Build margins everywhere

Build margins everywhere

Almost any system in the natural world is a sum of order and chaos: rainforests, deserts, coral reefs, volcanos, busy streets, stock markets, companies, etc.  It’s all order + chaos.  The disadvantage of ‘chaos’ in a business context is that you cannot predict it.  So the question is: how do you plan for what you cannot predict? 

Personally, I believe it’s a good strategy to build margins into everything – just to anticipate a potentially negative situation. Can you predict the breakdown of key equipment?  Well, not 100%.  But you can build a margin for unexpected costs.  Can you predict a sudden positive opportunity?  No.  But you can build margins to fund those opportunities.  The key question is: is your organisation systematically building margins everywhere?  If companies (or if you yourself) build extreme margins, you will be extremely prepared for the unpredictable.  That is exactly what brillant expeditioners have always done.  Take the example of Roald Amundsen and Robert Scott. 

In 1911 – one year before the Titanic – they both started a race to be the first to reach the South Pole.  The team of Amundsen returned alive and well.  All team members of Scott, however, died on the return journey.   Bizarre: Scott had more expedition experience than Amundsen.  But he lost the race.  So let’s zoom in on the story behind.  At the start, they both had the same objective, but their approach was totally different.  Scott had hoped for the best-case scenario.  And that was his fatal mistake.  Amundsen, however, was prepared for anything and everything that could possibly go wrong.  He had build margins everywhere, in terms of food, equipment, resting moments, safety, etc.  

And ok, it would lead us perhaps too far to make a detailed comparison, but the point is this: every company in the world knows that we cannot predict the future.  However, successful companies deeply and fully realize this reality and they prepare to the extreme.  They build margins everywhere to anticipate ‘the unpredictable’.  They do not just focus on winning.  They also focus on ‘not losing’.  

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