Join Derek Hudson as he explores Essential Dynamics, a framework for approaching the challenges facing people and organizations. Consider your Quest!
Welcome back to Essential Dynamics, the wonderful show about growing your business and making it stick. I'm Reed McColm, your occasional and erstwhile host. Glad to be back and discussing things again with my friend, Derek Hutz. Derek, are you there?
Derek:Reed, it's so good to be back with you. Thanks for, joining me or thanks for inviting me. What however we do it, it's great to be together again on this podcast together today.
Reed:It certainly is.
Derek:Yeah. It's essential.
Reed:It is. I feel it's it's dynamic. Derek, tell me now, how you've been doing this? We've had a we've had a very busy year and a lot of lot of talk on essential dynamics and covering a lot of ground. And do you feel there's an area that you would like to pursue that we have not yet touched?
Derek:Yeah. Yeah. There is. As you know, essential dynamics as a concept seems to apply really well to helping business organizations. That's how I got into it.
Derek:It's also shown to the principles are shown to be relevant in our personal lives and in broader society. And, most of the past several episodes are really focused on helping leaders of organizations. And Interesting. I think we've had some, some great conversations about getting your business unstuck and trying to make sure that management's attention, which is an important resource, is properly focused and used. I wanna branch out, and I see that the episode today is a bit of a bridge between talking to individuals who run organizations, and then talk talking also to an audience of people who have an interest in the overall economy, and in each of these individual businesses growing and doing better.
Reed:That's interesting.
Derek:So so I want there's just a term that, that came to mind last week and some conversations I was in that I want to explore a little bit. We spend a lot of time, if you pay attention to what's happening in in the local economy and what governments and others are trying to do to make the economy better so that, you know, people have jobs and have incomes and stuff. Spend a lot of time in what's called the startup space or, or the innovation, ecosystem. And we all want, you know, you know, in our various local communities, we wanna have these tech startups start, be successful, grow, hire people, have great products, and, you know, become worth, you know, millions and maybe hopefully billions of dollars. So there's a lot of energy focused on creating the next Google, the next Spotify, the next, you know, AI superpower.
Derek:And there's a lot of energy goes going into that. But I think people are starting to recognize it might be saturated, it might be too much energy, and there's a lot of potential in the current mainstream economy for doing better.
Reed:Well, I was going to ask you, Derek, to to that point. What at what point does a does a business stop being a start up? A start up is an exciting little term with with hope attached, and, and people get excited about some in my business, in theater, it's original. If it's original, oh, great. Let's let's do it.
Reed:Or that's exciting.
Derek:Yeah. Yeah. It's very exciting.
Reed:At what point do you stop being original?
Derek:Well well, there's a there's a there's a few places. One one, major step that kind of separates the, you know, the early stage startups from later stage startups is when you start having customers. And, no offense to folks who don't have customers yet, but it's, when your business is based on PowerPoint presentations, it can be anything and do anything. And you can talk about all kinds of things. And then as soon as you have a customer and the customer is looking for you to deliver value, then, you you get yeah.
Derek:You're stuck in the real world now.
Reed:Yeah. It narrows you down to focus considerably. It narrows the focus, I should say.
Derek:It Yeah.
Reed:And then your then your your business is your customer.
Derek:So so it your your focus very much narrows to the needs of your customer, and you have to deal with reality. You can say, this is my plan. I'm going to invent this and people are going to buy it. And then, when someone buys it and says it doesn't work, that's a completely different level. So there's that's one level.
Derek:And then, there's another level at which, you might say a business is mature, they've developed a product, people are buying it, they've had to solve a lot of problems to make sure that the product works, the customers are getting it. And then as we've spoken about on previous episodes, you solve these problems until you get to a problem that you can't solve. And, and then you're stuck. And that may be at various sizes, but at some point, you have a small company that's chugging along. And, for people who are interested in economic growth, they would love to see those small companies become big companies.
Reed:Yes. Isn't the goal of a small company to be swallowed by a bigger one?
Derek:Well, maybe you bought out, maybe grow, maybe just grow slowly, maybe grow fast, maybe, you know, for, for some companies just stay as they are. But if you're concerned about the overall economy, you wanna see these businesses, you know, collectively grow and hire more people and create more jobs and economic activity. So the term that we hear for that is, to move from startup to scale up. And so scaling a business is, like, okay, I have a business in one location, now I'm gonna scale it to be in 10 locations or a hundred locations. Or I have a business that produced one product, and now I'm gonna produce a new product every year.
