. Use proven, repeatable methods everywhere to maintain the predictability, regular timing, and output of your processes. Allow creative and individual expression to improve on the standard.
  10. Level the workload, making it even and steady. Synchronize the pace of the process with customer demand and on-hand inventory. (Work like the tortoise, not the hare.)
  11. Let a process “pull work” from a previous process, not have work “pushed” upon it (overfeeding). The down-line customer in the production process gets what they want, when they want it, and in the amount they want.
  12. Include visual controls to make management easy. Workers should be able to tell how the system or process is performing at a glance.
  13. Build into your culture the philosophy of stopping or slowing down a process to get quality right the first time. This will enhance productivity in the long run. Avoid accumulating rejects for later handling.
  14. Don’t trouble your customers (anyone affected by your work or decisions). Don’t force people to do wasteful work. Don’t give them defects. Don’t make them wait. Don’t overburden them. Don’t pass along problems.
  15. Keep work-in-process to a minimum. Only build inventory to meet customer demand (inventory hides problems).
  16. Use technology to support, not replace people. Focus on process and people first, then add information technology to support them. Use low-cost reliable alternatives to expensive new technology. Test technology thoroughly before implementing it.
  17. Allow customers to pull products, or in other words, do the non-value-added tasks themselves. For example, customers can complete their own online order form or pump their own gas.
  18. Managers should go observe work where it is performed to understand problems and verify data (genchi genbutsu), rather than theorizing or just working from reports.
  19. Practice the simple and widely used “Five Whys” kaizen tool to develop problem-solving and root-cause analysis skills. 

The Challenge of Lean

Lean Thinking must be practiced every day in a consistent manner to align each business system and process with the needs and goals of the organization. It is common sense and practical approach to problem-solving that is accessible and easily learned by workers at your weekly business improvement workshops. Lean Thinking is a strategy that can be used at any level of the organization and applied to any process or work area. It delivers rapid, measurable results.  (Cartoon Source:

Lean Thinking Cartoon

The essence of Lean Thinking is to constantly challenge the status quo. Ask, “Why are we doing this, and why are we doing it this way?” Repeat the cycle of continuous improvement. As you increase quality and speed, you will lower costs and provide greater value to customers. You will also become a culture of excellence!

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Box Theory™ for Small Business–Create High-Performance Systems!

Six Sigma for Small Business—Improve Quality!

Six Sigma is a methodology employed by many large companies to improve the output quality of their business systems and processes. Small-business owners can profit immensely by becoming familiar with the fundamental principles.

Three major concepts will aid in your understanding.

  1. A “quality” product or service is one that conforms to standards. Quality refers to an acceptable level of performance within an approved range of customer specifications or expectations. For example, are the roof shingles the grade specified in the house plans? Has the steel part been machined to engineering specifications? Was the furniture delivered within the promised time range of 8:00 a.m. to 10:00 a.m.? Are the restrooms “clean”? Simply put, are your products or services up to specified or expected standards?
  2. Quality standards are determined by the customer, whether expressed or implied, as in the case of clean restrooms. The “voice of the customer” indicates what matters most to your customers—what is “critical to quality” (CTQ). These essential requirements might include such things as first-class workmanship, on-time delivery, or superior customer service. While no organization is perfect, repeated failure to meet customer CTQ requirements is usually fatal. If you don’t provide what customers expect, they will take their business elsewhere.
  3. “Variation” is the deviation from customer specifications or expectations. All quality standards have a tolerance for some variation. However, when variation becomes too great, the product or service is defective and unacceptable. Defects, delay, and deviation must be kept within the bounds set by the customer.

Acceptable Variation

The output quality of any process is considered “perfect” if it falls within the lower and upper specified limits, as you see in the graph below. For example, if the furniture store mentioned above delivers the furniture before 8:00 a.m. or after 10:00 a.m., it has performed outside the promised limits. Delivery anytime between those hours is a perfect outcome.

Business Process Quality

In football, a field-goal kick passing anywhere between the goalposts is a perfect kick and earns three points; if kicked outside the posts, no points are given. Likewise, a machined part may have a tolerance of .003 inches. If machined outside of the tolerance limits, the part will not fit or work properly.

In Six Sigma, quality standards are either met, or not. There is no in-between. A business owner must completely understand what their customer wants (CTQ) and what variation is acceptable to them—what is their tolerance for error. Effective business systems and processes reduce the unacceptable variation—the defects and delays—thus keeping customers happy and reducing costs. (By the way, the “customer” of one of your business processes may be the next process in the line.)

