The business world is full of uncertainty. Many managers cross their fingers, build the planned addition to their business in its entirety, or their start-up, then launch it and pray. The most common outcome from this approach is - failure or, at best, mediocre success. Starting with the auto industry and then moving to the start-up industry, smart managers are dramatically reducing their risk by doing a series of experiments that let them "fail fast" and cheaply if their idea does not have legs. This approach substantially speeds up the migration to a profitable new avenue for the business. This is a Yellow Belt (Introductory) article.
The problem with building a new part of your business in its entirety is that you can't be completely sure which parts will work the way you expected when you built the system. You also will often have trouble correctly predicting what consumers want. Consequently, your fully built new system will quite likely have a number of components that have to be re-jigged for the activity to work well. Some parts of it may have to be completely discarded with the consequently loss of time and money.
Fortunately, there is an increasing body of very useful knowledge on how to most effectively, efficiently and with the least risk, start up a new business activity.
This is known as Lean Startup Theory.
The Lean comes about from the science of lean manufacturing and is designed to get from position A to position B as rapidly and effectively as possible.
Most interestingly, Lean has adapted the Plan/Do/Check/Act (PDCA) Cycle to operate for a Start Up activity.
They call this process developing a Minimum Viable Product (MVP).
Essentially it says that rather than start the entire business from top to bottom and then see if it works, you start the absolute minimum you need to test the viability of that business and then you go out, effectively door knocking, to see if people are prepared to buy the product. If too few potential customers are interested in your MVP, you are very unlikely to be able to sell a full-blown business with the same offering. So you “fail fast” before you spend too much time and money on something destined not to work.
This is very sound advice, and highly recommended, not only for Start Ups, but for any new avenue that an existing operating business is thinking of engaging in.
It is a thorough approach to testing the feasibility of an activity before getting too far immersed in it.
Military people say that all plans fall apart the moment the first shot is fired. Much better to have a small plan (your MVP) that you can launch and test in the market and then adapt to whatever circumstances come about. This process of adapting is very firmly entrenched in the Lean Start Up discipline and is referred to as doing a "Pivot".
A large number of very successful businesses started out doing something quite different and found that their MVP's weren't viable, then did a pivot into what has become a successful business activity for them.
If you decide to launch your own business, we strongly encourage you to read some of the Lean Start Up books and videos we list in the Profitable Startup article. Also, a Google or Amazon search will turn up many references to Lean Startup Theory
Very loosely, activities in business fall into 2 categories:
- Repetitive assembly line type tasks, even though they may require considerable specialist knowledge and skills as input. However, essentially the operators are following a well known and documented routine.
An example of a routine: the processes required by an Accountant to process an annual tax return.
- The other group falls into Projects. These are activities that are being done for the first time or which vary considerably each time they run.
An example of a Project: the design of a new building.
Over time, a body of knowledge has grown up about how to efficiently and effectively conduct Projects.
One approach has become known as the Plan Do Check Act Cycle (PDCA Cycle). It is attributed to W. Edwards Deming.
Deming had a tremendous impact on the area of quality control, particularly in relation to the Japanese automotive sector. He did his work shortly after WW2 but the concept dates back as far as Francis Bacon in 1620; it has had some testing done over time!
The concept revolves around having the same 4 stages for every project that a business undertakes. By adopting this standardised approach to projects, a body of techniques can be developed within the business for managing projects. Even though they may vary substantially in the nature of each project.
12Faces uses the PDCA Cycle approach in its training materials.
It provides a framework for making sure that the training is fully implemented from concept to outcome rather than potentially withering on the vine part way through.
In the Planning phase, the team sets out the goal for the Project. This ensures all following actions in the Project are designed to achieve the goal set.
Based on this goal, the nature of the activities within the Project can be Planned according to whatever planning methodology is appropriate for that particular type of Project.
The Doing phase encompasses all of those activities that are necessary to carry out the various tasks in the Project.
Once again, these will vary considerably depending on what the Project is meant to undertake.
However, many of the issues faced in efficiently "Doing" the tasks in a Project are discussed elsewhere in 12Faces.
Some suggestions, and their links, on how to undertake this stage effectively are:
We want to be:
- Confident that the Project has been properly and fully implemented.
- Able to assess the value of the outcomes of the Project so that we can see whether this type of Project should continue.
- Able to determine if this Project requires further work to make it as productive as possible.
This means setting a number of objectives, or KPI's (Key Performance Indicators), that are associated with the Goals in the Planning stage.
It might also mean selecting Metrics which measure the outcomes of the Project and can be shown on a Project dashboard to determine progress and the results.
Go to the article: Metrics for Profit
Exactly what you check will vary considerably with the nature and purpose of the Project, it is not possible to give a standard set of Checks.
When you get to the final stage of the cycle it is time to Act on the outcomes of the Project.
Many different decisions might be made at this stage but they could include such things as:
- Do you continue with later stages in the Project?
- Do you cancel the Project on the basis of unsatisfactory performance?
- Do you adapt or modify the way the Project operates? This is based on the experiences in the "Doing" part of the cycle to improve the workflow and/or the outcomes.
- Do you convert the Project into a routine so that it becomes a normal part of the operating cycle of the business?
This is only a very superficial overview of the PDCA Cycle.
A great deal of research and many books have covered this process. This is because it has had such a dramatic effect on the quality and the volume of production in many sectors.
There are many video's, blogs and books on the topic of the PDCA Cycle and its various elements.
We encourage you to explore other, more detailed, resources via Google.