Strategic Thinking – Understanding Limits – Are You Limiting your Company or are They really Constraints?
I spend a lot of time around motivational speakers. These people tend to be very positive, and always talk about how we should transcend our limits. This is a useful way of thinking, but the word “limit” can also mean something very real that should NOT be passed.
When you think of the limits your business has, both types probably come to mind. Your business has limits that should be smashed through so you can go to the next level. There may also be limits which simply need to be understood so you can adapt to them and – possibly – use them to increase your profitability.
The first type of limit is easy to spot. I saw it recently in a company where certain activities had
slowed down to a near standstill because of bureaucratic paperwork. In key strategic areas, the company simply was not moving forward because every step required three or four times as much effort as it was worth. The key to spotting this issue is to watch for this type of statement: “If we didn’t have to wait for requisition approval, we could have gotten this done a year ago.” The phrase “if we didn’t” often carries the key concept – WE are slowing ourselves down, so this is a self-imposed limit.
The second type of limit is almost always systemic in nature. To give a simple example, if you put a pair of fruit flies in a jar with a banana, there will shortly be many more fruit flies. Wait a little longer, and the number of fruit flies will double…and so on. The jar, however, will never become completely packed with fruit flies because there is a real limit on the number of fruit flies that can grow this way. In this case, the limit is the food source – the weight of the fruit flies in the jar can’t exceed the weight of the banana, because all of the creatures in the jar grow from that food source (and use some of it up as energy).
How does this relate to your business? Quite simply – in many, many ways. Businesses use up all kinds of resources – suppliers, employees, raw materials, customers. While some of these can grow over time (markets, for example), all of them will impose a limit on how much business you can do at any point. If you sell cell phone parts, it is unlikely that you can sell a number of parts exceeding the human population of your markets. That is a limit, and if your company is very successful, you might approach such a limit someday.
How does understanding limits help us in strategic thinking? There are endless ways, but here are five critical ideas that you may want to apply:
- Look for the self-imposed limits in your business and remove them
- Find the hard external limits and look for ways around them
- Unavoidable hard external limits will define the nature of competition
- Understand how system dynamics may change your limits over time
- Hard limits often cause cyclical fluctuations – anticipate these
Each of these ideas can be the basis for major undertakings in your business which will have incredible results. If you are interested in any of these, please comment and I’ll cover it in more detail in my next article. If you are interested in learning more about strategic thinking please listen to my webinar by clicking here.