About your unsolicited business advice

You likely have seen this many times, perhaps in my own blog. Some expert walks by a store, salon or restaurant and sees some great big opportunities the business is missing out on. Their readers are treated to an essay of how the business got it all wrong or what it could be doing now.

Take for instance such an article I saw recently. (You will have to google this on your own to find the article.)

Someone buys chips in a supermarket, opens it to take a few before the checkout. While the store clerk folds the open bag at checkout an idea strikes. Wow, the store is missing out on new revenue and marketing opportunities – surely this one clerk thinks many people open their bag of chips, why not sell bag clips at the checkout counter? It is a revenue opportunity and if not the store can at least brand it and give it away for free for marketing opportunity. The expert is surprised by such incompetence on the part of the store – letting money slip through their fingers.

Let me make sure that this not a bad idea. It is indeed good idea but can a business act on every idea thrown its way or is it losing out because it isn’t?

Let us apply similar reasoning on the guru himself and say- Wow! This is a great monetization idea, why isn’t he hounding the store manager or the corporate buyers, business development folks with either consulting services or a supply of bag clips instead of writing a blog post about it.

Wieser coined the terms marginal utility and o...

Wieser coined the terms marginal utility and opportunity cost.

Underneath it all is the opportunity cost which we all forget when pitching our own ideas and ignoring what other opportunities available to the business (or the guru). Combine this with lack of knowledge about how the business measures its success and operates, presumption that the business did not already consider this, the tendency to generalize from single observation with a dash of hubris (some gurus, not this one).

In this specific case let us be clear that stores have done years of work on shopper behavior to maximize sales per cubic inch (square feet is so 2000). Stores operate on thinnest possible operating margin and are always squeezing out extra sales to make those tiny margin percentages make sense. Anything a store does needs to make sense on scale. Every cubic inch of shelf space has an opportunity cost – could they be stocking something else that is more profitable than say selling bag clips that a few may buy? Or could they be doing something completely different with the investment?

Exactly how big is the demand we are talking? A store clerk’s selective recall is definitely not what you would want to base a new product introduction on (unless every store clerk is recording every such instance over a period of time). This is extrapolating from one bad data point.

Even if they chose to do what will be the impact on their supply chain or sourcing?

I am just using this advice as example – you read even worse cases in tech blogs. Tech bloggers with no business experience telling billion dollar businesses what they should be doing with their products, how to set prices or who they should acquire next.

But can you blame them if their readers are eating it up and retweeting endlessly?

It is you, dear informed reader, who should skip past such pronouncements or at the very least ask some tough questions to the esteemed gurus and the well revered tech bloggers.

 

 

One thought on “About your unsolicited business advice

  1. Armchair punditry is always easy. Pronouncing summary judgements or subtly denouncing someone for their lack of initiative, creativity or business sense is also very easy…especially when there is no “real” experience in that industry or functional area, to draw upon. That is why I think bloggers and columnists (and analysts too?) should, ideally, think more carefully before freely airing their opinions.

    Then again, to play the devil’s advocate, if such articles and posts are endlessly retweeted, Like-d, etc., it just shows that there is a market for these opinions though…what’s wrong with that?

    Mohan Kompella

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