Challenge How Your Business Operates

When you go to generate new ideas to run things better, you need to think critically about the way your business runs. I like to look at three things: a business model blowup, a revenue blowup, and a cost blowup.

On the business model blowup, fundamentally rethink how you go to market. And rethink what your market actually is. You’re going to challenge the entire business model for the way you deliver products and services. On the revenue blowup side, how do you dramatically expand the products, your pricing, the geography, and the reach of your business? And on the cost blowup, how do you fundamentally eliminate drag from the business to become more efficient?

Business Model Blowup: Skybus Airlines

One company I hold up as an example of one that fundamentally blew up the business, blew up the cost, and blew up the revenues is Skybus Airlines. If you think back to the way the airline industry functioned several years ago, everybody was the same. Tickets were all bundled. They had a similar operational model, and prices were pretty predictable. Along came Skybus and they said we’re going to blow up the way all of this works. From now on, all meals are going to be paid for individually. And people are going to stop subsidizing the meals of other passengers by paying for a bundled ticket. They said don’t call us. We’re not going to have a call center. Call centers are very expensive to run. We’re going to do everything online. It’s a different customer service model. They said tickets aren’t refundable. It costs a lot of money to rebook passengers. They said once you buy it, it’s done.

The impact of all these changes Skybus made—because they thought critically about the business model—was pretty tremendous. They were able to sell tickets for $10 or $20 each way. Sure, some of the tickets on the plane cost $200 as you got closer to the flight time, but unbundling everything and reducing their overall cost structure allowed them to compete differently. I personally benefited. I took my entire family to California from Ohio for $200 total, each way. In the past, those tickets would have cost me thousands.

Now, these changes that Skybus made were very radical and risky, and these risks won’t always play out well for you. One day, I was teaching a class on how innovative Skybus was, and I was talking about how great their business model was. When I got home that night and went to book some new tickets on Skybus, I was greeted by a splash screen that said they were out of business. Now, even though Skybus wasn’t successful in the long-term, their critical thinking—looking at the business differently—altered the landscape. I’m sure if you fly today, you’ve noticed that pricing is unbundled. So that critical thinking led to massive changes in a huge industry.

As you think about applying some of these critical thinking tools, let me offer you some questions you can ask. On the business model blowup, ask yourself, “If we had to do over, what would we do differently? If we were to start this business again today, what would we change?” How would you double the size of whatever metric you care the most about in two years? That’s a huge goal. Doubling something? But it’s going to challenge you to look at your business differently.

Revenue and Cost Blowups

On the revenue blowup side, ask who could create more value with our customers than we can? Who does it better? That’ll get you to look outside of your own walls at different ways of doing things. How would you triple your revenues or your profits within five years? Again, use that big provocative number to get you to remove some of the constraints that you currently face.

For the cost blowup, how would you run this business with 2/3 fewer people? Wow, new processes, new technologies, and new ways of doing things. By making a massive cut, it’s going to force you to look at your business differently. I love this one question: How would you eliminate your job? That’s pretty unnerving to say I want to put myself out of a role, but by asking that question, it forces you to think critically about the work that you do. What work should you stop doing? What work should you delegate to other members of your team? What work can you automate? And my last favorite question is, “What’s the most wasteful thing we do as an organization? And what’s stopping us from stopping that?” Look at your business. We all know where some of the waste is. Understanding what the waste is and what the barriers are to eliminating it can create new solutions for making your business more efficient and more effective.

So as you look at your organization, ask yourself how you can blow up the business model. How can you blow up the revenue side? How can you blow up the cost side? The answers to those critical questions will help you identify new opportunities that can make your business much more competitive and effective.