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Select the Best Opportunities for Establishing a Vastly More Profitable Business Model

Jun 1, 2008
As a result of your thoughtful pursuit of new business models, your organization now has a vast number of potential ways to expand value for customers, end users, and those between them. Many of these ideas look promising for expanding your volume and profits at current price levels.

You cannot possibly have the time or money to ever do even half of these choices. Which ideas do you pursue first?

Arriving at that answer can look amazingly difficult or remarkably simple. If you see it either way, you may well be in trouble.

To a financial person, the process may seem straightforward. Take the ideas that seem most realistic and quantify the costs and benefits. Pick the ones that have the best predicted profit, cash flow, and discounted cash flow values.

To a sales person, it may look even simpler. Rank the ideas by the estimated sales increases.

For the marketing people, the process may involve looking at which accounts can be gained as well as which accounts can avoid being lost, and how those relate to the company's media strategy.

For the MIS department, the perspective is to pick the ideas that are easiest and fastest to implement without disrupting current priorities.

For the operations people, the ideas that save money and can be done with existing business processes will be favored.

For the quality staff, those that produce less variation in results compared to specifications will be most appealing.

And on it goes.

Left to your own devices, those changes that are near the top of the list for each functional perspective will be the ones selected. And that will usually be a big mistake. Hopefully, your competitors will make that mistake. And even more optimistically, you will not.

Why will that focusing on the functional favorites be a big mistake? Fast, high-potential, and easy changes that your organization loves usually make life better for your organization, but may or may not provide benefits for those who buy and use your offerings.

Consider that once-vaunted new automobile, the Edsel. That car was once Ford's idea for a great way to provide a more desirable car for existing customers based on the then most extensive market research ever conducted for a new product. The Edsel turned out to be the wrong car for the time (a bigger car when gas economy was starting to be important and economy cars ere about to do well) and a poorly executed one (there were quality problems and the style didn't appeal to many people).

Looking at the track record of those who located improved benefits that were valuable and stimulated demand at existing prices, you will first notice that their initial forecasts of what would work and by how much were almost always way off the actual mark.

If you have perfect information to start with, anyone can make a good choice. But you don't and won't have that information. What should you do?

What you have now are merely guesses about what will work. Some of those guesses are too low . . . and many are too high.

Your challenge is to turn that guess work into more reasonable hypotheses about what could happen. To do that, you have to try things in the marketplace and see how your sales respond.

In doing so, you will make a lot of mistakes in creating the wrong execution of the idea. So you have to be sure that you check out the idea itself, rather than just the way you first tried to do it. The idea might be sound, and the implementation lousy. Keep an eye out for that potential roadblock to progress.

The other problem you have is that your organization can only absorb only so many changes at one time. If you pick the most productive ones, you will generate more performance that will, in turn, expand your resources to accomplish more. Pick the wrong ones, and you will accomplish less and have to cut back on your resources.
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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