Today’s Guest on the Podcast is Josh Long, a entrepreneur and author of Bottleneck Breakthroughs, which discusses the many unaddressed “Root Causes” in Businesses/Companies that can result in detrimental and unsuccessful symptoms and results and, most importantly, how to tackle them and make positive progress.
Running a company/business is a learning curve, full of trial and error, so it is a useful and wonderful thing to discover and read a book that can give you clear answers on how to take steps into the right direction. What more could you want, really?
What you will learn in this episode, among other things, is:
- Discovering Root Causes and how to deal with them effectively
- How to address symptoms and issues that may be effecting your income
- The idea of Bottleneck Theory
- The True Purpose of a Business
- Figuring out what to prioritize
Narrator: Welcome to The Sustainable Business Radio Show podcast where you’ll learn not only how to create a sustainable business but you’ll also learn the secrets of creating extraordinary value within your business and your life. In The Sustainable Business, we focus on what it’s going to take for you to take your successful business and make it economically and personally successful.
Your host, Josh Patrick, is going to help us through finding great thought leaders as well as providing insights he’s learned through his 40 years of owning, running, planning and thinking about what it takes to make a successful business sustainable.
Josh: Hey, how are you today? This is Josh Patrick. You’re at The Sustainable Business.
Today, we have a repeat offender with us. His name is Josh Long. I love Josh. He is just such a great guy. We just spent three days together in San Diego at an interesting seminar. We were just talking about that. We might get into that today. But what we’re really going to talk about today is Josh’s new book, Bottleneck Breakthroughs. I love the title of that book. It’s essentially around what’s called the Theory of Constraints. And instead of me trying to explain what the Theory of Constraints is, let’s bring the expert in and we’ll let Josh tell us what it is.
Josh Long: Thanks.
Josh: Hey, Josh. How are you today?
Josh Long: Doing great, Josh. So I’ll be Josh2, you be Josh1 and we’ll get everybody confused.
Josh: Or I’ll be Josh65 because it’s my birthday today.
Josh Long: Yeah, happy birthday. I saw that.
Josh: Yes. Thank you. Thank you.
So what is a bottleneck breakthrough? Let’s start there. How’s that?
Josh Long: Yeah, it’s a good question, I think.
When I started my entrepreneurial career, I was overwhelmed with the chaos of everything on my plate. As a mortgage broker, it was my first real business that was making money, I found that if I just focused on the next point of friction, the things that were causing me frustration and that were coming up over, and over, and over, repeat offenders, like you accuse me of being, that if we just fixed those things one at a time, growth occurred and growth sustained. And so, I started calling them bottlenecks so just the easy layman’s term that fit for me.
I knew I wasn’t the only person to come up with this idea. Thankfully, years later, I came across The Goal by Eli Goldratt, and The Theory of Constraints, and Popular in the Manufacturing World in the ’70s and ’80s. Really, a bottleneck is simply a friction point that is a root cause, a root problem, a root issue that is preventing your company from moving forward.
Josh: Let me interrupt you just for a second because one of the things we like to do is here is kind of kill jargon. I’m going to bet everyone’s heard the term root cause and I don’t think we ever bother to define it enough. So what’s your definition of root cause, first of all?
Josh Long: If we use a medical analogy because with all have bodies and we go to the doctor, so we understand it. It’s the–
Josh: Some of us more than others.
Josh Long: Yes. The root cause is the underlying problem that is creating all of the symptoms. And so, in a business, a root bottleneck could be as simple as we don’t qualify our leads well enough or thoroughly enough. And so, we spend a lot of time chasing leads, getting our proposals, trying to on-board people that aren’t qualified, don’t have the money, they flake out. All of these other symptoms that we deal with, but the root cause. And, often times, those symptoms is you’re not qualifying effectively. And so, when you start qualifying more effectively, all those other problems disappear.
Josh: Yes. And qualifying effectively requires an understanding of what you’re qualifying to.
