Three Sigma Systems

In business, we become habituated to thinking that is too abbreviated. We fall into a mind-set that our enterprise is about financial profit and rivet our attention on doing whatever it takes to maximize the bottom line. Of  course, some enterprises really are about nothing more than the bottom line. For example, many but not all bank robbers are in the profit business and their enterprises reflect straightforward theory and to-the-point methodology: “Your money or your life”.

( Come to think of it, we put bank robbers in jail if we can catch them, don’t we?)

But most business ventures do not fall into the same category as bank robbery. In most cases, profits are incidental to the value a business creates in the form of product and service. If your business does this very well, you, your employees, and your customers will profit. If your business does this poorly, everyone loses.

To overcome the problems that result from habitual thinking, it is important that you carefully consider the nature of the business enterprise, or any enterprise for that matter. If you do this, you will force your mind to attend to the issues that really matter with regard to the long term success and sustainability of your enterprise.

Homage to Entropy

Let’s  begin by paying homage to the second law of thermodynamics, AKA Entropy. This law states that all things “out there” are winding down toward disorder and ultimately to total randomness. The only way to overcome this tendency to disorder is to invest energy. Insofar as we know, life is the only agency that actively swims upstream against the tides of entropy through the process of natural selection and human beings are the only agents who do so with intention.

Might there be other intentional agents who swim upstream against the tides of entropy? Some say that there must be gods, GOD, and/or extraterrestrials who do this. That’s fine, but at this point in the game, we at least need to understand that the struggle against entropy is JOB #1 for human beings.

Swimming Lessons

It is not enough to say that enterprise is the process of overcoming entropy. We must toss our intentions into the mix, because our unique adaptation as the species Homo sapiens, is our ability to deal with the world as knowing creatures. This means that we have ideas about the course we should take while in swimming upstream and the methods we can use to follow that course. These are our theories, our stories, about the nature of ourselves and how the world “out there” works.

Next, we need to think about what we actually do in enterprising. In the simplest sense, we take a set of inputs and, in accordance with our theories of how the world works, we invest energy, material, and method into transforming those inputs into outputs that are more orderly than the original inputs.

For example, we dig an ore out of the ground and refine it. We smelt the ore into steel for building. We take steel and bridge a waterway so that people can travel more efficiently. We sandblast and paint the bridge to forestall its disintegration. We take a child and teach her engineering theory so that she can design bridges that are more useful, less costly to build, and last longer, than the bridge we built that allowed her to travel to engineering school.

Instead of the bottom line, focus on these elements of your system of enterprise

So now we have a definition of enterprise that states that enterprise is a process of swimming upstream against the tides of entropy with intention, by investing materials, energy, and method (based in knowledge) to transform a set of inputs into outputs of greater order.

NOTE: In general, energy and materials are equally available to your competitors. Knowledge is the sole source of competitive advantage.

The Hard Task of Figuring VALUE

The really hard part comes when we start thinking about what the aims of our various enterprises should be. Can the intention of our enterprises be anything? The answer is a qualified “yes”. As individuals, groups, and as a species, we can create an enterprise to any purpose, but some intentions will lead us to act in ways that harm us and other intentions will lead us do act in ways that will help us. Generally speaking, those intentional acts that are perceived as helpful are said be “value” enhancing. Those that are regarded as doing harm, are value destroying. Those that do nothing, are of course, valueless.

Who decides what is value enhancing? W. E. Deming said that the customer decides. In the narrow sense of the business enterprise, the customer is the ultimate “decider” who votes with his pocketbook, by embracing or not embracing the products and services of a business enterprise. In a larger sense though, the value of any enterprise must also be judged by the net effects it produces. We must ask if, on the whole, it is harmful or helpful. This question must be answered in the context of our needs in some given time and place. Only the process of knowledge creation can help us to make these determinations and we can never do so with perfection.

The question of what constitutes value lies at the crux of any enterprising intention. Ultimately, there is no level of financial profit, or set of numbers, or calculation, that can tell us if educating our young, or making war, or building Hummers, are value creating enterprises. These are problems of long-term optimization, and although knowledge and understanding can help, in the final reckoning we can only aim our enterprises with the intention to create what we believe will be valuable to ourselves, our loved ones, our community, and our fellow human beings. This is the ultimate measure of success in the human enterprise.