Square The Benefits Of Your Recent Breakthrough Cost Reductions
Topics: cost, profit, speed, improvements, entrepreneur, leader, manager, planning
When clients and students describe their first breakthrough solutions, they always acknowledge that repeating the process will be a good idea. When the improvement has been related to reducing costs, however, few set a date for that repetition. I strongly encourage you to set such a date . . . and consider making the time to begin again sooner rather than later.
I had a recent experience that led me to think that frequent repetitions might be a good idea. See what you think after you read this story.
The breakthrough solution involved a large nongovernmental organization (NGO) that provides relief activities for poor people. Because of the scope of the organization’s activities, each step in obtaining and distributing aid resources needs to be carefully coordinated.
Otherwise, people would be waiting around for resources that weren’t yet available. To create such closer coordination, the organization saw an opportunity to upgrade the quality and frequency of its status reports on resource availability by location. The savings would be over a million dollars a year in a single unit of the NGO.
When the person working on the problem first explored the solution options, he reported that the only choice was to hire expensive database experts. This solution meant a cost of over $340,000 to create the necessary reporting and communications’ capabilities.
While that might be a breakthrough solution over time, I was skeptical. Surely, the software and systems would have to be redone every few years. If each update cost $340,000, this might be an 800 percent solution, but it probably wasn’t a breakthrough solution.
I suggested that the solver look for cheaper ways to put the information technology in place. With the help of a colleague, a reputable local supplier was found who charged only $50,000 for the information technology. Within a year of beginning to use that technology, it looked like this NGO had a breakthrough solution for reducing costs. Naturally everyone was happy.
The very same week that this solution was devised, a different person working for a government organization in another country reported on his progress with a similar problem. Major projects in the government organization were being delayed because it took the staff so long to accomplish each step. Everyone else was waiting for the information in the meantime. Yet the information could be easily summarized, reconfigured, and communicated by sending out e-mails containing answers from Excel spreadsheet calculations.
Because the government group had no budget to work on the solution, the solver wrote the necessary formulas in Excel and trained the person working on this activity how to use Excel to make the calculations. He spent about 50 hours on this task. At the end of that work, his organization was able to make the necessary calculations and communicate them in less than 1/20 of the time traditionally spent.
As I applauded this second excellent solution, I couldn’t help but think about the first solver in the NGO. His reports and communications could probably also have been provided through an Excel spreadsheet attached to e-mails.
But the first solver hadn’t thought of that option. Instead of spending $50,000, he could probably have gotten the job done for 50 hours of someone’s time who is good at writing Excel formulas.
If that alternative were truly available, the NGO had another 2,000 percent cost solution waiting in the wings for the next time it needed to update its software and reports. If the first solver happens to pick that software update as a cost-reduction checkup date, the second solution can be created. Otherwise, another $50,000 (plus inflation) will be spent.
By setting the first software update as a checkup point now, the first solver is more likely to repeat the process then and create a 2,000 percent squared cost-reduction solution for this reporting.
What are the lessons? Clearly, you should set a definite checkup date before you will have to spend money again.
But if you normally have a lot of staff turnover, you may run the risk of that checkup never taking place. If you are the problem solver and later leave that part of the organization, who will repeat the cost-reduction process?
The odds of the timely repetition are greatly improved if everyone involved in that aspect of the organization learns about creating breakthrough solutions during the first solution-finding process, and you create a consensus among the group about when the repetition should occur. A further benefit could come in agreeing during the first solution process on some hypotheses about how the next round of breakthrough solution cost reduction might take place.
In the case of the NGO, such hypotheses could include amending the reports to allow for better coordination of expensive activities, locating less costly information technology solutions, and looking for more problems to solve through improved reporting.
An even more valuable lesson is to hold more frequent checkups. If the group could find a second breakthrough cost-reduction solution soon after the first, that would impress everyone with the full potential of this important discipline. Such an approach would also mean that the skills of everyone in creating breakthrough solutions would expand a lot faster.
I have a radical suggestion that may shock you: Shoot for a breakthrough cost-reduction solution with squared benefits on the first application of the breakthrough solution cost-reduction process. If you don’t succeed with going past a single breakthrough solution, you will have only spent a little more time than if you had sought a regular breakthrough cost-reduction solution.
But if you make a little more progress, you may well end up with a 2,300 or 2,800 percent solution as a reward for relatively little more consideration. If you succeed, the benefits are, of course, magnificent. You have a breakthrough cost-reduction solution with benefits that are the squared size of a normal breakthrough.
In addition, you’ll have created a capability for additional cost solutions in other areas that will probably be unmatched in your industry or activity. That capability’s value is priceless.
