Are you moving rocks or pebbles?
Blog Posts:Mu Sigma
Published On: 25 September 2013
The speed of business transformation has led to an exponentially increasing range of business problems across the marketing, risk and supply chain functions. Companies are forced to think of ways to tackle these business problems in a manner that future-proofs their environment from the impending impact.
So what do organizations need to do? How do they go about solving these “problems”? What is the best approach that would result in better ROI?
The pattern we notice in our experience working across various verticals is a tendency for organizations to look at finding and addressing only big business problems (what we’d like to call rocks). Companies do so in the hope of securing large returns in one big bang approach. However, the continuously shifting nature of business requires organizations to start with solving smaller problems since many big problems are often a result of many connected smaller problems. These smaller problems individually lead to reasonable returns but in aggregate can lead to returns much higher than what you could get with one or two big problems in the same time frame.
The tendency to focus on finding only the big problems is also a human bias since that’s what gives us more satisfaction and bragging rights.
Here’s a hypothetical example of a retail store based in US, whose vision for the store chain was to give their customers what they were looking for – a one-stop shop for all their needs. To realize this vision, when setting up their inventory, the store chose to have selective assortment of items. They eventually noticed customer churn. This impact resulted in the retailer overstocking their inventory under the assumption that customers were not getting sufficient of what they wanted. But the business did not seem to pick up and profits seem to loom large.
They tried to dig deeper to understand the cause of the problem. This exercise helped them uncover a set of exploratory building blocks – questions to which answers needed to be found. This included, questions such as why do certain product choices sell well, why does one choice have a preference over the other, what products bundle well together, what are the attributes of choice, is there sufficient stock for the top selling choices, etc.
These smaller business problems needed to be optimized to answer the broader problem statement in terms of of demand transfer when certain choices are eliminated, lost sales prediction if a choice is eliminated, and adjustment of order plans.
At each stage, there was clear need to resolve smaller problems in order to obtain an optimal solution to a broader problem.
With the retailer addressing each small problem (exploratory building block), they were able to provide better a customer experiencealso improve profitability.
What we recommend our Fortune 500 clients is to also look beneath the layers of “big” problems. There are multiple smaller problems – just like stones that are raw material to a construction. Aggregating each stone (smaller problems) and cementing them firmly, in a conscious, effective and continuous manner can result in large return on investments. The total impact of these (many) reasonable returns could be a mammoth sight.
Today, our problems might seem more ordinary. But when considered in aggregate, they form the essential building blocks of our modern lives. Moving rocks and pebbles are both equally important. But as a global consumer society, we must learn to focus on those moderate return small problems and find solutions for them.
What is your take? Are you focusing only on moving big rocks or pebbles? We’d like to hear your organization practices.