Advice: Keeping It Simple, Stupid.

Apologies if you haven’t heard of it, but I think it’s a timely reminder for everyone in business for 2009 – the KISS theory: Keep It Simple, Stupid.

Global financial crisis, or *no* global financial crisis, some downtime over Christmas and January is a great time to do some serious navel gazing into your business, take a good hard look at what has as what hasn’t worked in 2008.

‘Keeping it simple’ is just a realisation that over-complicating your business might not be doing you our your customers any favours – the chances are that if *you* get a little confused with your product or service offerings, your customers are certainly scratching their heads, too. 

By keeping your product lines limited to your strong sellers, or your service pricing structure clear and streamlined, you’ll enjoy better relationships and better profitability from the majority of your customer base, while not missing out on too many customers who really reveled in your ‘bells and whistles’ deals.

Confused? That’s probably a sure sign that *I’ve* not made my message simple enough… Let me explain in small sentences…

The very first step – analyse your current offerings

For product-based businesses, you simply must have ways to analyse your top sellers, and conversely, your slow moving products. Via stock control systems as you purchase or control inventory, or by accounting methodologies based on sales data – it’s imperative that you know which line items you sell are making ou money, and which line items are losing you money. 

For service-based businesses, you similarly need to be able to analyse your rates and the percentage of a week you’re able to bill at those rates – and know this information for each client type and for each different service you offer. Multiply these two values (average rate x weekly billable percentage) to get a figure for the relative value of that offering or client type. 

Be prepared to win some, lose some

From the above analysis, for both types of businesses, the rule of diminishing returns comes in to play: it says that for each further unit of ‘work’ you do, you get closer to achieving 100% perfection, but more slowly with each further try. For example, with one ‘effort’ you might get 70% of the way to ‘perfection’, but then another effort might only get you to 90%, then another to only 95%, then 98% and so on… you’ll eventually reach 100%, but only after a *lot* of effort.

Er, I’m not trying to get you down and persuade you to only strive to mediocrity*. In fact, just the opposite. 

There’s a strange realisation to be had: if you know what your customers are wanting from your business, then there’s not a lot of point in surpassing their expectations by a large degree. Yes, surpassing their expectations in quality, timeliness, skill, etc – but not necessarily in product range, or in the complexity of your payment options, or in the number of way to mix and match your savings coupons. In short, going the distance to do what your customers want from you (plus a pew percent more!), but not wasting your time going for perfection…

It’s actually an extension of the 80/20 rule (you know, that 20% of your customers give you 80% of your profits). It’s not always those exact numbers of course, but in any case, there is also an opposite truism: that losing the top 10% of your customers (especially the incredibly-hard-to-please type of customers) won’t lose you 10% of your profits – you may only lose 1% of profits, but you’ll gain more by being able to streamline your stock levels, or simplify your services.

The paradox of choice – yet another reason for the KISS theory

Apart from the fact that diminishing returns makes over-complicating your business not as profitable, another reason to makes things simpler is that your customers don’t often respond well to choice. 

A famous psychological experiment had a salesperson selling jam in the supermarket aisle, complete with taste tests. When they offered 10 types of jam, sales were good, but if they only offered the top 3 sellers, their overall sales went through the roof. 

It’s called the ‘paradox of choice’, and it comes about when humans are presented with a huge range of possible options. We humans *like* choice on the whole, but when faced with the seemingly infinite, we often respond poorly, or not at all. On the other hand, when given a manageable range of choices, we can confidently assess them, and feel good about our decision. Simplifying your message makes your message stronger.

What to do in 2009

I’m not going to use the word ‘limit’ here, but for your business in 2009, use your experience and your knowledge of your industry, and see if there are ways to ‘preguess’ what your customers will be wanting, then cater directly to those needs. 

Global financial crisis or not, there are ways to tighten your business belt without putting the brakes on  entirely. Analyse your business rigorously first, then simplify your offering by a couple of product lines or a couple of overly-complex billing/payment options… 

It’ll be hard to cut a few precious product lines or a few complex service ‘add-ons’, but you’ll be surprised how little you’ll miss them when they’re gone. Sure as heck, if you don’t notice they’re gone, most of your customers won’t have missed them either. There’s some pennies saved right there, without compromising your core customer group one iota.

Any colour you like…

Henry Ford must have been on the right path when he made his cars in “any colour you like, as long as it’s black.” OK, he was a little over the top, but anywhere in the middle would be fine. Time for some serious navel gazing…

AB out

*Mediocrity: It takes a whole lot less time, and most people probably won’t notice the difference anyway.
From an old ‘Demotivations’ poster – the parody of the ‘Motivations’ series of  ’inspirational business artwork’.