Before Trying Cost Reductions, Be Sure That Performance for Customers Will Improve or Be the Same

Consider how tricky your performance-protecting task can be in picking out cost reductions. A well-known office products company looked for ways to create a more responsive, efficient sales force. Based on a test in one sales office, the company changed from having a desk and space for each salesperson and put in a hoteling concept that encouraged salespeople to spend all of their time out of the office calling on customers and solving their problems. As a result, office costs dropped. Sales people were out of the office much more, as well. Sounds like a good idea, doesn't it?

When the company examined its sales results from implementing this change, it found that new equipment sales for about a third of its sales force dropped enough to eliminate the economic benefit of the lower office costs. These salespeople needed a lot of time in the office for morale-boosting and coaching purposes in order to become or remain effective. Hoteling as originally conceived didn't provide enough support for them.

As a result of misunderstanding the requirements for delivering good sales performance to customers, the company had to expensively add back more office space and assign people to spend time in the office for mentoring and coaching purposes. This issue had not shown up during the initial test of the concept because that office had a staff which didn't need much mentoring and coaching, and wasn't representative of the entire company.

Like all such creative efforts, until carefully sifted the less useful chaff continues to be mixed with the kernels of good ideas. With cost reduction ideas, however, there is an unusual risk that you must be on the look out for. Without realizing it, your bushel basket of business-model improving ideas could be all chaff, cost reduction methods that will create more problems than benefits.

How can that happen?

Creativity research has shown that the narrower you focus, the easier it is for your mind to come up with many ideas. However, narrowness of focus may keep you from creating the solution you need. For example, in the sales office example the focus began with reducing office costs. If the thinking had begun with the broader issue of reducing costs by making salespeople more productive in supporting customers, better solutions would have emerged. As you can imagine, the source of the idea was from the administrative staff, rather than the sales staff.

Since many people get their ideas for cost-reduction based business models from thinking about expense categories, you may well see examples of such narrowness in the ideas you are considering. Realizing that a narrow focus initially helps creativity but makes the proposed solutions suspect, you may feel caught on the horns of a dilemma.

Actually, you have a perfectly appropriate process available that takes advantage of narrowly-focused creative thinking. By turning your attention sequentially from one too-limited focus to another, you can effectively keep adding perspectives until you have enough of them to perceive effective solutions from all perspectives. That progression of adding perspectives is what you will be using to locate the ideal cost reductions to test for becoming part of your new business model.

Your cost reduction ideas, while having potential to be beneficial, may not yet achieve the totally positive balance you want. Like the waiter who provides wonderful service throughout a meal and then insults the diner while delivering the check, all the good that has been done can be lost in a single flaw. Yet, removing that flaw is impossible until you notice it, like a waiter who views his insults as being wonderfully witty rehearsals for a stand-up comedy routine sure to make an audience laugh, rather than as pointed, hurtful barbs that get under the diner's skin.

So first, we are going to look for such potentially fatal flaws among the proposed tests, and then consider how these flaws might be removed before selecting which tests to pursue. The purpose of this stage of your thinking is to turn unworkable ideas into workable ones by finding and fixing their flaws before testing the ideas.

Consider this step to be an exercise in preventive imagination. Planning an airplane evaluation exercise is a good metaphor for what you will be doing. In locating exits properly relative to where people will be seated and describing how to use the exits, many of the problems that can occur with a real evacuation can be eliminated. If you don't do this planning, your may end up with lots of injured people in your test.

Having started with a sound testing concept, you can actually learn something useful from the test about how to refine your idea . . . or that you should abandon it. If you involve enough perspectives and experiences, this pretest imagining can eliminate at least some potentially fatal errors in otherwise solid cost reducing business model concepts.

Think of this task as being like helping our insulting waiter learn the significance of always employing better manners so he can fulfill his service role in all dimensions. The waiter might start out by asking the diner if the diner would like the waiter to try out some of his comedy routine. If almost everyone declined, the waiter might try practicing the role of perfect waiter instead.

Copyright 2008 Donald W. Mitchell, All Rights Reserved