Monthly Archives: June 2015

The 64-4 Approach, how does it help your company focus?

We have all heard of the 80/20 rule.  80% of the result comes from 20% of the products or clients.  This business rule or law suggests that with proper focus on products or services and elimination of wasted energy will result in greater profits or revenue for your company.  In most cases, this model will have various levels of success with nearly all companies.  Whether you are a manufacturer of products or provide a service, proper focus on the true drivers of your business growth will result in profitable gains. 

The question here is what happens when simply looking at your business through the 80/20 lens is not enough.  When you need additional clarity or granularity to determine where and why the revenue or profit are not meeting your expectations, additional insight may be needed.

The 64-4 approach is focused on providing that additional granularity and focus to quickly identify gaps in the business and make changes and corrections for quicker results.  Using the 80/20 model as a foundation, looking at the best of the best of your business and then the worst of the worst will allow your company to quickly identify the areas which can grow your business and eliminate those that are limiting your growth.  This is not limited to only revenue or profit, but rather all areas of your business which provide value to your customers.  Your product or services may be obvious choices to start, however, understanding where other sources of opportunity exist is equally important.  Your company value can be located within your engineering, operations team, or inherent market expertise.  These other sources of value should also be considered using this approach so you know how to properly leverage them to grow your business.  

 

What does it mean to look at the best of your business and how do companies accomplish this task.

 

  1. Initially, identify areas within your business which appear to represent the best of what you offer to your customers.  Products, Services, Customer Support, technical assistance, or shipping speed may all be areas where you excel and provide significant value to your customers.  Validation of this will occur later.
  2. When taking inventory of your business and areas of current success, focus on understanding the sources of the input, meaning, where does the data come from and is it accurate in its depiction of the current situation.
  3. Based on this data, determine what actually represents the best parts of your business, where your revenue and profit come from and why.  Here you may categorize them in a meaningful segment for your business so they can be rated based on the group they are in vs. against every product or customer.
  4. Identify those products, customers or other areas which are the top tier of your business.  Which ones generate the highest returns or opportunity for growth for your business?  Understand the why is key here as it will be used as the foundation for future decisions within the business.
  5. Using the organized data, create groups of areas which can be rolled into functional areas as the basis of your strategy formulation. 

Now that you have identified the best and worst parts of your business, begin looking at new strategies to manage these areas differently within your business.  Areas of strength which bring you strong revenue and profit growth, determine the why and create a strategy to expand this area of your business. 

For areas of weakness within your business, the process is identical with the focus on being areas which are limiting your ability to grow or improve your profit.  Since these areas more often have a greater negative impact on your business, a strategy to deal with them quickly with a defined course of action is necessary.  As an example, should the business raise the price, limit the sale to a certain customer types, partner with another company who can provide this product or service or eliminate it completely from the business.  Depending on your business situation, some or all of these actions may be necessary to improve your ability to grow.

Looking at your business differently can be a challenge in many cases.  It often contains significant bias and opinions not based on fact but rather perception.  Using the best data you have, listening to your customers and developing a focused approach on the best and worst parts of your business will provide a great foundation for future growth.  Regardless if you focus on the “Best” or “Worst” parts of your business first, a defined strategy with set goals and objectives should be created to properly focus the business on these areas first, as the impact will be significant early on.