Derek:And so this idea of scaling up is, something that's getting some attention, maybe in some ways increased attention, because we've kind of put all of our chips on the startup number, and we're realizing that that takes a long time. A lot of startups don't get very big. And we're trying to move the needle on the overall economy, and so maybe scaling is something that should be paid attention to. So what I thought I'd do today is to connect, the idea of scaling a company with the work that we've been doing to help companies get unstuck. And so I've come up with, seven steps to scaling your business.
Derek:Oh. And I wanted to
Reed:That sounds like a successful number.
Derek:Yeah. And and, and so I wanna talk about them, probably probably over the next couple of episodes because we do we do tend to go on.
Reed:So Seven seven steps to scaling your business. Have you already figured out what those seven are, or are you looking for the seven?
Derek:Well, I I've got seven. And, what I'm interested in is by the end of the next episode, are they still the same seven? Or is there Ah. Is it is it seven? Are they same order?
Derek:But it's, it's fun to think things this way, and I and you know I love alliteration. Otherwise, we wouldn't have people passing purpose. So
Reed:I have to tell you a story, Derek.
Derek:Go ahead.
Reed:Quick. When I was doing summer stock in Yellowstone Park, 1 of our one of our recurring customers every summer was a man who whose family had he had built an enormous mansion of a cabin just outside of Yellowstone Park, and his name was Stephen Covey.
Derek:Yes. Yes. And
Reed:he used to come to the shows every summer, and I got to know him a little bit. And I remember once he hired me for a small project and gave me as a as a reward or payment, an advanced copy of his newest book, Seven Habits of Very, Something.
Derek:Yeah. Yeah. Yeah. It's right up there. Yeah.
Derek:It's right up here. Seven Habits of Highly Effective People.
Reed:Oh, okay. I guess that's what the title was.
Derek:Yeah. That's right.
Reed:Anyway, I I I asked him immediately, what if there's an eighth habit? And he said, well, then I'll write another book, which twenty years later, he did.
Derek:He did. He did. Yeah. That that might be our eighth principle, might be, then write the sequel.
Reed:Yeah. That's right. Yeah. I have to tell you, seven habits was obviously an incredible breakthrough for Stephen Covey as a business person, as an adviser, and as consultant. And, and he was obviously revered for that and justifiably so.
Reed:His his comments were he was able to to distill a lot of business principles into workable solutions and and thoughts, and I really appreciated that. But I also have to say that he was never once on time for a
Derek:show. Okay. K. Well, it's it's nice to know that even the superheroes are regular people. So the the one of the things that resonates about the seven habits, and that's that Steven, tried to do, was to base things on, sort of enduring principles.
Derek:Yeah. So the situations could change, but you could go back to, to these foundational principles. And I think this is something that we'll explore the next few episodes, because sometimes when the helping organizations want to help businesses, they try to fix a particular problem that they see. And, every company is unique. It's it's quite possible that the government agency doesn't understand, our business, but yet they they write up a solution that they can do a press release on.
Derek:It may not be the best solution. So I think a principles based approach to scaling your business would be highly highly appropriate, and so maybe that's why there's seven steps. So let's see what we got. Let's see and see if it makes sense.
Reed:Well, tell me what your tell me a few. Let's just start let's just take a few in in order. Tell me the first three steps in scaling your business.
Derek:Okay. So what I'm what I've come up with, and then we can talk about each one of them, is, the first one is you need to get really clear about what you're trying to accomplish. Really clear about your purpose, or as we talk about essential dynamics, your purpose x and your purpose y. One of the ways that that purpose x, purpose y gets, manifest is a lot of times there's a natural tension between growth and stability. And so you could have your business all nice and stable, no risk, everything sort of batten down and stagnate.
Derek:Yeah. Or you could take on too much too fast, overbuild your foundation and collapse. And so there's a natural tension. So I am always gonna say, let's consider purpose x and purpose y. But if you're gonna scale, the question is, what's the foundation upon which you're scaling?
Derek:What's the thing you're trying to accomplish? And so that's that's, probably the first step. The second step is to
Reed:I was just gonna before you leave the first step
Derek:Okay. Wanna know I
Reed:wanna know if that's a different if there's a difference between perp be be clear about your purposes is what I'm hearing you say. Yeah. That's the first step.
Derek:Be clear
Reed:about your purpose. Is that a lot of companies have a mission statement. How is that different?
Derek:Sometimes sometimes the mission statement is a really good indication of purpose. Other times, it might sort of, it might deal with a a purpose x, and a purpose y is unstated, and that causes big problems.
Reed:Mhmm. Mhmm.
Derek:And other times, the the mission is it's a statement. It's on the wall. It's not really what people think.
