Ants and leverage: what do they mean for your business?
It is June. Summer has arrived. Birds are chirping. Flowers are in full bloom. People are enjoying picnic lunches in the parks, and you know what that means: our friends the ants are out and busy at work.
Ants are everywhere. They are one of the most abundant animals on the planet, and their contributions are important. They are fantastic engineers and born to work. And ants are strong. Very strong for their size. Scientists generally agree that an ant can lift up to 20 times its body weight – with its jaws. That’s like a human adult walking around carrying three full-sized cars with their teeth! With their strength and numbers ants waste nothing – in other words they leverage everything at their disposal.
Does your business fully leverage everything it can to improve performance? Let’s explore that question together.
Leverage across the performance chain is about making more or doing more with existing resources and capital assets. Think of it as the productivity of fixed capital, working capital and labor. It can also mean benefiting by tapping the resources of your customer base, business partnerships and relationships. Like a growing ant colony, the challenge is to make sure you get the most out of the capacity you have and the investment decisions you have already made – people, supply and distribution networks, raw materials, plants or branch facilities and equipment – before spending, investing or borrowing more money.
Too much capacity
When there is too much capacity, clearly everything at your disposal is not being fully utilized. And, when talking about excess capacity one thing needs to be clear: cost cutting and leveraging the performance chain are not the same thing. Using excess capacity takes a strategic behavior change and a committed effort to repurpose the resources and assets. Many companies sadly decide it is easier to just cut it out. An ant would never make the choice to cut. Ants only know more. More work. More output. More room for others. Leverage the colony, everyone and everything at their disposal. Growth is the only way.
If you find yourself in this situation with too much capacity the first two questions are:
|1.||Is this a short-term or long-term excess capacity problem?|
|2.||Is there opportunity to use your resources and assets in new ways?|
If your answer to the first question is that you have a short-term problem, leveraging your performance chain to cover the downturn with new or different activities preserves your strengths for the rebound. If you determine that you have a long-term problem, your job is to preserve the resources and assets that give your performance chain strength and that can be leveraged into new opportunities.
Not enough capacity
Not enough capacity is much more enjoyable to think about. This is your opportunity to do more and perform better with the resources you already have in place. Leveraging your existing performance chain resources and assets is all about thinking differently and locating the pockets of opportunity across the performance chain that can release capacity and energy.
How do you go about finding these pockets of opportunity? The key is to start with a diagnostic that provides the information you need to prioritize decisions. If you are going to do more with what you have and release capacity quickly, you can’t change everything and likely don’t need to touch every person, process and physical asset. Whether your performance chain is vertically integrated and completely in your control, or includes outside suppliers or distributors, this is a time to get everyone on the same page.
Looking broadly and horizontally across your performance chain will increase the likelihood that you’ll spot great opportunities to hone in on and make dramatic leverage improvements without disrupting the entire chain. There may be one or two operations or sites which, if changed, can impact the flow of ins and outs across the entire chain. You may find employees who, if simply freed from burdensome processes, can improve their output. It is highly likely that if you look, you will find historical or dated practices that can just be eliminated.
Find buried working capital
While you are taking a strategic or horizontal look across the performance chain at leverage opportunities, you may already know of some hot spots or bottleneck areas that need to be addressed. You can use focused projects to begin solving these challenges and start increasing system output through tactical changes. Consolidation of two good operations and teams into one super team. Taking one day out of cycle time can be worth thousands to a small company and millions to a large one. Changing a process that holds up large receivables behind small ones is pure gold. These are all good business practices. The company performs better. An ant would be proud.
If you need to address how effectively you are leveraging your current performance chain, here are a few questions to get you started:
|1.||Is your current concern too much capacity or not enough capacity to match your demand requirements?|
|2.||Where are hot spots or constraint areas that you know about?|
|3.||What metrics, actions and forums allow for development of shared interests across functions?|
|4.||What would one additional day of cycle time reduction be worth to you in freed up working capital?|
Leveraging a business performance chain really is much like the ant colony that over time grows from thousands to millions, from a small mound to an entire ecosystem. Leverage comes from utilizing every resource; finding ways to release working capital to fund additional growth.
If youre at a park or garden spot this summer and you see your highly leveraged friend the ant, stop to admire his strength and selfless contributions to the greater good before you sweep him away.
And if you want to learn more about how to effectively increase leverage in your business, read more in ROAR: Strengthening business performance through speed, predictability, flexibility and leverage. www.roarthebook.com
Pragmatic optimist with over 20 years of leading meaningful change. Sees every performance chain through lenses of speed, predictability, flexibility and leverage. Gets excited when smart decisions align with what customers value and generate stronger business performance. More about Chris.
"ROAR does an excellent job of making complex business models easy to understand and accessible. Through the skillful use of metaphors, Mahai breathes life into business concepts that tend to be very dry. I would recommend ROAR for any organization looking for innovative ways to engage in understanding and implementing best business practices." - John Foley, author of "Balanced Brand"