Water in the Soup
Once upon a time, there was a restaurant owner who was very famous for his soup. One day his accountant suggested that you could greatly increase your profits by adding 5% more water to the recipe and he proved it right. The water was added and no one noticed. Some months later, the restaurant added another 5% water and still no one noticed. Then more water was added. AND then a little more, but never more than 5% because it had been “proven” that customers did not manage to detect just 5% more added water.
As anyone can imagine, the restaurant was not losing its customers gradually, but one day he practically lost all of them at once. “The soup here is not as good as it used to be”.
In general, entrepreneurs have a blind vision about the possibility of losing everything at once for putting water in the soup. In general, one expects to see incremental casualties when abuse is incremental. However, this is not how it works. When the wife is packing to leave home, take the children, and leave at once.
A Cost Cutter
The main belief of a “cost cutter” is that profits increase when prices fall expenses. And that on paper is incontestable because the “cost cutters” never project a decline in business. Therefore, in the short term, the “cost cutter” is seen as a genius.
Then when customers stop buying the soup and the business is going down the drain of the pool, the “cost cutter” emerges again as a hero: “If I had not reduced the expenses would not have come this far, since I saved the company by making it profitable.”
An example of this would be McDonald’s.
McDonald’s itself had such a crisis some time ago in the USA. It was not necessary to look at the state’s accountants. It was possible to “savor” the problem that arose when several “cost cutters” corporate headquarters changed some recipes to reduce expenses, including that of the famous “Special sauce” from the Big Mac.
With the arrival of a new CEO with a great entrepreneurial spirit, McDonald’s managed to reverse the problem just in time. They assumed that the problem had to do with increasing sales rather than reducing the costs.
There is also a great legend about the costs that American Airlines managed to save by eliminating a simple olive from the aperitif they served on their flights. But who of us does not have the perception that before they started adding water to the soup, they travelled much better?
When someone proposes to reduce costs that directly affect the quality of the product or service (We are not talking here about costs with drivers, executive vacations, luxurious offices, etc.), are you suggesting to grow the company or transform it into something else?
Let us always preserve the heart of our business. Because if we lose heart too, we lose our soul. And if we lose our soul, we lose everything. A “cost cutter” buys grapes to make raisins. An entrepreneur buys grapes to make raisins. I never have seen someone come to a party carrying boxes of raisins.