If I told you thousands of dollars were disappearing from your bank account every day, you’d probably want to figure out why and stop it as quickly as possible. Well, it’s happening in a variety of ways that aren’t as easy to spot as a bank account balance. Your company is likely leaking money in multiple places, dragging down your profitability. The good news is that there are ways to find and fix these leaks, and you already have most of what you need to do it.
Let’s explore the different kinds of leaks that are costing you money. Here are some of the major categories:
Bugs
We are a software-driven world, and all that software means ample opportunities for bugs in the code. Whether you are an entirely digital business selling subscriptions or ad-driven media, or an eCommerce-driven product company, or a manufacturing or industrial company with software supporting your operations, little errors in the code can block sales, disrupt the customer experience or lead to waste and spoilage.
The big bugs are easy to spot. All of a sudden something major stops working and everyone knows about it. This is the equivalent of a broken water main, not a leak. The leaks are the smaller bugs that often go unnoticed. Their real cost on any given day can be completely under the radar, but that is what makes them so nefarious. That cost builds up day after day, week after week, month after month, and when it goes on for so long, it is even harder to spot, because you are comparing one impacted time period with another.
Example: A major global media company with a portion of their revenue coming from online video ads had a bug sneak into the video publishing workflow. The bug was only affecting newly published videos, which was initially a very small portion of the total library. Over time that percentage grew without attracting attention. At the point that we discovered it, it was blocking between 5% and 6% of their potential ad inventory. Let that sink in. 5-6% of their revenue opportunity was leaking away every single day because of one tiny bug!
Inefficiency
There’s a common saying “don’t confuse activity with productivity”. Many times, people figure out a way to do their job and just keep doing it that way year after year. There are two problems with this pattern:
- That first way may not be the best, most efficient way
- Over time, new resources and new technologies may open up better ways of completing the task
Repeating the same inefficient process over and over again leaks resources and those leaks add up. A $100K/yr salaried employee costs the company approximately $72/hr. If inefficient processes are wasting 4 hours of that employee’s time each week, that works out to nearly $13,000 in waste per year. That may not seem like a lot, but multiply that by 100 employees and it becomes a lot more significant!
Data and insights offer the opportunity to revisit most of the workflows and processes in your business and identify ways to make them more efficient.
Example: A highly qualified, $100k+ employee was responsible for preparing an important weekly report on marketing media spend and results, using data from 4 separate platforms. From start to finish, the compilation and preparation process was taking up 20 hours of his workweek (i.e. 50% of his available hours). After analyzing the report, the process and the sources of data, we created an automated workflow that allowed him to prepare the same exact report in just 2 hours, freeing up 18 hours a week that he could apply to other valuable work. That was another $50,000 leak fixed!
Misdirected Efforts
Even if you are doing a job in the most efficient way possible, that doesn’t mean it is the right job to be doing in the first place. You have a limited amount of resources (money, people, time) and there are virtually limitless ways they can be used, so the real challenge is choosing the right initiatives and activities to apply them to. All too often these decisions are made using some combination of gut instinct, muscle memory and pride. That leads to two distinct problems:
- Projects where the likely payoff will never equal the cost of doing the work itself
- Projects that are still profitable, but where the same resources could be applied to other opportunities with a greater cumulative value.
The best way to avoid these kinds of leaks is to take a data-driven approach to project and product planning. When you lean into the available data to quantify the opportunity, cost and risk of possible projects, you can make the best decisions about how to deploy limited resources. Adding a data-driven experimentation program works even better, as it allows you to validate key assumptions faster and more cost-effectively before making big commitments.
Example: A nascent video streaming service decided to undertake a full website redesign expected to take 6 months to complete. They dedicated 100% of their available design/development resources to this project.
Meanwhile, an examination of the data showed that 20% of the traffic to the existing site was being driven by organic social traffic, despite the fact that the social sharing buttons on the site were hidden behind a secondary slide-out panel. Bringing those buttons to a more visible location would have taken less than a day of work and likely would have driven a significant increase in traffic for the duration of the 6-month redesign project.
All of the data suggested a major ROI for this small piece of work, but the team chose not to do it because they didn’t want to do anything that would eventually be replaced. Instead they let the opportunity for increased revenue leak away for 6 months.
Fixing the Leaks
These leaks may be all over your company. The more of them you can find and fix, the more profitable you will be. The answers lie in your data and the key to finding them is giving your team the right skills to uncover them.
- Encourage people to dig deeper.
- Ask them to revisit their assumptions about the way things work and pose the question “Can you clearly confirm that it is actually working that way?”
- Look for ways to use the data to work smarter, not harder
- Make sure data is incorporated into project planning and strategy.
Each leak may be a drop in the bucket, but together they can fill an ocean.
