Four Thinking Tools for Understanding the Key Trade-Offs in your Business
Even just one of these four thinking tools could make a big difference to your strategy. Most people don’t know about any of them. I’ve taken out the maths and made them simple. Once you’ve seen these four ideas you’ll wish you’d seen them years ago, and you’ll never forget them!
Tool 1 – Service vs Cost: The queue formula
How much extra would it cost to be able to serve people quicker? Would it be worth doing?
Are you paying more than you need to? Are you asking your managers to do the imp0ossbile and then wondering why they keep failing? The formula for queues will tell you how much spare capacity you need in order to deliver whatever level of service you decide. A spreadsheet (copies for all) will allow you to model your business, simulate the rate of incoming work, and optimise your position.
Tool 2 – Quality vs Cost: The cost of quality graph
How much extra would it cost to provide a higher level of quality? Are you running your business at the point of minimum cost, and did you know that this will not be the point of maximum profit? Would increasing your profit actually be cheaper for you, or would it be slightly more expensive but in fact make you more profit? How can you work out where you are, and where you should be? What should you be measuring in order to make the right management decisions for your business?
Tool 3 – Price vs Quantity: The elasticity-turnover-profit equation
The effect of changes in price on profit per item, quantity sold, and therefore overall profit. Are you being a ‘busy fool’? Are you sales people incentivised correctly? Are they costing you profit? An elasticity spreadsheet (copies for all) which shows what proportion of your business you should be losing on price if you are going to maximise your profit. It’s probably more than you think!
Tool 4 – Price vs Quality: How to simulate the competitive market options
An interactive game where four teams compete for the market by getting the best mix of price, quality, and customer service. Application of the lessons learned to your real businesses – knowing your competitors’ strategies, knowing your buyers’ thought processes, and being able to pull the right levers in your business.