Building a Sustainable Business
The 12Faces Mission is your Sustainable Business Success (SBS).
Here we expand on our approach to establishing and maintaining sustainability in your business discussed in our Mission Description.
Briefly, your business is Sustainable indefinitely if you have an acceptable income, acceptable workload and acceptable stress.
We use the term “Ratchet” to refer to the process of incrementally improving your business and avoiding the risk of backsliding. You probably get the idea, very quickly, from the following image.
And Ratchets can be defined as:
” a ratchet is something that makes a situation change or develop in one direction only, for example by being able to rise but not fall …:” – Cambridge Dictionary
In the “Success” component of our SBS strategy, you will be making substantial inroads into improving existing, and generating new, activity. The ratchet phase comes along behind that and consolidates the gains that you have made. This will allow you to continue to take advantage of your progress towards your particular Success.
Ratchets tend to be comparatively small changes operating on the many fronts of your business. It is a slow and incremental improvement by ratcheting up; rather than a sprint toward some distant goal.
We group the skills necessary to lead a successful business into 12 categories. That is the origin of our brand name, 12Faces.
Six relate to the business. Weaknesses in any of these areas will damage your business (remember the adage “a chain is no stronger than its weakest link“).
- Revenue creation like sales, marketing, pricing, product range
- Operations like workflow, variable costs, inventory
- Overheads like office costs and R&D
- Systems like IT and accounting
- People issues like motivation, hiring and
- Plan & measure, finances, planning and monitoring
The other six relate to you as Owner and your Team. In other words they apply to the individual, not the business as a whole. We offer Continuing Professional Development (CPD) to improve personal skills.
- Decision making skills
- Self management like time management and working efficiently and effectively
- Leadership of and by staff
- Planning to maximise sustainable business success; however success is measured
- Performance measurement to identify weak spots and measure their improvement
- Workflow efficiencies like wasted work, production co-ordination
In geometry, a 12 sided structure is called a dodecahedron. We have shortened that to “Dodeca” when we refer to it in 12Faces
Ratchets are incremental, rather than radical, change. Improvement through these incremental changes of your business have the goal to keep all those 12 Faces of your business in balance. Also, it will ensure that the gains from any improvements that you make are not lost by backsliding.
We classify the expertise you need for our materials using the Martial Arts concept of “Belts”. Every manager that ever there was started at White Belt.
Initially, you will be able to oversight all aspects of your business yourself. For this you will use our Yellow belt techniques.
As your business grows, and takes on more staff and management layers, it will be increasingly difficult for you to have your finger on everything which can be improved through a ratchet strategy. Therefore, the Blue belt aspects of our ratchet strategies focus on how you set up a system that can be executed by your staff; rather than just by you.
Table of Contents
What to Ratchet?
Improvements to your business can, loosely, fall into 3 categories:
- New systems and approaches: These are typically multi-month exercises in improving your business and fall under our GamePlan strategy.
- Major overhauls of existing systems: Over time, your business will accumulate deadwood from earlier projects. We suggest you use ratchets is to carry out major overhauls of existing systems to update them, and to prune away unnecessary material.
- Kaizen: This is a Japanese word meaning incremental improvement. (Read more about Kaizen here). It refers to a company-wide routine for gradually improving any, and all, aspects of the business. Done properly, this becomes part of the business’ DNA and all staff participate in Kaizen as a matter of course.
Irrespective of what is being done in your current Ratchets, they will likely follow a similar routine, which is described next.
PDCA Cycle
The PDCA Cycle was developed by Toyota as a way of structuring their improvement – or ratcheting – cycles. It stands for Plan Do Check Adapt.
The advantage of following a PDCA Cycle is that it ensures a comprehensive and consistent approach to a problem. It also becomes a routine that is much easier to teach to staff; rather than taking a different approach for each and every project.
In our Success driving strategy using GamePlans, we encourage you to focus on just a single GamePlan for a financial quarter. This will ensure that your energies are completely focused.
With Ratchets, our thinking is that there may be slower, and incremental improvement, over several aspects of your business, more or less simultaneously. Because your business is creeping forward on its Ratchets, there is not such a need to sprint to get the activity done. Rather, ratcheting is more a process of gradual improvement and consolidation of those improvements as you go. That helps to ensure the Sustainability of your business
Planning Ratchets
Building a Candidate List
There will always be more things that you can work on than is possible for you to actually engage with, at any point in time.
We, therefore, encourage you to build a “Candidate List” of potential areas where you can ratchet up improvements.
The mechanics of building a Candidate List are fully described in our What’s Next family of articles: How to Prioritise Work.
In those articles, we indicate some of the sources of candidates for making the decision about what to do next. In addition to the ones that are listed there, Ratchets are also more likely to generate candidate projects from monitoring the health and progress of the business.
There are aspects of your business that you probably look at each month.
Examples of these are:
- Information flowing from your accounting processes
- Information flowing from your sales monitoring process
- Staff performance measures like KPIs and
- Other regular monthly measurements that can generate information that you can use as guidelines for your ratchet candidate list.
For convenience, we call these types of measurements Metrics. Read more on this link.
