Join Derek Hudson as he explores Essential Dynamics, a framework for approaching the challenges facing people and organizations. Consider your Quest!
Welcome to Essential Dynamics. I'm Derek Hudson, creator of Essential Dynamics, sometimes host of the podcast. Really excited to be on, today with my colleague from Unconstrained, Glen Vanstone. Glen, welcome.
Glen:Hey, Derek. How are you?
Derek:I'm, I'm doing great. So Essential Dynamics is a thinking framework that, we've been working on that helps us solve, tricky business problems and, and see things a little more clearly. The podcast is set up as an opportunity to test the concepts of essential dynamics through deep conversations with interesting people, and I'm excited to have Glenn with me today. He is definitely an interesting person who's up for deep conversations. Glenn is a colleague of mine at Unconstrained, and has spent a lot of time working with, companies who are trying to grow and working with, agencies who are trying to help those companies try to grow.
Derek:And I think Glenn's got some really interesting perspectives on what's hard about all of that. Glenn, I know you've been thinking about it. I know you've been writing about it. What's, what's your take on the state of business in, 2023?
Glen:Well, that's a big large question, open to interpretation, but, very interesting times. And to be honest, I think that, the changes that we're seeing right now are only kinda getting started, and we're gonna see a lot more dramatic shifts in the business community or the business ecosystem, as we move forward. We're certainly not, going back. We're going forward, and in some respects, we're not exactly sure going forward to what. There's so much actually happening now in terms of big macro forces that are, occurring that are going to influence choices for businesses and communities, in the future in ways I don't think that we're, we're fully grasping yet.
Glen:So large large picture kind of view sounds kinda negative, but it also to me represents more opportunity than, downside.
Derek:So, Glenn, what are some of those big macro forces that you're thinking of?
Glen:Well, I I've started writing about some of those and and I think that, there's obviously the geopolitical shifts that are going on, right now that are, trying to establish some new form of order. Right? Because we're seeing these multipolar polarizations of TETRO and who's actually got more influence in setting, the terms of engagement at in in a global level. We've been going through decades of hyper globalization, right? We've had this unfettered growth curve of, really in the last thirty years.
Glen:It's been accelerating, but it's always been based on some sort of structured order. That's being eroded in favor of something new and that's just normal change. Another force of, at work is, shifting the trade, where it used to be unfettered trade with anybody who would work with you, we're now moving into this near shoring or friend shoring or these these kind of groups of like traders versus the whoever needs, and the distribution of resources, that is changing. We've got climate adaptation, which is not climate change per se, but, you know, what happens when public dollars are no longer incentivizing, mitigation measures, but public dollars are now gonna have to go towards, repairing impacts. Right?
Glen:You know, all those fire issues, that unplanned spending of public dollars that is not about, transitioning to, leader with a low low emission industries. We got population issues, and then there's the whole matter around, the race for technology supremacy. Right? He who owns the technology or commands the use of technology is going to have, outsized influence in, how things are done in the future. In businesses, I use the expression, the emergence of digital Berlin walls.
Glen:Right? The the which technology group is more innovative able to transition versus, being able to distribute that to all kinds of markets. We're starting to see that with the Ukraine war attempt. So lots of forces actually that are way above what can be done at a provincial and even at a national level. All of those are going to hit the streets and and impact, individual businesses in ways they may not be considering.
Glen:The fact of the matter is is changes occurring isn't gonna be like it was before. So how do we start to define our path forward as communities, as states, and provinces as nation?
Derek:So if you're an owner and operator of a business that's sort of deep in a Canadian supply chain, you can look at these things and worry about them. There's not a lot you can do to influence whether they happen or not.
Glen:Sure. Exactly. But it's also, I think in the we know that all of this is is occurring. These are all, forces at work and, you know, we we're not sure what the outcomes are going to be. But if we take the position or the stance that well, how do we define a more favorable position for ourselves?
Glen:How do we start to position our organization or whatever we do in terms of creating value? How do we, apply that and position it so that we can, maximize, where we see things going? And that kind of, pre thought or forethought or foresight, or even strategy is part of that process that we should be doing right now. We we can expect things to go back the way they were. There's too much change, too much at work.
