Quantification

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Quantification

"The measure of choosing well, is, whether a man likes and finds good in what he has chosen." — Charles Lamb

How do you know whether your innovations are working? You need to quantify your results. This is how take a business from good to great. You experiment, you innovate, and you measure your results. You carry forward what works and you throw out what doesn’t. If you don’t have the numbers, you’re flying blind.

In The E-Myth Revisited: Why Most Small Businesses Don’t Work and What to Do About It, Michael E. Gerber writes about the need for quantifying your results.

Key Take Aways
Here are my key take aways:

  • Know your numbers. Start with what you can quantify that’s meaningful for your business. Find ways to find the numbers for things that may not be so easy to get, but may produce better results.
  • Your numbers are your health chart. Remind yourself that the purpose of quantification is to chart your business’s health. You need to know whether innovations are improving or decreasing your performance.
  • Wear your multiple hats. In a small business, you wear multiple hats. Remind yourself that your inner entrepreneur, manager, and technician are always at odds. If it helps, think of switching hats. When you go into bean-counting mode, put on your "manager" hat.
  • Make data-driven decisions. In the absence of data, you have to use your intuition and pattern matching. If you make your decisions purely by emotion, that’s a recipe for failure. It’s why most people lose at casinos. You need to make data-driven decisions.
  • Carry forward what works. This is where your numbers serve you. It can be tough to break a habit or practice that’s not working, particularly if you have an emotional attachment to it. If you have the numbers, it’s easier to convince yourself to make meaningful change and throw out what’s not working.

Innovations Need to be Quantified
If you don’t quantify your results, you don’t know whether your innovations work. You need to quantify your innovations. 

Gerber writes:

“By it’s own, Innovation leads nowhere. To be effective, all innovations need to be quantified. Without Quantification, how would you know whether the Innovation worked? By Quantification, I’m talking about the numbers related to the impact an Innovation makes. The sad fact is that Quantification is not being done in most businesses. And it’s costing them a fortune!”

The Numbers Tell You the Value of Your Innovation
Numbers tell you the value of your innovations. 

Gerber writes:

“For example, how would you know that by changing the words you use to greet an incoming customer you produced a 16-percent increase in sales unless you quantified it by (1) determining how many people came in the door before the Innovation was put into effect; (2) determining how many people bought products and what the dollar value of those products were before you changed the words, and what you said to produce those sales; (3) counting the number of people who purchased something; (5) determining the average unit value of a sale; and (6) determining what the improvement was as a result of your Innovation? These numbers enable you to determine the precise value of your Innovation.”

Quantify Everything Related to Your Business
Quantify everything related to your business.

Gerber writes:

“Begin by quantifying everything related to how you do business. I mean everything. How many customers do you see in person each day? How many in the morning? In the afternoon? How many people call your business each day? How many call to ask for a price? How many want to purchase something? How many of product X are sold each day? At what time of the day are they sold? How many are sold each week? Which days are busiest? How busy? And so forth. You can’t ask too many questions about the numbers.”

Without the Numbers You Can’t Know Where You Are
Without the numbers, you don’t know where you’re improving.

Gerber writes:

“Eventually, you and your people will think of your entire business in terms of the numbers. You’ll quantify everything. You’ll be able to read your business’s health chart by the flow of the numbers. You’ll know which numbers are critical and which are not. You’ll become as familiar with your business’s numbers as your doctor is with your blood pressure and pulse rates. Because without the numbers you can’t possibly know where you are, let along where you’re going. With the numbers, your business will take on a totally new meaning. It will come alive with possibilities.”

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Photo by aussiegall.

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