Monday, January 31, 2005
System Steve’s IPSE System
Part One
We’ve talked about the critical role of systems in the odds of business success, and what hard and soft systems are. Now its time to look at where to begin to build a systems driven business.
It can be more than a little intimidating when deciding where to begin when just starting to systemize a business. Every thing needs a system. I first learned about the need to do it listening to Michael Gerber’s E Myth (http://www.amazon.com/exec/obidos/ASIN/0887307280/ ) book on audio.
Somebody must wear the hats of the CEO, CFO, Marketing Director, Operations manager, and Accounting Manager of your Business
One of the lessons I learned from Michael Gerber’s E Myth book was that Every business has to have an overall leadership for strategic vision and direction. Additionally every business must be engaged in the planning and execution of ongoing marketing, operations or production, and accounting tasks in order to continue to exist. Whether or not a business formally acknowledges this or it simply exists by default these duties are either being done or being neglected.
This hierarchy of leadership, organization and tasks should be envisioned as an organizational chart showing a CEO, department heads of marketing, operations and accounting, and employees in each area who actually do the work. To a lot of business builders, some who haven’t started yet, some whose business is already running, and some who’ve been in business for a long time, this is a dramatic revelation.
Mr. Gerber’s book is a masterpiece on the topic of the needs and roles of systems in business, but as a result of that listening I was in a deep depression. I’m not kidding. It is a sobering reality to fully understand the likelihood of failure if your business is not systems driven and the full magnitude of the task of creating them.
Knowing where to begin is daunting and intimidating. If you’ve never done it before, figuring out how to build a single system is a challenge let alone a whole series of interlocking systems that will run your entire business!
Introducing System Steve’s IPSE System:
Not long after the initial shock and dismay stemming from my now fully opened entrepreneurial eyes, I came up with an awesome system to figure out where to start, what systems to build and what the physical environment will need to be to support them.
In today’s post I am introducing the IPSE system and will explain the first step of the system and how you can do it in your business.
Step One: Ideal Customer Experience
The first step in my IPSE system is to ask a two basic questions that will drive the rest of the system.
Question One:
What is the ideal experience that I would want to have if I were this businesses ideal client or customer?
Question Two:
What do I (or business owners) want in the experience as owner of this business.
Start by trying to put yourself in the client’s shoes. Ask yourself (and your partners) to consider what the ideal experience would be if you were the client. Describe in detail how your first contact with the business would go. Who would you talk to? What would they say? Would I get a live person or an answering service? If we’re a web based business what would my starting page need to look like in order to provide that excellent experience?
How would I pay. What would my options be? If I had questions, what would my ideal customer service be like? How long would I have to wait for service or delivery? If this was repeat sales type of service or product how would my relationship with the business be managed? If it was retail store, how would the store look? What would the return policy be? How would the isles be laid out?
You get the idea. Be specific. Take notes and discuss the results with potential clients. Keep in mind that at this point you are only asking what the experience would be like from the customer’s perspective, not how you’ll do it or pay for it.
The other question for step one is to ask what you want your business to actually be. If you plan on being an internet business than you can’t exactly fulfill the ultimate customer experience if it includes hot coffee and a concierge in the lobby. The answer to this question should be brainstormed in detail like the first question.
Who is our ideal client? What do they want? Who is not our client? Who are we not set up to serve or sell to? Where will we do business, or ship? What is our ideal price range and market niche? How does that impact who our ideal client is and their ideal experience?
This exercise is powerful tool. Knowing the answers to theses questions causes you to become totally aware and driven by a matrix between the two most primary and essential desired outcomes of your business. Now, every resource of the business available can now be focused on the most important goals.
It defines in detail who the ideal clients are and aren’t, and what the business needs to be planning and preparing to do. It helps to illuminate wasted efforts and resources that may have gone toward trying to help customers that this business model does not service.
