A fundamental concept that I want to discuss is that of the success of a business being based on its systems and processes. The success and size of a business is directly proportionate to the efficiency and effectiveness of its systems.
Let me give you an example of this.
Everyone knows McDonald’s is famous for it’s Big Mac.
But it’s also famous for it’s approach to business as a system. There wasn’t anything particularly special about McDonald’s, but the fact that it adopted standardized processes and systems allowed it to rubber stamp its operation all over the globe and become one of the largest companies in existence.
McDonald’s is actually a system of systems. There’s a standardized process that spells out every single job operation and role in the company. McDonald’s has a huge success rate in training it’s employees, kids off the street, in becoming productive in the operation because its systems are easily trained and measured.
A Big Mac tastes like a Big Mac in every single store because McDonald’s has a specific system in place to ensure the sandwich is made to exact specifications.
What would happen if it were left up to the line cook on duty in each store to interpret how the ingredients were supposed to go together to make a cheeseburger?
Before long, the customer experience and product would be different in every single store.
To make matters worse, inventory and costing of individual ingredients would start to vary. One store might use more lettuce, another might just have one burger patty. This creates real problems for a company on the size and scale of McDonald’s because what used to be a very measurable, consistent thing is now random from store to store.
Inventory needs can be forecasted because the exact amount of each ingredient is already known for each menu item when it’s served according to the exact formula in the system. The costing of the ingredients is automatically calculated and known, so purchasing has a very concise understanding of how much each store is using, and how much cash needs to be allocated to the budget.
This is just an example of how business systems are important to the success of an operation, but it’s an important foundation going forward.