Business Changes Planning: How to Choose Next Step
When you are planning the next steps for your business improvement, there are usually several changes that you could choose from. You believe all these steps will improve your business on your path to Sustainable Business Success. The problem is, it can be very confusing to decide which, of the many things that you could potentially do, is actually the next best step to do. This article provides a method for you to work out which is the best next step. Yellow Belt
Degree of Difficulty
Step One: The Important Few
1. Theory of Constraints (TOC)
2. 80/20 Principle
Step 2: Shortlist Your Business Changes Options
Step 3: What Decision Making Technique to Use
2. Complex Situations
3. Expected Value
Choosing One Decision Making Technique
Step 4: How Big a Bite
Minimum Viable Product (MVP)
Be clear on the Goals for the next planning period; monthly, quarterly or annual. Until you have a clear sense of the direction your business changes should take to reach these Goals, you are pretty much a rudderless ship and will not get too far in any direction; let alone the right direction.
Over time, the general nature of your Goals will likely change.
- You may start with a growth Goal, but
- at some point you are prepared to sacrifice some growth for a better lifestyle Goal. More time to enjoy the lifestyle your success has built
- Finally, you may have a Goal to exit your business.
Go to the Dodeca face 9 menu: D9.3: How to Manage Your Business’s Lifecycle and Industry Type
Some Decision making is required at a strategic, or high, level and is covered in the Dodeca face 7: How to Problem Solve and Use Decision Making Tools & Skills
Other decisions are made in all parts of your business on a daily or regular basis. These are tactical decisions.
Dodeca face 2 menu: Improve Productivity & Reduce Operating Costs
Dodeca face 11 menu: Methods to Improve Business Workflow
The Objective in this article is to determine a process for deciding on strategic level decisions.
Every Manager starts in business with a low level of business skills and experience.
Over time, they gain more experience and get better at what they do. 12Faces relates this to the concept of “belts” in the martial arts.
Everyone starts at the white belt and progresses up the various grades to eventually reach black belt.
It is the same with making choices about how to progress your business. It is perfectly acceptable and normal, when you are comparatively inexperienced, to start with simple decision-making techniques and over time, as you gain more experience, move into more powerful techniques.
A white belt decision-making technique is to simply use intuition or the famous “gut”.
As you become more experienced with decision-making techniques, you can move into much more sophisticated techniques.
Start simple with your decision-making techniques and move into more complex and more powerful techniques as you become more experienced.
12Faces is dedicated to making your business management workload easier.
For that reason, we have developed some comparatively advanced tools which have been designed to be easy to use.
Related to this, there are different levels of impact the decision will have on your business.
Business people are making decisions all day, every day:
- The intuition that comes from experience is usually perfectly acceptable.
- However, from time to time, there will have to be much more important decisions made that warrant a more scientific approach than the proverbial “gut”.
There is often a number of possible choices available at any decision point.
It is comparatively easy to become overwhelmed by this wide range of choices (multitasking woes) and spend all your time considering what choice to make and not progress very far in the actual process.
The following are a few truly critical things 12Faces believes are to be considered at the start of your decision-making process.
It is vital to understand the importance of the (generally) one or two “Bottlenecks” or “Constraints” in your business.
Until these are overcome, a change in any other part of your business will not improve the overall productivity of your business.
Consider an hour glass. This has a container at the top that holds the sand, a narrow neck through which the sand runs and a container at the bottom to hold the sand that has gone through the mid part of the hour glass. The narrow, middle part of the hour glass is the Constraint or Bottleneck in an hour glass.
No matter what you do, the sand will not run through that Constraint any faster. Therefore, the only way to make your hour glass run faster, is to relax the Bottleneck by increasing its size (if that is possible). Trying to do anything else other than reduce the effect of the Constraint is a waste of time.
The same is true of your business. A very few Constraints will control the throughput of all types of business.
Therefore, the first consideration, on any area to improve, is to find the Constraint and work on it.
Go to the Skills Module introduction: SM5.0 Theory of Constraints (TOC) Find and Remove Bottleneck
There is a rule of thumb that says:
- Approximately 80% of any improvement can be achieved by focusing on 20% of the things that you can improve.
