Lenny’s Top Business Books

Productivity is the act of bringing a company closer to its goal. Every action that brings a company closer to its goal is productive. Every action that does not bring a company closer to its goal is not productive.

Productivity is not about getting more done in less time. It’s about getting the right things done. The right things are those actions that move you or your company closer to the goal.

In business, you have three primary levers – net profit, return on investment, and cash flow. You want all three levers to move in the right direction. A common mistake is optimizing for one of these metrics, which may inadvertently make one or both of the other metrics go in the wrong direction. 

It’s important to view your business as a system, and the system improves when you move the three metrics the right way.

In a warehouse setting, throughput, inventory, and operating expenses are proxy metrics that represent net profit, return on investment, and cash flow, the three levers of a business.

Throughput: the rate at which the system generates money through sales.

Inventory: Inventory is all the money that the system has invested in purchasing things which it intends to sell.

Operating expense: Operational expense is all the money the system spends in order to turn inventory into throughput.

The goal is thus to increase throughput while simultaneously reducing both inventory and operating expense