Have you seen the popular movie from a few years back, Apollo 13? Three astronauts make it safely back to earth, despite a mid-mission oxygen tank explosion that all but cripples their spacecraft.
The primary energy source fails in their capsule, forcing engineers on the ground to completely redesign the power to the command module. Under enormous time pressure, the crew at NASA have to find a way to eliminate every non-essential power drain, ensuring all available energy is applied to propelling the spacecraft back to earth.
This remarkable story of innovation and ingenuity can teach business a lot today. This is how a typical business situation might look with the Apollo 13 story behind it. …
The astronauts are now your sales team. Their mission is to secure revenue growth at an acceptable margin in the present quarter. The NASA ground crew become 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.
The plot unfolds like this:
On a routine sales mission, a distress call is issued, “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 routine crisis:
- 1) Abort the mission & write off the quarter.
- 2) Continue the mission and absorb a price reduction.
- 3) Continue the mission with a price reduction and a lower service cost.
But first, let’s return to our scenario and consider what NASA would do. …
- Option 1 is out because NASA never gives 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.
All unnecessary costs would be eliminated in Option 3, and a new supply solution is tailored that would ensure “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!
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.
Facing a similar margin catastrophe, could your business find a solution, or would all be lost?
