Henry Ford revolutionised the motoring industry, indeed manufacturing generally, through the adoption of production lines, division of labour and application of the principles of economies of scale. By dividing the manufacturing process into 45 separate steps, with each employee specialising in just one small stage, Ford reduced the time it took to produce an automobile from 13 hours to just 45 minutes.
Every single element was standardised to ensure the most economical possible product – even the paint colour, hence Ford’s famous line “You can have any colour, as long as it’s black.” This brought motoring within the reach of the average man for the first time. When Ford opened his first rolling production line in 1913, his Model T sold for just $900, half the cost of his competitors’ cars, and equivalent to two years’ average wage. By 1921, the price had dropped to just three months’ average wage.
Today, process is just as important as it was for Ford. It’s process that enables businesses to scale and grow; to provide consistently high-quality products or services, and to keep costs down and profits up. But the world of business has undergone (several) revolutions in the last century, meaning that effective process today means something very different than it meant to Ford.
In the West we’ve largely transformed our economies from manufacturing bases to service economies. Because of that, value is now primarily located in people and skills, rather than factories and machinery. The processes that matter most in this market are those that increase the productivity of our people in providing those services, not those that maximise the output of physical products through increased automation. There’s always been overlap, of course, but the shift in the market emphasises the value of highly skilled, independent employees, and processes and technologies that enable them to focus on their role.
For small businesses looking to develop into bigger companies, there are also diseconomies of scale. As we build from a one-man-band to a micro-business with a few members of staff, for example, the cost of office space represents a huge step in costs. As you grow into a somewhat larger business, with say 50 staff, you need to recruit more experienced managers and directors, invest in software licenses, and so forth. All of these costs rack up, and eat into profits. Bigger isn’t always better.
So processes today refer to something very different. Instead of standardisation, it’s about enabling those skilled individuals your business relies on to work independently, whilst giving them the framework to work within, and a mission to work towards.
Crucial to this are well-laid out objectives and KPIs that work towards the overall business strategy, company values that let people know how they’re expected to behave with clients and colleagues, and the support of technology services such as CRM systems and software that reduces admin time. Today, processes should be oriented towards creating habits, not automatons!
So today for early stage businesses looking to scale the rule book has changed. The step cost of scaling a business to a hundred staff or more represent inherent diseconomies of scale. Against this challenge, it’s vital that we instil the right habits in our team so that our creation can work without our daily involvement. We need to feel sure that we can deliver the very best customer experience day in day out, not just on a ‘Berocca day.’