The things we are best at we enjoy doing
The converse is also true the things we don’t do so well we rarely enjoy doing.
Most small businesses are built around the passion and specific expertise of the founder. But there are many things that must be done if a small business is to grow and prosper. Cold calls must be made to find prospects. Proposal written before contracts are signed. The work must be done well to meet the needs of the customers. Invoices must be prepared and sent before the cash can be collected for all the good work done. The accounts must be kept to financially manage the business.
Be honest with yourself. Think about your own business and I am confident that you will, like most small business owners, recognise that you only do a few of these things better than most. To run your business you think you have to do it all but do you? Should you?
Back in about 2004 Acumentum had been employing an enthusiastic and knowledgeable techo to look after our network to make sure that all our expensive designers and programmers didn’t waste time configuring and maintaining their PCs and software. He earned about $50K a year. Having mastered our 30 PC network he accepted an offer of a more exciting job working on a larger and more complex network. We wished Martin well. We advertised and appointed a replacement but a week later the new techo resigned (because he got a better position he was going for). Right at that frustrating moment one of the owners of The Grid made a cold call to our office and not surprisingly he was very well received as he had a wonderful solution to our problem! I think we even gave him an espresso coffee and a sticky bun.
The Grid are specialists at setting up and maintaining PC networks. Rather than costing me $50,000 salary plus payroll tax, Workcover, sick leave… I needn’t go on. They put a proposal for $22,000 per year covering every working day of the year! No payroll tax or Workcover but critically no calls in the morning saying I’m sick can’t come in today.
Earlier this year I began coaching David Markus the founder and Managing Director of Combo. Combo (www.combo.com.au) is a firm that provides outsourced technical support for computer and telephone networks. They have worked extremely hard at refining their specialty. Learning how to do things more effectively, more reliably, at a higher quality and ultimately at a much lower cost than their customers could possibly do themselves.
By setting up the network to refined standards, configuring software so that it meets requirements and providing online access for experts to assess and fix problems Combo have improved the productivity of their customers whilst substantially reducing their costs. They can do this because they learn better techniques and better solutions every day. New standards emerge and costs are reduced. Everyone is a winner.
Increased specialisation is driving innovation which is creating real value and ultimately wealth
This is not a new idea. Adam Smith wrote in 1776, six years after Captain Cook sailed into Botany Bay, that “the greatest improvement in the productive powers of labour, and the greater part of the skill, dexterity, and judgment with which it is anywhere directed, or applied, seem to have been the effects of the division of labour.” That is productivity gains are achieved by breaking the work into its specialised parts.
Over the 235 years since Adam Smith identified the importance of specialisation, economic success has clearly demonstrated the value in freeing up workers to focus on what they do best, creating efficiencies through learning better ways of accomplishing the chosen specialised tasks, improving the process by breaking the tasks into simpler tasks and providing opportunities for the specialists to innovate and invent better ways of achieving the outcome.
In this time industry has also learnt the cost of mind numbing repetition and worker disconnection that reduces productivity and over relatively recent times work practices have focussed on motivation and responsibility to drive quality and productivity.
All this has produced highly innovative outsourced businesses that provide products and services to save time, improve quality or lower costs. Phil Ruthven, Australia’s best known futurologist, has been forecasting the outsourcing of cooking, cleaning and education from our homes for more than 20 years. Think about the last time you went to a good butcher. Not only do they dice the beef but they will also add the marinade and provide you with the ready ingredients so that all you need to do is cook.
As the NBN is rolled out and every business and every home gets 100mb (which will soon become a gigabit) Internet access to their desktops it will be possible to divide up the tasks even further and new and even more innovative businesses will emerge.
Small business owners are self reliant, action oriented, results focussed people
Will the characteristics of successful small business owners hinder owners in taking advantage of the emerging outsourcing businesses that can improve the quality and lower the costs of many of the tasks they do internally today?
In 1937 Ronald H Coarse published a paper titled “The nature of the Firm” in which he argued “A firm will tend to expand until the costs of organising an extra transaction within the firm becomes equal to the costs of carrying out the same transaction on the open market. As long as it is cheaper to perform a transaction inside your firm keep it there. But if it cheaper to go to the marketplace do not try to do it internally.”
In 2009 the enormous range of potential suppliers (usually over the Internet) of ever increasing range of tasks makes the cost of carrying out most things externally cheaper than continuing to do them in-house.
Smart businesses today use their business planning process to thoroughly review every task they perform in their business. Each team within the business should be encouraged to compare what they do every day and decide if someone else can do it better and or cheaper. They should be using this process to constantly focus on what they do best.
But even with those things that people do best they need to be using the Internet to help them do it even better. “Someone outside your organisation today knows how to answer your specific question, solve your specific problem, or take advantage of your current opportunity better than you do. You need to find them, and find a way to work with them collaboratively and productively with them.” (Wikinomics: How Mass Collaboration Changes Everything)
Tags: business planning, Collaboration, innovation, Russell Yardley, small business, specialisation, strategic planning
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Well done Russ. Our working environment is characterized by a specific set of material (firms, infrastructure), immaterial (knowledge, know-how), and institutional (labour, authorities, legal framework) elements. These elements make up a complex web of relations that ties firms, customers, research institutions, unions, the industry associations, and federal and local authorities to each other. How we relate to these stakeholders is key to any collaboration / project / endeavour we engage in.
I think your article is spot on – specialisation is both inevitable and essential in order to improve productivity, and also robustness. The other side of the coin is the role of the integrator: the person who understands what constitutes a working business eco-system, and which ‘organisms’ or components are worth including.
I like the analogy of an eco-system because any healthy eco-system is well-integrated but loosely coupled. Healthy eco-systems are well-integrated in the sense of the various elements contributing to a sustainable outcome, but loosely coupled in that Individual elements can come and go without creating a ripple, and even whole species may be replaced without disruption. The older way of doing IT systems is where everything was tightly-coupled – remove one element and the system is damaged. This is too fragile a mode of operation for any business to tolerate long-term (although many businesses are still be in this vulnerable condition).
I think the high-level view needs to include:
- overall system-plan
- identification of quality components to fill the various roles
- definition of human job roles and processes
- data-exchange between the various components (this is the critical translation mechanism that enables disparate elements to contribute to a unified business outcome)
- security.
I have pulled security out as a distinct item, even though it is obviously part of assessing the components. My reasoning here is that data-security is the major challenge now that so many critical business functions are going online.
Businesses that embrace the power of connective technologies need to be sophisticated in credentialling the components and services, and in understanding how the elements connect to form a viable business eco-system. Naivete in this domain can be very harshly punished.