Here's another example of a critical assumption....

OK, Company X has determined that some of their services are commodities and that they need to move "up" the food chain and do more consulting services. Now I'm sitting in this meeting while their talking about how this is the area that will produce the highest margins.

I pulled a Tom Hanks (remember from BIG) and said I didn't understand. They explained how the commodity services were "low" margin and consulting services would be "high" margin (ok, I've simplified, but you get the picture - there are too many MBAs in the room to make it that simple). And I told them that was a big assumption - and what if these high margin consulting services were really not high margin after all. You should have seen all the looks that came my way - did I actually mean that consulting services would not be HIGH margins and that we (the great Company X) wouldn't just rake in the $$???????

Yes that is what I meant. And here is MY reasoning....

First of all, consulting services have a longer sales cycle, thus there is more COST in the pursuit of a new customer.
Second, the people to deliver these high margin consulting services COST more to the company.
Third, how many companies did we think there were out there requiring these high margin consulting services.

So, there are few customer, to "close" one cost more and to deliver costs more - sometimes it's not about what you COULD do as a business, it's about what you SHOULD do (and in my opinion, that is be the best you can be, deliver what you said you would, and always do things to the benefit of the customer).



Post a Comment

Thanks for commenting and go ahead and let me know what you like and don't like. Always looking for ways to improve.