Glen:It's going to be different. So how do we think about positioning our business to succeed in the future?
Derek:I I really like that in in the context of, you know, the way we talk through essential dynamics about taking a taking a systems view. And so one of the things we say is you gotta get yourself outside the business and understand the system. I think another another pitfall that you're talking about is and and another thing that won't work is hanging on and waiting for yesterday to come again.
Glen:Yeah. Yeah. Yeah. Exactly. I think that that's true.
Glen:I think that if you take a system's view and we think about that kind of bit, the system is not going to repair itself so your business model will work again. You're not gonna be able to get somebody to say, you know, we'll just fix all this so it works like it did in 02/2006. You know? We're it's not going to happen. So what are you gonna do about that?
Derek:Hey. Hey, Glenn. There's a sound bite I've heard you say before that you haven't said yet. There's something along those lines that people are upset that their business model isn't relevant anymore. Do you do you have the catchphrase?
Derek:Or
Glen:Well, what is it? I I keep thinking about, Mel Brooks and Blazing Saddle, which is, you know, pounding the fist on the table. They somebody should do something about this rump rump. But, basically, it's that that line that why won't somebody fix things so my business model works again? Right.
Glen:And all they're doing is projecting, the issue into places where they don't control.
Derek:Well, I think that's, something that we can pick up from this early stage of our conversation is that trying to get the external environment to change, to suit us, isn't going to happen. It's a waste of time. It's frustrating if you're trying to effect a change. It's frustrating if you're waiting for someone to do it for you. Correct.
Derek:Yeah. Now now let's layer on top of this, this idea that there are public agencies and other organizations that are really set up or have an objective of helping businesses do better.
Glen:Okay. Well, you know, back to the systems view. So step back and and I always start with questions. So why is it that it is so difficult for small enterprises in Canada to become big enterprises? We're dominated by small sized entities.
Glen:And some would say, well, it's demographics. We just don't have the population base. We don't have the consumer rate. Well, Canada is unique in the in in the world. We've got agreements with 51 countries, 60% of gold GDP, and 1,500,000,000 consumers.
Glen:We have preferred access as Canadian entities that is, more competitive than any other g seven nation. So we have that kind of of reach yet we our economic our business ecosystem is not built, and and it doesn't encourage that. So why is it that given those kind of advantages, adjacent to the number one economy, why is it the Canadian businesses are not capitalized on that? So I asked a question, what gets in the way? What's holding our ourselves back?
Glen:So what is the the Canadian business system? And breaking it into to simple parts, there's the public sector and the private sector, two domains. And from my point of view working in both that there is a disconnect in the system, where we have the public sector who define prosperity from an from an economic terms is as more jobs, more businesses, more diversity, more revenue, more like, it's about quantity as a definition of success from the public lens, right? So the public sector will turn and say here's how we demonstrate that our efforts as, as government and the public sector in use of of repayer dollars is generating more and more and more and more and more. Okay.
Glen:So that's the kind of the public view of how do they define successful outcomes. The problem with that is that there's an artificial barrier there that says the public sector, is challenged because the use of rate payer dollars is governed by for the many, not for the one. Right? They have difficulty in applying public dollars to individual organizations, so they they allocate and position notes. So can we deliver something that is going to be a benefit to many?
Glen:And the public sector in in their part of that, system tends to focus right now on early stage business formation. So you've got all kinds of resources and energies and focus and money being funded towards, this creation, part of the economic system where we have more businesses. Let's put dollars into startups and entrepreneurship and accelerators and incubators and every community needs to have, you know, a place for for kids to come out of school and start their own own business. So there's a big bias there. And what happens is though the economy is dominated by the private sector.
Glen:Right? So the private sector, is different. They measure prosperity not through discrete terms like more jobs or number on sale, what they look at is more continuous metrics like profitability, return on investment, things that are more fluid if you will in terms of what's the business out. And the their environment is much more complex, it's more integrated, it's much more dynamic if you will. And at the same time, the the essence of a private sector business is differentiation.
Glen:Right? So a private sector company has to differentiate itself from its competitors. That's what they blue they
Derek:have to find the blue ocean.