Sigma, expressed by the letter “Z”, is a Greek term that means “amount of variation in a process, set of data, or anything you can measure.” For statistic students, Six Sigma refers to six standard deviations; however, it is not necessary for you to understand the math to apply the principles.

Determining Your Sigma Score

Using Six Sigma analysis, a process is evaluated based upon how many errors occur in one million opportunities for error. No matter how few or how many outputs there are from a given process over a period of time, the result is always converted to “defects per million.” In this way, all quality measurements are compared to a common standard.

For example, in a sample test period, 50 of 1000 prepared payroll checks have errors and employee complaints. Converted to Six Sigma language, there are 50,000 defects per million opportunities. This is done by multiplying the numerator (50) and the denominator (1000) each by 1000.

The fewer the errors, the higher the “Sigma Score,” and the closer the process comes to reaching perfection. Notice in the table below that 6 Sigma (statistically six standard deviations) is 3.4 defects per million opportunities—very near perfect.  Two Sigma is 308, 538 defects per million, or nearly one out of three errors. Three Sigma improves to 66,807 errors per million, or one error for every 15 opportunities—a 93.3% yield.

Six Sigma Score

It is important to note that the road to higher business quality gets increasingly difficult and expensive. In Box Theory™ methodology, the goal is 4 Sigma for most processes. Four Sigma is actually one defect in 160 opportunities or a 99.38% yield. This is a very good starting point for the core systems and processes of most organizations.

New companies typically start with processes at about 2 to 2.5 Sigma and progress with “common sense” and “trial-by-error” solutions to achieve control at near 3 Sigma. This may be somewhat shocking to you, but it points out the great opportunity for quality improvement in most organizations. Formal improvement methods such as Six Sigma are usually required to achieve greater results than 3.5 Sigma, a 2.3% error rate.

You Are in Control

Most errors happen because of faulty systems and not faulty people. People want to perform well, and will, if put into an effective business system. Mistakes and defects are normal. How many you will tolerate is a business decision. Remember, without a conscious effort to improve, you will hover in the 2-3 Sigma range and lose a significant portion of your potential profit. This is one reason why effective business systems pay for themselves many times over!

I repeat, YOU are in control and can choose what Sigma level you are willing to pay the price to achieve. For example, the airline industry has chosen to pay whatever it costs to operate airplanes above Six Sigma—fewer than 3.4 crashes per million flights (the voice of the customer is pretty loud on this one). However, baggage claims operate at 4 Sigma—a lost bag for every 160 handled. This is why airlines put a lost-luggage claim office in every airport. It costs less than improving the baggage handling process, and the customer has proven to tolerate an “occasional” lost bag. The airlines make these business decisions by balancing cost and customer satisfaction.

Look at the table below to compare a 99% yield (less than Four Sigma) to a Six Sigma yield of nearly 100% quality. Then consider for a moment the potential lost profit in your company that is probably operating at 2-3 Sigma.

99% YIELD (3.8 Sigma; 10,000 defects/million) 99.99966% YIELD (6 Sigma; 3.4 defects/million)
20, 000 lost articles of mail per hour 7 articles of lost mail per hour
Unsafe drinking water for 15 minutes per day 1 unsafe minute of drinking water every 7 months
5,000 incorrect surgical operations per week 1.7 incorrect surgical operations per week
2 short/long landings at major airports daily 1 short/long landing at major airports every 5 years
200,000 incorrect drug prescriptions each year 68 incorrect drug prescriptions each year
No electricity for almost 7 hours each month One hour without electricity every 34 years
11.8 million shares incorrectly traded on the NYSE daily 4,021 shares incorrectly traded on the NYSE daily
3 warranty claims for every new automobile 1 warranty claim for every 980 new automobiles
48,000 deaths from hospital errors per year 17 deaths attributed to hospital errors per year
Six Sigma for Dummies, p. 25
Like the Theory of Constraints and Lean Thinking, the principles of Six Sigma apply in product or service-based companies, in the office, the retail store, or on the production line—wherever mistakes can be made.

How many defects, unacceptable delays, or deviation from specifications/expectations occur in your business processes? I think you would be surprised!

With a little attention to the details of your business operations, you can reduce the errors and waste to less than 1%. A small effort to improve business quality can significantly boost customer satisfaction, profit, and hopefully your take-home pay.

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Box Theory™ for Small Business—Create High-Performance Systems!

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Michael Gerber, "E-Myth"

Michael Gerber

"Organize around business functions, not people. Build systems within each business function. Let systems run the business and people run the systems. People come and go but the systems remain constant."

W. Edwards Deming, Total Quality Management

W. Edwards Deming

"If you can't describe what you are doing as a process, you don't know what you're doing. . . . 94% of all failure is a result of the system, not people."