What is Operational Thinking?
Operational Thinking is about systematically reducing friction across every aspect of a business while amplifying its ability to create and deliver value. It is not just about building systems—it’s about creating the right systems that are measurable, adaptable, and strategically aligned to enable long-term growth while ensuring short-term survival.
It’s about creating systems that are:
- Low Friction: Simple and intuitive processes that minimize effort and waste.
- Consistent: Predictable results, regardless of who is operating the system.
- Scalable: Systems that grow with your business without breaking under the pressure.
At its core, Operational Thinking means automating the day-to-day while building a culture of improvement, adaptability, and value creation.
The best system is the most effective and efficient system that will actually get used.
- Joshua Schultz
Why Operational Thinking Is Where Scale Happens
Every scalable business, whether it’s an e-commerce startup or a manufacturing plant, operates on systems. Without systems, businesses rely on heroics—key employees making it work by being excellent at what they do. Heroics might get you through the early stages, but they don’t scale.
Here’s the truth: Systems are where scale happens. When you build your business on a foundation of systems, you enable it to run predictably and independently of any single person. You create capacity for growth by removing bottlenecks, reducing risks, and improving efficiency.
Why Operational Thinking Matters
Operational Thinking is more than a business philosophy—it’s a competitive advantage. Businesses that run on systems consistently outperform those that rely on heroics. Here’s why:
- Scalability: Systems create capacity for growth by removing bottlenecks and reducing dependency on individuals.
- Efficiency: Systems minimize wasted effort and resources, improving profitability.
- Resilience: Systems reduce risks by making processes predictable and transferable.
- Consistency: Systems ensure customers, employees, and stakeholders have a reliable, high-quality experience.
The Flywheel Effect of Operational Thinking
When you implement Operational Thinking, your business gains momentum. Here’s how:
- Systems Create Predictability: Reduce chaos, eliminate guesswork, and deliver consistent, reliable results.
- Predictability Frees Capacity: With fewer surprises and smoother operations, your team can focus on growth, innovation, and strategic priorities instead of firefighting.
- Capacity Fuels Growth
- Scalable systems enable your business to expand consistently, making growth repeatable and sustainable.
- Growth Generates Cash
- Expansion delivers the financial resources necessary to invest in the future of your business.
- Cash Enables the Acquisition of New Skills and Capabilities
- With more resources, you can develop your team, invest in new technology, or enter new markets to drive further competitive advantage.
- New Capabilities Require New Systems
- As your business evolves, new systems are needed to operationalize and scale these capabilities, restarting the cycle and reinforcing the momentum.
This flywheel effect compounds over time, turning your business into a scalable, resilient enterprise.
This flywheel creates an upward spiral of efficiency, value creation, and scalability.
Why Operational Thinking is Essential for Business Leaders
Businesses that rely on intuition and heroics get stuck. They grow haphazardly, waste resources, and burn out key players. Operational Thinking is the antidote.
Operational Thinking Reduces Chaos
Entrepreneurs and executives often find themselves putting out fires instead of building the business. Operational Thinking creates clarity:
- Clarity in processes.
- Clarity in decision-making.
- Clarity in who owns what and how success is measured.
When your team operates within clear systems, they can focus on execution instead of constant troubleshooting.
Operational Thinking Drives Consistency
Customers, employees, and stakeholders expect consistency.
- Customers want the same high-quality product or service every time.
- Employees need consistency in expectations, processes, and communication.
- Stakeholders rely on consistent results to trust your leadership.
Systems are what make consistency possible—whether it’s in your sales pipeline, service delivery, or hiring process.
Operational Thinking Unlocks Scale
Scaling a business is impossible without systems. Growth amplifies inefficiencies. What works at $1M in revenue will break at $10M or $100M without systems to handle the complexity.
Operational Thinking ensures your business can grow without breaking under its own weight.
The Three Pillars of Operational Thinking
The Value Creation Machine:
Every part of the business (sales, operations, finance) is interconnected in a larger process: creating and delivering value.
- Sales communicates that value to the market, customers, and stakeholders.
- Operations delivers that value through products, services, and experiences.
- Finance records the results, measures success, and feeds actionable insights back to refine sales and operations.
