Standardize this, or the comparative profitability of Deng Xiaoping and Louis XIV

Standardize this, or the comparative profitability of Deng Xiaoping and Louis XIV

What is the difference between an autocrat and a constitutional government? Standardized business practices are functioning laws that apply equally to all.

Want to transform your business from a Honduras to a Japan — study this.

Standardized business practices can miraculously transform a business from trash to gold. They’re accessible to every manager and owner for absolutely nothing.

The difference between a "young, rapidly growing company" ("to rent the stapler") and a full-fledged organization, is the latter's use of standardized (to some degree) business practices. The size, number of employees and turnover are irrelevant.

But "a young, fast-growing" band of friends cannot systematically be profitable. In other words, standardized business processes are an essential (but not the only) part of a consistently profitable company.

What is the difference between an autocrat and a constitutional government? First off, standardized business processes are functioning laws that apply equally to all.

Want to transform your business from a Honduras to a Japan? You already know what to do. After a couple of years of perseverance, the result will exceed all expectations.

But, after only a couple of years and the necessary perseverance.

The less power the boss holds — the more similar to the retired Deng Xiaoping, and less similar to Louis XIV in his prime — the higher the dividends for shareholders.

In the long run, companies in which the boss alone makes commercial decisions are always worse off than companies facing similar conditions, but in which decisions are made according to formal, public criteria.

A business that functions perfectly on the operational level = Standardized business-processes + correct system of material incentives for personnel. Ford in the age of the real Ford, Toyota in the age of the real Toyota.

No wizardry, no shamanism, no management, no IT and no multimillion dollar consultants.

NB: we're only talking about the operational level.

It is possible (and in the long run inevitable) that companies, ideally functioning on the operational level, will go bankrupt, but because of failures in marketing strategy. And vice-versa.

April 06, 2017 by John Galt