Josh Long: Yeah, right. And so, it takes some heavy thinking to work through this stuff because there’s a lot of new shinies in the world. I mean, we see them all the time and we get distracted by them, thinking, “Oh, this is going to solve my problem. Oh, this is going to make me never have to work again and have all the cash in the bank,” right? I mean that’s the–
Josh: Right, yeah. Yeah.
Josh Long: That’s the fool’s gold that we, entrepreneurs, fall for all the time so.
Josh: We’re all looking for that magic bullet that gives us all the customers we ever wanted and we don’t have to do any work for.
Josh Long: Yeah, exactly. People that pay us and never question us and never demand anything and show up on time every time. Yeah, all of the ideals that we wish happened.
Josh: Right. I actually would find life very boring if that happened but–
Josh Long: Right, right.
Josh: –a little bit on the silly side though.
Josh Long: Yeah, I think some of us would enjoy it for a couple of months but then we’d really get bored, for sure. I mean, just to have some insanity.
Josh: Yeah, that’s my understanding–
Josh Long: On the cushion of sanity, for sure.
Josh: So let’s continue on, okay? So we found the root cause analysis. And then we’re going back. We’re looking at that these symptoms. How do we know which symptoms we should pay attention to and which we should probably ignore because they really aren’t very important. And, in fact, they may not even be symptoms.
Josh Long: Yeah. That’s, I think, the million-dollar question. I think that is something that gets developed over time. You start seeing the pattern of, “Oh, well, I paid attention to this system and it didn’t make a difference. It didn’t move the needle.” I always come back to, “How are we going to streamline cashflow?” because at the end of the day, cash is king. And without it, you’re out of business even if you’re profitable. So everything always, for me, just comes back to “How are you getting cash in the bank? How does this symptom or this issue affect your ability to keep cash or collect cash and keep it in the bank?”
Josh: You must have read my biography because I was the poster child for having a very profitable business that completely ran out of cash.
Josh Long: I didn’t know that about you but it’s not uncommon, unfortunately.
Josh: It’s not uncommon at all because finance is the language of business. And how many business owners do you know who can speak the language of finance?
Josh Long: Yeah, very few. Those that know finance go into finance, work at banks, deal with underwriting, deal with credit lines and stuff. And then there’s the rest of us small business owners that bumble their way through it. But I mean, that’s why you and I become such advocates for financial literacy and knowing what’s going on with your cashflow and tax structure and how to keep it. At the end of the day, the whole point’s keeping it.
Josh: I would say that’s true. So what brought you to write this book?
Josh Long: So I had been noodling on what I called the bottleneck theory for the last 10 years. My clients really found it to be useful when I would talk to them about it and say, “I think we’re facing a bottleneck in this part of your business.” And it just made it really easy for us to start digging in together.
So I was helping a buddy of mine, Keith Krance, great Facebook Ads guy and trainer. I was helping him with his training company, Facebook Ads University, under the Dominate Web Media Company. I was doing a lot of assessments, asking the members what they needed and what they needed help with. And there were a few authors that I had talked too. I was shocked that they had these great bestselling– literally, New York Times bestselling books but didn’t have a business behind it. It was just speaking from stage and selling books. It’s not a bad business but it was, by no means, longstanding or sustainable and that’s why they were looking to Facebook Ads and all that.
I was talking to my wife about it. I said, “I was just amazed that these amazing authors who I really respect, great human beings, that deliver amazing wisdom through their books didn’t have a sustainable business.” They owned a job speaking from stage, essentially. And my wife said, “Have you ever thought about writing a book?” And I said, “Yeah, like a dozen times but I don’t know what I’d write about. And she said, “I think you should do it. And I think you’ll figure it out as you go.” And so, that was May 2015, she challenged me with it.
I was right on the heels of some really great wins with clients. And so, I could use that as my kicking off point to start solidifying what I wanted to talk about. I’ve always felt there’s this big gaping hole in the business literature world that there’s the marketing guys and then there’s the systems guys. And they don’t talk, they don’t hang out together. They don’t do anything together in the business literature training world.
