Guest Commentator: Dimitry Cohen, Head of Strategy & Innovation, Archetype Solutions Group
What are the most crucial data points Middle Market companies should be tracking?
Many software developers use the term “technical debt” to quantify the cost of the extra work required as a result of an inferior solution being used in place of a more sustainable solution. This concept isn’t exclusive to software development. It applies to sales, customer service, marketing and more. This can broadly be called “operational debt.” Small, concerted, doses of operational debt can be healthy; many companies will refer to this as ‘not letting perfect be the enemy of great.’ However, there is a point at which the incremental resourcing that operational debt requires far outweighs the benefits it may create.
Middle market companies must find a way to provide value to customers in a competitive industry while navigating limited resources. Companies that have found success have done so through two sources; a hard-working, dedicated staff and the ability to move quickly when an opportunity arises. Companies that excel in the middle market know they can work harder and faster than competitors to win their customers’ business. While in success this makes for great folklore, companies can easily fail by taking the wrong shortcuts to achieve short-term goals. These shortcuts can have the unintended consequences of creating inefficient workflows that consume company resources for long periods of time. This is operational debt.
When we’ve partnered with companies, we often see previously successful organizations that have recently buckled under operational debt. Any extra resources brought in are not able to efficiently add value as much of their time is spent filling holes. When you add an employee to simply manage the consequences of inefficient processes, that spend is not productive, it only subsidizes operational debt.
A refrain we hear from middle market companies is they don’t have time to focus on the long-term fix and, as an example, their dedicated salesperson covers the gap by responding to inbound customer service inquiries in the meantime. However, how much are you losing in sales by covering that operational debt?
The good news is operational debt can be overcome however, continuing with current practices is the equivalent of an operational band-aid. Minimizing operational debt requires addressing the underlying inefficiency which often involve paradigm shifts and infrastructure replacements. Here are a few suggestions on how to solve the underlying causes of operational debt:
- Operational sprints – Table non-critical tasks and set sole focus on accomplishing a single meaningful goal. Operational debt is often caused by issues that are avoided due to complexity. Use a sprint to tackle the things you keep avoiding.
- Jumpstart innovation – Companies can intentionally create structures and programs outside of their usual systems to generate new processes that are not buoyed by existing operation debt. For example: hackathons, internal innovation hubs, temporary task forces, dedicated time for employees to pursue business related passion projects.
- Get outside help – Recognizing where you can buy or integrate best practices from others is important. Companies can contract with operational specialists in a variety of functions to tackle specific problems and recommend new processes to incorporate longer-term. This can be as simple as using a freelancer for a task or engaging more deeply with a specialized consultant.
Archetype Solutions is a member of the Chamber’s Middle Market Action Team, a consortium of leaders driving rapid growth in companies with annual revenues between $10M & $1B through targeted programs and strategies. #MidMarketPHL
Connect with more middle market businesses in the region at our upcoming event:
Funding Your Future: Clearing the Path for Middle Market Growth
Friday, October 19, 2018
8:00 – 10:00 a.m.
Mars Drinks Conference Center at the Chamber