Essentially, anything that is acting unfavourably is likely to be an obvious entry to your candidate list.
To make identifying adverse movements easier, we encourage you to have trends associated with your monthly data and display them in a visual format. This allows you to see at a glance when something is operating below expectations and/or trending in an unfavourable direction. We write about this in greater detail when discussing our software tool for this purpose, TrendBoard.
You may have other monitoring tools that are useful for showing unfavourable situations. These can become candidates to be remedied. There are a number of ratios that are useful for this purpose. Typically, they might include:
- Gross Margin Ratio: measures the efficiency of your production system.
- Labour to Revenue Ratio: measures the Labour cost per dollar of Revenue.
- Overhead Costs to Revenue Ratio: measures the level of your Overhead Costs to each dollar of Revenue.
It is very easy in a busy workplace for some of these ratios to move in unfavourable directions without you noticing without some type of recording system. For this reason, ratios like this are built into our TrendBoard product.
Attached to our Dodeca, we have a MyDodeca spreadsheet system. This lists all 12 Faces of your business and lets you evaluate them on their condition and their impact on your business.
Some of the “Faces” in your business do not have a particularly big impact on your business. Others, like Revenue, almost certainly will.
The MyDodeca spreadsheet allows you to check the balance in each of the 12 faces of your business.
We suggest doing this on a monthly basis in the early days of using the system. This is because changes can happen quite quickly. As your business stabilises, and becomes more sustainable, the “Faces” of your business may not change very much.
Having built a list of candidates for your ratchet cycles, the next step is to prioritise which of the candidates you want to work on next.
Ratchet Prioritisation
With a smaller business, it is probably fairly easy for the owner to work out what the next priority for improvement is. This is based on your “gut feel” for the business. The gut is quite a powerful tool and is perfectly adequate in the early stages of evolution in your business for working out what to do next.
Later, when your business becomes more sophisticated, and possibly larger with more staff involved, you will need a more systematic approach to prioritisation. We expand on more advance prioritisation in our What’s Next family of articles: How to Prioritise Work.
Doing Ratchets
There will be many different ways of implementing (Doing) a ratchet cycle for a particular aspect of your business. It is not possible for us to cover all of them here.
Following, we introduce some of the methodology that will allow you to “Do” whatever improvement cycle you want to engage in.
More on Doing can be found in our article on PDCA.
Diagnostics
Our Diagnostics System provides a “drill down” way to find our resources covering any particular issues that you have in mind. If you are unclear about what the important issues are, you can use the Symptoms part of the Diagnostic System.
One thing to keep in mind when looking at the Diagnostic System is that it can indicate to you things that you may not have taken into consideration. Everybody has “don’t know/don’t know” gaps in their knowledge. Our Diagnostics System can alert you to things you have not previously considered.
Sprints
We are great proponents of the concept of using Sprints to progress the Doing parts of any PDCA Cycle. The phrase Sprints refers to short periods of 1 to 2 weeks. You set yourself a short term goal and move as quickly as possible to reach that goal. Each Sprint is, in fact, its own mini-cycle. The same process of Planning the Sprint, Doing, Checking and finally Adapting applies. Read more about the Sprint methodology: Speeding Up Success.
Kaizen Tools
Kaizen, as mentioned above, is a Japanese word referring to incremental improvement. Read more about Kaizen here.
The concept of Kaizen was developed by the same school of thought that developed the PDCA Cycle. You may be familiar with this from the 6Sigma and Lean Business Improvement Philosophies.
Kaizen tools are useful in their own right, but become much more effective when your staff are trained to implement them as a routine part of their job. This way, you have all of the brains in your business working on constant and consistent improvement of your operation.
Check Ratchet Results
The Check part of your ratchet within the PDCA Cycle refers to the process of checking that the outcome of the cycle is useful and works the way you anticipated. If not, you can remedy the problems that have arisen during this particular ratchet at this stage. This may mean the termination of a ratchet cycle that is not working out the way you think.
The second aspect to the Check part of the PDCA Cycle is the outcome of routine tests that you apply to your business. Just as we are used to regular Breast and Prostrate screening practices for our own health, you can develop a family of “Checks” that apply to your business to routinely test the businesses health. Several of these were outlined in the Planning section above.
Adapt to Ratchet Outcomes
In the Adapt part of the PDCA Cycle we look at any discoveries and improvements that were made during the Cycle and take steps to ensure that the best aspects of them are retained in the business.
Typically, this can be achieved through:
- Standard Operating Procedures (SOP)
- Checklists
- Changes to Staff induction strategies to alert them to the outcome of the Cycle.
- Various training and software tools to routinely teach and monitor the operation of the area of your business that was the subject of the Cycle.
Wrap Up
In this introductory article, we have outlined a method for routinely improving the operation of your business with many, comparatively small, steps operating on the “12 Faces” of your business. This process helps to ensure that your business remains in “balance” and contributes significantly to the Sustainability part of our Mission for your Sustainable Business Success.
We use the term Ratchets here to demonstrate that each improvement of your business is designed to prevent your business backsliding and thereby upsetting your Sustainability.