Closed Loop vs Open Loop

One of the things I love is to understand how systems work.  From FedEx sorting, to gas station fuel pumps, to nuclear weapons (which are actually a lot simpler than you might think). One of the things I’ve learned is that systems can be divided into two classes: closed loop and open loop.

An open loop system is a system with no feedback; it just happily runs along doing what it is told to do with no real indicator of success. It just assumes everything is hunky dory. While these systems are usually cheap to build and very reliable, they can cause problems.

For example, I spent a small amount of time at a grape vineyard assisting with the grape juice processing during harvest season. There were 8 different machines the grapes went through before processing was finished. There was one machine whose job is to crack open the grapes by crushing them just a little. This was the first real step, and it was the main bottleneck in processing the grapes into grape juice. There was a large conveyor belt that fed this machine, and if the guys putting grapes on the conveyor belt were too fast, the hopper on the crusher would fill up and grapes would start raining down inside the building. It was a non-profit facility run by volunteer labor, so the quality of the labor was somewhat random. Sometimes you would get over-eager people that no matter what you told them would keep dumping grapes on the conveyor until finally, to their dismay, you just turned off the electricity to their equipment so they were forced to slow down for a while.

Older car air conditioners (you know, those ones with a knob that is blue on one side and red on the other and no matter how many times you adjust it, you’re still too hot or too cold) are another example. Did you know that thermostats were invented almost 400 years ago, but it’s taken over 80 years from the invention of the car air conditioner for thermostats to become popular in cars? That means that for 80 years drivers have been needlessly distracted and irritated by their air conditioner needing manual adjustment.

While both of these systems are by definition “open loop” we make them work by making ourselves the the feedback mechanism, which is better than nothing but not nearly as efficient as it could be.

Making both of these systems closed loop systems is a piece of cake. For the first example, a level indicator was placed in the crusher. When it got too full the system would first turn on a yellow light outside, and if the volunteers continued to put grapes in the system too quickly and the hopper started to overflow, a different sensor would turn their power off and illuminate a bright red light outside. When this happened, the volunteers would come inside and say, with stupefied expressions, “Our machine stopped working, we think the power is out.” To which we would hang our heads in disbelief (since we had briefed them about the large yellow and red lights and explained things just hours earlier) and calmly re-explain to them what the green, yellow, and red lights were for.

For cars, to make it a closed loop system, $4 worth of electronics has to be installed in the car by the manufacturer.  I’m still curious as to why no one ever made an aftermarket thermostat for cars. I think it’s one of those “if the customer hasn’t noticed it’s broke, don’t fix it” things.

So how many of us have marketing systems or business processes that are open loop? And what can we do to close the loop? Do we have employees plodding along, doing their daily tasks, some of which are no longer needed, or are being performed too frequently? Marketing Campaigns for which we have no idea what the end ROI is? Do we even have a “thermometer” to assess how our business is performing? Do we even know how our own campaigns are functioning?

Like the thermostat, is there some simple, cheap technology that will let us turn our open systems into closed systems with near real-time feedback? This isn’t about making things more efficient, it’s about converting our businesses from unsustainable monsters which consume vast amounts of our energy and yet yield little performance to a precision instrument which transforms all the energy you put in into meaningful results.

The first step in this process is to identify the Key Performance Indicators (KPIs) that allow you to measure your progress and gauge the efficiency of your current open loop systems. (Actually, the very first step is to define your vision / purpose so that you can set goals that will get you there, so that you have a destination to measure your progress to, but I’m assuming you’ve done this, or will do it soon.) At Novak Solutions, we have enabled larger companies with their own development teams to get access to this data from Infusionsoft so they can start making data-based decisions instead of gut-feeling-based decisions. We’re currently working on packaging these enterprise class solutions into more manageable solutions for the small business market, and hope to release them soon. In the meantime our free Health Check Dashboard may give you insight into some of  the most valuable KPIs for your business.

Once you have identified your KPIs and have a way to track and report on them you are ready to start converting your wasteful open loop systems into closed loop systems. And enjoy a more comfortable life.

Tell us below about some of your open loop systems that you are having difficulty closing or making more efficient. What KPIs do you want that you don’t have an automated way to track and report on?

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