Is There A Maximum Value In Your Business?

Ok... Stop for a second.

Let’s take a bit of time to look at your business. 

Regardless of whether you are a Solopreneur or run a Multi-million dollar enterprise, I want you to step back and look at how things are going. Take a bit of time to examine what you or your company does day in day out. Make a list if you can.

Okay, now looking at this list, go through and mark only those activities that actually add value to your business proposition. By this I mean ONLY those activities that your customers / clients would be willing to pay you extra money just to have you or your company do this task above anyone else. Did you make a complete list of everything that you do day to day? Even the mundane tasks that you push back down the list whenever you have a chance?

How many items can you identify that are critical from your customer’s point of view that they are executed by you or your company? These might be items that you make better than anyone else, a service that you provide that if by far superior to your competition or an aspect of your business model that keeps customers coming back.

So what percentage of “What you do” is what your customers want to pay you to do? How much of your time is spent working on these tasks that your customer does not really care about?

Let me give a couple of perspectives here.

Years ago I worked with a client on a site optimization project. The client wanted to get the best utilization from parts and equipment in their manufacturing facility and minimize the amount of bottlenecks and down time. One of the first activities I noticed was they were using a plasma cutter to cut repetitive sheet metal profiles manually. The shapes then would need to be filed into the correct shape in order to fit into the end product and regardless of the skill or amount of work done by the operator, consistency was a major issue.

This also had a knock on effect that cutting of larger thicker sections for assembly with the plasma cutter were delayed due to machine utilization on smaller repetitive parts which in turn dragged out the total efficiency of the facility and the run time needed to complete a product.

A laser cutter was far better suited to create precise and low cost parts from the same material and so I convinced the client to move this process to an outsourced laser cutting service nearby. The results were compounded: plasma cutter time was no longer a premium nor was it a problematic bottleneck, the laser cut shapes were fit for purpose straight from the factory and did not need “adjusting” and the overall output of the facility increased by approximately 25%. All from ceasing doing one process that not only was not adding value but was impacting on those the were value add.

Upon questioning the facility owner on why the parts were not sent out to a more specialized service I got the response “we have a plasma cutter which cuts metal so we though we could just do it all in-house” basically it made sense to do it in house because there was a machine that could do it as opposed to having the best solution to do the job.

I see similar stories over and over, companies that start out doing one task really well and continue to internalize as much as possible under the misconception that this is saving money because “we are already paying wages anyway”.

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Now let’s flip over to SE Asia.

I have also done a lot of work with factories throughout China, Thailand, Taiwan and South Korea and found that the opposite is true.

You will find it extremely difficult to find a factory that “dabbles” in a multitude of different activities, regardless of whether they are SME facilities or factories the size of a small town there is always one common ideology: We do this well so this is what we do! If they need something else for a client, they find who is the best at this and subcontract the function. Collaboration is everywhere even within industries and even the smallest business is usually so well connected that they either know directly a facility to undertake specialist work or know someone who does (and I’ve had some unique requests over the years...)

So in essence, what am I trying to say here is:

1. Focus on what your customer is paying you to do.

2. Internalizing is not often an effective use of your workforce

3. Collaborate – if you collaborate with another company to do those tasks that you are not specialist in performing, maybe they will do the same for tasks in which your company is expert in undertaking

4. Don’t be scared to outsource - locally or wherever the solution makes the most sense from your business model and customer requirements. This is both physical tasks and office functions. Your customer does not really want to be paying you (directly or otherwise) on doing your admin tasks. So unless you are not yet deriving a stable income from your business, you should consider freeing up this time so you can do more of the value-added work (that customers are willing to pay for).