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Our USP: Building Human Machines

You may have noticed that Joe and I have been a bit off the radar in the last couple of weeks. In addition to taking a much-needed holiday in Thailand, we had the wonderful opportunity to present at the Dynamite Circle event in Bangkok where we were able to share our story and experiences with a remarkable group of entrepreneurs from around the world.

Both Joe and I have given group presentations before, but never to such a fantastic group of friends, peers, and mentors. Knowing we were going to be sharing a stage with Derek Sivers (Who’s given some amazing TED presentations), Simon Black from SovereignMan, Chris Ducker, Brendan Tully, and a host of others we have a ton of respect for…to say we were a bit nervous would be a bit of an understatement. Talking about keyword search volume, ordering/editing content, etc. would be way to specific and niched-down for this audience.

Instead, we put together a presentation on our USP that has spanned multiple businesses and companies, giving away our successes and failures when it comes to hiring, training, and building a team of people that can accomplish fairly complicated tasks at scale.

We titled our presentation, “Building Human Machines” and we wanted to share our slides, notes, and ideas with you here now. All of these points and observations were forged in experience through trial and error and have more to do with our actual business rather than simply the building of niche websites for profit. Our hope is that this will help you to better understand how it is we’re able to build teams of people to work for us so that you can take some actionable tips and strategies away as you continue to grow your business.

So let’s get to it!

Joe and I cover some of our background that led us from a mortgage company to TryBPO and AdSense Flippers. (For more details on our story, check out this podcast episode) Throughout the journey, one of the things we found tremendous value in was the ability to build out teams to manually scale processes. We wanted to share some of the behind the scenes with our business in the hopes that it will help give ideas to some of the attendees as they continue to grow and build on their own businesses.

Building out human machines are great for process-oriented projects, but might not be the best fit for more creative work. i.e. a marketing agency. Human machines are typically hierarchical and there are instances where a flatter business structure is more effective.

When we first arrived in the Philippines we were really hoping to change the model. We wanted a more “Googlish” feel to our company culture. (You know what we’re saying here…bean bags in the breakroom, PS3’s on a flatscreen to play during lunch, cappuccino machines, etc.) Unfortunately, there were two problems we were faced with:

1. Cultural Differences – The team of Filipinos we hired responded to and respected a more traditional company and culture.
2. Core Competencies – Joe and I have plenty of experience managing and finding success with hierarchical business structures.

It was tough for me to come to terms with, but we realized that we can solve the biggest problems and provide the most value to our partners and clients when we build human machines and remain process oriented.

What is a human machine? It deal with breaking down a complicated process into its component tasks, handing out those smaller chunks to dedicated specialists or teams, measuring and reporting efficiency and quality, and then replacing yourself and new processes over and over again.

Note: The thought of a “human machine” may sound a bit dehumanizing, but it’s really the best method we have to explaining what it is that we do.

One of the attendees asked the question, “Do any of your agents or employees get bored focusing on a very specific task over and over again? Is that stifling creativity?”

The answer is yes…it can get tedious/boring which is why we hire personalities that would be a better fit for these types of tasks. We also provide pretty in-depth cross training that still allows us to batch the work, but lets the agents mix it up over time so that the tasks don’t get too repetitive. It’s also interesting to note that (I’m generalizing here) Filipinos typically find their bliss in spending time with their family, supporting their family, etc. and their job is simply a means to an end. We build out our teams to be supportive of their goals by offering flexible hours, work from home positions, etc.

Building human machines is great, but how does this compare to true automation? Wouldn’t it be better to fully automate the process rather than staff up to manually knock out the work? We wanted to cover some of the advantages and disadvantages when it comes to Human Machines Vs. Automation.