This is known as the “80/20 Rule” or the “Pareto Principle”, named after the Italian economist, Vilfredo Pareto, who first discovered the principle in the 1890’s.
If you focus on the 20% of things that are important, you stand to be 16 Times more productive than if you spend your time on the 80% of things that are not particularly productive.
Go to the Skills Module introduction: SM2.0 80/20 Sales Growth; Double Sales, Triple Profits
Sometimes there are things to do that are not particularly productive in their own right.
But you have to get them done in order for something that is more productive to follow on.
Make these your “prerequisites” for more important work which you plan to do downstream.
With those three decision filters in mind, look at all the things you could do that would move your business towards its Goals.
Filter out ones that are:
- Not Constraints
- Low on the 80/20 scale
- Not Prerequisites
Once those that fail these tests are removed, your choices have been narrowed down considerably.
The ones that are left are your shortlist of changes likely to have the fastest and greatest impact on your business
- You have considered how to determine which are the comparatively few important things to do.
- Now decide what techniques you are going to use to prioritize these.
- Then apply the chosen technique to prioritise which ones to focus on.
Following are several techniques for arriving at your choice.
Your intuition, or the famous “gut” feeling, is often a very effective way for a person familiar with the business to choose what to do next.
In fact, intuition is probably the most common decision-making technique used.
However, it comes with a couple of down sides that are worth understanding:
- There will be issues to do with your business that you don’t know that you don’t know exist.
Go to the article: I Don’t Know What is Wrong
- There is a risk that by sticking to your intuition – things that you already know about – may stop you from introducing other alternatives that are more productive.
Following the path you are already familiar with may be counterproductive.
- In the same way, intuition will tend to drive you down old, familiar and comfortable paths in your business.
If your business is not as successful as you like, it is quite possible that these old paths are no longer doing the job sufficiently well.
If you use your intuition, you will stay with these well-worn, or potentially less than optimal solutions.
For this reason, intuition is to be respected but probably should not be the only decision-making technique used.
Identifying the constraint in your business has been discussed above.
It is definitely worth trying to identify what the constraint is and to give active consideration to whether it can be worked upon to increase the throughput in your business.
It will be difficult to grow your business until you have “relieved” the constraint.
Go to the Skills Module introduction: SM5.0 Theory of Constraints (TOC) Find and Remove Bottleneck
As you move into yellow, and perhaps later, blue belt areas, there are 2 groups of decision making techniques that you are likely to use.
When you are faced with complex decisions between apparently similar alternatives, there are techniques you can use to throw some light on what might otherwise seem a very complex decsion.
Let’s say you want to purchase a new house.
There are a large number of variables related to your house preference like, location, bedrooms, bathrooms, price and so on. So this is a complex decision to make.
However, these variables are not all at the same level of importance in your mind.
These are called “weights” to reflect the weight they have in your decision making process.
For each item you are weighting, give them a score to indicate their importance.
With a house, you might weight the quality of the local school highly and then score each possible house on the quality of the local school.
The technique known as “Weighted Scoring” helps to simplify these types of decisions.
Go to the article: Using Weights and Scores Prioritising Technique
12Faces has recognised 12 different aspects that you can work on, in your business, to improve the business and/or your own management expertise.
This is called the Dodeca named after the 12 sided geometric shape; a dodecahedron.
At any point in time, not all of the 12 faces of your business are of equal importance or able to be developed to the same extent.
Our free MyDodeca tool allows you to apply weights and scores to the 12Faces of your business.
Using it will also give you an introduction to the concept of weighted scoring.
Go to the article: How to Use MyDodeca for Sustainable Growth
Expected Value is a statistical term that says how much you expect to get back from something taking the probability of it happening into account.
An alternative term is Return On Investment (ROI), which indicates how much you will get back from investing a sum of money into an activity.
Although there are a number of ways of calculating Expected Value, we prefer to use a technique called Sensitivity Analysis. In essence, Sensitivity Analysis says – if I change this aspect of my business by (say) 10%, how much will my Profit improve.
Go to the article: Measure Impact with a Sensitivity Analysis
When you apply this calculation to a number of the variables within your business that can be altered, and use the same percentage change for each, it quickly becomes clear which of the many things that you could do will have the greatest impact.
