WHAT IS A GOOD BUSINESS OPERATING SYSTEM?
Most great companies have systems that differentiate them from the competition. Some call those business systems, some operating systems, some production systems, some business operating systems. Because so many excellent companies have something named similarly, it makes sense to ask: "What is a good business operating system?"
I believe that a business operating system is higher level and broader than an operating or production system, but for some that distinction is semantics.
For me a business operating system defines the most critical aspects of the company that create differentiation: the way the company thinks, behaves, goes to market, produces value and works with each of its constituencies. The operating system, for me, controls the last three of those, and reflects the first two.
When I look at top companies, I find distinctions created by clear vision, codes of conduct, and respect for all constituencies, but those mean nothing if not supported by the observable behavior of discipline. So perhaps it is discipline that is the true differentiator.
Does that imply an army of human robots without the ability to adjust, innovate, or think? Not in the least. Discipline does not imply unchanging. It refers to doing things the way we agree to do them without exception. Constant change is facilitated by a defined change process that is used with discipline. Without that discipline, constant change is chaos.
Does your company have a formal business and/or production operating system? What are the components you believe critical to success?
I look at manufacturer assessment tools and see wide discrepancies. Some focus on results metrics, some on strategy deployment and execution, and some on quality systems. None of those is wrong; I simply find them all incomplete.
Perfect execution of a bad strategy at least confirms it is a bad strategy. Let's not settle for that. A tight feedback loop of vision, core values/behaviors, strategy, and execution — all done with discipline — can keep you profitable for years to come.
So how does a good business operating system accomplish that?
Can a company be truly great without effective systems?
Does it not also require well-defined processes from top to bottom?
What about clear roles, responsibilities and accountabilities?
What about an organizational structure that is effective, easy to navigate, and sufficiently flexible to support a changing world?
What about skills? Is it enough to have an outstanding cross training program if the business can't identify the skills needed now and in the near future, and then ensure they are resident or in some cases accessible?
You are smart and have seen many good and bad companies that I have not experienced. Please share your thinking regarding business operating systems vs production systems, and the critical components of each. I'll share your input (without names, if you prefer) in a future letter.
After all, we're all in this together!
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