As I hope you know, my business theme is that small changes lead to big results. I am constantly frustrated by managers and CEOs who do not understand this very, very, very important concept. When businesses hire me, they often want the big change, the huge innovation that will change everything for the better. Most are skeptical when I try to explain that the small, inexpensive improvements are where the best returns are found. These are not necessarily the easiest things to do, often referred to as the “low hanging fruit”, but they are usually much smaller scale improvements than generally envisioned.
So here’s a test of your thinking. You’ll guess the right answer, of course. You still won’t really believe it. That is a very interesting managerial trait. You’ll know the answer, you’ll know that I can prove it or I wouldn’t ask the question. But, most still won’t accept it and very few will see the application to their own business. I know. I face this all the time. Even when presented with proof, it just isn’t sexy enough for a CEO to accept. CEOs, owners and managers like big stuff. They want to be “wowed” with a breakthrough idea even though the little stuff brings the big results…
Half the cars on the road get 10 miles to the gallon of gas. The other half get 30 miles to a gallon. Let’s assume each group drives an equal number of miles per year. You are welcome to set both the total number of cars and the total miles driven per year.
We are a company working to improve auto mileage. We have enough R&D money to do only one of these two projects. Which saves the most fuel?
A—Improve the 30MPG cars to 40MPG (a gain of 10MPG on half of all cars)
B—Improve the 10MPG cars to 11MPG (a gain of 1MPG on half of all cars)
Apply this to your business and you will see great results. (Assuming you chose the right answer: B)
You know it’s B or I wouldn’t ask, right? But do you really believe it? Do the math. You’ll be stunned. If you want an Excel Spreadsheet with the math done, I’ll email it to you.
Alrighty! If we get the small buyers to order just a little more is that better than getting the biggest customers to order a lot more? Maybe. Do the math.
Chris Reich, Author of TeachU’s Business Talk Blog