Advantages:

• Lower Front-End Costs – It can be much cheaper and faster to build a team to test through something than it might be to spend the next 12 months and $100,000 to complete the programming required for full automation. This provides an excellent opportunity for bootstrappers!
• Flexibility With 3rd Party Platforms – Many projects now require a sophisticated level of integration through API’s and 3rd party platforms. When those 3rd parties change their platforms, Terms Of Service, etc. this can cause quite a bit of grief and cost when it comes to full automation. Human machines can make these adjustments much more quickly/easily.
• Personal Touch – True automation often leaves signatures that can be difficult to mask without quite a bit of complication. (Automated backlinking, for example) Allowing for human intervention will always include some level of variance and a personal touch that true automation can’t provide. This is especially critical when it comes to customer-facing tasks or projects.
• Stop-gap Or Testing Solution – Human machines can quickly be setup or broken down so this allows for flexible scaling until true automation can be built and put into place. It also allows you to test through your vision without devoting the time and resources that may be required once it’s been proven to “work”.

Disadvantages:

• Long Term Costs – Automation may be expensive to setup, but your long-term and ongoing costs will typically be much less and there will come a time where you reach your “break-even” on automation.
• Human Error Rates – There will always be some packet loss when performing tasks manually that you might not have with true automation. This can prove particularly costly if having an error rate significantly impacts your bottom line or if you’re compounding error rates through in-line processes that can multiply out those errors.
• Personnel Hassles – Let’s face it…sometimes having employees can suck. Sick uncles, no-shows, complaints, internal bickering…all of this can be a bit soul-sucking at times.
• Usually Slower – True automation can be instantaneous whereas relying on team members can increase the completion times. For some projects (i.e. a keyword research tool like LongTailPro) this would not be acceptable.

The key to building out human machines hinges on your ability to replicate skillsets throughout the organization. The most effective way to accomplish this was taught to us by our mentor, Dan Meyerson, an old-school exec. that has used this method to transfer skills to thousands at Time-Life and as a consultant for AOL. There are five critical steps involved:

1. Explain – Give a high-level overview of the project and the particular steps involved in the task or skill you’re looking to transfer.
2. Demonstrate – Go through the process yourself, step-by-step, explaining the details of each step along the way.
3. Practice – Allow the agent or team member to complete each step in the process, stopping after each has been completed to review and/or correct mistakes.
4. Observe – Have the agent go through the entire process start to finish without interruption. Review the process at the end of each completed task. If major errors are made, drop back to the Practice step.
5. Feedback – Ask the agent or team member for feedback on how they think they did. Use open-ended questions to ensure they understand the process and can continue to replicate each step correctly. Back down to previous steps if the agent is not completely comfortable performing the tasks on his/her own.

Example #1 – Our Mortgage Company

Our problem was that even though we were now running our own company, our earnings were still tied directly to the work we were doing ourselves with the clients. We wanted to move from working for ourselves to actually running a company and we realized the best way to do this would be to start replacing ourselves with hired loan officers.

Unfortunately, we soon realized we traded one job (loan officer) for another (recruitment/staffing). There was a heavy time investment in actually recruiting loan officers and we were spending more time on that than actually helping to develop their skills, assist them with their loans, etc. Our answer was to build a lead generation funnel that would help us transition from having a job to being the “boss”.

Outsourcing and Virtual Assistants for smaller businesses was still a relatively new concept, but we found and hired a VA from the Philippines to help us by posting on Craigslist and other message boards throughout the country to help us attract loan officers. We trained her on how to qualify potential hires so that we could then spend more time talking to and working with qualified candidates. This solved the heavy lifting problem of recruitment by outsourcing the high-volume, low-value work required on the front end.

Some time after this, the mortgage industry and our company crashed, but we realized we were on to something with our lead generation funnel and the use of offshore VA’s.

Example #2 – Local SEO Company

Joe and I both ended up taking on “jobs” again and we found a high-growth company where we could really provide some impact. This business sold Local SEO packages to small and medium sized businesses around the country. We found ourselves with one of those “high-quality problems”…the company triples sales in less than 6 months and reached a point where they were doing more than $1M in revenue per month.

This would have been great, except the sales growth far exceeded the capacity of the operational team and their process at that time. Every customer has handed off to one employee who would then do all of the work for that one particular customer. This led to each employee having a ton of tabs open in the browser and having to know/specialize in all kinds of different platforms and processes that made the process slow and inefficient.