And so, like you’ve got the systems guys of Michael Gerber and Sam Carpenter, the E-myth and Work the System, I think, is Sam’s book. They’re great. I went though Michael’s stuff. I loved it but I felt like it was lacking marketing horsepower. And then you’ve got the Jay Abraham’s, and the Dan Kennedy’s, and the Perry Marshall’s and all of the guys that you and I know and follow and gravitate towards. But I felt like these guys grow and these guys sustain and they need to come together. And so, that was the beginning of the book. It was marketing with systems because every client has come to me over the yeas thinking they have a marketing problem. And half the time, they just have a systems problem. But to create growth, you have to do a [inaudible 00:08:55] marketing. And to sustain it we need the systems.
Josh: So where would you put sales? Would you put that in marketing or would you put that in systems?
Josh Long: I think sales always falls under marketing. But I think systems is the foundation that everything is built on. Your finance process has systems. Your recruiting process has systems. Your marketing and sales processes have systems.
So I always feel that sales follows marketing because I’m a big fan of Drucker and I think, when he says that the business’ purpose is to innovative and then market that innovation, everything else is a cost. Innovation and marketing have to work together. And then sales follows that marketing lead.
Josh: Yeah, marketing and innovation create and everything else is a cost.
Josh Long: Yup, exactly.
Josh: If I’m not mistaken, that’s the quote.
Josh Long: Yup. And the purpose of a business is to create a customer, right?
Josh: And the purpose of a business is to create a customer. Yeah, I love this because a lot of people tend to think the purpose of a business is to be profitable. And I always say, “no, no, no, no, profit is a result. It’s never a purpose.”
Josh Long: Right. And I think that’s where– if we get into the arguments against crony capitalism – the extreme of capitalism, is to deliver shareholder value. And that creates all sorts of problems.
Josh: I could go on for hours about my whining about publicly traded companies and their supposed focus on shareholder value and the difference in private companies, where you to tend to get more ethical behavior–
Josh Long: Exactly.
Josh: –and my experience is that in the the public companies, this whole thing about profits first is really an excuse for bad behavior by senior executives.
Josh Long: I totally agree. Yeah. And I think that’s where, again, Drucker – purpose of business is to create a customer. And the small businesses, private enterprise, their purpose is to create thrilled customers and the profits result. Whereas, if we get into the financial shenanigans of publicly-traded companies. Not all of them are bad. But I think that by having shareholder value be the edict, it creates a lot of bad behavior.
Josh: Yup. So one of the thing I do is I call the Theory of Constraints which is what you’re describing in your book whack a mole for business. And why I do that is what I’d like to talk a little bit about is, too often, I see business owners try to take too many different projects on at once.
Josh Long: Exactly.
Josh: And I like the theory of whack a mole because there’s only one mole you whack when you’re playing it. You’re not trying to whack five moles at once. You’re whacking one mole.
Josh Long: They give you one stick and that’s all you’ve got.
Josh Long: You’re constrained in your activity to be focused.
Josh: Yes. So how do you help clients and people you’re talking to figure out what is the mole they need to whack?
Josh Long: So I think that laser focus is key. And I think, as entrepreneurs, we like variety. We like–
As quick starts we talked about, before we started, that we like getting things going, not necessarily finishing them. That’s our natural tendency as entrepreneurs. And so, we get a lot of variety out of our business. I think that’s the first step that I point out to clients is not to use their business as a source of variety fulfillment. Get hobbies for that. Go do something else.
Josh: What a great suggestion, by the way.
Josh Long: It sabotages the growth because when they want a lot of variety, they need that simulation, things start, and fits, and spurts and they never finish. And so, that’s the first thing that I talk about is, “I know you need variety. I know you need simulation. I know you need to constantly feel like something’s new and worthwhile but your staff, who are not wired like you, they need to feel like they’ve mastered what they’re doing already. They like the structure of succeeding at doing what they’re told well. And when you’re changing all the time, they’re having to learn all the time and they’re not used to that uncertainty or comfortable with it. So that’s the first thing.