Reed:Ah, so it's it's, it's there to be admired more than
Derek:It's a marketing tool rather than a sense of, you know, real real internal purpose. And then, and then there's lots we can talk about in terms of whether the people are connected to that purpose or not, but that's the step that I have down the line here a little bit.
Reed:So What's what's the second step?
Derek:Second one is, okay. If you're not growing at the pace you think you should grow, then, you know, by definition, you're stuck. And so if you're stuck, the question is, where are you stuck? And if you weren't stuck, you would be growing, like, infinitely. So you're not, and so the question is, let's let's get really clear about how you're stuck.
Derek:And that is, there's a lot to that, so we can talk about that one. And then the third one, which we've talked about before, is now it's time to step outside of the work that you do and look at your business as a system.
Reed:Okay. I wanna clarify some stuff. Let's let's redefine to the second step as get clear. First one is be clear about your purpose. The second is get clear about your progress.
Derek:So I'm gonna I'm gonna use the word stuck.
Reed:Yeah. Yeah. Okay. Get unstuck.
Derek:K. No. So so step no. Step two, if the whole thing's getting unstuck, step two is document and understand the dynamic which has got you in a holding pattern. So why are you not progressing?
Derek:Get clear on why you're not progressing. And we talked we talked about this in previous episodes, and sometimes it's because no one's trying to progress. Sometimes it's because you run up against the problem you can't solve. And sometimes it's the business is so complex, you don't actually know which of the factors is holding you back.
Reed:Oh, good.
Derek:Okay. Okay. And there are some techniques that, you can use to identify what we call negative self reinforcing loops or, some pervasive conflict where the very the actions that you take, reinforce each other in holding you stuck. And I would say, I'm gonna project right into your business, right into your living room there, Reid. And say, when you're a writer, if you are feeling a bit frustrated
Reed:All the time.
Derek:The words aren't flowing
Reed:Almost never.
Derek:Then you're not writing well or prolifically.
Reed:You're describing my career.
Derek:And so then you are frustrated.
Reed:All the time.
Derek:Which means the words are not flowing and you are. Right?
Reed:Well, I'm stuck. I'm stuck.
Derek:Okay. But if you however you break that, when you break that and you write a paragraph and you look at it and you say, where did that come from? That's good stuff. Was that me? Then you can write another paragraph, and that's reinforcing in a positive way.
Reed:Derek, I really appreciate what you're saying because as a writer, I have felt that several times. And you get going on a project and you feel I I feel stuck. Yes. The the the stuckness that I don't know how to say that properly. But the moments when I am most stuck are actually when I'm unhappy with the the direction my story is taking me.
Reed:But if I can depict that, story accurately and honestly, then I feel like I it's taking me to a good place.
Derek:So I think, Reed, there's a difference between being stuck and, you know, fighting through adversity. Oh, good. And both both of them feel uncomfortable. Yeah. The problem with the stuck is if we don't change what we're doing, we're gonna keep in the same loop.
Reed:Well, you described the loop very well.
Derek:Yeah. Yeah. Well, and I've had that in, in writing projects that I've been working on too, that no one's ever read, even when I'm unstuck. But the, but I think it's a great example of that negative loop. And so the negative reinforces, we got a breakthrough to get to the positive reinforces.
Derek:So, that step two then is, like, define it for what it is. And and you can't move on until you see that you're in some kind of, self perpetuating dilemma or negative reinforcing loop. Or you just lost complete momentum and you're stuck with inertia. So that was step two, and then I think I described step three as now we step outside and look at the business as a system.
Reed:As a system, you sound that forgive me. That sounds impersonal? That are you saying we have to look at it objectively?
Derek:I think object objective objectivity is is definitely part of it. But the other part, that I'd say is we have to understand, cause and effect. We have to understand, things like precedents and dependence. Like, this step creates, an output that that step consumes and creates an output for the next step. And, so one of the ways we think about it is that if your business is a system and we've stated a purpose, so now the system has to create the reality of that purpose, or in a business, we have to create value for the customer.
Derek:And there are steps that are critical to creating value to the customer, and then there's a bunch of other stuff that maybe makes it hard for that to even be seen or discerned. So the first thing is, you know, what's my what's the business system? I have a purpose. It's not producing like it should. What's the system?
Derek:And then when you look at the system, you're able to see where things are flowing and where they're not flowing and where there's extra capacity and not enough capacity. When you're busy doing, you cannot see those things.
Reed:When you're actually in the in the process of the production, if if if I may, when you're in the process of making your your product, whatever you're going to sell, whatever they whatever is going to make your business attractive, does that mean you're automatically blind to the problems that you have?
