{"version":1,"type":"rich","provider_name":"Libsyn","provider_url":"https:\/\/www.libsyn.com","height":90,"width":600,"title":"Operational Friction","description":"In a previous episode we discussed market friction, which I described as the heart of all entrepreneurial opportunity. This week we\u2019ll discuss operational friction, which is central to profitability. Theory of constraints In the classic personal development book The Goal, Israeli management consultant Eliyahu Goldrapp outlines a \u201ctheory of constraints,\u201d which essentially says that to achieve any business goal \u2014 such as profitability \u2014 you must first identify and resolve the operational friction in your organization.  Friction can mean anything that slows your company down, impedes growth, or stymies innovation. Often, it\u2019s seemingly small things that go overlooked until you start digging. Friction is hindrance to the execution of strategy A century a half before Goldrapp, the Prussian general and military theorist Carl von Clausewitz described a similar type of friction in his posthumously published book On War. He defined friction as the hindrance to the execution of strategy. If your objective is to overtake an enemy, he wrote, the friction might be getting armaments to the frontlines: managing supply transport, keeping the horses fed, etc. Work on the business, not in the business How do you identify the operational friction in your business? First, you need to free up time to think about the big picture \u2014 and the minutia. In the classic book E-Myth Revisited, author Michael Gerber wrote that the goal for leaders is to work on the business, not in the business. Have a vision You have to have a vision of how something might be done. Have a dream scenario that you\u2019re trying to achieve. Look for the chokepoints Then scrutinize all of the things that may be causing friction along the way. Ask, \u201cWhy aren\u2019t we able to do this today? What\u2019s holding us back\u201d Look everywhere for the bottlenecks \u2014 the things holding your organization back from achieving your main objectives. Essentially, you\u2019re asking, \u201cWhat\u2019s wrong with the way we\u2019re doing things today?\u201d  Understand your objectives The key is understanding your objectives. For example, are you trying to increase the throughput of a specific system within the business or lower the costs of a certain process? Defining your objective helps you hone in on the chokepoints.  The \u2018little\u2019 things aren\u2019t always When you do this, you end up paying attention to seemingly little things that are easily overlooked. It could be a policy that requires someone to take an extra step, which adds that much more time or cost to a process, and ultimately hinders your ability to hit your company\u2019s objectives. Often, it\u2019s something put in place by accident. Formula 1 now vs. 1950 There\u2019s a great YouTube video, \u201cFormula 1 Pit Stops,\u201d comparing a pit stop from 1950 to one today. A process that once took 67 seconds now takes less than 2. Pit crews removed friction across the entire chain: They adjusted policies, such as quadrupling the number of people on a pit crew; they invented new tools; and they started training like professional athletes. The result: faster pit changes than anyone thought possible in 1950. Elon Musk\u2019s \u2018production hell\u2019 Elon Musk was in what he called \u201cproduction hell\u201d recently. Tesla built an assembly line to automate the entire process, in order to reduce their operational friction and cost of production. But it didn\u2019t work, and humans had to take everything back over.  During this time, Musk slept on the factory floor working out small engineering problems to improve the efficiency of the line. In order to understand those issues, Musk felt he had to be there 24\/7. Get into the details When you roll up your sleeves like Musk to investigate, it\u2019s among that morass of small things that you find the one thing that matters and has an oversized effect on everything else. A lot of times it\u2019s decisions that you made before that people take for granted. Measure the right things To do this well, it\u2019s crucial that you track the right metrics. If a 1950 pit crew measured its performance solely by what their competitors were doing, they\u2019d be setting their sights too low, compared to what\u2019s possible.  Knowing where things are today doesn\u2019t help you understand what\u2019s possible in the future.  Low-hanging fruit When you see a lot of capital \u2014 whether time or money \u2014 spent in one area of your company, that\u2019s often low-hanging fruit for improvement.  Don\u2019t over-correct Organizations can create their own friction by overanalyzing what went wrong and trying building elaborate mechanisms to ensure it doesn\u2019t happen again. So you have to put things into perspective. The biggest thing The biggest thing is asking questions about why something can\u2019t be so much better than it is \u2014 and not incremental better, but transformationally better.  It\u2019s an automated assembly line. It\u2019s instantaneous auction listings on Music Exchange. It\u2019s a pit stop in less than 2 seconds.  These are the types of things that reduce friction within an organization and lead to sustainable profits.   Resources E-Myth Revisited, by Michael Gerber The Goal, by Eliyahu Goldrapp  ","author_name":"Smith Sense","author_url":"http:\/\/smithsense.com","html":"