Thread by @joshuamschultz

🚀 50+ Principles, Concepts & Mindsets related to operating a business. I've made a lot of mistakes,
Gotten a lot of advice,
Sat in a lot of roles...

Here is how it has shaped my view towards business thus far 👇

Twitter disclaimer:

Business is a spectrum of gray, not black and white

- These are in no order
- These are all wrong at some point

Some of these
- were developed by me
- were learned through mistakes
- were taught to me by better operators.

Ok, here we go!

Its better to learn to allocate capital within the business, to projects, and to strategies & experiments

Acquisition is largely related to cost of capital, which lowers with size and relationships

Lowering your capital need & ROI hurdle rate through allocation should be focus

When you focus on performance, risk builds in the system

Eventually this risk can cause problems or even catastrophic loss

It is better to continually remove risk from the system. In the end, you'll realize higher returns over large periods of time.

Optimize for risk reduction

Systems, over long periods of time:

- perform better
- are more reliable
- perform best when emotion is highest (and thus needed most)
- are more consistent
- are predictable
- allow for quality at scale
- diminish the need for superstars
- are understandable
- are improvable

People are

- more important than systems
- have needs, desires, and ideas outside of systems
- are the purpose and reason
- are who we hire, buy from, sell to
- more adaptable than systems, and quicker
- are to be valued, empowered, and believed in

Performance tends to be due to regime structures.

When regime changes, performance ends/crashes

When you optimize for performance, you over-invest in the current, at the expense of the future

Instead, longevity and survival should be the focus of the operation and the business

An aspect of longevity is the ability to exist in dynamic environments.

The first step to building an operation that can adapt is building one that prizes experimentation (and the inevitable failures that will come as a result).

Through time, most innovations tend towards commodities.

One way to differentiate is relentless focus on customer, supplier, and employee touchpoints.

- Remove friction
- Make simple and beautiful
- Build them to be smart and hide complexity
- Personalization goes a long way

Technology is not a strategy.

Technology can help things
- happen faster
- handle more volume
- Grab and use more data
- automate low-value tasks
- increase your ability to execute your strategy...

But adding it is never a strategy.

A constant & relentless view at build-up in your operations is required.

Over time feedback systems & adaptive moves will
- add unnecessary red tape
- render older systems and processes no longer needed.

Constantly look at what you can
1. Eliminate
2. Delegate
3. Automate

Companies spend 30% or more of their time on
- communicating,
- searching for information,
- or doing "rework"

None of the above pushes the company forward.

This all falls back to:

"How does your company communication both internally and externally"

This matters BIG TIME

Business is the perfect instrument to

- serve employees, their lives, and their families
- develop communities
- add to industry knowledge
- contribute towards climate
- reduce socio-economic problems
- increase the well being of stakeholders

A business that is clean and organized beats one that is not

every single time

- Customers are more impressed
- Tasks take less time
- Information is found faster
- Health and mental well-being for workers is higher
- Safety is higher

Implement 5S

Everything you do or own is sales.

Every email response from everyone in the company either builds or tears down your company.

The boxes your customer gets.
The paper weight of invoices
The shelving color in your warehouse
The e-whiteboard in your conference room

Its all sales

Over the long run, deep relationships are going to help you

- get great prices
- reduce lead times
- increase quality
- have your stakeholders innovate for you
- pull out a win in an emergency

Avoid humiliating and profit stripping negotiations. Build LT relationships.

Sometimes you have a major issue.

How do you

Nothing can

- innovate on the spot
- adapt
- foresee problems
- assess a dynamic situation

as quickly as nimbly as a human.

Experiment first, automate last.

Sometimes a short-term loss is a long-term win.

Understand defensive sales.

Don't let anyone come close to your customers and potentially take market share.

Sometimes this means entering adjacent markets

Quarterly goals are one of the most important aspects of moving a company forward.

Short enough to focus
Long enough to accomplish

Should focus on main metric, while weekly discussing activity metrics that will impact main.

