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What Is System Design & Why It's Crucial For Smart Growth

by Doug Davidoff | Mar 19, 2021 12:00:00 PM

I find myself thinking about something that Brian Halligan, CEO at HubSpot, said in his inbound keynote in 2017:

brian-halligan-quote

I've had the opportunity to watch thousands of companies--and not only from outside to see what they're doing, but from behind the scenes to understand what they were trying to do.

I consistently see a growing chasm between the strategy and intent of a company and the execution. One reason for this is that the language of strategy and the language of execution are very different.

intent-execution

If you want to sustain smart growth, you must create a system that bridges the gap between your organization’s intent and the path of execution. This enables a reinforcing feedback loop; as people in your company execute actions, the resulting insights and data feed into the strategy and structure, enabling a proactive iteration cycle to enhance execution.

I’ve found that most people responsible for executing a company’s strategy feel more like this truck trying to get through this underpass. 

low-bridge

You Can’t Solve Upstream Problems Downstream

The problem with addressing problems before they become problems is that they’re often invisible, intangible, uncertain, and variant when they’re upstream. They require you to think through multiple scenarios and wrestle with trade-offs that are often uncomfortable. It feels so much easier, faster, and logical to jump into execution.

But, there’s a high cost to this approach. Friction, confusion, and disruption are pushed into execution. 

The late Peter Drucker, a noted business thought leader, said it best: to sustain or scale growth, you must build the genius into the system. The only way to execute at scale is to address the barriers, conflicts, confusions, and ambiguity before they hit the execution point.

Whenever one of these issues presents itself, it creates friction, and your company pays what I call a “friction tax.” Our analysis of nearly 1,000 companies estimates that:

  • Companies that are great at system design and execution pay a 10-15% tax (it’s impossible to pay no friction tax)
  • Good companies typically pay a 33% - 45% tax.
  • Average companies pay greater than a 50% tax (which means they’re losing half of their growth efforts’ impact and outcomes).

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The Pathway to Effortless Execution

The latest research from CSO Insights shows that salespeople spend just 33% of their time selling. Why? Because they have to spend far too much time managing the administrative aspects associated with their jobs and chasing their manager or someone else to find out how to handle something. 

What’s sad is that the very technology that has companies spending billions of dollars to erase the need to do so much non-productive, low-value work has made things worse. (The trend on this data point has been consistently negative over the last 20+ years.)

While this data is focused on sales, my experience working in the marketing function and with marketers supports that it’s just as bad, or worse, for them.

To reverse this trend and enable our customer & revenue acquisition & expansion teams to execute effortlessly, you must design and maintain the systems, structures, and disciplines that mitigate the complexity and friction that naturally increases in an organization.

inverse-friction-principle

If you’ve ever used Uber’s app, you understand The Inverse Friction Principle. The app is intuitive and effortless. The experience is light and easy to use. Super easy on the front-end, tremendous complexity managed on the backend.

Now stop for a moment and consider how you approach execution in your sales, marketing, and customer success efforts. 

More likely than not, it’s going to look something like this:

  • Attention paid to strategy
  • Some thought is given to the more significant issues
  • Someone starts asking many questions, many of which don’t have easy answers or possibly any clear answers at all.
  • The sense of urgency builds, and the realization that doing something is better than doing nothing.
  • Plus, “we need to hit our number/objective.”
  • You start executing, committing to address these wicked problems when things get back to normal, and you have more time to think through things.
  • Lo and behold, that time never comes.

The tendency is to jump in and start executing. After all, everything seems clear at the time. Don’t get me wrong; I get the impulse. I pride myself on a bias to action as well, but it doesn’t have to be an either/or decision.

As I shared in an earlier blog post, Sisyphus vs. The Flywheel:

The Second Law of Thermodynamics is that entropy is always increasing. Entropy represents disorder and randomness. In simpler terms, it means that a natural organizational dynamic is that disorder and randomness are always increasing. In your business, this disorder means more friction. As a business grows (or simply survives), it picks up more complexity. That complexity creates friction, and before long, what seemed easy becomes difficult or impossible.

Friction is a part of growth. It should not be ignored. Frankly, whether you recognize friction or not, it will yield its sharp edge. The key to sustaining growth and making growth manageable, predictable, and, yes even enjoyable, is to manage the friction.

Friction is to your growth efforts what barnacles are to a sea vessel.

friction-tax

To enable effortless execution, you must actively manage complexity and friction, or you’ll experience the increased drag and higher costs that sailors experience when they don’t keep their hulls clean. What’s more, you must do it while continuing to manage all of the ongoing, urgent activities you must work on today.

How can you do this successfully? Welcome to System Design.


System Design: The Path to Sustained Scalable Smart Growth

Here’s an academic definition of system design:

System design is the approach to understand design and systemize the flow of value from various aspects of an organization through the value chain to ensure synchronicity, consistency, integration, and maximization between people, activities, processes, policies, places, and resources.

