In the Tom Hanks movie, Apollo 13, three astronauts make it safely back to earth despite a mid-mission oxygen tank explosion that all but cripples their space craft. The story goes that the primary energy source fails, forcing engineers on the ground to completely redesign how to power the command module.
Under enormous time pressure, the ground crew at NASA come together and find a way to eliminate every non-essential power drain in the command module and ensuring all available energy is applied to propelling the spacecraft back to earth.
This remarkable story of innovation and ingenuity can teach business much today.
This hypothetical, but typical, business predicament, in an Apollo 13 style, demonstrates how.
A Distress Call
The astronauts are now your sales team. Their mission is not to explore space but to secure revenue growth at an acceptable margin, in the present quarter. The NASA ground crew are every function sitting behind the sales team. They are the operations, logistics, and other related specialists who source and supply the end product for customers.
On a routine sales mission, a distress call is issued from the sales team.
“Head Office, we have a problem. Our competitors are discounting and we can’t compete. If we don’t lower our prices, we’ll surely miss our target for the quarter! Do you copy? Over.”
A disaster is unfolding for the business. Tensions are high. How can management save the day?
There are three possible endings to this unfolding, yet common, crisis.
- Abort the mission and write off the quarter.
- Continue the mission and absorb a price reduction.
- Continue the mission with a price reduction and a lower service cost.
Firstly, however, let’s return to NASA and the Apollo 13 mission and consider what they would do?
Option 1 is out. NASA never give up.
Option 2 is unacceptable because the loss of resulting margin is unsustainable; especially if net margin is already slim.
Option 3 is the audience favourite. If there is no choice but to match lower prices, then the ‘cost to serve’ must also be reduced to maintain acceptable margins. The cross functional NASA team would come together immediately and set about re-engineering their sourcing and supply model. A new value proposition would be designed.
All unnecessary costs would be eliminated and a new supply solution tailored that would ensure the customers can buy at a competitive price but under conditions that maintain margin. This may mean slower delivery, shorter payment terms, lesser warranties, etc … whatever it takes!
The principle goes that you can’t expect a first-class flight when you can only afford an economy fare. The Apollo 13 astronauts didn’t have the necessary power supply to return to earth in style, but they still made it home. They got what they needed.
Facing a similar margin catastrophe, could your business find a solution, or would all be lost?
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