A great book that speaks about this subject is “Raving Fans” by Ken Blanchard. In the book Mr. Blanchard describes the process of creating “raving fans” out your customers by going through the process of asking these two questions. The process of adopting what is learned results in a business being able to say “That’s the way we do things here,” knowing that all efforts made by the business are targeted to the ideal experience for our clients and us.
In the next post I’ll discuss step 2 of the IPSE system.
We’ve talked about the critical role of systems in the odds of business success, and what hard and soft systems are. Now its time to look at where to begin to build a systems driven business.
It can be more than a little intimidating when deciding where to begin when just starting to systemize a business. Every thing needs a system. I first learned about the need to do it listening to Michael Gerber’s E Myth (http://www.amazon.com/exec/obidos/ASIN/0887307280/ ) book on audio.
Somebody must wear the hats of the CEO, CFO, Marketing Director, Operations manager, and Accounting Manager of your Business
One of the lessons I learned from Michael Gerber’s E Myth book was that Every business has to have an overall leadership for strategic vision and direction. Additionally every business must be engaged in the planning and execution of ongoing marketing, operations or production, and accounting tasks in order to continue to exist. Whether or not a business formally acknowledges this or it simply exists by default these duties are either being done or being neglected.
This hierarchy of leadership, organization and tasks should be envisioned as an organizational chart showing a CEO, department heads of marketing, operations and accounting, and employees in each area who actually do the work. To a lot of business builders, some who haven’t started yet, some whose business is already running, and some who’ve been in business for a long time, this is a dramatic revelation.
Mr. Gerber’s book is a masterpiece on the topic of the needs and roles of systems in business, but as a result of that listening I was in a deep depression. I’m not kidding. It is a sobering reality to fully understand the likelihood of failure if your business is not systems driven and the full magnitude of the task of creating them.
Whether or not a business formally acknowledges this or it simply exists by
default these duties are either being done or being neglected.
Knowing where to begin is daunting and intimidating. If you’ve never done it before, figuring out how to build a single system is a challenge let alone a whole series of interlocking systems that will run your entire business!
Introducing System Steve’s IPSE System:
Not long after the initial shock and dismay stemming from my now fully opened entrepreneurial eyes, I came up with an awesome system to figure out where to start, what systems to build and what the physical environment will need to be to support them.
In today’s post I am introducing the IPSE system and will explain the first step of the system and how you can do it in your business.
Step One: Ideal Customer Experience
The first step in my IPSE system is to ask a two basic questions that will drive the rest of the system.
Question One:
What is the ideal experience that I would want to have if I were this businesses ideal client or customer?
Question Two:
What do I (or business owners) want in the experience as owner of this business.
Start by trying to put yourself in the client’s shoes. Ask yourself (and your partners) to consider what the ideal experience would be if you were the client. Describe in detail how your first contact with the business would go. Who would you talk to? What would they say? Would I get a live person or an answering service? If we’re a web based business what would my starting page need to look like in order to provide that excellent experience?
How would I pay. What would my options be? If I had questions, what would my ideal customer service be like? How long would I have to wait for service or delivery? If this was repeat sales type of service or product how would my relationship with the business be managed? If it was retail store, how would the store look? What would the return policy be? How would the isles be laid out?
You get the idea. Be specific. Take notes and discuss the results with potential clients. Keep in mind that at this point you are only asking what the experience would be like from the customer’s perspective, not how you’ll do it or pay for it.
The other question for step one is to ask what you want your business to actually be. If you plan on being an internet business than you can’t exactly fulfill the ultimate customer experience if it includes hot coffee and a concierge in the lobby. The answer to this question should be brainstormed in detail like the first question.
Who is our ideal client? What do they want? Who is not our client? Who are we not set up to serve or sell to? Where will we do business, or ship? What is our ideal price range and market niche? How does that impact who our ideal client is and their ideal experience?
This exercise is powerful tool. Knowing the answers to theses questions causes you to become totally aware and driven by a matrix between the two most primary and essential desired outcomes of your business. Now, every resource of the business available can now be focused on the most important goals.