Donald Mitchell is an author of seven books including Adventures of an Optimist and The 2,000 Percent Squared Solution. Read about creating breakthroughs through 2,000 percent solutions and receive tips by e-mail by registering for free at
Previous Articles Highlighter:
Why Everyone Is Talking About Fibre Optic Cables (1)
The major one is that data rates across fibre optics are very quick and as a result a large amount of data can be transferred over long distances quickly. They also improve on metal wires in that they are immune to electromagnetic interference and they experience less loss than metal wires.
Wisconsin Dells River Walk Hotels (2)
Dining in the restaurants, many of them in the river walk, is a treat to your taste buds with some excellent food being served from al the continents. Some of the recommended River Walk hotels, cottages and resorts in the city are Caribbean Club Resort, Cedar Lodge & Settlement , Island Pointe Resort, Pine Bay Lodge, Renaissance Resort & Spa, Sand Co.
Look For The Cheap Car Insurance Quotes (3)
Simply the features like Anti-theft Devices, Airbags, Anti-Lock Brakes, Automatic Seat Belts, Window Etching, Multiple Car Discount, Multiple Policy Discount etc., enable the owner to have a lesser premium on the car and thus save money.
Why Should You Invest For Your Future? (4)
It's also easier for smaller investors to participate. There are two types of investment funds. One is an open-end fund, or mutual fund, and the other is a closed-end, or an investment trust.
How To Make A Smart Offer On A Home (5)
This way you can find out when the owners are considering lowering the price and make an offer before the price reduction is in effect. If you wait until the price has been officially lowered, you may end up paying more than need be.
Good Ways To Improve Your Niche Site Using Images (6)
When you have finally found and organized several images for your niche site, you should then properly implement them into your site's design so that they make it very appealing to visitors.
Separation Anxiety In Dogs (7)
Dogs that were separated from their mothers and siblings too early have been identified as being especially prone to separation anxiety. Puppies from pet stores are a perfect example of this.
Exploring The World Of Playthings (8)
Generally, these toys allow children to use their bodies and intellect to learn about the world and their role in its existence. Human adults also play with toys, although quite differently.
Why Spain Is The Retirement Haven (9)
For those Brits looking to rent out their private house to tourists and tenants, will need to be careful as the Spanish authorities and tourism agencies are beginning to clamp down on houses that are unregistered to let.
The Best Beaches In California (10)
Venice Beach: No trip to Los Angeles would be complete without a trip to this iconic beach. Street performers, artists and "the beautiful people" mingle and stroll all the way to Santa Monica along the famous boardwalk that runs through this inimitable California beach town.
Newer Articles Highlighter:
It Is Easy To Design Your Own Shirt Online (1)
These sites let you create a design and submit it. You choose the shirt material and all the details and the site does all the printing. You are guaranteed a professional quality shirt with your own customized design on it in a few days at your doorstep.
Container Gardening - The Ins And Outs Of Container Gardening! (2)
If plants are not exposed to adequate amounts of light, they tend to turn sallow and colorless and look nothing like the beautiful blossoms featured in shops or periodicals. People who are deliberating taking to container gardening should examine the type of soil required for the plant.
New Developments For Web Analytics In SEO (3)
Given that all businesses are unique, the system can be updated to give more relevance to certain pages that are viewed and less to others. This will give the web site owner and his SEO company a much clearer overview of how well the site is doing and what changes need to be made to ensure its search engine friendliness.
How To Find The Perfect Car Show For The Cars You Are Interested In (4)
So if you though that you were just going to be able to get up out of bed and find the car show that you wanted to attend then you are wrong unless you are living in Miami then there is always something to do.
How To Find The Best Network Supplies (5)
So take your time to make sure you don't compromise on any of these stipulations. Many companies that sell network supplies appreciate how important it is that you get your supplies delivered quickly and without costing the earth.
Data Recovery FAQ (6)
For instance no data no fee, fixed costs, data security and no hidden charges? 6. Are they qualified? What experience do they have with your particular media?
Landscape Gardening Services - Your Guide In The Field Of Gardening! (7)
Visit his website www.Gardening-Master.com and download his FREE Gardening Report and learn some amazing Gardening tips for FREE! Learn how to create the perfect Garden on a shoe-string budget.
Forex Forums Can Seriously Damage Your Wealth (8)
You may not even realise you're doing it. For example, you may consider taking a position but decide to go to the forums to see if other traders are taking the same position, for confirmation.
The Advantages Of Indoor Team Building (9)
So if you are not looking for an endurance test or even an outdoor event, then why not consider the wide range of interactive events indoor team building has to offer.
Do I Need A Dedicated Server? (10)
Sometimes it's cheaper to get a dedicated server as opposed to renting shared space per month and per year. Take all these things into consideration and then ponder over them for a while.
Permalink to Square The Benefits Of Your Recent Breakthrough Cost Reductions