From the Ground Up: How First Principles Thinking Can Transform Your Systems

by Jean-Eric Plamondon | 25 Oct, 2023 | Scalable Business Model

The short answer: First principles thinking means breaking down a complex concept into its fundamental elements and building up from there, instead of improving on what you already have or copying what another business is doing. Suitcases existed from the late 1800s, but it wasn’t until 1970 that Bernard Sadow added wheels, by looking at the underlying function of “moving belongings.”

The wheel was invented over 5,000 years ago.

People have been using sacks or pouches to carry belongings since ancient times.

The first suitcases – rectangular boxes meant to hold clothing – were created in the late 1800s.

These went through many design iterations over the years, including making them lighter and easier to carry.

And yet? It wasn’t until 1970 that Bernard Sadow added wheels and invented the roller suitcase.

In hindsight, it seems obvious that heavy boxes designed to carry belongings should have wheels to make them easier to transport.

Wheelbarrows, carts, and the wheeled skid that inspired Sadow’s design all existed long before the roller suitcase.

Why the delay? (And what other “obvious” innovations are we missing?)

We have a tendency as human beings, to build on what we already have – to look at previous forms and try to improve – instead of looking at the core function.

Suitcase manufacturers limited their improvements to making a smaller, or lighter, or more efficient version of the “rectangular box” that they started with.

Sadow looked at the underlying function of “moving belongings” and with a more expanded view, developed a more functional product.

This adherence to form over function is a mistake that we see a lot of business leaders making.

Instead of looking at what they functionally need to accomplish, they look at what they already have and try to make it better.

Or they look at what another business is doing and assume it will work for them.

There’s a better way.

At Growth Strategy we take a “first principles” approach to everything we do.

Operating from first principles means breaking down a complex concept into its fundamental elements and building up from there, based on logical reasoning and fundamental truths.

In doing so, we don’t accept things as they are currently. We don’t rely on past experiences or assumptions. We don’t try to copy what another business is doing (including “best practices” which might work for one company, but not another.)

Instead, we question and analyze every aspect of a problem, starting from the basics and derive solutions from there.

There are several benefits of using a first principles approach to developing business systems:

1. Innovation: Operating by first principles encourages innovative thinking and can lead to creative solutions to complex problems. By breaking down issues into fundamental components, businesses can identify new and innovative ways to solve them.
2. Efficiency: When you develop systems from the ground up based on fundamental principles, you can create processes that are efficient, streamlined, and effective. This approach ensures that you’re not relying on outdated methodologies or assumptions and instead focus on the most critical aspects of the business.
3. Flexibility: A first-principles approach allows for more flexibility and adaptability when developing systems. Rather than relying on traditional or pre-existing methods, businesses can build their systems based on their organization’s specific needs and goals.
4. Clarity: A first principles approach provides clarity and simplifies decision-making by breaking down complex problems into their fundamental components. It helps businesses focus on the most critical aspects of the system and prioritize them accordingly.
5. Cost Savings: Building systems based on first principles can save costs by avoiding unnecessary expenses and efficiently allocating resources.

Overall, a first principles approach to developing business systems can lead to more innovative, efficient, and practical solutions that align with an organization’s specific needs and goals.

This is especially critical when you’re updating your systems to move from $10 million to $50 million or to scale beyond that.

As Marshall Goldsmith says,

“What got you here, won’t get you there.”

The systems and processes and procedures that successfully brought you to $10 million aren’t going to hold up when you 5x or 10x your volume and team size.

Building next level systems in your company requires setting aside the status quo of “how we always do things” and reimagining how to do things within a larger and more successful business.

Otherwise, the profitability you’re expecting to come along with the growth will get eaten up by the high costs and overhead of running jury-rigged systems.

If you’d like to take your business systems to the next level, your first step is a complimentary systems consultation.

Common questions

What does first principles thinking mean for business systems?

Breaking a complex problem down into its fundamental elements and building up from there, based on logical reasoning and fundamental truths. It means questioning and analyzing every aspect of a problem rather than relying on past experiences or assumptions.

Why not just copy another company’s best practices?

“Best practices” might work for one company, but not another. Looking at what another business is doing and assuming it will work for you is the form-over-function mistake: it skips what you functionally need to accomplish.

What are the benefits of a first principles approach?

Innovation, efficiency, flexibility, clarity and cost savings. Overall, it can lead to more innovative, efficient and practical solutions that align with your organization’s specific needs and goals.

When does first principles thinking matter most?

It’s especially critical when you’re updating your systems to move from $10 million to $50 million or beyond. The systems that brought you to $10 million aren’t going to hold up when you 5x or 10x your volume and team size. Building next level systems requires setting aside the status quo of “how we always do things.” Otherwise, the profitability you expect from growth will get eaten up by the high costs and overhead of running jury-rigged systems.