Glen:They have to be unique. Right? Yeah. So coming through the system, you can imagine you have a public sector that is for the many. So we'll all teach you how to spell business plan and and create a, proposal or some sort of investment, profile.
Glen:But as soon as you become established, the system disappears. The supports kinda disappear because it's you're on your own. It's up to you to carve your own success, to create your own differentiation, to compete and win as your own business. So we have this system that is heavily loaded to creation and then we have a drop off in terms of the cultural growth supports that help companies move through that that growing base. If you go from zero to 10 in the public domain, when you're trying to go from 10 to a hundred, you're kinda on your own, And it falls to a bit of we rely in the Canadian system as but still the funnel with as many as we can create and then hope that natural selection will, market selection will help, these companies achieve greatness and be impactful in the Canadian system.
Derek:Glenn, I don't I don't know if if this is the case, but it may be that this is some of the clearest thinking that I've heard on this subject. I wanna go back to a bunch of things you said, but I've got us at about, fourteen minutes here. And we'll have to look back on that and see if it makes as much sense when we listen to it. I there's a whole bunch of things I wanna pick up on. So private sectors or public sector is measuring things like jobs, maybe discrete components, program results.
Derek:Private sector, there's a more of a continuous measurement to it. I really like, Simon Sinek's book, The Infinite Game. And, and he says there's games that have boundaries and times, and then that's a score, and then we can figure out and then there's infinite games. Like, for example, marriage is an infinite game. You can't win marriage.
Derek:Yeah. But you have to have it set up so you can you can keep playing, and, that's a business has to make these short term, long term decisions. And when when the government has a specific outcome in mind, they they interrupt the in infinite game, change the rules a little bit to try and get something to happen, so they can, you know, have their announcement. But the company has to deal with the aftermath of that, and they'd say they should be playing infinite game. So there's something interesting about that.
Derek:The other thing is that, in my mind, cause and effect you talked about natural selection, something like cause and effect is alive in the private sector, but somehow it's disconnected from time to time in the public sector. For example, when you're the public sector, if you're the federal government, you can say, we have a health emergency on our hands. We're gonna spend money. We're gonna spend money we don't have. We're gonna spend money we don't know when we're gonna get it.
Derek:Private businesses can't do that. There's a there's a cause and effect. You spend money, your bank account goes to zero, you can't write checks anymore. That's not how the government operates. You think that you have the rules of engagement in private sector, you play by them, government, they can change the rules.
Derek:So so that's the difference as well. But I really wanna go back to this idea about filling the funnel. Because, you know, we talk about theory of constraints on this podcast. We're trying to digest it. And, it's very clear from that theory that if you want to increase flow, stuffing more stuff in the end of it is not necessarily gonna get you there.
Derek:In fact, it might make it worse. And I had this I had that experience with Microline years ago. I've talked about this, I think, before. We had a client that wanted more and more of our product, and they were a very important client to us, but they weren't the only one. And we have we had limited, fabrication facility capacity.
Derek:So at one point, as part of their order, they dictated how many wafers we would start a week. And so you can bet we complied. The problem was we couldn't finish anymore. And so we created more and more inventory, more and more stuff halfway through the process. When the process, then, needed to change, we had stuff that was partially processed with the wrong process.
Derek:Yeah. The costs were phenomenal. So I haven't I haven't thought of that. It's easy to start. It's hard to finish.
Derek:So if the system wants to show activity, you can start. And you can support you can support the startups. If you wanna show results, you gotta figure out where the restriction and flow is, and work at that place to get the flow moving, not start more stuff. So I think I think that's profound. That's why I wanted to mark minute 14, and now I've gone on for a couple of minutes.
Glen:Well, there's also, you know, in the system, in the private domain, you know, where outcomes and, again, a demarket between what is, prosperity measured by discrete counts of things, where people can say, here here's what we did. We created x y, number of this, number of that. Look how many more jobs they are. Great. Understand that.
