Guide 8: The 10 Times Systems Test
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The first challenge every food entrepreneur faces is, “How do I get this food company to grow?” Once you solve this problem, the second challenge is, “Wow! How do we keep up with all this growth?” Sure, it’s a great problem to have, but make no mistake about it—it really is a problem that needs to be solved.
Scalable Systems The key for managing rapid food growth is to standardize your operations and design internal procedures that are scalable. Scalable operational procedures can handle significant increases in volume without re-design. If you have a highly technical background, you’ll recognize that these terms come from the technical side of the IT business. A scalable technology system is one that allows you to add many more users to your system without the system breaking under extreme usage. A simple example would be your website and provider, such as Wordpress or Shopify. These platforms are fantastic systems designed for up to a specific amount of users and customers to shop on the page at any one time. However, if you land on Shark Tank and 10,000 consumers attempt to check-out at the same time, it’s going to break. The site is likely not designed to handle that heavy a load in the system. You might have a great looking and capable site, it’s just not set-up to handle the 10,000 shoppers. You will need to talk to your suppliers and internet provider on the capacity and ability of your site to take plenty of orders in such an event. Also, be sure to look for pieces of the process that might break with such a heavy load such as credit card processing, various systems, and plug-ins along with the amount of bandwidth your provider has allocated for your service. Scalable “People” Systems This concept of a “scalable system” can also be applied to the non-technical aspects of a food business. Every facet of your company - accounting, sales, marketing, customer service, consulting, product fulfillment, production, and technical support—is a system. I’m not talking about just the baking or tech systems used in these areas; I’m also talking about all the manual work that gets done. For example, when you integrate a new employee into your company, you use a system. There are specific steps that need to be done—employee orientation, tax forms, employee benefit setup, e-mail address setup, provision of a desk, phone number assignment, and so on. The key idea here is to recognize that literally everything in your business is, or should be, a system. The “Bottleneck” Concept An important concept to understand in dealing with systems is “the bottleneck.” It’s the part of the system that holds back every other part of the system. Executives who manage factories commonly use this term. When a portion of a manufacturing line is broken, it creates a bottleneck that constrains the output of the entire factory. For example, let’s say you were running an ice cream manufacturing facility capable of producing 1,000 cartons of ice cream a day. One day, the carton sealer on the production line has a problem—one of the two primary sealing tools has failed, and only 500 cartons can be sealed a day, instead of 1,000. This is the bottleneck. Bottlenecks can cripple any system. In our example, ice cream production drops from 1,000 cartons per day to 500 cartons per day because of a single failure in the line. It does not matter if the factory employs thousands of workers and every other part of the line is running at full capacity; the entire output of the facility is constrained by this single bottleneck. Another way to characterize the bottleneck is: A system can only produce at the capacity of its weakest link. The “Bottleneck” Is Enemy Number One The Bottleneck effect has important implications when it comes to creating and sustaining extreme food revenue growth. It’s impossible to sustain extreme revenue growth if you’re not actively anticipating, looking for, and removing, the key bottlenecks in your company. Let me give you some examples that illustrate this idea: Let’s say your company has grown quite dramatically from $35 million in sales one year to $100 million the next. Clearly, your sales force was able to produce $100 million in sales. But, can your production and retailer order support departments handle $100 million in sales? If not, your customers will be disappointed in the experience. If the problem is severe enough, they will stop buying and your sales will automatically drop to a level your plant and retailer order support staff can handle. The market has a tendency to automatically correct itself whenever you have a bottleneck in your customer-interaction systems. Obviously, you don’t want the market demand to be reduced to meet your company’s ability to supply. You’d much rather increase your company’s ability to supply to meet the hot market demand. Now, in a modestly growing company (say 15% per year), this is much less of an issue. It’s much easier for modestly growing businesses to improve their systems and capacity incrementally. The challenge in a company with extreme food revenue growth is the need for greater capacity—yesterday. The Key to Scalable Systems: Remove the Bottleneck The key to creating scalable operations is to continually look for, and anticipate, bottlenecks in your business operations, and to continually remove bottlenecks through process re-design, automation, or outsourcing. It’s an on-going battle that you must deal with for as long as you intend to grow. In other words, you’re always going to be dealing with this issue. Remember, any time a system has a bottleneck it constrains the overall output of the system. So, if your capacity to recruit new employees is lower than your ability to generate revenues, you’re going to hit a brick wall at some point. If your website can handle 10 million users a day, but your bandwidth agreements and data storage systems only allow 1 million users a day, when user number 1,000,001 visits the site there are going to be problems. Here’s the peculiar thing about bottlenecks: They’re often hidden and difficult to detect. It’s also common for underlying bottlenecks to be far removed from their more visible consequences. For example, if you had a slowdown in sales, would it ever occur to you that the reason is due to the lack of customer service reps for your club store channel? So, what are you supposed to do? Go answer phones for the reps yourself? Of course not. Here’s an easier approach. Train your team and all your employees to be on the lookout for future bottlenecks and eliminate them before they can constrain growth. You will have to remind your team to do this constantly. It takes a little more effort up front to create a process, procedure, or system that scales well, but it makes such a big difference in the end. The 10 Times Test A simple way to get your entire team thinking about and removing future bottlenecks is to ask them a simple question: “If our business grew 10 times overnight, would you be able to handle it?” Ask your head of Customer Service: “If our new customer volume increased by tenfold, tomorrow morning at 9 a.m., would your department be able to handle it?” Ask your appointment desk, dock, and warehouse: “If the number of trailers needing full pallets increased 10 times, could you handle the number of loads?” Your VP of Sales should be thinking: “If the number of retailer category reviews and promotional interest increased tenfold by 9:00 tomorrow morning, could my team follow up with all of them?” Don’t be surprised if the first time you ask these questions you get a “You’re crazy” look. In spite of the look, it is the right question to ask. In fact, from a “managing growth” perspective, it is THE question to ask. Here’s why: It gets your team thinking about all the ripple effect issues that 10 times growth would cause. We’ll take a simple example: If your customer service department had to handle a 10 times growth in new customers each month, could they do it? If not, why? Let’s look at the potential issues:
I always measure how good a question is by how many other questions it inspires. By this measure, the “10 Times Test” is a really good question. So, ask yourself: “Could my company handle 10 times growth overnight?” Almost every time I’ve asked this question I’ve gotten a frown in response. That’s because virtually every leader I know realizes the answer to the question is “No.” Further, the question itself shines a bright light on all the potential bottlenecks. It forces you to answer the questions about what parts of your business would “break” under a 10 times increase in business. More importantly, you want your entire team thinking about what could be done today (with little to no incremental cost) that would make it easier to handle such growth. The key to managing, and ultimately sustaining, extreme food revenue growth is to anticipate future revenue growth bottlenecks and eliminate them before they actually constrain revenue growth. Key Ideas:
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