Small Gains, Big Profits


OK, Friday morning, you’re all fit and alert, let’s do some maths…

Your total receipts in the year are £100,000. Your expenses are £50,000. Leaving you a nice, round £50,000 of profit.

Now let’s work a little bit harder on the top line – up by 5% to £105,000. Let’s work on the expenses as well – down 5% to £47,500. And this means your profits are up to £57,500 – an increase of 15%.

Hang on, is that right? Earning up 5%, expenses down 5% but profits up 15%?

Yes, it is right.

And having done maths, let’s move on to cycling – because what we’re talking about is Dave Brailsford’s ‘aggregation of marginal gains.’

When Brailsford became Performance Director for British Cycling in 2003 the sport and the team were at a low ebb. Brailsford was determined to change that, and everyone now knows the results. Two gold medals at the 2004 Olympics, followed by eight in 2008 and 2012 – and victories in the Tour de France for Bradley Wiggins and Chris Froome.

Brailsford’s philosophy was the aggregation of marginal gains: he reasoned that if he could find a 1% improvement in everything that his team did, the cumulative effect of all those one per cents would be enormous.

The whole principle came from the idea that if you broke down everything you could think of that went into riding a bike, and then improved it by 1%, you will get a significant increase when you put them all together.

There was plenty in the work of Brailsford and his team that you’d expect: nutrition, training, the weight of the tyres, and so on.

But there was plenty there you wouldn’t expect as well: which type of pillow gave the best night’s sleep; the most effective massage gels and – almost unbelievably – teaching the riders the best way to wash their hands to avoid infections.

The parallels with business are obvious – and as my remarkably simple maths demonstrates, small gains can make a big difference to your profits. You might, however, suggest to me that running an SME is slightly more difficult than sitting on a bike.

And you’d be right.

Much as I admire the achievements of Hoy, Wiggins, Froome and company their job description is simple: eat, sleep, train, sit on that thing and pedal.

The job of any professional sportsman is to perform in the moment: it’s not to see the bigger picture. If you’re running an SME you need to perform and see the bigger picture – all the time.

The Brailsford model is excellent – and I absolutely commend it to anyone running a business. If you can make a small difference in sales, in finding and retaining new customers, in the performance of your team, in cutting costs – the overall effect on your business will be little short of sensational. But you have to do that whilst consistently focusing on your big goals – the aggregation of marginal gains is a tool, it’s not a result.

You also have to make sure that you don’t get lost in ‘the thick of thin things.’ Not only do you have to stay focused on your big goals, you have to be aware of what’s happening in the world outside your business.

It’s no use saving 5% on the cost of tallow and beeswax if someone has just invented electricity.

Fortunately, you have The Alternative Board. Rest assured that your colleagues around the table will see the big picture and they will keep you focused on your goals. Yes, they’ll cheer when you announce that sales are up 10% and they’ll ask you how you did it. They’ll be delighted that the aggregation of marginal gains is working for you – but one of them might also say, ‘By the way, have you heard about this Thomas Edison bloke…’

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7 comments

  1. Chris Wilson · September 19, 2014

    Excellent blog as always Ed, this is a mantra we adopt in the office, and to encourage it, I would promote a good “suggestion scheme” in any workplace. The best ideas come from within and when the business is seen to engage with these suggestions (we don’t always adopt them) it helps reinforce the idea that “we are all better together” (sorry, couldn’t resist that today…!).
    If anyone wants some good reading as you embark on a holiday, take a copy of “Will it Make the Boat Go Faster?” by Olympic Gold Rower, Ben Hunt-Davis. It is a similar message to Brailsford, it’s all the little things that come together that influences the end outcome.

  2. simonjhudson · September 19, 2014

    Interestingly I spoke on the same topic at the NHS event we were hosting in Manchester yesterday; while I referenced the Olympic 1% approach I also asked delegates to think about New York Mayor Rudy Giuliani’s Zero Tolerance programme (http://en.wikipedia.org/wiki/Rudy_Giuliani); while his was focused on crime mine was on the legion tiny business ‘crimes’ we allow to go unaddressed: the little delays in processes, bad habits, tolerated poor practice or slightly broken systems and the tendency of not fixing small things when you find them. All the many, many inefficiencies that not only mount up and erode business efficiency, but also create a culture for staff where larger inefficiencies are tolerated and where your team doesn’t believe things can be changed for the better because not even the little things get attended to. The irony, of course, is that the minor things are often so easy and quick to fix, and mostly by team members themselves.

    Accepting these minor transgressions become the ‘gateway drug’ to bigger cultural and business problems. But being seen to have a Zero Tolerance to little issues, of fixing the 1% problems, tends to reap massive rewards for much less effort and cost than mounting another big improvement project.

  3. simonjhudson · September 19, 2014

    In fact I was sufficiently inspired that I turned out my own blog post this morning, based on the above:
    http://simonjhudson.wordpress.com/2014/09/19/zero-tolerance-and-the-1-2/

  4. edreidyork · September 19, 2014

    Thanks Chris and Simon; you both make excellent points (no surprise to me!). I read Giuliani’s bio, and his story is fascinating (even if his ego could do with tempering!). He certainly transformed New York with Zero Tolerance.
    Will It Make the Boat Go Faster is also brilliant; complete and ruthless focus on one goal.

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