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Common sense

To run a business, what you need most is common sense. It is far more useful than any educational qualification.

I define common sense as the ability to distill a viewpoint into its constituent assumptions (and beliefs), inferences and conclusions — laid out in straightforward language.

Assumptions and beliefs are the trickiest part of the puzzle. They are best uncovered by repeatedly asking way asking why. Challenging them often open up new ways of doing business.

I once saw a healthcare service firm's founders realize that they had the means to achieve their growth goals organically, once they examined assumptions underlying the following conclusion:

  • The only way to grow is to have more capacity.

  • The only way to increase capacity is to have more equipment, because existing equipment is utilized at over 85%.

  • Therefore, the only way to grow is to get more funds to purchase new equipment.

They looked deeper, and found and found that:

  • Machines run for 14 hours a day. Equipment utilization was calculated using 16 hours as the denominator.

  • They assumed that machines could only run during the day, and not at night.

  • This was based on the assumption that their services could only be delivered during the day, and not on a 24-hour basis

  • Other services of a similar nature were being delivered by other firms on a 24-hour basis.

When they re-set their assumption about how long they could run their machines, they realized that they could exceed their growth goals, without investing another rupee in equipment purchases.

Photo credit: Kelly Sikkema on Unsplash

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