The Enigmatic Black Box In Your Business

We’ve all heard about the black box. It’s this little device they have on aircraft (and likely other craft as well) that records everything that’s happening. This box is designed to survive whatever calamity may befall it so that those records can be examined and the cause of the calamity can be determined.

There’s also the black box in engineering, where we have some input … like the turn of a crank, on the side of the box, and on the other side of the box something else happens. Maybe a light turns on.

How does that happen?

No idea. Because it’s a black box and I don’t know what happens inside. Is it mechanical? Is it electrical? Is the crank I turned even related to the light coming on? Worst of all … is it coincidence?

This is the problem with a black box.

So many elements of your business are effectively black boxes. When something important depends on what comes out of the black box, it’s nearly impossible to make good decisions.

We all know that we need clients to make money. More clients, more money. But is that actually true? Do you think every one of your clients is worth the same amount to you, or to your business? If you had to figure out which ones were worth more, and which ones were worth less, or which ones actually cost you money … would you be able to? Would you have the information necessary to figure that out?

If you were able to rank every one of your clients, past and present, in terms of profit (not revenue), what sorts of decisions would you be able to make?

You know how much you charge, and you likely have some idea of what your profit margin is … but when you calculate that profit margin, do you account for all the hours it took? Hours from each person in your firm? What about the time spent answering questions and fielding calls above and beyond the specific service they paid for? Was any rework needed? What other costs are associated with serving each client?

Marketing’s a fun one. In business school I had Marketing right after Statistical Analysis. And both classes introduced and talked about confidence in your result on the same day. In Stats, the example presented had a confidence of 35%. In business terms, that means there’s a 35% chance that the result you saw was because of the action you took. The professor told us this was garbage and that we shouldn’t accept anything less than 95%. With a 95-99% confidence you can be fairly certain that what you’re doing is having the desired effect.

In marketing, the example presented had a confidence of 13%, and the professor effusively told us how unrealistically great this result was.

Take from that what you will … but if only 13% of what you’re seeing is the result of what your marketing team is doing … that’s information you’d want to have isn’t it?

You’re spending how much on advertising? And you’re spending how much time on Yelp and Nextdoor? Every month?!

Is it working?

How do you know?

What does “working” even mean?

The point I want to make is this: Transparency is critically important. If that box wasn’t black, but was in fact transparent, you would have clarity. You would understand what happens inside, and why the result occurred.

This is what I want for you. Transparency into your business so you can make better, more informed decisions.

In which aspect of your business do you wish you had greater transparency? Email me, poke me the next time you see me, text or call. Let’s talk about it.