Sprocket: The Mechanics of Business Success

Introduction

Adapt or die.

Charles Darwin¹ wasn’t that direct when he proposed his groundbreaking theory of evolution, but his meaning was clear. Organisms that successfully adapt to changes in their environment survive, and those that don’t die, extinction becoming the ultimate fate of their species.

As a business leader, you know this is your reality, too. When businesses fail to adapt to changes in their environment, performance suffers. If ineffective adaptation is allowed to persist, poor performance progresses first to obsolescence and then ultimately to failure. The failure will be incorrectly chalked up to external forces that were out of the business’s control. In reality, the failure resulted from an inability to effectively respond to these forces, which was well within the business’s control.

In the natural world, changes and the resulting necessary adaptive responses required by organisms generally take place over decades, centuries, or millennia. Consider that the earth’s major landforms are created and destroyed by tectonic plates that move less than one inch per year. Even when catastrophic events occur (a volcano erupts or an asteroid hits the earth), changing landforms instantly, it can take years to fully realize their impacts on organisms.

In the business world, change occurs at such a fast and furious pace that you are lucky if you have days to adapt, let alone years.

In 1900, the world was only just beginning to harness the power of electricity and the combustion engine. At that time in history, it took one hundred years for the totality of human knowledge to double.² In the ensuing century, the world experienced an explosion of technological innovations, including (and this is the short list) aviation, television, nuclear power, computers, and the internet—with human knowledge doubling every twelve months and predictions that it would soon be every twelve hours!³

Change in the world is so rapid, so widespread, and so constant that it can feel at times like it is impossible to keep up. The world is yelling Faster! while businesses are still slowing down to negotiate the hazards in the road that the last change created. We are witnesses to the exponential nature of change—the more it occurs, the faster it occurs.

The degree to which your organization can implement appropriate adaptive responses to change is dependent on its effectiveness and efficiency. Effectiveness is the ability to produce a better result, one that delivers more value. Efficiency is the ability to create and deliver this value using the least amount of time, effort, and resources.

If your organization is like most, your business design is compromising its effectiveness and efficiency. When change occurs, the degree to which your organization is ineffective and inefficient will determine how well (or even if) it can implement an appropriate adaptive response. If you want your organization to thrive and not just survive (or even dive), you need a better design—one that will allow you to identify and implement transformational changes without major interruptions to operations.

Right now, it’s trendy to try to anticipate and prepare for all the changes coming your way. Doesn’t it make more sense to own a vehicle that allows you to drive your business forward, whether conditions are sunny and clear or dark and stormy, and nimbly adjust to changing road conditions without sliding into a ditch or plunging over a cliff (even if you can’t see any pavement markers or road signs telling you what’s up ahead)?

This book introduces you to a better design for your business that I call Sprocket. Adopting this more intentional design will allow you to optimize your organization to run effectively and efficiently and adapt quickly and successfully to changes in your business landscape so that you are not stuck on the side of the road with all your competitors.

As a scientist, I am educated and experienced in performing detailed research to further the body of knowledge in a given field by observing phenomena, devising hypotheses that explain these phenomena, and designing experiments and/or collecting additional data to test those hypotheses. This approach is an iterative process, meaning it’s a cycle rather than a straight line. The more times the cycle is repeated, the better the answers get through the process of convergence. As an applied scientist, my work starts with acquiring knowledge, but my endgame is applying this knowledge to design and build practical solutions to real-world problems.

Our modern society, particularly in the business world, puts a premium on being smart. But being smart is no substitute for having knowledge, and having knowledge is no substitute for acting. If you only take one lesson away from reading this book, let it be this one.

In my more than thirty years as a business owner, I have worked with hundreds of clients representing small private organizations (less than ten employees); large private organizations (thousands of employees); local, state, and federal agencies; and nonprofit entities of all sizes. This work led me to discover that there are five critical components that drive up effectiveness, efficiency, and accountability in organizations, helping them to succeed over the long term by allowing them to adapt to changes without significant disruption to their operations.

This work also uncovered another pattern that I was not expecting. The business leaders I interacted with were almost without exception aware of the problems with effectiveness, efficiency, and accountability in their organizations, but saw them as by and large unavoidable, much like death and taxes.

