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1/ What is the optimal business strategy for your company at this moment? How do you decide what the next project you should work on is? A thread summarizing my latest post. 
2/ The answer, of course, is “it depends.” But, I think that there are frameworks that can help you figure out the next step.
3/ The framework I've found most helpful for thinking about this problem is Eli Godratt's Theory of Constraints.
4/ Here's an example: If a factory has an assembly line with three machines and those machines can produce 50, 100 and 150 units per hour, then the total output of the system will be 50 units.
5/ Increasing the capacity of the second two machines seems “productive” and like a “good business strategy,” but is, in fact, a total waste. More resources have been spent to improve the product line, but the first machine is still the limit.
6/ Goldratt’s work revolutionized the manufacturing industry, but it’s applicable far beyond that. Nearly any system can be improved using the two core questions of the Theory of Constraints:
7/ My experience working with early-stage companies has been that there is a pretty clear series of bottlenecks which companies go through.
8/ When these businesses struggle to grow, it's rarely a lack of effort but one of two reasons that the Theory of Constraints would predict:
9/ Imagine an early stage business where it is just the founder(s) and maybe a couple of contractors. The founders are strong operationally but not so much at marketing and sales. The throughput of their business would look something like this:
10/ Like a manufacturing production line, the bottleneck is always changing. If the same business improved their marketing and sales and were able to hire a full-time person, then the production function would shift to look something like this:
11/ Now, the bottleneck is hiring and management and the business needs to focus its attention there. Let’s say they do and there is a small team which works well together so operations and management improves. This is great, total output goes up.
12/ But now the founders' personal operations may have fallen behind as their schedule fills up with meetings and responding to emails that are coming in way faster then they were used to. The bottleneck shifts to personal operations.
13/ What you’re going to be very excited to learn is that this framework is (wait for it….) fractal. If marketing and sales may be the overall bottleneck, within the marketing and selling systems of that business, there is an even more specific bottleneck.
14/ Here are the different sub-categories I think through with clients and how you can apply it.
15/ The first bottleneck for many founders is what I call personal operations. I break personal operations down into three sub-categories: task management, priority management and knowledge management
16/ If this is your bottleneck, you're thinking things like:
17/ Task management – At the most basic level, this means an ability to do what you are going to do, when you say you are going to do it. Task management includes things like:
18/ Priority management – If task management is the ability to take incoming data and request and transform them into tasks that get done, then priority management is the ability to not just complete tasks, but to prioritize them based on bigger business objectives.
19/ Priority management includes things like:
20/ If priority management is the ability to prioritize tasks into projects based on bigger business objective, then personal knowledge management is the ability to take the learnings and outcomes of those projects and convert them into re-usable intellectual property.
22/ Everything listed here is by no means exclusive to people working in early stage companies, but are generally useful work skills.
23/ The next bottleneck is typically marketing and sales and is all about making sales (and getting to Product/Market Fit along the way).
24/ The most common mistake among first time entrepreneurs is an insistence on getting all their “ducks in a row” before going out to (aggressively) market and sell their product or service.
25/ If marketing and sales is your bottleneck, you are thinking things like:
26/ The three elements I typically look at are the Economics, Conversion, and Traffic, what @PerryMarshall calls the Tactical Triangle.
27/ Traffic means getting people through the door (literally or metaphorically). The main components of traffic are determining who you are targeting (who would buy this?) and how you are going to reach (how are you going to reach them?). It includes things like:
28/ The importance of economics is self-evident for bootstrapped businesses because they need the profit to keep running, but it’s equally important for venture-backed companies to have good unit economics, even if they are burning money. Improving economics includes:
29/ If the economics of the business are good, the next step is typically to work on better converting leads into buyers.
30/ The next bottleneck is business operations. At this point, a business typically has product/market fit but is having trouble scaling. I find this to be a particularly common problem with fast-moving founders.
31/ If Operations is your bottleneck, you are thinking things like:
32/ The first and best way to improve systems is through automation. Software works 24/7, predictably and cheaply. Any systems in the business which can be (profitably) automated should be. Automation includes things like:
33/ For those tasks where automation isn’t feasible, the next step is to clearly document the processes in a way that passes the “off the street test.”
34/ That is, could someone who has the basic qualifications for their role, be that an electrical engineer or social media manager, read your documentation and complete the task successfully. This includes things like:
35/ Once you have the basic documentation structure for the business or business unit set up, the next bottleneck is to outsource those tasks which can be done more efficiently by a specialized contractor. Outsourcing includes things like:
36/ When a business has a good marketing and sales system in place and established processes in their operation, the bottleneck typically shifts to hiring and management.
37/ Hiring – The first step for going from a good to great company is getting the right people on the bus. That means developing systems for attracting, vetting, onboarding and training new team members. Hiring includes things like:
38/ Culture – One of the common mistakes that happens at this stage is that the founder or managers try to micromanage too much.
39/ Having specific documentation and checklists for some things is great, but at this stage, founders and managers need to rely more on communicating a mission and values then letting the team have greater latitude to operate. This includes things like:
40/ Managing – Many people who haven’t studied management or have a lot of experience think that management means assigning tasks to people in Trello or holding team meetings.
41/ If you read someone like Peter Drucker (who pioneered the field), you will see that management is something much more broad, an understanding of how to use the resources of the business (particularly human capital), in the most efficient way possible.
42/ This framework is not perfect and this list is not exhaustive by any means. Whole books have been written about each bullet point in this list and their are entire fields of study about each of the sub-category.
43/ That being said, I've found this framework quite helpful as a starting point for looking at any business and being able to do a quick diagnosis.
44/ You can read the full post and get all the links at taylorpearson.me/business-strat…
