Scary thought, isn’t it? Please allow me to put a more positive spin on this concept. It was introduced by Austrian-American economist Joseph Schumpeter who lived from 1883-1950. He considered entrepreneurs (Yes, that’s you, whether you are the third generation running your Family Business or you have started your own shop…) to be the lifeblood or most dynamic factor in pushing the business cycle forward through capitalism.
He developed the term “Creative Destruction,” outlining how entrepreneurs continually disrupt economic stasis, by introducing new concepts to the market place. And before you become annoyed about “continual change,” consider that, without it, you wouldn’t be able to read this Next Level Thinking™ blog post, unless, of course, the one person I had mailed it to decided to share it with another person, and so on…
So, let’s take a look at what “Creative Destruction” looks like in real life. During a recent Client meeting, they described a situation where an employee had developed an “attitude” and had decided that, not only did he know more than the Foreman and the Owner of the business, he would be absolutely defiant about the process, to the point that he was recorded on video stating that “he would only do it his way…” Initially, I thought this looked like a prime “cost cutting opportunity.”
However, after thinking about it for a while, I realized that was simply “Downstream Thinking,” i.e., putting out fires after they had been started. So, at the risk of sounding like a “ruthless capitalist,” I realized that it was an opportunity to combine the “Creative Destruction” concept with “Upstream” thinking that Author Dan Heath describes in his book of the same title.
Now, this is what I really get excited about. The Client’s Labor Cost was about 30% above where I wanted it to be. Thus, I asked the question, “How can I take control of this process and change it, so that I am not chasing the problem? What steps can I take to change this?”
The annual cost of the labor associated with this segment of my Client’s business was about $171,000. If we added in the expense associated with Workers’ Comp, Benefits, Overtime, and Corporate Taxes that were being paid, the annual tally was around $225,000. That’s the bad news…
The good news is that this entire segment could be “automated” for about $2.1 million. However, this capital investment would easily be repaid in 9-10 years without changing the rest of their operation. Oh, but there is more good news. This change would allow them to increase the through-put of their business by at least 20%, reducing the payback period to about eight years.
There is no telling how much it might boost employee morale & productivity among the remaining employees, but it would certainly be beneficial to eliminate the Labor Cost, Workers’ Comp, Benefits & Corporate Taxes being expended in this part of this Client’s operation.
Using the combined thinking of Joseph Schumpeter (Creative Destruction) and Dan Heath (Upstream), my question for you is this:
“What innovations do you have available to you right now to boost the productivity of your business?”
If you spend some time on this, I guarantee that you will continue to expand your future opportunities and profitability results!
I urge you to please join me in making the changes we need to in order to succeed and prosper! As I move forward with my Next Level Thinking™ blogs, I’ll continue to focus on the benefits of this type of thinking, and if I can assist you in any way on this process, please reach out at email@example.com or at 209-988-8960.