Here’s my definition:

system-design

System design is the combination of systems thinking with design thinking to create the ongoing process of making the trade-offs and adjustments necessary to align all vectors within your organization to maximize value creation within the constraints that exist for you.

Reducing friction is not as simple as just stopping things that aren’t working, integrating your tech stack, or ensuring that your sales, marketing, and success teams communicate and are “aligned.”

Remember, as you move forward in execution, you’re going to increase friction and complexity naturally. The faster you execute, the more significant the increase. Your system needs to be designed to manage that friction without interfering with the ongoing activities that everyone is doing “in their day jobs.”

A robust system design capability orchestrates everything to create continuous improvement loops and maximizing velocity and throughput within the constraints that exist for your business. It enables you to make more significant progress and generate more traction without increasing the effort required.

The Four Elements of a Strong System Design Cycle

Before I describe system design elements, I want to emphasize that the system design function complements ongoing execution; it should not interrupt or interfere with it.

system-design-cycle

Empathize: You cannot enhance, iterate and improve your systems without a strong foundation of empathy. Empathy is about having a comprehensive, holistic understanding of the situation, inputs, stakeholders & objectives. It's a complete understanding of what's going on for real, as well as an understanding of what the desired output is, what the desired ideal would be.

Hypothesize: To sustain improvement, you must be able to build a strong hypothesis about progress first. This requires divergent thinking. You must be willing to break things apart and challenge previously held beliefs and assumptions. 

The most common and damaging mistake I see in companies’ improvement efforts is the quick reaction to identifying a potential problem to determine the solution. At Imagine, we’ve learned to live by this principle:

The problem you think you see is seldom the real problem.

Analyze: With your hypothesis laid out, the next step is to analyze the potential approaches to determine which one fits best to get the job done. The analysis stage focuses on breaking down the various elements to ensure you address the causes (as opposed to the symptoms) and gain clarity on the upstream, side-stream, and downstream impacts of the adjustments you’re considering.

Synthesize: The final step in the process brings convergent thinking to the forefront. The focus now is integrating the new adjustment with the existing processes and methodologies to minimize or eliminate disruption. This stage is all about integrating the new with the current to enable everyone to accelerate.

The Three Trade-Offs of System Design

If I’ve learned one thing advising businesses, it’s that there is no such thing as a perfect solution. Every choice has advantages and disadvantages. I’ve learned that while there are indeed “wrong” choices, there are rarely clear “right” ones.

Success is about managing the trade-offs associated with various choices. In the system design process, there are 3 trade-offs to manage:

The first is feasibility. Can we do this? How hard will this be? System design is about orchestrating the best path, given the constraints that exist for you. So feasibility is crucially important. 

Next is viability. Will we be able to sustain the improvement we’re considering? A common mistake in jumping to the solution (and skipping system design) is that adjustments are made that make sense in the moment but aren’t sustainable or create greater friction elsewhere. This is where tech debt really builds. 

Last is desirability. How disruptive will it be? Will our team use or do what we’re considering? Will they like it?

The system design team is focused on building the best pathway to attain the desired outcomes/objectives through the constraints that exist. It creates an ongoing, iterative improvement process that enables transformation while minimizing the disruptive nature inherent to change. When managed optimally, those involved in execution are likely not even to notice the change that is taking place.

The 3 Zones of Execution

Over the 30 years I’ve been advising businesses, I’ve noticed one fundamental difference between the best companies and others.

Most companies attempt to implement new initiatives and try to “fix” things at the same time they’re doing everything else. It’s disruptive, confusing, and damaging.

The best companies design change into the systems and structures by aligning with what I’ve come to call “The 3 Zones of Execution.” 

The Performance Zone is all about the next 90 days. It’s about meeting objectives and “hitting the number.” When you're in The Performance Zone, you want to be very careful about anything that could mess with your team’s performance and ability to achieve their objectives.

The Enablement Zone is where you stage the enhancements designed to improve performance. The Enablement Zone is typically focused on what’s required to succeed over the next 3-12 months (90 days to 1 year). This is where your teams are operationalizing, we're systemizing, and we're optimizing the changes and new initiatives that have been designed.

The Enablement Zone is the bridge from your strategy and intent to what’s required for day-to-day operations. If you’re experiencing the chasm I described at the beginning of this post, it’s highly likely that you have a flawed, or missing, enablement zone.

The Transformation Zone is focused on strategy, vision, and building capabilities. The time horizon for The Transformation Zone is typically 1 - 3 years. 

The Performance Zone is where objectives are met and revenue is generated. The Transformation Zone is where you build “your moat” and innovate to protect your revenue and profit generation. The Enablement Zone is where the “future company” is integrated and orchestrated with the “present company” to create the path to sustainable, scalable growth.

Realize that your existing system is perfectly designed to create the precise results and experience you have now. If you want to improve the experience or results, your system must change.

System Design is about making those changes with intentionality and creating a pathway that enables your team to navigate the change required without being disrupted or burnt by it. A robust system design discipline allows you to generate more “juice for the squeeze” continually.

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