The second thing is that I use a process that I learned from Jay Abraham. I call it the profit-priority process. It’s just, “Let’s go through and find the opportunities – the moles that are sticking their head out and let’s score them.” It’s all arbitrary scoring but it gives us a rubric to prioritize.
And some of the things that I talk about in the book, to prioritize on are “What’s the potential upside of solving this? What’s the risk of failure? How fast can we do it? What’s the cost of capital that it’s going to take to do this?” Because not everything’s equal. And in some businesses–
I was just consulting with a company before we got on this call, they’re revamping their software platform. That’s a huge undertaking but it’s going to create a lot more stability for them to grow and increase their valuation because they’re not dependent on a third-party solution for that long-term growth but that’s a huge undertaking and it’s going to take twice as long and twice as much money as they think. But they just need to manage that transition and how they communicate about it.
So, back to your question, I just go through getting it all out on the table and then we score it. We prioritize it and then we decide, “Do we want a quick win? Which I’m always a huge fan of quick wins because it (a) drives revenue, usually, (b) increases motivation to keep doing this, and (c) it gives us a baseline of saying, “Okay, this is how long this took. We thought it was really quick but it took a month instead of three days. So how does that adjust our timelines, going forward or our estimates going forward?”
Josh: So going forward with that, it sort of makes me think is that when you’re evaluating, you’ve got big rocks, and smaller rocks, and no rocks. And the bigger the rock is, the longer and more complicated it takes. And the more probably it’s worthwhile into breaking up into smaller chunks.
Josh Long: Right. And I don’t like tackling big rocks unless they’re cancer. Again, getting back to that health analogy. That if it’s a big rock and it’s just a big rock to chase because you want to conquer a big rock, let’s work on getting to the next plateau or let’s get to a revenue stage where we can take some hits while we’re tackling that big rock.
Josh: Well, what I would consider a big rock, like you just explained, this major software project your client has. That’s probably dozens of projects within one project.
Josh Long: Yeah. I mean, it’s working back from, “Okay, what’s our software doing now? What’s missing?” And so, we have to create all the user stories. And we have to figure out the user experience. And I mean, that’s very common steps but without doing that and then getting feedback from users on – “If we change this or if we did this, would that be useful?” So it’s working through that first stage. And then, from user stories, then it’s wire framing. And then getting all of the wire framing and making sure that that’s in place and that everything goes where you think it should go and that people can click on it and use it and test it. So yeah, there are a lot of sub-projects to that.
Josh: So what would wire framing be, because I know I’ve heard the term before?
Josh Long: It’s a jargony word – getting back to your thing, of the design of the web page. The static design of what it would look like. And so, there’s great software tools out there that you can put a web page. Let’s say it’s your dashboard and you’ve got all of your client info here. And then you’ve got, say, your projects and your billing info. And that’s all on the side. And you design that dashboard as a graphic file, a PNG file, let’s say. And it looks like a real web page but it’s just a static image. The cool thing is there’s software that you can upload that image and make areas like the menu buttons clickable that then click and go to the next image for that next piece of that dashboard. So those are called wireframes. They’re really just the mockup designs of what the website or software is going to look like when it’s live.
Josh: So, from what you said, your focus is, if the project we’re going to start on doesn’t create cash, why bother?
Josh Long: Or does it streamline the ability to collect cash, right? Yeah, why bother?
Josh: Right. Which ultimately creates cash.
Josh Long: Mm-hmm, yeah.
Josh: So what happens when somebody comes up and says, “Well, I think, if we did this, it would be good for our image.”
Josh Long: I, fortunately or unfortunately, don’t deal with clients that bring that stuff to me. So I am not against secondary impact-type projects that, like you said, “if this improves our image”. So what would be an example from one of your clients that we could talk about that I could spit ball in response?