It defines in detail who the ideal clients are and aren’t, and what the business needs to be planning and preparing to do. It helps to illuminate wasted efforts and resources that may have gone toward trying to help customers that this business model does not service.
A great book that speaks about this subject is “Raving Fans” by Ken Blanchard. In the book Mr. Blanchard describes the process of creating “raving fans” out your customers by going through the process of asking these two questions. The process of adopting what is learned results in a business being able to say “That’s the way we do things here,” knowing that all efforts made by the business are targeted to the ideal experience for our clients and us.
In the next post I’ll discuss step 2 of the IPSE system.
Saturday, January 22, 2005
What systems are and how a business uses them
In this post we’ll look at what systems actually are and how they work. We’ll learn about two types of systems; hard and soft, how they function, and well look at a few real life examples of both kinds that real businesses are using today.
What are systems and what is their purpose?The purpose of systems is to influence the results of any activity that impacts the business to within an acceptable variable range. The system itself is either tangible or intangible, physical or behaviorally based tactics that accomplish the stated goals of variable control.
Hard and Soft SystemsThere is more than one way to segment systems but for the business builder beginning a systems implementation or improvement plan, we’ll describe two types; Hard and soft systems.
Hard and soft systems are called “hard” and ‘soft” because they reflect two type of system, ones that are people based activities that follow a systemized strategy of behavior or communication (soft), and the hard systems which describe technological, physical location, machinery or equipment based systems.
Lets take a closer look at soft and hard systems
If I wanted to use a hard system, I would have some type of automated dough machine that would cut my dough to the precise size and weight necessary to make my ideal cookie. In a soft system I would hire artistic employees who would “eyeball” the best start shape equivalent to the desired pattern as possible, or I could use a hard system that would cut out the dough into perfect stars of the same exact pattern each time.
It may seem like I’m saying that hard systems are always better and more efficient, consider this. Say that I am an owner of a growing business and I need to have a way to handle an increasing load of customer calls.
I could utilize a hard system in which I could have the client call into an automated voice systems that routed them through ever increasingly specific options until they hopefully hear an answer to their question. I could refer all of my call to a web site with a question and answer area.
Or I could have customer employees answer calls either helping the customer by handling the issue while on the phone, helping them to find the correct person they need to speak with, or helping them to connect up with the proper “hard system” designed to expedite resolution of their concerns.
There is a place for automation of customer services, especially online based solutions where those using them expect low touch responses, but we have all been the victim of being in one of those automated telephone systems that seem more design to discourage you form actually attempting to resolve your problem than to resolving them.
Soft spoken-soft systems
“Hello, welcome to McBurgers,
Ever hear anything like this? That’s a soft system. It’s a script used by many fast food restaurants. The script is a proven verbal communication that has been developed and tested to increase sales of double scrumpy value basket. And guess what, when followed precisely by the employee, it works. It increases sales of the item mentioned.
Scripting for success
My business struggled for while trying to find the best way to handle prospective clients. We tried mailing out multiple option educational packets, and tried for a while to just “wing it” on each sales call. All of these produced marginal success at best.
After some thought, I a developed a sales script based on what I had learned were the specific questions that 99.99% of all potential clients wanted to know. Who are you? What can you do for me? How does it work? How much is it going to cost me? How do I take action on this?
My Business helps trucking companies get into and stay in compliance with federally mandated drug and alcohol free regulations. When we make contact with a client they usually don’t know much other than they need a drug and alcohol program and they could get in trouble if they aren’t.
Our script begins with a question; “how much do you know about the regulation?” They usually say “not much” and then the script goes on. “I’ll let you know what the federal government expects from you in order to be in compliance and then I let you what we do and how it relates to that.” Then I say I’ll be telling them how much it costs and what they can do to get started”
The script takes about five to seven minute of mostly just the company rep speaking. You might think that that is too long but we learned that the clients are very interested because we use the educational approach, and they are getting questions they have had answered for them. In most cases without even asking first.
