Remove constraints and blow up the way you look at revenues, costs, and business model/processes. By doing so, you can remove constraints and more easily question the way your organization does things
- When you go to generate new ideas to run things better you need to think critically about the way your business runs. I like to look at three things, a business model blow-up, a revenue blow-up, and a cost blow-up. On the business model blow-up, fundamentally rethink about how you go to market. Even rethink what your market actually is. You're going to challenge the entire business model for the way you deliver products and services. On the revenue blow-up side, how do you dramatically expand the products, your pricing, the geography, the reach of your business? And on the cost blow-up, how do you challenge the business model and what you're spending money on? How do you fundamentally eliminate drag from the business to become much more efficient? One company I hold up as an example of one that fundamentally blew up the business, blew up the cost, blew up the revenues, is Skybus Airlines.
If you think back several years ago, the way the airline industry functioned, everybody was the same. Tickets were all bundled, they had a similar operational model, and prices were pretty predictable. Along came Skybus and they said, "We're gonna blow-up the way all of this works." They posted some things on their website that were very provocative in terms of how they were going to do business differently. Things on their site included hungry, thirsty, bring cash.
From now on, all meals were going to be paid for individually, and people were going to stop subsidizing the meals of other passengers by paying for a bundled ticket. They said, "Don't call us. "We're not gonna have a call center." Call centers are very expensive to run. Skybus said, "We're going to do everything online." It's a different customer service model. They said, "Don't expect an army of gate agents." People in the airport cost a lot of money. They were going to change their staffing model in terms of how they would get passengers onto the plane.
They said, "Tickets aren't refundable." It costs a lot of money to rebook passengers. They said, "Once you buy it, it's done." They also said, "Bigger isn't better." They were not going to fly to the major airports. They would fly to secondary cities and then you could drive the rest of the way because the large airports cost a lot more money for them to operate at. The impact of all these changes Skybus made, because they thought critically about the business model, was pretty tremendous.
They were able to sell tickets for $10 or $20 each way. Sure, some of the tickets on the plane cost $200 as you got closer to the flight time, but their pricing model by unbundling everything and by reducing their overall cost structure, allowed them to compete differently. I personally benefited. I took my entire family to California from Ohio for $200 total each way. In the past, those tickets would have cost me thousands.
Now these changes that Skybus made were very radical and they were risky, and these risks won't always play out well for you. One day I was teaching a class on how innovative Skybus was and I was talking about how great their business model was. When I got home that night and I went to book some new tickets on Skybus, I was greeted by a splash screen that said they were out of business. They took some major risks. They fundamentally altered the way that they went to market and it caused their competitors to change too.
Now even though Skybus wasn't successful in the long term, their critical thinking and looking at the business differently, altered the landscape. I'm sure if you fly today, you've noticed that pricing is unbundled. You'll pay $25 or $50 for an extra bag. It'll cost you $75 to $200 to change a ticket. A meal on the flight will cost you $9. If you get preferred seating, it's gonna cost you $12 or $25.
By Skybus looking at the industry differently, they forced all their competitors to do the same thing. In order to compete with Skybus, they had to unbundle pricing. So that critical thinking led to massive changes in a huge industry. As you think about applying some of these critical thinking tools, let me offer you some questions you can ask. On the business model blow-up, ask yourself if we had to do over, what would we do differently? If we were staring this business again today, what would we change? If we move this business to India or China, both the operations as well as your customers, how would you restructure it to compete more effectively in an environment with different economics and different regulatory challenges? How would you double the size of whatever metric you care the most about is in two years? That's a huge goal, doubling something, but it's going to challenge you to look at your business differently.
On the revenue blow-up side, ask who could create more value with our customers than we can? Who does it better? That will get you to look outside of your own walls at different ways of doing things. How would you triple your revenues or your profits within five years? Again, that big provocative number to get you to remove some of the constraints that you currently face. On the revenue side, ask what are the 10 products we're not offering that we should be? What are the things that our customers want that we simply can't provide? For the cost blow-up, how would you run this business with 2/3 fewer people? Wow, new processes, new technologies, new ways of doing things.
By making a massive cut, it's goings to force you to look at your business differently. I love this one question. How would you eliminate your job? Think about all the work that you do. That's pretty unnerving to say, "I want to put myself out of a role." But by asking that question, it forces you to think critically about the work that you do. What work should you stop doing? What work should you delegate to other members of your team? What work can you automate? Again that question is very provocative but it forces that critical thinking about your role.
And my last favorite question is what's the most wasteful thing we do as an organization and what's stopping us from stopping that? Look at your business. We all know where some of the waste is. Understanding what the waste is and what the barriers are to eliminating it can create new solutions for making your business more efficient and more effective. So as you look at your organization, ask yourself how can you blow-up the business model, how can you blow-up the revenue side, how can you blow-up the cost side? And those answers to those critical questions will help you identify new opportunities that can make your business much more competitive and much more effective.
- Break big problems into small ones
- Define the problem statement
- Ask focusing questions
- Find root causes
- Demonstrate how to use critical thinking tools
- Teach others to think critically
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- Breaking big problems into small ones
- Defining the problem statement
- Asking focusing questions
- Finding root causes
- Using critical thinking tools
- Teaching others to think critically