Josh: Well, I actually really don’t have that I come up a whole lot. I mean, I have a client once in a while who says, “You know, this would be good for our image.” My response to them always is, “Yeah. I tell you. I’ve had some very high-profile clients during my business life. And they’ve been very good at selling me on, “I need to give them a deal because they’re a high profile client. And my experience is high-profile clients don’t create any more business than low-profile clients.” So I try to get people to get away from what– you know, I call false positives.
Josh Long: Yup, exactly.
Josh: You know, it looks like a good idea but when you lift the hood up and you start going down a few levels, you realize that it’s a good sales conversation for them but it’s a money loser for you.
Josh Long: Right. So it looks good for us.
I’ve got a great example. I had a client years ago. They did software development and Google actually outsourced a project to them and paid fine but they couldn’t talk about the details of the project because it was Google and Google wanted it all in-house. And so, it’s the challenge.
I had another client that worked with Starbucks. And they worked with Harvard as well. And Starbucks and Harvard wouldn’t let them use their name in any of their project details. Then Starbucks and Harvard came back later and wanted them to help move the projects that they had done for them, to re-sell the products or whatever in the secondary market.
And so, in all of those situations where you’re making a concession because you think, “Oh, this whale is worth it. Or this big client is worth it.” I’ve never found those concessions to pay off like you said. And so, if somebody says something like, “Oh, I’m going to do free work for Apple because it’ll go great on my resume”, I’ll ask the next questions of “Do you have permission to use their name? Can you talk about the project? Can you get referrals from them?” If none of those happen, then there’s zero benefit.
Josh Long: But, again, it’s always coming back to what’s the effect on cashflow. I hate to sound like a mercenary but it seems to be a very good rubric to keep people sane and make sound, sustainable decisions.
Josh: We’re going to have to end it there because we are out of time for the podcast, unfortunately. I’ll just end with a little ditty I have on cash is that, “Private businesses run on cash. Public companies run on profits. And private companies should never confuse the fact that they’re not a public company.”
Josh Long: Right.
Josh: So, one of the things I’m going to recommended to everybody, learn how to read a statement that you never look at. It’s called your statement of changes in financial position or otherwise known as a cashflow statement. It’s complicated. And if you can’t read it, you might have the same problem I did.
So, Josh, I’m going to bet and I really want people listening to read your book–
Josh Long: Thanks.
Josh: –and buy it. So how would they find it?
Josh Long: It’s at Amazon. It’s at Barnes&Noble. It’s on my website at bottleneckbreakthrough.com. It all drives back to Amazon or Barnes&Noble. There’s a Kindle. There’s a Nook.
It’s a hard cover. Here’s for anybody watching the video. Here’s what it looks like. It’s 260 pages of all actionable content. There’s no fluff. I pulled a lot of stuff out that even would’ve been useful but I wanted to keep it focused and actionable and help you find your bottlenecks and fix them and unlock sustainable growth.
And I also have an offer for you. I have a one-hour free audio CD course. It’s actually a physical CD which we’re going to mail to you. It’s really easy to get.
It’s called Success to Sustainability: The Five Things You Need to Do to Create a Personally and Economically Sustainable Business. All you have to do to get it is to take out your smartphone – if you’re driving, pleased don’t do this. But when you stop driving, you can take out your smartphone and text the word SUSTAINABLE to 44222. That’s the word SUSTAINABLE to 44222. You’re going to get a link. You’ll give us your name and your address and we ship it to you. If you happen to have one of those nice new cars that don’t have a CD player in it, and you don’t have a CD player at home, you can just e-mail me at firstname.lastname@example.org, that’s the number 2, and I will send you the audio file.
This is Josh Patrick. You’re at the Sustainable Business. Thanks a lot for stopping by today. I hope to see you back here really soon.
Narrator: You’ve been listening to The Sustainable Business podcast where we ask the question, “What would it take for your business to still be around 100 years from now?” If you like what you’ve heard and want more information, please contact Josh Patrick at 802‑846‑1264 ext 2, or visit us on our website at www.askjoshpatrick.com, or you can send Josh an e-mail at email@example.com.
Thanks for listening. We hope to see you at The Sustainable Business in the near future.