Derek:Not necessarily automatically, but, what we need is an overall systems view. You need to see how this the value flows through and gets created in the system. And when you're at one point of it, then, you know, you're at a workstation with an inbox and an outbox, and you're, you know, cranking through the step, you can't see the whole system. And so the value of, you know, management in general is that you step back, you're building the system, evaluating the system, refining the system. So if we're going back to our context here of scaling, if we wanna do a whole lot more of something, we absolutely have to take a system view.
Derek:You can't just, like, do more. You can't hire more people, just speed up the line. You can't just buy more raw materials. You have to see it as a system.
Reed:What if there's an an innate end where you shouldn't really expand? Because beyond that, where the expand expansion will ruin your business.
Derek:But so so, Reid, that's a really interesting point. And and so, you know, the premise that we're talking about here is that it's better to scale your business. Or if you have if it fits your purposes Yeah. Then then let's scale a business. So so there could be some reasons where why that wouldn't be a good idea.
Derek:So let's say, for example, that you're a professional. You're a dentist. You're a dentist. Okay. Okay.
Derek:You you love you love dentistry, and all you wanna do is, you know, help people with their dental health. You wanna work in their mouths. If you have enough of a system to get, patients in your chair all day, you know, that's one level of the system. If you feel like your particular approach to dentistry, the location that you're in, financial objectives, you're actually more interested in, some other things besides actually the practice of dentistry in somebody's mouth. You may feel to expand and have, multiple chairs, multiple dentists, evening and weekend hours, and, you know, being a training, you know, like doing all kinds of stuff.
Derek:But if you do that, you're gonna spend way less time working with people's spouse. And so depending on what what, you're really interested in, you may choose one of those or the other, and neither of them would be wrong. So when we're talking about sort of public policy, and we want some businesses to grow, we want them to grow a lot, and you can only grow really effectively by taking the system's view of things. Because otherwise, the constraints, we talked about so many times, when you're growing fast, it's gonna move around on you like crazy, and you're never gonna know where it is. And so every place you add resources to will be the wrong place until you figure it out.
Derek:And so there's, I guess our premise is getting clear in what you're trying to accomplish and how you're stuck, and then looking at it as a system, are three really important steps to being able to scale a business because you can't just add more speed or resources.
Reed:So should you know your end point before you even begin? Should you say, I want to grow this business this far and no farther? Or should you say it one step at a time?
Derek:I think sometimes there are these natural step changes, and you kinda have to be able to get your your head and your stomach around the step change. Some people are really, specific about goals. I'm probably less so because I've put so many projections together with so many numbers that don't mean anything. But I I would say, let's get ready for the next step change when that is, and and decide if we wanna do it or not. And then take it as far as you can, and then think about the next one.
Derek:So I don't know if that's I don't know if this podcast is gonna hold up on its own. I mean, we're we're gonna come back, and do another one, but that's about that's the first three of, the seven steps to scaling your business, Reid.
Reed:I think that's plenty to digest for this week, but I am eager to hear the last four, steps in scaling your business. I think this has been fascinating. I think it's applicable to many, you know, I I worry sometimes, Derek, that my career choice and and, my experiences are of no value to you because they're so unique and so theater is so far away from what you present, what you would do. And yet I find parallels in every discussion.
Derek:We talked about principles. Right? Yeah. And if they're if they're good principles, they should apply in lots of different places. And so we'll take the extreme example of the theater.
Derek:Any chance we can get? Because if it was there too, then we're on some we're on to something.
Reed:But you reminded me very, very specifically of a show that was going very well at a theater that I was running. And, it was it was going very well, and we talked about taking it on the road. And the cost, not financial cost, we thought we could handle the financial cost, but the emotional cost to the cast and how long what exactly did we want by taking it on the road, and how do we tell the people on the road it was such a big hit where we were originally? That was so we decided not to. And I think we made the right decision.
Reed:You know? From a financial standpoint, we could we might have made money on a tour, but it was a risk. And I know it would have made our cast very unhappy.
Derek:So we're gonna get to that in our next episodes when we talk about the people. But that's the kind that's the kind of step change I was talking about. So we'll we'll pick that up next time. That's awesome.
Reed:I think we're about out of time for this podcast, but I sure look forward to the next one. That's a good, cliffhanger on which to hang. I I just wanna say thank you very much to Derek Hudson. Derek, where can people find you if they wanna talk to you?
Derek:Go on the web and look for getunconstrained.com. We'd be happy to hear from anyone.
Reed:And, I'm Reid McCollum, and you can't find me on the web because I don't exist, as a social person. But I am delighted to say, until next time, consider your quest.