Our conversion rate for a qualified prospect or referrals is near 100% including respondents to any marketing piece we use. And it doesn’t matter whether it’s me, a sales person, or a complete stranger to the business just following the script. It is always that effective.
More Hard and Soft System Examples
O.K. how bout some more hard systems. McDonald Fries making machinery ensures uniform quality in their fries from Chicago to China and from Moscow to Miami. Using a fax machine is a hard system ensuring fast delivery of hard copy information. Email is a hard system that speeds up communications.
Computers are hard systems. The letter sorting equipment used by the postal service is a hard system. A cannon is a military hard system designed to deliver predictable destruction. An automated fabric cutting machine is a hard system used in clothing factories.
More soft systems; Wal-Mart’s “How can I help” badges that employs wear signifying there training to help anyone who asks no matter what department they’re from. The Southwest Airlines mindset that they promote in all their employee. Casual Fridays at any company.
You too can develop systems, hard and soft, for your business as well. Try this next exercise to start helping develop you systems awareness. And I’ll see with the next installment soon.
Exercise:
What are systems and what is their purpose?
Hard and Soft Systems
Hard and soft systems are called “hard” and ‘soft” because they reflect two type of system, ones that are people based activities that follow a systemized strategy of behavior or communication (soft), and the hard systems which describe technological, physical location, machinery or equipment based systems.
Lets take a closer look at soft and hard systems
If my company was making star shaped cookies and I wanted them to be the same size and weight each time I would need to utilize some sort of system. An example of a soft system would be to have my employees try to create uniform dough balls of approximate similarity in weight and size by sight and feel.
If I wanted to use a hard system, I would have some type of automated dough machine that would cut my dough to the precise size and weight necessary to make my ideal cookie. In a soft system I would hire artistic employees who would “eyeball” the best start shape equivalent to the desired pattern as possible, or I could use a hard system that would cut out the dough into perfect stars of the same exact pattern each time.
It may seem like I’m saying that hard systems are always better and more efficient, consider this. Say that I am an owner of a growing business and I need to have a way to handle an increasing load of customer calls.
I could utilize a hard system in which I could have the client call into an automated voice systems that routed them through ever increasingly specific options until they hopefully hear an answer to their question. I could refer all of my call to a web site with a question and answer area.
Or I could have customer employees answer calls either helping the customer by handling the issue while on the phone, helping them to find the correct person they need to speak with, or helping them to connect up with the proper “hard system” designed to expedite resolution of their concerns.
There is a place for automation of customer services, especially online based solutions where those using them expect low touch responses, but we have all been the victim of being in one of those automated telephone systems that seem more design to discourage you form actually attempting to resolve your problem than to resolving them.
Soft spoken-soft systems
“Hello, welcome to McBurgers,
would you like to try a
double scrumpy value basket today?”
Ever hear anything like this? That’s a soft system. It’s a script used by many fast food restaurants. The script is a proven verbal communication that has been developed and tested to increase sales of double scrumpy value basket. And guess what, when followed precisely by the employee, it works. It increases sales of the item mentioned.
Scripting for success
My business struggled for while trying to find the best way to handle prospective clients. We tried mailing out multiple option educational packets, and tried for a while to just “wing it” on each sales call. All of these produced marginal success at best.
After some thought, I a developed a sales script based on what I had learned were the specific questions that 99.99% of all potential clients wanted to know. Who are you? What can you do for me? How does it work? How much is it going to cost me? How do I take action on this?
My Business helps trucking companies get into and stay in compliance with federally mandated drug and alcohol free regulations. When we make contact with a client they usually don’t know much other than they need a drug and alcohol program and they could get in trouble if they aren’t.
