E-M8 Entrepreneurial Management for Eternal Mission

Understand Means
 

A person of an average strength that has proper leverage is capable of lifting more weight than does a champion in weigh lifting. Means act as such leverage for the business. Means can include real property: land and buildings; chattel: machinery, furniture, fixtures and equipment; and increasingly intellectual property: trade secrets, customer lists, brand names, trademarks, copyrights and patents. 

The team that consistently utilizes appropriate means for the tasks at hand has an advantage over a team that lacks the proper means to do their work. People make organizations successful, but tools make it easier to succeed.

Having the means is not a guarantee of business success. An otherwise successful team can easily acquire the necessary means. Yet, a company that is struggling can have the means become the leverage that works against the company.

The means will not do the thinking for the management. Leverage has no heart or brain. It works equally well for both good and evil. Means do not change the equation; they just magnify its results.

Means are not the business
In accounting terms means are called fixed assets. Means are easy to see and count. A lot of people, when they think of an organization, think of the means of production since the buildings, machinery, tools and equipment are the single most visible aspect of an organization.

The equipment is not the business. Machinery and buildings are not what makes business special. Even if the equipment is proprietary[1], the real value is with the people who developed it, not the equipment itself. People make a business. Means, when used wisely can enhance the business of the people, but should never dictate the focus of the business.

Means are what’s for sale
Means are all things that can be auctioned off. Their liquidation[2] value is what the means are worth even if the company is otherwise dead. Banks and other lenders really care about liquidation value, since it gives them some rough idea of what they might be able to say if the business defaults on the payments. While it is easier to secure bank loans for items with high liquidation value that by no means assures us that they are a good investment. If the liquidation value is high enough, the lenders will not care if you succeed or fail, but provide the money with the assumption that they can always get it back from liquidating the items.

It is the impact on the going concern[3] value of the means that is more important to the business.

Managing the Means
To do well in a given industry, the management and the workers have to be familiar with the tools that are used in that industry. A lot of training is devoted to knowing the equipment. The investors and bankers, too, care a great deal about this area, since the means of production, in the accounting terms – fixed assets[4], are a key capital[5] investment.

In spite of that, Means of production are commonly mismanaged. Some organizations treat people as though they were machines, while others treat machines as though they were people. For others the problem appears to be the discord between the objectives of the people that are financing and people that are using the equipment.

Traditional manufacturing tools are used to transform inventory. Service industry tools are used to transform information[6].

Workers are not Means of Production
There is a popular slogan that workers are the best business assets. They should not be. Workers should be workers and tools should be tools. An asset i.e. means of production, is something that can be bought and sold. On the other hand, buying and selling people, at least in this country, is illegal. Besides, the things that workers bring to the job could never be bought. In a well managed company, an employee, or a contractor, or a supplier is first and foremost a person who can make decisions and bring them to fruition, two things that machines or for that matter slaves cannot do. People are capable of dealing with exceptions. The machines are more effective than people in just about anything other than thinking.

Unfortunately, many managers and workers do not want to change. They never learned how to make good decisions and so it is hard for them to adjust. But, in order to truly succeed, we must adjust. We must become an organization that is learning and growing. Then the manpower can focus on creative and out of the ordinary, while the machines do the routine and mundane.

Means exist to enable workers
There is only one way in which means can improve the going concern value of the business. They can enable the workers. Not only do we want the workers to be more productive, but safer, always learning and with a clear opportunity to get involved and contribute. If the per worker productivity does not increase instantly with the addition of the new means, that does not necessarily mean that the means are not needed. Upgrading the lunch room in a manufacturing company would add little to the factory productivity. However, when properly implemented, it can have an impact on employee morale, engagement and commitment.

Means are not a replacement for Manpower
The goal of the effective means is to reduce the mundane and allow the workforce to focus on creative tasks, such as process improvement. If the work is more mundane and requires less thinking by the time the means are implemented, they are the wrong means. There is no greater waste of human energy than turning humans in to brainless zombies that, without thinking, press a button when the system gives them a signal. Sometimes making a task so simple that anyone can do it is a bad thing, because it allows an organization to hire a bunch of “anyone.” Typically, if a task requires no thought, it can be completely automated.

Simple and cheap is better than complex and expensive
 Means are the leverage of business. Generating the most leverage at the least cost is always preferable, to paying too much. There are many components to the costs of the means.  Albert Einstein accurately noticed: “Any intelligent fool can make things bigger, more complex, and more violent. It takes a touch of genius and a lot of courage to move in the opposite direction.”

Costs
For all the wonderful things that the tools can help us do, they are a substantial cost to the business. Unlike workforce, which can be brought in as needed, the bulk of the tooling cost is vested up front, and the ongoing costs often continue even when the machines are not used. Further, unlike people, who under proper management should become more valuable to the organization as time goes on, with time machines typically lose their value and eventually have to be disposed off.

In the lifecycle of ownership of the Means of Production there are many costs that go beyond the initial price tag. Everything we buy has to be installed and configured. The machines require space, training, maintenance and upkeep. The safety, as well as overall appearance and cleanliness of facilities can also be easily affected by the choice of tools. Finally, the equipment has to be disposed off, after it is no longer needed, and there is often a cost associated with that. All of these costs combine in to the total cost of ownership (TCO).

