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The story of the frog in a boiling pot: Is your business at a boiling point?
Many people like a success story. A business that started from scratch became a multi-million revenue business.
I want to share with you a mistake most business owners make.
Have you heard of the old story of "Yudegaeru"?
Well, it was a story of a frog being placed in a pot of water. In the beginning, the frog adapts to the temperature of the lukewarm water that is slowly heated. It does not foresee danger but is slowly being cooked to death.
Unlike another frog being dipped into a pot of boiling water, it quickly jumped out and save itself.
The story displayed the concept of gradual change in a business environment.
I remember a representative of a certain company came to me for a consultation about conducting in-house training. He told me, "Our clerks make a lot of mistakes. Can you help me train my employees to give more importance to their work?"
When I investigated further, we found out that one clerk has been handling 150 projects at the same time. He manages them with only a Google spreadsheet (something like Excel). The sheet was crafted conveniently but still had some problems.
- One person had to type in all data from the sales
- Data transmission from other sales departments was sometimes overlooked
- Main communication channel was only LINE
- Other clerks do not know how to use the spreadsheet correctly, which leads to more errors.
- Clerks often overlooked the timing when they had to check with sales by looking at the spreadsheet.
From the president's perspective, processes have been working out before. It was the process that they followed since the beginning. It brought them success. If employees keep following the standards, it should still work out well.
Unknown to many, the amount of work for clerks did not suddenly increase, but gradually.
I could tell that their company was at the “boiling point”. I talked to the owner frankly. It was impossible to manage that big number of projects with just an online spreadsheet. The clerk was not to blame.
The business owner then ask me, “Should I increase the number of clerks?"
I immediately said, "No. Adding more clerks would only reduce the profit."
That's honestly true! It costs about 2.7 million JPY a year to hire a clerk five days a week. For a company with a profit margin of 10%, the cost is equivalent to sales of 27 million yen. This cost is already too much for a company with an annual turnover of 100 million yen. That huge impact might lead to the deterioration of management.
My recommendation was for the company to build a system for only 1.5 million JPY.
By changing the spreadsheet to a web business system, we were able to create a system that maintained business growth by greatly reducing mistakes. As a result, there is no more need to hire new clerks.
Let’s compare the two options for a span of 3 years.
- If you continue to use the spreadsheet and increase the number of clerks: 2.7 million yen x 3 years = 7.1 million yen
- With the system: 1.5 million yen + maintenance cost 300,000 yen x 3 years = 2.4 million yen Difference: 4.7 million yen
For a company with annual sales of 100 million yen, the difference of 4.7 million yen is already a big deal.
It might be true that "It's hard to notice slow changes."
I told them honestly. The business is at the boiling point. It was a problem that the owner was not able to perceive.
Just like the story of a frog in a boiling pot, there are many ways a business can be slowly affected by the changes around it: the market, the economy, the technology, and the competition.
In the book, Atomic Habit written by James Clear said " A single decision is easy to dismiss." Most entrepreneurs think the small changes won't hurt. Most problems weren't there when you started the business. It would slowly build up as your customer baseline increase. If a company does not adapt and respond to these changes, it will eventually find itself in a crisis. It is very important to be aware of the environment and take a proactive approach to change. Businesses should be constantly monitoring their surroundings, looking out for changes that could impact their operations, and taking steps to adapt and stay competitive.
Evolving is not just an option, it is inevitable. Do not be like the frog stuck in the water. Comfortable in the changing world. Just settling. Take the action. Find the right people to help you and our business. To turn off the heat and save you from demise.
Date published: 2023/03/24