Three Numbers Matter

All important management occurs on the margin. The rest is administration not management. On the margin, management decides when and how to change. One important measure of change is by the numbers.

In businesses there are three important numbers. None, few and many.

A change from none to few is a large change and carried out only after careful preparation. Similarly a change from few to many is important. The rest is just stuff.

For example, a change from no employees to one is a huge change. All sorts of new issues. A change from one to two is pretty seamless. Somewhere out there however, there is a change from big few to small many and that change will impact. It is just as exciting when you change the customer numbers.

Management needs to realize that having scalable processes, product and markets is not completely continuous. They need to anticipate a change in number.

In early 1999 Monster.com, the job search website, ran three ads on the Superbowl. Big price, big risk, big opportunity. They were hoping to change the number of people using their site and hoped to earn dramatically more than the ads cost. They were right. Prior to the ads, they had been running 600 job searches per minute. By 10:30 the evening of the game, they were running 2,900. That recipe could yield success or a huge failure.

Fortunately they recognized the scale problem. You need more servers if you are going to run more searches. Monster.com added 30 servers and a T3 line before the ads ran and everything worked flawlessly. The risk beforehand is that the overhead side of the growth problem is lumpy. You cannot buy half a server. Or half a manager. Or half a machine.

Without the added capacity they could not have handled the traffic and would have left a lingering impression of incompetence. Not smart to pay advertising dollars to look incompetent.

It does not always work that way. Back in the ’80’s Wendy’s ran one of the best ad campaigns in the history of advertising. Where’s the Beef. Unfortunately Wendy’s supply chain was not prepared for the increase in volume. It was touch and go to overcome that problem. Dave Thomas claimed that the Where’s the Beef ads nearly destroyed them.

When you are planning, be careful with the idea of seamless scaling. It rarely, if ever, happens.

Don Shaughnessy is a retired partner in an international accounting firm and is presently with The Protectors Group, a large personal insurance, employee benefits and investment agency in Peterborough Ontario. don.s@protectorsgroup.com

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