Monthly Archives: June 2021

When considering the purpose of organization, we must not forget the circumstances that gave rise to its creation. It was society and its needs that called for the establishment of this entity we call organization. Its contemplated role: to provide what individuals couldn’t, to provide for new products and services efficiently.

This dual-purpose -innovation for new products and efficiency in performing the task of production-is an existential reason of leadership.

Though both innovation and efficiency are critically important, there are stages in an organization’s life that make one more needed than the other. See diagram below:

Efficiency

Innovation

Neglecting either one could have serious consequences. Focusing only on innovation will in the longer term open the door to other efficiency focused companies to take away from the innovative company the gains, whereas focusing only on efficiency will deprive the company from deploying the resources necessary for innovation.

If both, during an organization’s life, are necessary, how to go about them, is a question vexing many companies. Our suggestion is depicted by the diagram: innovate first, but after, be prepared to do the task efficiently, a sequence that in the life of the company repeats itself and leads to the fulfillment of the vision and mission.

For a sustainable company it is necessary to be good at both processes. Efficiency follows a more logical path, and it is easier understood how to apply methodologies like lean and six sigma to enhance it. Innovation, on the other hand, is rather an untamed process that has no real recipes as to how to apply it. Following the doctrine that a leader makes the company, it would follow that to do both should be a prime concern of a leader.

Furthermore, since the time when either [...]

Who wouldn’t want a tool that identifies problems early avoiding the inaction or complacency that comes from not knowing and not pinning down where the trouble is?

To respond to this, we introduce here the “business critical mass framework”.

Critical mass is that quantity of something that makes the desired process sustainable.

The term “critical mass” was first used in nuclear physics where it meant the smallest amount of fissile material needed for a sustained nuclear chain reaction (Wikipedia).

In business “critical mass” is the point at which a growing company becomes self-sustaining and no longer needs additional investment to remain economically viable (Investopedia).

Note, however, that the critical mass concept applies to two areas of business, the overall business and the individual processes that comprise it.

Business critical mass (overall): It relates to the customer revenues determined largely by the number of customers. They provide the income to back feed, to the necessary degree, all business processes.
Individual process critical mass: The individual business processes have also their own critical mass that is the quantity needed to make them efficient. Below that quantity, resources are not fully utilized, and processes underperform consuming more funds and thereby increasing the magnitude of business critical mass. This process critical mass, though important, is secondary.

Customer revenue

Customer revenue is the main determinant of the business critical mass and in its terms the business critical mass is expressed. A company should strive to raise the customer revenue above a threshold, the critical mass, to provide adequate feeds for all the business needs.

Business needs

A business cannot be sustained without covering its production system costs, nor can it survive without keeping current its machinery and other infrastructure, nor without advertising campaigns to attract and maintain customers nor can it survive without new [...]