Glen:On the private side, you've got the the private sector of the company, the the organization that has something that they do to create value. They're kind of like other operators in that private side too. I'll call that there is the the financial part of the private sector where it is access to capital and there is the access to expertise, you know, the services side that are on the private sector as well, not public services but private sector services that are there to provide professional services for organizations, etcetera. So you know different role players within that. But in the continuum of growth you also have the what's the role of the large enterprise?
Glen:The organization that has, made it to, self sufficiency, self resources where they actually can command the capital to do new things and to, take different types of risks etcetera. All of that maturation stage of whatever it is. You need a balance in the equation of the funnel and the what I call the large enterprises become the the gravity at the end of that pipe. Yep. So as organizations go from, zero to five and then five to 50 and then up to 500, large corporations have a big role in that ecosystem because they become a bit like a gravity well.
Glen:Right? They need a constellation of suppliers and vendors, etcetera, that sustain that business model, and so it's all of course integrated and very dynamic. But when you have imbalance in the system, when you're creating this mass load in the funnel and hoping that more companies go through the maturation cycle to become large companies, If you have, fewer of the large presences that are part of that ecosystem, you have no pull. Right? It's back to that push process, and the public sector is pushing.
Glen:The private sector has to pull, and there are activities within that pull.
Derek:So one of my jobs on the podcast is to put this all back into essential dynamics terms. And so what you're talking about with that gravity well is the driver should be demand by customers, and and then the system is restricted or constrained to to satisfy that demand. If you don't have the demand, then trying to start more stuff isn't gonna give you more flow. If you have the demand, then, you know, maybe we can figure out the flow. And so large companies, large customers, can be drivers to a system that still doesn't mean you get flow if you don't deal with what's restricting the flow.
Glen:Right. So in taking that kind of systems view, what are we what are we working with here? You know, an organization that is established, that has revenue, that is outside of the, care administration of public sector supports and and services and and funding. They're autonomous. They're expected to be self determining.
Glen:They're, expected to be self reliant, etcetera, but they have low purchasing power in relative terms. And every decision they make about their next course of action has a proportion of risk to it. Right? And there is nothing, that is available to say, don't worry. We got your back.
Glen:So I look at that and say, well, the Canadian system is really strange. It's frustrating to me again. We have this unbelievably competitive advantage in terms of access to global markets. We are adjacent to the number one economy on the planet and yet we are dominated by small enterprises who every single day want to create value and grow, but are stuck, Right? They they they're not moving forward in a way that they potentially want to be.
Glen:And now let's that's a general term because not every, private sector business has ambitions of global conquest and and footprint. I get that. But if you're in the business of creating value now and in the future, you have customers that do want what you, produce, then why do we not have a system that says, Hey, you should be everywhere. You should be, on a path of growth that is beyond. The problem again comes back to, not a failure of the public sector, but an understanding that they have problems with pick the winners.
Glen:To say, I'm going to help this company and not that company is fraught with peril. Yeah. So again that's part of that natural barrier that says the safe play for public sector services and NGOs and agencies is to say, how can we allocate and and use rate payer dollars to support the economy by doing things generically so that more businesses can potentially get value out of that. But once they're informed, it's up to them.
Derek:And up until they go. So one of the things I've heard you say, Glenn, is that, every organization, that's stuck is uniquely stuck. Exactly. Right? They've tried to differentiate in the market.
Derek:They're told that that's what they need to do. It actually works, which means you create your business a little bit different than the ones beside you, and then you run into your own particular jam, and you get stuck, and there's no government program that can tell you how to get out of that. So we're running out of time here. So that suggests another episode, which we always love to do. And I I think now that we've kind of painted the picture of that, you know, that mainstream, Canadian company, let's come back and talk about what are some of the things either those companies or the public sector or others can help them do to get unstuck.
Derek:Is that where we should go?
Glen:Sure. Why not? Happy to.
Derek:Okay. Let's let's do it. So Glenn and I are both easy to find at getunconstrained.com. And so I encourage you to, to engage with us there. Share the podcast.
Derek:Follow us because there's more episodes coming, more valued. Like to thank Brian Griffiths for his help in the studio. Like to thank our, our host, Reid McComb, who's in and out as we need him, and I really appreciate his work on the last couple episodes. But I, today, get to say, until next time, consider your quest.