When their organizations were strained due to events such as acquisitions, market fluctuations, or regulatory changes, they mistakenly viewed the negative impacts on their operations to be the result of these external forces only. They did not understand or appreciate that these external forces were merely accentuating their existing problems with effectiveness, efficiency, and accountability. That’s analogous to getting into a car accident and blaming wet roads when the tires were bald and the brakes were shot.

If you are a business leader struggling with low levels of effectiveness, efficiency, and accountability, this book will help you understand the underlying causes, what needs to change, and how to affect that change with limited angst so that you can successfully adapt when external forces change your business landscape—again. I’ve divided this book into three parts to explain where you are now, where you need to be, and how to get there.

Part 1:

imgcircle.jpg Illustrates and explains the outdated design under which your business is operating and why it is wholly inadequate for creating effective and efficient organizations today

imgcircle.jpg Explains how this design will ultimately doom your business because of the three forces that are currently reshaping the business landscape and will be for the foreseeable future

Part 2:

imgcircle.jpg Introduces a more intentional design that incorporates the five critical components that are needed to achieve high levels of efficiency, effectiveness, and accountability

imgcircle.jpg Explains how these critical components work together as a system so that you understand how to create more synergies and less interferences among them

Part 3:

imgcircle.jpg Teaches you the most effective method to implement transformational change in your organization

imgcircle.jpg Provides a blueprint with step-by-step instructions of how to build the best version of each of these critical components so that you can minimize disruptions to your operations during periods of required change

I have seen the impact this design has had on organizations where it has been applied. After years of frustration trying to pull the door open, their leaders learned how a slight push was all that was needed.

My purpose in writing this book is to share my findings with you so that you can put this knowledge to work in your organization, making it more effective, more efficient, and more responsive to change—regardless of whether the market is up or down, the economy is growing or shrinking, or who is sitting behind the big desk.

When change comes, and it will, you don’t want to be in the driver’s seat of a Model T or Pinto.

Are you ready to embark on a journey together to drive your business forward, watching all the inefficiencies and misdirection and confusion get smaller and smaller in the rearview mirror? If so, what are we waiting for? Let’s get started!

Design is not just what it looks like and feels like. Design is how it works.

STEVE JOBS

PART 1

The Inherited Business Design

Causes Your Business to Misfire

If you’re a leader in an organization, your biggest frustration is likely how hard it is to move the needle in the areas of effectiveness, efficiency, and accountability. Since these are measures of employee behaviors, you might logically conclude that resolving these issues is a matter of fixing your people or culture (our latest ill-defined business buzzword). It may be logical, but it is incorrect.

The problem is not your people; it’s your business design. The harsh reality is that today’s business design is a composite response to past business sensibilities and, therefore, is wholly inadequate to meet the present needs of customers and employees, even under the best of circumstances. When stressors are applied to the business in the form of substantive changes in the economy, the market, or the regulatory environment, this legacy design can and does doom a business.

Let’s explore the origin of this business design you inherited; how it’s negatively impacting effectiveness, efficiency, and accountability in your organization; and how it’s making your business more vulnerable to threats.

What’s Around the Bend

In chapter 1, we’ll explore the four outdated and ineffective components of the inherited business design by defining them and investigating their individual impact on the effectiveness, efficiency, accountability, and adaptability of a business.

In chapter 2, we’ll explore the three major forces that are straining that legacy business design to a breaking point.

Let’s get our journey started.

If I had asked my customers what they wanted, they would have said a faster horse.

HENRY FORD

CHAPTER 1

Its Obsolescent Components

Organizational Charts, Mission/Vision Statements, Value Propositions, Money Focus

When I ask business leaders what their business architecture looks like, I generally get a quizzical look, followed by You mean our organizational chart?

Every business operates under the guidance of an organizational chart. But have you ever considered whether this tool helps to drive up effectiveness, efficiency, and accountability in your organization, or whether it helps you to quickly and successfully implement adaptive responses to changes in your business landscape?

Organizational Charts: A Graphical Directory of the Big Dogs

A little history. The first organizational chart ever produced was by the Tabulating Machine Company, which was truly groundbreaking—in 1917!