Profits flow like water over Niagara Falls when you have
the benefit of irresistible forces. But when is a raindrop
the start of such a stream and when it is it just a
raindrop?
Like static heard on a radio during a passing thunderstorm,
some random events will always be occurring. If these
events don't constitute a shift in irresistible forces, do
nothing.
When you gather a lot of reports that could mean something,
you need to be carefully discriminating in interpreting the
data.
By considering two circumstances differently -- the degree
of shift and the duration of shifts in behavior -- you can
approach the ideal best practice for locating changes in
irresistible forces. If the degree of shift is great
enough, it can be an irresistible force even if it doesn't
last very long.
For example, suppose you announce a new service to begin in
six months, and then orders suddenly dry up for your
existing service. Unless you do something now, your
announcement will have a large, negative impact on your
business.
On the other hand, the degree of shift can be modest; but
by continuing over a long period of time, the shift can
become very significant.
For example, customer loyalty (continuing to be a customer
with the same or a higher level of purchases) dropping by
one percentage point a year only becomes a crisis if it
continues long enough. Keeping an existing customer is
usually at least four times more profitable than adding a
new one.
If you have to replace too many customers, your profits and
cash flow will all vanish at some point.
You need to expand on that perspective to consider variance
from the most you could possibly accomplish in light of the
current conditions.
For example, if competitors' customers start buying twice
as much, and no more from you, this change won't affect
your performance versus budget, but your share of industry
profits will become much smaller. Presumably, there was
some profitable way that you could have captured some of
this increased volume for your business.
A great help in selecting data that are important versus
data that are not is to identify areas that have large
economic significance and to track them in some visual way
(like a graph).
Such visuals are even more effective if they have a
historical trend line or the extrapolation of that trend
displayed on them. New data falling significantly above or
below the trend line can be the first sign that something
new is going on.
Copyright 2008 Donald W. Mitchell, All Rights Reserved
----------------------------------------------------
Donald Mitchell is chairman of Mitchell and Company, a
strategy and financial consulting firm in Weston, MA. He is
coauthor of seven books including Adventures of an
Optimist, The Irresistible Growth Enterprise, and The
Ultimate Competitive Advantage. You can find free tips for
accomplishing 20 times more by registering at:
====> http://www.2000percentsolution.com .
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