MetaSystems are incredibly important when longevity is the goal.

Systems that build or adapt systems.

Create methods/reviews so you know when your company is not acting right.

Build systems that help you assess, innovate, and execute.

When de-risking operations, you need to make sure you are "Always Up".

The more flexible your operations, the less chance you'll experience loss.

Make sure multiple people know how to do key processes (and that they know who they are)

Hiring the right people tends to cover up most other problems and issues.

The right people will create new ideas, strategies, frameworks for your company to continue growing.

The wrong ones will require you to keep doing it all.

Don't be cheap, ROI is huge here.

Toxic people are NEVER good for an organization.

Put aside their sales numbers, their productivity, and their connections.

If they don't build the team, the vision, and the community... they don't belong.

Adaptive Organizations require Feedback Loops

Build methods for
- collecting
- discussing
- innovating on
- implementing
- analyzing
- removing

...feedback from
- problems
- customers
- employees
- suppliers
- stakeholders.

Want some examples of implemented feedback loops? Take a look at this...

Alignment is created by synchronous participation

I hate meetings, but nothing aligns like a live meeting.

1. Mandatory weekly
2. Add daily when misalignment is bad
3. Consider monthly/quarterly for higher-level alignment (strategy, project)

These are expensive, use sparingly

Create a platform for work that is based on asynchronous work.

Decisions
Projects
Collaborations
Approvals
Communications
Feedback

As much as possible, make the core of these systems async.

The most flexible organizations have a core OS based on remote work.

Not that all (or anyone) is remote.

Work should be
- done
- analyzed
-discussed
-retrievable
-contributable

... from anywhere (as much as possible).

A culture of written work is a superpower in operations.

Writing:
- enforces clear thinking
- reduces sync time need
- encourages preparation and thought
- creates a historical record
- provides history for new people, or when others leave
- Can be used to improve in the future

Whenever looking at systems or processes, I like to ask

"While this still work at 10x or 100x the volume"

Don't build things that will break or cause bottlenecks elsewhere.

If everything passes this test, you'll experience far fewer issues during growth.

Decentralized Decision Making at the Node leads to a more adaptive (and thus longevity-focused) operation.

You'll sacrifice uniformity, control, and efficiency. These are performance contributors.

When longevity is more important than performance... decentralize.

When you are around long enough, you'll experience crisis.

This can either
Kill you
or
bring you amazing opportunity

Buffers give you the capacity and cash to
- protect what you have
- capitalize on what you dont

When a system is operating at near full capacity over time, the likelihood of breaking down is raised quite a bit.

There is also no excess capacity to take care of new needs.

You sacrifice speed for efficiency.

Some slack in the system is good.

An organization where every single person can effectively

problem solve correctly and make
probabilistic decisions has a
compounding advantage for

every decision made, at every level, every day.

I have come to view a business as 3 machines.

Machines because you can tweak, fix, improve, and invent on the core.

Operations creates value
Sales communicates value
Finance tracks and leverages value

For more about

Documenting your business is one of the most important things you can do!

Reduce Error
Increase Scalability
Decrease training and onboarding
Create Corporate understanding
Create a cash flow asset, not a hobby.

If you want to do this, here is how:

Every day people in your business, & your business itself is
- learning
- improving
- adapting

Many let this flow through their fingers.

Find a way to capture knowledge as its created.

Retain more, which is acted on daily, compounds amazingly.

Create an internal knowledgebase

I'll take an operation that is focused on small improvements implemented continually over betting on massive change.

Evolution happens through daily exposure to slightly changing environments.

Create a culture of micor-innovation from the ground up.

They say you can only have 2 of 3...

I'll pick Quality every single time.

Low Price leads to low margins and impossible wars.

Low Quality will create a bad reputation no matter what your price was.

Keep a LEAN company all the time.

Never is there a time when "We need to bloat up to survive".

There are a few times when leaning out allows for survival though.

Prep for the crisis before it hits, and keep more money in the meantime.