This alignment ensures that all systems work toward the same overarching goal of creating value, not competing priorities.
Systems as Friction Reducers:
Systems should never be created for their own sake. Instead, they must directly lower friction in delivering value to customers, employees, and stakeholders. When built properly, they create momentum—a “cash generation machine”—by making processes simpler, repeatable, scalable, and measurable. This eliminates chaos, drives clarity, and ensures long-term profitability.
People As Decision Makers:
While systems are critical, people are the heart of Operational Thinking. Employees must be trained to think critically, solve problems, assess risks, and make long-term decisions. Systems handle 70–80% of predictable operations, but it’s skilled individuals who adapt, innovate, and know when to tweak, add, or retire systems.
Key Components of Operational Thinking
Building with Systems
What Makes A Good System
A system should do more than just organize tasks. A system is an operational asset that delivers measurable, repeatable results. Great systems share these characteristics:
- Consistent: Produces reliable outcomes no matter who executes it.
- Trainable: Simple enough to teach others, ensuring scalability.
- Synergistic: Works seamlessly with other systems to amplify results.
- Scalable: Grows without collapsing under complexity.
- Repeatable: Operates as reliably on the 100th attempt as the first.
- Transferable: Easy to hand off or replicate across teams, business units, or locations.
- Measurable: Able to measure it, track progress and results with clear metrics, and ascertain if its working or not.
- Improveable: Provides data and feedback for continuous refinement.
- Investable: Delivers a known ROI, making it worth funding and optimizing.
Systems aren’t static. They’re living processes that adapt and evolve, always driving toward greater efficiency and effectiveness.
Strategic Cadence and Feedback:
Businesses thrive when planning, execution, and measurement are treated as distinct but interconnected processes.
- Planning: Long-term (strategy), medium-term (tactical), and short-term (daily/weekly) goals are established in the annual plan. This ensures all systems and activities are aligned with the company’s vision.
- Execution: Daily and weekly activities drive the tactical goals that feed into long-term objectives.
- Measurement & Feedback: Variance analysis identifies where execution aligns—or misaligns—with the plan, creating a circular improvement process.
Balancing Rigid Systems and Flexibility:
The ideal business has no systems—just “rock star” employees making the right decisions at all times. But since this is impractical at scale, systems should act as scaffolding to replicate 70–80% of ideal behaviors.
- Critical areas impacting cash, margin, reputation, or growth should be systematized to ensure consistency and scalability.
- Non-critical processes can remain flexible, empowering employees to operate without unnecessary bureaucracy.
Scorecards with Risk Awareness:
Scorecards align departments around shared goals and measure both progress and potential risks.
- Every system must have a goal. Without clear goals, systems risk self-optimizing for unintended outcomes.
- Scorecards measure leading indicators (activities) at a weekly cadence and lagging indicators (outcomes) at a monthly or quarterly cadence.
- Immunity meetings address gaps by focusing on long-term, customer-centric solutions that reduce operational friction.
Standardization and OTS First Approach:
Off-the-shelf systems should be the default choice to avoid distraction and resource bloat.
- Technology is not a strategy but a friction reducer.
- Custom systems should only be built when no existing solution effectively enables the business’s strategy.
Prioritization and Focus
Operational Thinking requires ruthless prioritization.
- Focus first on systems that touch key outputs—cash generation, customer value, margin, and growth.
- Leave flexibility for processes that do not directly affect those outcomes (e.g., tasks like sweeping the floor may not need rigid systems).
- Align every system with the broader business goal, whether that’s scaling revenue, increasing efficiency, or building a lasting reputation.
Balancing Short-Term Survival and Long-Term Growth
Operational Thinking bridges the tension between immediate pressures and future aspirations by ensuring systems align with strategy.
- Systems that reduce friction today also create cash flow, which funds long-term initiatives.
- By focusing on value creation and adaptability, systems remain relevant as the company evolves.
- A clear annual plan anchors short-term actions in long-term goals, enabling the business to adjust dynamically without losing momentum.
What Makes This Approach Unique?
Systems as Enablers, Not Barriers:
Operational Thinking isn’t about bureaucracy—it’s about empowering people with systems that reduce friction, enable strategy, and scale value creation.
