As a chemical engineer (ok, among other specialties, but this is my first love and it affects how I approach almost everything in my life- business and personal), one of the first things we learn is material balances. This formula:
Input-Output + Generation – Consumption =Accumulation
applies to almost anything. But, the key consideration that I want to discuss here is that you have to determine the system boundaries. If we had a factory making widgets, we could define the system boundary (called the basis) as the entire plant. Then, all the raw materials coming into the plant would be the inputs to the system and all the products coming out would be the outputs; any waste stream would also be an output.
Assuming that we are not building inventory or explosions occur, our material balance would then be:
Raw materials In- Products Out- Waste Streams Out = 0.
But, if we were to analyze the mixing chamber alone, we would have a completely different material balance. And, by analyzing this factory on a component basis (and the combining all these components together to provide the full factory system), we would develop a great deal more information about what was going on in our factory. We should be able to determine what any potential changes would have on our ability to make production goals. If we pick the wrong basis, we may not learn anything of use about the facility.
In medicine, our augmented knowledge is forcing us to re-evaluate our bases, the ideas upon which we provide proper patient care. In dialysis, this has meant that, over the decades, we stopped looking at the ability of the dialyzer to remove a (theoretical) middle molecule, to what we thought was a more scientific one of providing the patient a Kt/V of 1.5 or so (where K was the clearance [the removal of toxins by the dialyzer], t was the time of dialysis, and V was the volume of fluid in the patient). In treating cholesterol, we now are learning that it’s not just “good” (high density lipoprotein, HDL) and “bad” (low density lipoprotein, LDL) cholesterol, but that “bad” cholesterol is what we could easily measure; it’s a specific component of LDL (small density lipoproteins) for which new testing has been developed, that is the true culprit. So, you see that we continually must reevaluate how the concepts upon which we base our decisions to provide patient care.
We need to do the same things when addressing how we run a company. Our basis, the fundamentals by which we run the enterprise may no longer apply. Ten years ago, we based upon business on certain market conditions. But, when the recession comes, the market dynamics shift
. We need to reevaluate our assumptions, our bases to insure that our enterprise can compete and grow- at the current market conditions.
Or, we may have been making a specific product that provides a wonderful profit potential. But, our distribution system is not happy that we only provide one product; it wants to “rationalize” the number of vendors. To survive, we either have to develop (or sell) a wider range of products (some with small profit potential), align with other vendors in marketing coop so mutual product lines would be bigger, or some other creative solution.
The key take-away here is that we need to take the time- at least once a year- to evaluate our bases, the assumptions we use to manage and grow our ventures.