Stage-Gate creates an almost impossible process to implement innovation.

Its better to make the decision from various perspectives and departments, and weigh them.

Stage-Gate will kill anything that doesn't pass all tests.

Some of the best ideas fail some common tests.

No company can do everything, especially when you price allocation over acquisition.

1. Set your strategy
2. Know the risks and costs
3. Prioritize and choose those with great ROI, good risk/reward, and are strategically aligned.

If you always maximize profit

You are also always destabilizing your company.

Leaving margin for suppliers, customers, and transaction parties keeps them
- interested & incentivized
- build relationship
- provides cushion for their survival
- allows them to innovate & invest

Great Leaders don't command, they don't need to.

They set an inspiring destination that calls to action from inside people's hearts.

They empower others to go after it.

Commanding is what you do when you can't lead.

Developing People is investing your number resource.

Help them become who they want to be, and who they can be.

Yeah they might leave.
So what?

This is one of the highest ROIs

Bring an ROI mindset towards everything.

If you are spending
- money
- time
- attention
- energy

Why?

What are you getting?
Is it worth it?

Always consider the Return!

I learned this the hard way.

No quicker way to lose loyalty or touch with what is needed, than to think you are above a role or job.

Stay in touch to better
- understand
- build loyalty
- lead
- improve
- strategize
- adapt

Culture exists.

Purposefully or accidentally.

Leaders have a responsibility to

- create a great culture
- enforce it through values, principles, and guides
- protect it through action

Anything you can't get back matters.

Some decisions are irreversible
Time is always moving forward
Money isn't free

Keep a keen on how you spend these.
Others in the company will follow your lead and attitude towards these resources.

If the company does well...

EVERYONE SHOULD BENEFIT

No matter the role.

This can look different for different people... but this a ride we are in together.

The hardest part of business is the people.

There are emotions, ex-work concerns, and internal desires and goals.

The best way to navigate the complex human side of business is to know what truly matters to the people that work for you.

Incentive?
Flexibility?
Status?

You want a long-term advantage over all your competitors?

Build Internal Training Programs.

Build your own superheroes, day in and day out!

Make it challenging
Make it rewarding
Make it fun.

The further you are from the customer relationship,
the lower your margins are, and
the harder it is to hang on to the business.

A fact I have not been able to avoid yet.

You need to be lean
You want good ROI
You don't want to waste.

however, as far as allocating resources... remember that there is
- infinite upside to sales
- a very limited downside to cost cuts.

Usually 5% up is much easier than 5% down.

Work backward.

Goal setting: Goal setting, look where you want to be, work backward and develop a plan.

Money: Set your profit, create an op that fits budget

Problem-solving: Work from ideal to problem, what needs to change?

Always push a process or task as early in the system as possible.

This creates more operational flexibility.

A few times a year this will save you and provide opportunity.

This can be thought of as Time Optionality

There are lots of trends, technology, and distractions that come up every day.

The reality?

Consistent
execution of the
fundamentals
day in and day out
for decades

brings a level of success you can't shortcut and you can't beat

Optimize for Optionality when you can.

You will sacrifice performance,

but will be able to provide a more flexible operation that can adapt and survive.

Operations leadership can be summed up as

"Remove friction for employees, customers, suppliers, and stakeholders"

Where might some forms of friction rise up that slows or even inhibits work?

Creating operational leverage is what helps small companies have a big company impact on small company budgets.

Operational leverage is largely reducing the marginal customer cost

How do I lower the cost of servicing an additional customer?

Fight the entropy that leads to being a reactive owner/leader.

Keep the strategic front of mind.

Otherwise, you'll find yourself spinning your wheels, and not moving much over time.

There are many ways to do this, but here is mine.

Everyone is responsible for improving the company.

No improvement is too small. They all work together and compound.

Create a culture of constant and continuous improvement.

Looking for a way to start?

Do this as a company, or in teams to get people excited:

Or if you want a more theoretical approach to just streamline what you already have, you can try this

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- smb operations
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Then follow
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