Human-Centered Execution:
The best systems still require skilled decision-makers to adapt and innovate. Training employees in critical thinking, problem-solving, and long-term planning ensures systems remain tools, not crutches.
Risk and Reward Awareness:
Scorecards track not just success metrics but also the potential risks of over-optimization, creating a balanced approach to execution.
Interconnected Value Creation:
Every department functions as part of a single value creation machine, with clear roles in communicating, delivering, and measuring value. This prevents siloed thinking and ensures alignment across the organization.
Practical and Scalable:
Start simple. Use off-the-shelf tools. Build modular systems. This framework grows with the business, focusing on what’s essential while leaving room for flexibility and innovation.
Operational Thinking in Action
Operational Thinking is not a vague idea—it’s a set of practical actions that transform businesses. Here’s how it works in the real world:
Documentation
Start by writing everything down. Whether it’s how you onboard a new customer or run payroll, create a record of how things are done.
Why? Documentation creates clarity and sets a baseline for improvement.
Training
A system is only as strong as the people operating it. Train your team to follow the system while empowering them to adapt and improve it.
Triggers
Build clear “triggers” that initiate processes. For example, a new sales inquiry triggers a follow-up email or scheduling a demo.
Systematic Prevention
Design systems to prevent problems, not just react to them. Include checks, balances, and safeguards to minimize risks.
Cadence
Introduce regular rhythms (daily, weekly, monthly) for reviewing results, addressing issues, and refining processes.
Asynchronous Operations
Systems should work even when you’re not. Use tools, automation, and workflows to ensure the business runs independently of specific people or time zones.
Written (or Recorded) Feedback
Feedback loops drive improvement. Document successes, failures, and opportunities to refine the system.
Balancing Mechanisms
Systems can over-optimize in one area at the expense of another. Include KPIs and countermeasures to balance risk and reward. For example, track both customer satisfaction (reward) and delivery speed (risk) in your logistics system.
Where Operational Thinking Shows Up
Sales: Create a predictable pipeline system that tracks leads, automates follow-ups, and ensures every salesperson operates with the same playbook.
Operations: Build workflows that standardize production or service delivery while providing flexibility for innovation.
Finance: Use systems to monitor cash flow, track KPIs, and ensure financial data informs decisions in sales and operations.
People: Systematize hiring, onboarding, and training to ensure employees are aligned with the company’s vision and expectations.
Culture: Operationalize your values with rituals, communication cadences, and recognition programs that bring the culture to life daily.
Strategy: Build consistent repeatable approaches to deciding the game you are playing, and how you’re going to win.
What Business Leaders Need to Know
- Systems Aren’t Bureaucracy—They’re Freedom.
When built correctly, systems don’t stifle creativity—they remove the friction that prevents creativity from flourishing. When work is pushed to a process, it is able to be done faster, with less error, less mental processing and attention, and possibly even by machines or software. This frees up the high level problem solving and innovation muscle across your entire company. Your workforce becomes builders, not task doers.
- Operational Thinking is a Competitive Advantage.
In a world where businesses rely on heroics, a systematized business that runs predictably stands out as a resilient, scalable, and investable enterprise. The more a capability or customer relationship depends on a singular person, the more risk there is in your business. De-risking means building a team, a process, and a system of machines. This, in turn, creates a business that is extremely hard to compete with.
- People and Systems Work Together.
Great systems amplify great people. By training employees in problem-solving, decision-making, and critical thinking, you create a culture where systems (and their managers) can adapt and evolve without losing their core purpose.
Operational Thinking isn’t just a framework—it’s a mindset that transforms how you run your business. It transforms small businesses by turning chaos into clarity and reactive action into proactive growth. By building systems that reduce friction, empowering people with the right tools and training, and tying every action to value creation, small businesses can achieve scalable, sustainable success.
This isn’t about running the business—it’s about building a business that runs itself.
By embedding systems that reduce friction, empower people, and drive scalable results, you’ll unlock the full potential of your business and position it for long-term success.
Businesses that wing it don’t scale. Businesses that think operationally do.
The choice is yours.
