The Aggregation of Marginal Gains…
In a discussion with a CEO, I asked what the Objective was
for 2018… “Add 35% to our Sales…” And what’s the strategy
for achieving that…? “Sell 35% more Product…” Not much
of a strategy, in fact, in business I find that Objectives,
Strategy and Tactics are blurred into a phrase, statement
or incantation that is meaningless at best.
So how can we improve performance; whether it be Sales, Profit & Cash or Career, Personal Best or our Relationships…?
In the book “Will it make the Boat Go Faster…” Ben Hunt Davis MBE describes how the GB Men’s Rowing Team went from mediocrity to Gold at the Sydney Olympics in 2000; it’s a story of questioning everything from training to diet, personal hygiene to focus – and asking the same question of everything they did – will it make the boat go faster.
Being faster in a boat is not just a case of rowing harder, it’s the cumulative effect of 100’s of tiny aspects conspiring to give them the edge, it is the focus on these tiny or Marginal Gains that when Aggregated lead to Gold.
So how can the same principles be applied to business...?
The process is simple, it involves breaking down the “activity” into component parts, then analysing each one such that it improves or contributes more effectively to the outcome.
In this sample business, to attract new clients, prospects are invited to a seminar, appointments are arranged, and quotations submitted – the statistics look like this…
Each step has been systemised and analysed so that the conversion between each stage can be measured – effectively for every 20,000 people invited to a Seminar the company gets 10 new Clients.
To improve this and build the business – and achieve the 35% Growth the CEO mentioned above wanted – all we have to do is improve each component of the system by a marginal % to effect an improved result.
If we improve the conversion rates at each step of the process by a Marginal 10% the reworked system will look like this.
The net effect of a 10% Marginal Improvement is a 60% increase in new clients.
Not by focussing on just “selling more” but by improving the system that delivers the outcome; of course, this “system” will be different for every company but the same principle applies.
The is a fabulous series of Video’s on YouTube produced by the owner of a business called FastCap in the USA where you can see the effects of Aggregated Marginal Improvements explained and brought to life in an engaging and entertaining way – just search for “Lean Manufacturing – Lean Factory Tour – FastCap.
How can these principles be applied to any company…?
Simple – analyse the system, break it down into component parts, then improve each component by a marginal percentage and the results will be remarkable.
My background is in Franchising where companies make their fortunes by understanding the power of systems that lead to predictable performance, then the rent the rights to use those systems to others who pay handsomely for the ability to use a proven method.
We had a phrase we would use with any Franchisee that wasn’t hitting their targets;
“Use the System…”
The same principles can be applied to career, professional and personal development too. In my work as a Business Coach, I work with systems and processes on every call with my clients, I also work on them and their teams enabling them to become more effective and productive.
Personal performance is dependent on a number of factors from health and wellbeing to knowledge and mindset.
For a person to become more effective in their work, it is not realist to simply tell them to work smarter, or classically “do more with less…” these slogans and exhortations only serve to irritate and undermine the process.
Let’s say for example that this “funnel” of activity applies to a member of the team.
It’s typical of many people, not that they are bad at what they do, but the environment they create for themselves doesn’t serve them in fact it becomes toxic to them and affects their ability to perform at work and restricts the opportunities that become available to them.
You may recognise yourself or someone you know in the chart...!
If a person wants to improve their life, income or become more “opportunity ready” then they can’t just change the outcome – they must improve the contributory factors affecting it.
In this second image the structure has been changed with improvements in 5 key areas of activity that will result in tangible improvements in the quality of outcome.
The same principles that apply to business efficiency productivity and efficiency are equally applicable to people – in fact in too many organisations, the systems are improved but the people ore neglected.
Managers fail to recognise that people use systems and not the other way around.
If you’d really like to go to the source of continuous improvement, check out the works of Edwards Deming, who arguably is the father of TQM, Lean, Agile and surely inspired Bill Smith of Motorola to develop the ubiquitous Six Sigma system back in 1985.
Deming put forward a 14 Point Plan for Total Quality Management that focussed on the process rather than the outcome alone, recognising that the contributory factors were the key to achieving successful results