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Let Extreme Scenarios Guarantee Tremendous Profit Growth

Apr 5, 2008
Use an Nth-degree perspective for your ideal dreaming. Here's what I mean by that directive.

Even if you eliminate the need to forecast, it is still a good idea to understand what causes the effects that you are most sensitive to. Then, you can focus your attention on the causes to identify the ideal best practice for adopting a position relative to each one.

Any irresistible force provides substantial positive potential, but you and your enterprise won't see that aspect of the circumstance at first. All you will initially see is the disruption that the irresistible force makes in your usual plans and procedures. To get past that initially negative perception, it helps to start by thinking the unthinkable.

For example, imagine that you manufacture a product whose price is now in a down cycle. Perhaps the current price in constant dollar terms is back to 1968 levels.

What if the price dropped even more to reach 20 percent lower than ever before, measured in constant purchasing power dollars? Your initial reaction may be that you should quickly find a new job while the company retains a bankruptcy lawyer.

But wait, what is good about this situation? You may have some high-cost competitors that would be unable to continue under the circumstances. Perhaps they would have to shut down before you do. You might have some lower-cost competitors who sell their businesses to you at very low prices.

Would this business be more attractive if it had fewer competitors, and you had created a new, more efficient combination of the best manufacturers? The answer is probably yes.

Because of the lower price, would you be able to expand into new markets that previously unavailable to you? Probably yes, again.

While the prices are low, would you be able to buy in your own company's stock at a low price? Also probably yes.

Now, from where could all of this money come? The low-cost competitors may be willing to sell out for your stock, if they face disaster.

You may already operate another business in a different industry that is unaffected by the depressed prices in this industry. Perhaps you could sell shares in that other business on the public market.

Maybe your stock will always sell at a premium multiple to others in the depressed industry. Possibly you have excess assets such as unused land and buildings that could be sold, or you may have untapped debt capacity.

Following this perspective on the lowered product prices, you should be able to see other advantages as well.

You should be able to see a number of ways that having a disastrously low-price crisis could be the basis of a winning strategy. In the long run, that new strategy will eventually make you more profitable and earn higher rewards for shareholders.

Having considered the depressed price scenario, you should also have had a new thought. The irresistible force facing your company is not low prices, but rather the need for an efficient consolidation of low-cost suppliers through acquisitions and joint ventures.

The low prices are the result of the irresistible force of incomplete consolidation. Consolidation into fewer, more efficient competitors with some high-cost capacity being eliminated would solve the profit-pressure problem.

Notice that this thought process can be helpful to you regardless of what happens to the variable (the product's price, in this case). This train of thought can identify a real irresistible force, rather than merely the consequences of one.

Now, you have succeeded in locating the irresistible force through the ideal best practice of analyzing an extreme (Nth degree) scenario and looking for its most silver lining.

By looking at the extreme version of what you perceive as your irresistible force, you can identify the benefits that will follow from that irresistible force direction.

From those benefits, you will usually find one or more causes of what you perceived as your irresistible force. Be sure to look at extreme directions, up and down, in testing for actions that always leave your organization in an improved position.
About the Author
Donald Mitchell is an author of seven books including Adventures of an Optimist, The 2,000 Percent Squared Solution, The 2,000 Percent Solution, The 2,000 Percent Solution Workbook, The Irresistible Growth Enterprise, and The Ultimate Competitive Advantage. Read about creating breakthroughs through 2,000 percent solutions and receive tips by e-mail by registering for free at

http://www.2000percentsolution.com .
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