To make this easy for you, all of our TrendBoard products come with a ChangeBoard that automatically does the Sensitivity Analysis for the data in that Board.
Go to the Article: Discover Your Business’s Secret Diagnosis
The article has a link to a Case Study that will allow you see these Boards in action.
Other Decision Making Tools
There are other decision making techniques in the 12Faces Dodeca Knowledgebase:
For now, choose which of the Decision Making Tools listed in this Section you want to use.
If in doubt, we encourage you to use the ChangeBoard technique. It will suggest the 20% of possible changes you can make that will give an 80% impact on your Profit.
Go to the article: Experiment with Changes to Your Business: No Cost, No Risk
- Once you have identified the most impactful changes with 80/20
- Check to see if any of them are your current constraint (TOC).
- You know from earlier discussion, that most impact will come about if you focus on the constraint until it is running as productively as possible
- Chances are that it will also have been identified as one of the high scoring elements in your Sensitivity Analysis.
- This is because the constraint is likely to be in the 20% most impactful group.
Now we turn to the issue of how much do you plan to achieve in this business improvement cycle.
Many people fall into the trap of trying to make too many changes at once. This spreads your energy and other resources across many alternatives.
It almost certainly means that you will take longer to implement those multiple changes than you would if you did them one at a time.
Go to the article: Why Multitasking is Not Your Friend
The moral of this story is, try to identify (ideally) one thing to focus on in the time available to make the change.
It makes perfectly good sense to want to implement the most productive business changes as fast as possible.
This desire is common in many project based activities, eg. writing software.
Software is notorious for taking far longer than anticipated to produce.
To overcome this, IT project managers have developed a concept called “Agile”.
This is a high speed technique for focusing on one, comparatively small, change at a time and pushing it through as quickly as possible.
Go to the article: Take Advantage of Agile/Scrum/Kanban to Increase Productivity
Some of the activities that you want to undertake will lead you in new directions where you do not have any reliable evidence that the new direction is the best one to take.
You might be going to change to a new Marketing Channel such as FaceBook.
Assuming you have little or no experience in this area, it would be ideal if you could have a methodology to test FaceBook without spending a vast amount of time, energy and other resources.
Fortunately, many other businesses have been in the same position of not knowing if a change will work..
A body of knowledge about how to launch new activities has grown up around the concept “Lean Start-up”.
If your business is in a Start-up or growth phase and/or if it is exploring new activities and directions that may or may not work;
Go to the article: How to Do Profitable Start-ups
One important aspect about Lean Start-up:
- Do not spend a substantial amount of time and effort developing a product which may not work.
- Rather, you should start with the “Minimum Viable Product (MVP)“
- That is the least amount of work you have to do to try to make a sale of your new product to people.
- Even if the product does not yet exist!
This is related to the preceding discussion on Agile.
The MVP is a swift way to test whether, in fact, anybody is even interested in the product or service that you plan to develop.
- If they are not, you can cease that change without investing a lot of resources.
- If they are interested, you can continue to expand and elaborate on the MVP with a view to making it a successful product. Read more on incremental improvement to business processes using Kaizen
The takeaway here is:
- Doing too much on any one change and/or doing too many changes simultaneously, is almost certain to stall your business.
- On the other hand, focusing on just one thing in short bursts, with experiments to prove that they will work, is likely to grow your business as quickly as possible.
In this article, we have identified;
- several techniques for short listing those comparatively few items that you could change to improve your business.
This lets you focus on those likely to have the greatest impact.
- several different decision making techniques to choose what to changes to work on that can be used in various circumstances and
- the benefits of making frequent small steps down the improvement path as the most effective way to progress
As you move up the “Belts” from white to black, you are likely to use increasingly sophisticated decision-making tools for your Business Changes Planning. You can see the Blue Belt version of this topic on this link.
But, even when you are first setting out to learn and apply decision-making, following the guidelines in this article is likely to make it as simple and successful as possible.
For more on our decision making resources:
Go to the 12Faces search: Decision making
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Go to the following Dodeca categories:
D2: Improve Productivity & Reduce Operating Costs
D7: How to Problem Solve and Use Decision Making Tools & Skills
D9: D9.3: How to Manage Your Business’s Lifecycle and Industry Type
D11: Methods to Improve Business Workflow