Lowest common denominators - the key to simple business strategies? ~ Sounds + Food 'n' Retail

lcd profit.jpgArguably, I managed to write some strange posts while I was writing my thesis… some of which seem completely unrelated to this blog, and which I may shift to another blog, my first blog, which I'm resurrecting just for these types of "philosophical" topics.

Still, I liked my post on the lowest common denominator (LCD) from a few months ago, simply because I can still apply that thinking to other disciplines also. To remind you, the LCD is defined as the "lowest"—least useful, least advanced, or similar—member of a class.

The LCD of business-components
It came back to me last night, when thinking about what I wrote in my last post, on how it was difficult to sell a lifestyle product, if conditions for that lifestyle are not yet present. So you find other unique selling points (USPs), and in this case it was health as that was a key driver. To me that is finding the LCD in marketing—you find the "keyword(s)" that connects your product's message with the context of the customer.

Another example. I was thinking about writing about IKEA this week again, but it was such a simple point that a paragraph will do. IKEA is well-known for its design, yet also for its low prices. Actually design was never core-objective, it was finding the cheapest way to produce and to distribute. Design came afterwards, and was even then a matter of working with what you have: whether it's a certain kind of wood from Poland, or the hollowing of walls to make them lighter, or removing the legs from a table for packaging. It's all a matter of lowering the costs, and only afterwards about making it look nice. The LCD of production is finding that sweet spot between a cost that works for a business and a design + price that works for the customer.

Business-planning = the reduction of assumptions
One of the first things we learned in our entrepreneurship-masters, is that business-planning is a fantasy-story—we make up stuff that we hope is believable. If we can reduce the assumptions in the document, however, to the level that an outside party (and inside parties) start finding it believable, that is the key to the mission-statement, the operational plan, and to finding funding.

Bringing things down to the LCD is a way of reducing assumptions and convincing others of my idea. Explaining that production is subject to costs and design comes later is logical; or that reaching customers is a matter of finding the simplest things that connect us.

Essentially, a business-plan is a simplification of reality. Your financial predictions will likely be off by a lot or (hopefully) a little. Your marketing-plan will make certain simplified assumptions about your customers. Your production-plan will assume that all goes well. Keeping it essential, however, does have a better chance of convincing investors, etc. that you can see through the mist and identify the key-drivers for success.

Simplicity, yes, but not of skills
As I wrote last time, it's good to know the LCD of whatever you're doing for yourself. It's not good to shout it out to the world (oh, the irony!), as that really decreases your competitive advantage.

Still, while focussing on LCDs arguable simplifies the strategy, finding those LCDs and profiting from them is a matter of skill and study, of knowing your processes, your industry, your customers, etc.

Now if all of this seems pretty abstract to you, you're not alone. I'm still trying to figure stuff out for myself. One reason is certainly the fact that you need to have the skills, the know-how to accurately identify key-aspects of a business-strategy, which differs from business to business. Another possible reason is that I'm completely wrong about this (let's hope not).

A final reason is that I still need to write a recap of months 3-6, which I'll try to do this weekend, before going on to other topics.

Anyway, agree or disagree? Let me know in the comments.


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