Process Thinking Part 1: Input + Process= Output

While in college I had many different professors but the one who stood out to me and deeply impacted me was Professor Castle. He stood out because unlike many of the others he had just come from a COO position in a very large company in Asia. He was a no nonsense kind of guy whose style was more like that of a football coach who demanded high performance from his players. The number one lesson that stuck with me from this expert in the real business world was Input+Process=Output. Personally this concept/mentality has totally changed the way I view a business and the way I go about understanding and improving it.

Input+Process=Output

Every business is essentially a collection of inputs (time, people, money, machines, software etc) that are organized into a process that produces a desired output. Lets imagine a lemonade stand which has two departments the "Lemonade Production Dept" and the "Lemonade Sales Dept". One department would be in charge of the process by which the lemonade was made and the other would be in charge of the process by which the lemonade was sold. Each would design their own process for achieving the output they are in charge of and ideally measuring each step of that process for effectiveness and efficiency. The ultimate "output" for any business is money but each process and sub-process will have an output of its own. These outputs are often called your "success metrics" or "Key Performance Indicators".

Below is an example of the process a the lemonade stand both on a high level and a more detailed level . If it was needed you could even drill down deeper if you wanted and go into more detail (exactly how they mix the ingredients, where they purchase them etc). I have found it to be essential to deeply understand your own processes on both a high and lower more detailed level and to work closely with those running those processes to ensure they produce the output desired.

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A Real Example. 

In my own company we act as a marketing agency that helps vacation rental owners get more bookings. We find homes we can book, we market them online and book the guests who are interested in them. Therefore, I have 3 departments and each is charged with producing 1 output which we measure as follows.

1) Sales Dept= New properties for the Marketing Dept
2) Marketing Dept= New leads for the Reservations Dept
3) Reservations Dept= New bookings for the Owners.

Each department is provided with resources (inputs) and with the help of upper management come up with processes and subprocesses that will produce the output they are in charge of. Input metrics help us measure what we put into the process (IE our effort), output metrics measure the results and our process is the means by which we convert our efforts into results.

Are you making decisions based on data or just gut feelings?

Often the focus is placed almost entirely on the output when really that is only partially in their control. However you have near total control over your input and the process itself, and that is the goose that lays the golden egg. We have all heard the phrase work smarter not harder. This is simply saying that if you put in a lot of effort into a bad process you will get a poor output and you need a better process. The more objective measurement and analysis you do on your process the better you are going to be able to monitor if the process is performing the way you intended it to and you will be able to modify and improve it based on data instead of opinion.

This may all seem like common sense but very few people actually measure their inputs and processes, especially if it involves measuring themselves. It is my opinion that everyone in some way should be accountable for periodically reporting and analyzing both their input and output numbers, even if it is to yourself. By doing this you can more easily identify the source of bad performance (low output) and fix the broken parts of your process.

By collecting data on your processes you now are empowered to make decisions and create strategies based on data instead of a hunch. With this mentality you can easily and objectively identify why you are not getting the output and take the needed steps to get it.

Questions for reflection. 

• Have I mapped out my processes and subprocesses in detail? 
• Do I measure my inputs in my my processes in a meaningful way?
• Are these measurements as objective as I can get them to be?
• Are my input and output numbers reported and analyzed periodically?
• In general is strategy and decisions driven by data or personal whim?