Our script begins with a question; “how much do you know about the regulation?” They usually say “not much” and then the script goes on. “I’ll let you know what the federal government expects from you in order to be in compliance and then I let you what we do and how it relates to that.” Then I say I’ll be telling them how much it costs and what they can do to get started”
The script takes about five to seven minute of mostly just the company rep speaking. You might think that that is too long but we learned that the clients are very interested because we use the educational approach, and they are getting questions they have had answered for them. In most cases without even asking first.
Our conversion rate for a qualified prospect or referrals is near 100% including respondents to any marketing piece we use. And it doesn’t matter whether it’s me, a sales person, or a complete stranger to the business just following the script. It is always that effective.
More Hard and Soft System Examples
O.K. how bout some more hard systems. McDonald Fries making machinery ensures uniform quality in their fries from Chicago to China and from Moscow to Miami. Using a fax machine is a hard system ensuring fast delivery of hard copy information. Email is a hard system that speeds up communications.
Computers are hard systems. The letter sorting equipment used by the postal service is a hard system. A cannon is a military hard system designed to deliver predictable destruction. An automated fabric cutting machine is a hard system used in clothing factories.
More soft systems; Wal-Mart’s “How can I help” badges that employs wear signifying there training to help anyone who asks no matter what department they’re from. The Southwest Airlines mindset that they promote in all their employee. Casual Fridays at any company.
You too can develop systems, hard and soft, for your business as well. Try this next exercise to start helping develop you systems awareness. And I’ll see with the next installment soon.
Exercise:
- Try to find ten soft systems being usd in businesses all around you and write them down
- Then try to find ten hard systems \
- Send me your lists to spbiz4@juno.com
Each business is unique and it systems needs are as well. Some can be borrowed wholly or adapted from other businesses and others must be developed for your business alone. In the next installment we’ll be talking about how to go about developing and implement systems with some examples and another activity to help you learn how to.
Systems Steve
Friday, January 21, 2005
Systems, the key to business success
The Almost no-win gamble also known as starting your own business
What would you say if I told you that every day, of every week, of every year, millions of Americans young and old, of all races, faiths or otherwise, place a bet that will cost them all or most of the money they can earn, borrow or obtain in any way for the foreseeable future, consume the majority of their waking hours, despite having seen clear evidence all around them their entire life that a much smaller than 1% chance of winning?
You might think they were playing the lottery. Not these people, and at least the people playing the lotto get a clear disclaimer on the back of their tickets that explain the chances of them winning are much lower than getting hit by lightning, multiple times.
No, these people, despite seeing a vast landscape of lost dreams and lost bets from sea to shinning sea, tell themselves, against all observable evidence and reasonable expectations, that they are special, they will be the ones, or in many cases they don’t even think about at all, they just plunge into the bet without any thought as to what will happen if they fail.
And more than 990,000 out 1,000,000 will fail.
The Business-Bug and the Entrepreneur
Every year a million or so Americans invest vast sums of money and time to pursue a common dream; Business ownership. It is a worthy goal sought by many for myriad reasons. Some seek freedom. Some wish for fortune believing that only they will pay themselves what they are really worth. Some are following a career path laid out in certain industries, and others are just unemployable under conventional terms and must at least attempt to earn a living in business.
Despite the many valid, honorable and even passionate reasons that people start businesses nearly ninety percent will fail within the first three to five years and of the survivors, ninety percent of them will be gone by the tenth year.
So to get a handle on the prospects for success in business, you really have a less than 1% chance of making it. Unfortunately even the 1% success statistic is actually skewed; making it seem you have a much better chance than you actually do. Let me explain.
Let’s say you want to start a new small business, and you believe that you can be in the 1%. For starters, the stats that are kept on new businesses don’t distinguish between, you, inspired-Jane-startup, and an existing multi-million or billion dollar corporation forming a new business to launch a new product, division or project under a separate legal entity. So indirectly, you’ll be competing with “the big dogs” for your spot in the 1%.
