Why don’t we ask the “right” questions?
- Cost of the answers is too great. Does the marketing guy in a company really want to know that his expenditures cannot be tracked to results? Does the sales guy really want to know that his interpretation of cost/value is at odds with an accounting view of same? As a result we look at questions related to our ‘narrow’ view of the situation. Therefore because questions are asked with a narrow view, they cannot get answers that have greater value to the business at large
- Self-imposed limitation of attribution.
- Frame from our single reference point.
- Fear of the answer. I have always asked companies to value their customers from most to least profitable. The ranking then begs the obvious question – why don’t we fire the non-profitable customers. The answer should be to fire them and put the resources (product development, marketing etc) to bear on the profitable customers. Too often the answer is unpalatable to (especially middle management) management because it forces the realization that business as usual is not as good as it could be if hard decisions are made. Great examples are the US airline industry and US Banking. In major banks, profitable customers generally are less than 20% of the base and yet the banks continue to promote expansion of that base – acquiring four non-profitable customers for every profitable one and often a high cost. If it costs $100 to acquire a customer, then they are spending $400 to acquire a non profitable customer and only $100 to acquire a profitable one – shouldn’t that be reversed? The airlines try to be everything to everybody. With the exception of focused air carriers (Southwest, AirTran), they would probable be better off firing all unprofitable customers – but when management looks at the situation, they realize that their company might be highly profitable if they act, but the business model will be different – instead of a $10Billion revenue airline, it might be only $1Billion – but highly profitable.
- Facts versus trends. It is easier to state that ‘we sold 100 widgets this month’ vs looking a trend that says “worldwide widget sales are down and we should evaluate whether we should continue with this product”
- Questions lead to additional questions. Managing a business is rarely defined by a narrow answer. Business – especially ones with clearly defined departments (accounting, marketing, sales) – personnel look at an answer, where the answer is likely to be another question.
- We have not trained people at school or on the job to question the ‘holistic’ or all-encompassing view of the business. Since people aren’t trained, nor typically have access to broad sources on information, make decisions within a very narrow definition
© Trevelyan Group LLC 2019