You Don't Know What You Don't Know

2011 | Jun 1 in Recruiting , Home Page News , Leadership

My clients, Steve and Susan, run a pizza parlor. They’ve been in business for nearly six years and they’ve managed to make a comfortable — albeit hectic — living thus far. Sometimes business is good, sometimes it’s not. Relatively new to the coaching program, they’ve still not been able to give me a solid reason for what was causing their business to ebb and flow. Fortunately, they have a prime location with heavy foot traffic and a loyal customer base so they’ve always been able to get by.

In our last coaching session, Susan, who keeps the books for the restaurant, told me a story. It seems that a few months back she’d noticed that the month’s totals were far less than the previous month's. They were experiencing an unusually slow period and cash flow was poor. The problem was that they had no way of quantifying how this slow period compared to their busier times.

They only knew it was slow because there was less money, because it felt slow.

So, deciding to be proactive, Steve and Susan opted to get more bodies through the door by offering a coupon redeemable for a free draft beer with the purchase of a small pizza. They were excited about this fresh and innovative idea, and were confident that it would surely boost sales. They placed a coupon in the local paper and waited.

And, sure enough, it felt busier. The restaurant felt noisier. They took more orders. They sold more pizzas. But, as the end of the month drew near, Susan was shocked to see that their bottom line hadn't increased with the increased amount of business that their promotion had generated.

"But how could this be?" she thought.

She couldn't understand how it was possible. The restaurant had felt so busy; she had personally helped so many customers. She was more exhausted than she had been in a long, long time. But, none of this sweat equity was reflected in the bottom line.

Consumed with frustration, and at her wits end, Susan concluded that one of her employees must be stealing from them. This was the only reasonable explanation. So, she asked Steve to fire Helen, the suspiciously quiet and shifty-eyed cashier.

The following month, they continued with the promotion, assuming that their money problems had been solved with the firing of Helen.

And, surely, it felt busy. The restaurant was noisy. They took even more orders. They sold even more pizzas. But, once again, as the end of the month drew near, Susan was shocked to see that their bottom line still hadn't increased.

Steve and Susan were extremely upset. Had they been wrong about Helen? It felt like a busy month, but again, with Helen gone they'd been short-handed. Was their promotion a failure? Was their business doomed?

Questions.

Concerns.

Frustrations.

Doubts.

Panic.

Fear of the unknown.

Steve and Susan were standing on the edge, looking deep into the crater called "They don't know what they don't know."

I assured them that they were not alone. In fact, most business owners operate in that safe-seeming, comfortable haven of "What I know, I know."

I know how to make pizzas.
I know how to repair VW engines.
I know how to shop for insurance products and give investment advice.
I know how to direct actors and design theater sets.

But...

I don't know how to run a pizza restaurant business.
I don't know how to figure the margin on parts and accurately evaluate the true value of my time.
I don't know how to market my financial advisory services.
I don't know how to gauge the appeal of this particular kind of play to my market, and I don't know how to price my tickets to assure my theater will last the season.

Steve and Susan were using qualitative criteria (what they knew they knew), instead of quantitative criteria (what they didn't know they didn't know) to determine the success of their innovation. If Steve and Susan had begun with a simple quantification plan to track and record things such as: desired results, actual costs, and effectiveness of their innovation, they would have been able to measure and monitor an informed outcome before things got so out of hand.

Innovations, if not quantified, might not address the frustration that they were intended to deal with. Or, they might not address the frustration in the most efficient and compelling way possible. That's where quantification comes in — innovations, once quantified, can become orchestrated into the operating reality of your business. Quantification systems allow you to measure the impact of the innovations that you implement in your business. Without quantification — and knowing exactly what it is you want the result to be and knowing, therefore, exactly what it is you will need to measure to tell you if you've obtained it — you don't know if your innovation has worked, and you lack the controls to orchestrate it properly.

You Don't Know What You Don't Know

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