Your business sells a product that probably started as an idea. How did you move from idea to physical product? You researched the market, researched how to create the product, identified your target market, created a business plan, created a marketing plan, made the product, sold the product, got paid for the sale, tracked production costs (R&D, manufacturing, marketing, sales, etc.) and more.
ABSOLUTELY a business is a system! It is a collection of individual systems that work together to support growth, efficiency, and consistency. Knowledge is captured and compiled in a manner that allows the system to be created. Once the system is created and documented, it becomes something that can be trained to anyone to perform the tasks outlined.
The main operating categories for any business are Finance, Human Resources, Production, Research & Development, Distribution, Sales and Marketing. These 6 operating areas have systems that remain within the area and some are interconnected to other areas with some crossing all areas.
Finance and Human Resources routinely touch every aspect of your business. Finance tracks the costs incurred to produce your product, captures payments and generally accounts for how the money is spent and received within your business. If your business has employees, human resources functions help track employment and personnel needs, employee hours worked, performance reviews, vacation/sick days earned, etc.
With Finance and Human Resources interacting with all operating areas of your business, how do the remaining areas interact with each other? Let’s look at each individually:
- Research & Development (R&D): This area works on new designs for your product and/or new products. The area receives intelligence from Sales & Marketing about new features/functions that could be incorporated into your product, based on market feedback from existing or potential customers. Once a new product or updated product is finalized, it can move into Production. The specifications needed to manufacture the new or updated product are sent from R&D to Production.
- Production: Upon receipt of new or revised specifications for products, this area will manufacture the product(s). Materials will be ordered for the manufacturing process to create a new or revised product(s). Quantities needed to be produced, if just-in-time, will be provided from Sales. Distribution will receive the completed product(s) to store and eventually ship to customers.
- Distribution: Completed products for fulfilling orders are stored in warehouses after manufacturing has been completed. Once orders are received, products will be “picked” to fulfill an order and shipped to the customer. As inventory is reduced, Production will be updated to provide more products. This request will be balanced against Sales forecasts to ensure the product will sell and not sit on selves to become outdated.
- Sales & Marketing: Once new or revised products have been completed in R&D, Sales & Marketing receives the new specifications. New marketing materials will be created for Sales to share with existing and potential customers. Sales will take orders for Distribution to fulfill.
This is a simplistic view of business and the interactions of the major operating areas. Just as the operating areas interact, systems follow those same interactions. One definition of a system is a regularly interacting or interdependent group of items forming a unified whole.
Keeping to the simple, another definition of a system is an organized or established procedure. Procedures, automated or manual, document systems for your business. Having clearly defined systems provides your business with the ability to scale, or contract, when needed. As your business grows, systems will be important to keep your business consistently producing products your market continuously wants.
With the many areas of business, we will explore each in greater detail and discuss simple and more complex systems. At some point, you will want to automate your business systems. The clarity of your manual systems enables your selection of automated systems to be easier. More on that as we move forward.
If you want to learn more, complete the Contact Form to start your systems improvement journey.