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…’