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Find Problems with Cost Reductions and Then Make Improvements

Aug 12, 2008
Most people find that thinking about potential problems with cost-reductioins soon runs out of steam. The imagination is exhausted.

How can your mind and those of your colleagues be stimulated to locate more potential difficulties? Properly aimed role playing can be another useful way of testing the cost reduction without running a test.

The best way to simulate the new situation will vary from one circumstance to another, but the principles you should follow will be the same. Even the waiter who has just delivered soup with an unnoticed fly in it can learn to spot the problem by taking a moment to pretend to be the diner who is about to eat the soup, thus sharpening the waiter's vision and perceptions.

First, you will focus on the many ways that customers will be affected by the potential change. Begin by listing all of the different people connected to your company, your offering, or your customers who will potentially be affected and where those effects can directly or indirectly impact customers.

Assume this list will at least include those who first use your offering within the customer organization, those who look at the profitability of employing your offering, your customers' customers who use your offering, end users, and any regulatory agencies that might be involved. If you have any special circumstances such as the potential for litigation, be sure to consider those who might sue and the choices open to their lawyers.

Having defined as many such perspectives as possible, assemble different groups of people to reflect on each of these listed roles. You will obtain the best results if you assign at least three people to take each listed perspective. Be sure to place as much emphasis as you can on those areas that turned up as problems in the burden of proof thinking.

Brief each person on how your product or service is provided now and what your concerns are about the proposed change. Ideally, work with people who are already familiar with what you are describing. For instance, if you are planning to cut down the telephone force that answers customer questions and replace it with an Internet site for solving problems, be sure that you have people who take those calls now be part of the evaluation.

You also should brief each person in advance on what perspective they should represent in this evaluation.

Then demonstrate the change that is being proposed with as many examples as you can in order to simulate how customers might be affected. Use more types of demonstrations than you think you need. Each demonstration will open up possibilities that will stimulate the thinking of those working on these issues.

Check to be sure everyone understands what is being provided now, their role, and the change by having them describe those points. A moderator can help make this checking and the next steps in thinking work better.

Then, ask each person to write down all of the things that they don't like about the change from the perspective of their assigned role. If the change is a large enough one, you will find that more ideas will occur if this evaluation takes place on occasions over several days. The daily time spent doing that observing and thinking can be brief. The main point is to keep focusing attention on the proposed change.

When the task of finding problems with the new business model is done, then turn those problems over to a combined team of those who originally proposed the cost reducing concept and all those who participated in the evaluation, regardless of their role. Ask each person for potential, low-cost solutions to the recently exposed weaknesses of the business-model improving concept.

Next, turn over what you learn about potential solutions to the person or people who had proposed the original cost-reducing business model innovation, and ask them to consider if they want to modify their test idea. Some will and some won't.

Ideally, you should repeat this process described above in this section by also looking at each other stakeholder group to check out how they will be affected. These groups should include at least partners, suppliers, employees, shareholders, lenders, and the communities you serve and operate in.

You can obviously scale the scope of how extensively you test each one to reflect the magnitude of the change. A simpler way of providing product specifications doesn't require as much evaluation as does substituting a new form of service for the existing one.

At this point, you may feel like this work will be overwhelming for your organization. Naturally, you have to scope what you do to fit the time and resources available. A one-person company, for example, will not be able to find three people to play each role. But get all of the help you can. A lot of people enjoy this kind of mental exercise, so you will probably find more willing helpers than you expect.

Keep in mind though that developing improved business models is the top priority task in the rapidly evolving competitive business environment of today and tomorrow. As a result, you should be sure that enough time and resources are available to do these test-improving tasks in an adequate way.

The cost of not evolving constantly better business models is not only missing large profit opportunities, it may also include going out of business. Few activities that your organization pursues now will have as high payoff as the simulation work just described here.

A hidden benefit of this imagination-based testing is that it will whet the appetite for learning more about how stakeholders are affected. Everyone in your organization will be more curious and learn more about stakeholders. With that additional knowledge and experience of thinking like those stakeholders, you will find that your organization will rapidly expand its ability to create better business models.

Think of the work in this article as also serving the role for business model creation that basic training provides for military recruits. Many other tasks that are done in your organization will improve as well from this role playing experience.
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 and receive tips by e-mail through registering for free at

http://www.fastforward400.com .
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