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Prepare a High-Speed Road to Profitable Growth

Jan 27, 2008
Nobody in his right mind tries to cross a broad ditch in two steps. --Carl von Clausewitz

Have you ever seen a figure skater gracefully glide across a gorgeous rink of ice? It's sheer poetry in motion.

Add potholes in the ice and turn off the lights, and you would see a vastly different picture through thermal imagining glasses. There would be cautious movements followed by pratfalls.

It's hardly the way to go. But that's how many companies conduct their attempts at profitable growth.

Travel through the mountains by road or by train, and you quickly see the wisdom of adapting your organizational path to avoid obstacles. The alternatives are often to level mountains or build enormously expensive tunnels through them. Neither alternative is usually worth much consideration.

But the challenge of avoiding obstacles is more significant than it first seems. The cheapest road to build, or railroad track to lay, may also be the least efficient to operate.

If cars and trucks are forced to switch back and forth endlessly over tedious ascents and descents, massive traffic jams will occur and wider roads will have to be built . . . adding needless expense. Similarly, long delays on upgrades and downgrades may mean that a second track will have to be laid for a railroad.

Make a mountain road too steep and people will die when their brakes fail on the descents. Put the road or track where erosion will cause lots of collapses, and you will have a repair nightmare and frequent traffic interruptions.

Choosing the route under, over, and around the worst obstacles has to be just right . . . or you will be trying to jump across a broad ditch in two steps.

What is the right route? Here's a process to use:

First, you will brainstorm with as many others as you can to accumulate as many ideas as possible.

Second, you will thrash those idea grain stacks to separate out just the choicest seeds of potential improvement.

Third, you will compare those best opportunities to select the most attractive barrier-avoiding methods in light of your resources.

Let's contrast that approach with one that many people use: Find the best people and turning them loose on the issues. By itself, that approach is fine. But if that's all you do, you will miss most of the best opportunities.

Focusing on what the best people can offer is a common mistake. Here's one dimension of that mistake: People who are skilled in creating breakthrough often develop such solutions by themselves and then share the results with others . . . hoping to persuade everyone else that the new approach is the only way to go. Sometimes such lone rangers are disappointed to find that others don't share their logic and may even point out important issues that have not been considered.

Far better is to involve all those who are stakeholders in what needs to be improved. Still better is to involve as many good thinkers as possible in developing your breakthrough solutions.

Think of a gold mine as a good metaphor for the barriers to much greater usage. In many mines, there is easily 20 times more gold remaining than has already been extracted. Before you can obtain it, you have to locate where that gold is and how to extract it efficiently.

It usually isn't practical to excavate all the rock under the acreage you own. Once that gold is turned into mined ore that can be easily processed and refined, you can assume that the gold will soon be in circulation as jewelry, coins, investments, and financial reserves of central banks.

An organization's business model (who, why, when, what, where, how, and how much of operations) usually has the same characteristics. The current business model only produces one-twentieth or less of the usage that's possible. But you have to locate where changes in the business model can be profitably made before the usage can reach the higher and more valuable level.

Consider the Goldcorp Challenge where a gold mining company provided a few hundred thousand dollars in prizes to geologists online and located additional billions in gold. Even this excellent approach could have been improved.

Goldcorp could have probably produced even better results if it had made the following changes in its process:

1. Invited external geologists to enter a prechallenge contest to design the challenge's structure, process, and prizes. If these geologists had helped formulate the challenge, the geologists might have described better ways to make data available, selected better incentives to pursue the challenge, and increased interest and participation in the challenge.

2. Adjusted the design of the challenge to require using the breakthrough solution process for both suggesting where reserves might be found and exploration to verify those reserve hypotheses.

Determining that there might be $3 billion in new reserves at a level far below the main shaft wouldn't have done Goldcorp much good unless the company could afford to make the extensive investments in exploration and infrastructure to verify and extract those reserves.

By combining the concept of finding reserves with the idea of extracting profits rapidly through using the 2,000 percent solution process, geologists would probably have found reserves that were smaller but easier to profit from than those that emerged from the contest. Goldcorp's profits and cash flow would probably have been much higher in the near term if that were the case. Subsequent challenges could have focused on finding larger, more difficult to extract reserves.

3. Provided for a follow-on contest to design the best exploration program to find and exploit reserves assuming that reserves are located in a variety of likely locations. If you have ever visited a gold mine, you would be impressed by all the effort and time it takes to explore for ore. It's slow and costly. Most exploration doesn't turn up anything interesting.

An optimized exploration program to take into account the likely prospects could be designed to remove years and tens of millions of dollars from the effort while locating more profitable and immediate gold ore to mine.

4. Sponsored a contest for geologists to design a challenge for finding high-potential reserves in locales Goldcorp doesn't own where no one is looking now. One of the unintended consequences of the Goldcorp Challenge was to encourage many mining companies to hold their own similar competitions. That response meant that hidden value was less likely to be found in a developed mining property.

But the potential to find hidden value in an undeveloped property is still as large as ever. Goldcorp did sponsor a follow-on contest, Global Search Challenge, to find new properties to acquire or develop, but the results were not nearly as rewarding as the Goldcorp Challenge. By letting potential participants design this new kind of challenge, it may well be that a better process with greater benefits would have emerged.

Good luck in designing your ideal route to rapid profit growth!
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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