Joe and I needed to revamp the operational side of the business by breaking down the complicated process into bite-sized chunks that could then allow for a specialist to hammer out the work. If you’ve ever been to a Catholic school, you might remember the punishment of writing a sentence over and over on the white/black board. (I will not eat Joe Magnotti’s Sesame Cake. I will not eat Joe Magnotti’s…)

The creative, out-of-the-box thinking kids realized it’s MUCH more efficient to batch your sentences by writing each word vertically rather than the sentences horizontally. (I, I, I, I… will, will, will, will…etc.) This is a simple example of what Tim Ferriss calls “batching” and, when implemented in our company, allowed us to process many more accounts with the same amount of people. Ultimately, the simplicity of each task now allowed us to send some of the work offshore, which led us to save a ton of money and allowed us to create our outsourcing company, TryBPO.

Example #3 – Starting AdSense Flippers

During the process of building out our outsourcing company we ended up losing a major client and we had no real way to quickly reassign the agents that were working on the campaign. We knew they were effective in a “human machine” so we set out looking for a process they could work on that would make us some money until we could get them reassigned and so we started building out niche sites monetized with AdSense.

The problem was that it was mind-numbingly boring for me and hardly scalable with me building out the first few sites on my own. Creating and organizing content for a site about “blue ski boots” isn’t very exciting…but what IS exciting is working with our team, keeping them onboard, and scaling up the process.

Joe and I worked together closely to re-create what I had been doing and to break it down into bite-sized chunks or components. We then organized our people around the process by their skillsets, fed the component pieces to the right teams, and scaled it up using the skill transfer process we mentioned earlier.

We were able to take a process that only created 40 sites the first month to over 2,700 sites created in 22 months. (That’s more than 4 sites per DAY!) The truth is this would have been largely unprofitable if I had continued to build out each site myself. (Not at a $ per hour I would consider viable, anyway) It was the building of the human machine using the skill transfer process that made this project successful.

There are 5 main steps that are critical when building out a human machine:

1. Do It Yourself First – It’s important that you know the project and work intimately so that you can begin to determine best practices, time the various steps, determine skillsets required, etc. Too many try to outsource tasks that they don’t yet have fleshed out and this is almost always a quick path to failure.
2. Document It – Along with written directions for each step required it’s also useful to use screenshots, screencasts, etc. Remember that people have different ways to learn and retain knowledge and using different mediums to document the process will help during skill transfer.
3. Ensure Profitability – When doing it yourself, you can be break-even or losing money, but with some quick napkin math you have to be sure that the project will be profitable at scale. Scaling an unprofitable project is an awfully expensive mistake to make.
4. Componentize – (Is that really a word?) Break down your process into bite-sized chunks and hand it off to specialists or teams that can efficiently process the tasks.
5. Skill Transfer – Use the Skill Transfer steps (Explain, Demonstrate, Practice, Observation, Feedback) to effectively scale the process. Don’t forget to setup reports on efficiency and quality so that you can monitor the scaling of your business and quickly squash mistakes.

Our next challenge will be implementing aspects of creative work into our human factory. This will require leveling-up our talent pool and will be a much more involved and complicated process than our initial niche sites have been. The EMD Update squashed some of our tactics for niche sites, but our strategy and goals remain intact. We’ll have to make adjustments to our machine and begin the process all over again.

Our goals in the coming months:

• Level up sites created from micro to mini businesses
• Continued transparency of tactics and strategies
• Upgrade our monetization strategies and revenue streams
• Revamp our content around our outsourcing business

A HUGE thanks to Dan and Ian from the Lifestyle Business Podcast for inviting us out to the DC Bangkok meetup and to John DeVries for putting together an awesome slide deck!

So…what did you think of the presentation? Let us know in the comments below! We’ll be putting some pictures of our trip up on our Facebook page in the next couple of days so feel free to check that out as well!