To be fair, many of those new corporate-owned of entities are created for finite purposes and are dissolved fairly quickly not as a matter of failure but by design. They take their place in the 99%, but some are not short term and when an establish business or group of investors begins a new business for the long haul, their greater experience, along with their deeper well of intellectual and financial resources makes them the much more likely to be in the 1% club-not you.
So what can you do to get
an almost unfair advantage
over everyone else
that starts a business this year?
There’s an interesting correlation amongst a certain type of new start up businesses that shows an inverse percentage, well over 50% that make it. These are the franchise model types of businesses. They have a better than thirty to fifty times better chance of succeeding than the average non business franchise.
Why do franchises do so much better?
I’ve seen plenty of businesses begun with great locations, ample funding, and marketing that brought paying customers in, and I’ve also seen them close their doors not long after. So what’s the secret? How about a little poem:
Take a tip from Systems Steve
The secret of success is the systems key!
The big difference in the franchise model verses the seat-of-the-pants model is that all good franchises not only require adequate funding, and provide proven marketing, but they are delivered as turn-key systems driven entities that the owner doesn’t have to stay up nights trying to figure out what needs to be done, and how to do it.
What does it mean to have a systems-driven business?
The perfect example of a systems driven business is McDonalds. What Ray Kroc did for the hamburger business, can be done for any business. Mr. Kroc. was a traveling salesperson and saw a restaurant, owned by the McDonald brothers. He observed that they were doing things a little differently than most hamburger places. They had turned all of the food making processes into easy to run systems.
Ray had a vision. A systems vision. What Ray Kroc understood was that systems being used by the McDonald Brothers in their burger stand ensured several things that contributed to their success.
Because of their systems they could handle a tremendous amount of business; beyond the normal level of a business that size with a staff that size. Because of their systems they could consistently produce the same quality food items over and over no matter who was cooking. Because of their systems they could turn the operations of their business over to the hand of teenagers and not miss a beat.
Ray was inspired, and the rest,
is as they say, history.
In fact it really is history. Ray Kroc went on to form the McDonalds Restaurant corporation and in the process revolutionized the food service industry. His impact has had ripple effects in many other industries as well. there are many good books about the history and story of Ray Kroc and the pioneers of McDonalds. A couple I recommend would be “Grinding It Out” and “Under the Golden Arches”.
The lesson for all business builders is not that systems will save a bad business idea, but the lack of systems can kill a good one. Systems transform tasks that must be done by hard-to-find “star employees” into simple check list activities that any average employee can accomplish with minimal training.
Systems can help cut the cost of doing business and increase profits. They make it possible to quantify the current processes and help illuminate ways to improve them. They aid in developing a clear marketing appeal, and installing maximum customer loyalty.
I will be going into greater depth on all of these topics. Future posts will include:
The systems driven business
- What are systems? Hard and Soft Systems
- How to create and implement a system
- Where to begin to build a systems driven business
- Don’t re-invent every wheel-utilizing existing systems in your business
- How too much and not enough focus on systems will kill your business
- How problems and failure are just systems waiting to happen
Systems and your employment team
- Creating a systems mindset for your business
- Systems and employee types: Discretionary employees and systems operators
- Developing a systems friendly employment team
- Using systems to set standards, goals and performance bench marks for employees
- Training employees on systems
- Developing the critical systems “buy-in” needed in any systems driven business
Management
- The new management: Systems oversight
- Managing “systems entropy”
- Training systems
Technology and systems
- Utilizing information technology (IT) systems in you business
- Utilizing internet based systems
- Meshing with the systems of your partners, vendors and key experts
Accounting and planning
- Systems and the quantification, innovation, implementation cycle
- Early warning systems
- Time systems
Specific systems used by business such as
- Billing systems
- Collections systems
- Marketing systems
- Banking systems
- Using scripts to systemize communications in marketing, operations and customer service
So you are invited to join me at Systems Steve’s to learn more about systems and how to build a business that’ll make you one of the 1% who are enjoying the rewards and freedom that only come from successful business ownership!
Systems Steve