Effectiveness
In spite of all the costs, tools are often a great investment of business capital. An organization truly owns tools. While the workers can choose to go elsewhere, the machines do not have that option. Unlike people, machines do not call in sick, just so that they can play golf. So, from the standpoint of investment, machines are much more predictable and reliable about doing the work.

However, not all equipment is equally effective. There are a number of variables that play in to effectiveness of tools and machines. Various attributes influence the effectiveness of the means.

The perfect machine
The perfect machine is the machine that performs what is needed, when it is needed at no cost and is otherwise nonexistent. In other words, the best machine is the product that does the work to itself by itself. So, while many futuristic concepts have our worlds surrounded by machines, the trend is for machines to get smaller and more integrated in the surroundings, thus making us less aware of their presence.

Machines of the future may well operate on molecular level, rearranging molecules to create products that we intend. Controls of such machines will be the issue of pre-eminent importance in the coming world. Self-learning and self-healing devices are the promise of the future. Knowing this trend we should be able to separate truly superior technology from yet another old concept repackaged.

Rather than thinking of “the perfect tool” it is better to think of the right tool for the job. The perfect machine does not need to have any capabilities beyond what we presently need. It is a common to get excited about additional capabilities, but unless we can reevaluate our requirements to include those capabilities, they typically only add to the complexity of the actual tool.

Our tools should be simple to operate, functional and flexible. They should integrate well with our other means of production. Tools should be easy to access and store at minimal cost. But perhaps most importantly, tools have to be safe and reliable.

Mental Tools
Many of tools of the future are not going to be big and visible rather many will be small and invisible. Some of the most powerful ones are already strictly conceptual. Even today, intellectual property is becoming greater generator of wealth than physical buildings and machines. After all, a conceptual tool only exists when necessary and has minimal upkeep costs once it has been developed or acquired, so it most closely approximates the perfect tool.

A whole new set of problems arises with the conceptual tool. These have to do with ownership. It is only wise and proper to understand how we can capture and utilize these “soft” tools within a business. But we must also consider how we keep these tools from walking off or being lost when an employee leaves.

After all, the whole organization is a machine that we seek to build to carry out our purposes. To the investors and clients this machine of our business needs to operate in precisely that fashion: predictable and requiring minimal oversight.

Reliable, Redundant
Quality of equipment is measured by both the precision of the work that it is capable of producing and the consistency with which it can produce that quality. The machines that are capable of producing highest grade of the output, but jam up or break down every time that it is time to use them are just as unacceptable as machines that cannot sustain the level of precision that is desirable for our product line.

Level of reliability of the equipment should be factored in to decisions about acquiring the equipment. It is often better to buy two simplier/ more reliable machines than rely on the one machine that if fails will jeopardize the whole production pipeline. On the other hand, it is often more practical to maintain one piece of equipment well, as opposed to relying on two pieces of equipment that may introduce systematic variation in the production, by having the production of one machine be consistently slightly different from the other.

For example, companies that run both a manual and computerized accounting system, are not threatened by downtime because of complete redundancy, but commonly spend inordinate amount of effort to keep the two systems synchronized only to continue finding discrepancies.

Short run, Production
A better solution for the dilemma is to have an alternative process that serves as a backup, but is not constantly running. For example, having a computerized accounting system, but still keeping the manual forms available if something has to be done, but the computer is not available. It is often common to rely on prototyping to help scale up the production of a new product quickly, but it is also a good idea to retain the prototyping capabilities should there be a hiccup in the main process.

Integrated, Flexible, Multifunction, Easy to store
Finally, a good tool is available when needed and can be put away easily when not needed. Historically this has been through making tools multifunctional, in other words combining many functions in one tool. So long as the quality of the performance of the function is not sacrificed, multifunction tools are an excellent way to do varying tasks quickly.  The key is finding the tools that have the useful combination of the utilities and that can be switched over from one use to another quickly.

Given the same level of performance, flexible tools are much more valuable than the single purpose ones. But even single purpose tools are not all created equal. Good tools can be setup and torn down quickly, can be stored easily and located when needed. The tools that integrate well with the rest of the work environment are by far superior to the tools that are not. This becomes paramount in service business where the tools are primarily used to transform data in to information.

Summary
Means exist to enable people and organizations to achieve their mission. Means can typically be acquired or sold fairly easily. People should not be viewed as the means. The best tools are simple. With every tool there is a cost and there is a benefit, it is our goal to minimize the overall cost and maximize the overall benefit. The ideal machine is one that does not exist, but whose function is still performed. Mental tools are the best approximation for the ideal machine. The means should be reliable, redundant, integrated and flexible.

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[1] Proprietary – A design unique to the particular company, typically is confidential and is a closely guarded secret.

[2] Liquidation – Value converted to cash through an auction.

[3] Going concern value is the price someone would be willing to pay for the operating business. This value is primarily based on the perception of the future earning potential and the risks involved with this particular business.   

[4] Assets are things of value that a business owns. Fixed assets are the assets that are not turned in to cash in the ordinary course of business.

[5] Capital is the wealth, whether in money or property, owned or employed in business

[6] Information is data that is useful for decision making. Data is everything that is or can be communicated. Data that is not information is commonly referred to as noise.

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