Ideas worth $20 and executions worth millions...

Do you have an idea for developing web-based software?

37signals's e-book helps you to get real in the realm of business, design, programming, and marketing.

Amongst many favorite parts in this book, this is my most favorite part:

Be an executioner!

It's so funny when I hear people being so protective of ideas - people who want me to sign an nda to tell me the simplest idea. To me, ideas are worth nothing unless executed. They are just a multiplier. Execution is worth millions. Explanation:

Idea quality

• Awful idea = -1
• Weak idea = 1
• So-so idea = 5
• Good idea = 10
• Great idea = 15
• Brilliant idea = 20

Execution

• No execution = $1
• Weak execution = $1000
• So-so execution = $10,000
• Good execution = $100,000
• Great execution = $1,000,000
• Brilliant execution = $10,000,000

To make a business, you need to multiply the two.

The most brilliant idea, with no execution, is worth $20.

The most brilliant idea takes great execution to be worth $20,000,000.

That's why I don't want to hear people's ideas. I'm not interested until I see their execution.

- Derek Sivers, president and programmer, CD Baby and HostBaby

The Goal of making money

The Goal is a must read novel for every business owner & employee about turning around a production plant on the verge of being shut down.

Key concepts:

• The Goal: Making money
• Productivity: What you do that results in making money
• Bottleneck: The factor that places a limit on reaching the goal
• Non-bottlenecks: Factors that have spare capacity

Objectives - based on system wide measurements:

• Increase throughput - money coming in
• Reduce investment - inventory and inaccessible money
• Reduce operating expense - money spent to make throughput happen

Management - ask these questions for each objective:

• What to change?
• What to change to?
• How to cause the change?

Five step process of ongoing improvement:

• Step one - identify bottleneck
• Step two - exploit bottleneck
• Step three - subordinate entire system to step two decisions
• Step four - evaluate the systems bottlenecks
• Step five - if the bottleneck has been broken, go to step one

Operational Accounting:

• T = Throughput = money coming in
• I = Inventory = money currently in the system
• OE = Operational Expense = money spent to make throughput happen
• NP = Net profit = throughput - operating expense = T-OE
• ROI = Return on investment = net profit / investment = NP/I
• TAP = TA Productivity = throughput / operating expense = T/OE
• IT = Investment turns (IT) = throughput / investment = T/I

Net profit needs to increase along with simultaneously increasing return on investment and cash flow. Operational accounting should be included in accounting and management courses and software solutions.

"I view science as nothing more than an understanding of the way the world is and why it is that way." - Eli Goldrat