How businesses, people, and systems work
A business is a repeatable process that:
1. Creates and delivers something of value
2. That other people want or need
3. At a price they're willing to pay
4. In a way that satisfies the customer's needs and expectations
5. So the business brings in enough profit to make it worthwhile for the owners to continue operation
Business = 5 interdependent processes:
1. Value Creation
4. Value Delivery
- improve skills/knowledge related to these 5 parts of business
- revenue is completely dependent upon people wanting what you offer: Law of the Market
- dependent on size and quality of market you serve.
Humans have 5 Core Human Drives
1. The Drive to Acquire
2. The Drive to Bond
3. The Drive to Learn
4. The Drive to Defend
5. The Drive to Feel
- you've selling some combination of money, status, power, love, knowledge, protection, pleasure and excitement
- clearly articulate how offer satisfies these
Ten Ways to Evaluate Market. 50+ = good. 75+ = great.
1. Urgency: how badly people need this now?
2. Market Size: how many people actively purchasing things like this now?
3. Pricing Potential: what is highest price purchases would be willing to pay
4. Cost of Customer Acquisition: how easy to acquire new customers?
5. Cost of Value Delivery: how much cost to create and deliver valued offered, both in time and money
6. Uniqueness of Offer: how unique is offer versus competing offerings in the market
7. Speed to Market: how quickly can you create to sell?
8. Up-front Investment: how much will you have to invest before ready to sell?
9. Upsell Potential: are there any related secondary offers could also present to purchasing customers?
10. Evergreen Potential: once initial offer created, how much additional work is necessary to keep selling?
Twelve Standard Forms of Value - see p.45
1. Product - create tangible item + sell and deliver it for more than cost
2. Service - help and assist, + charge a free for benefits rendered
3. Shared Resource - durable asset + charged for access, for example a gym
4. Subscription - offer benefit ongoing, + charge recurring fee
5. Resale - acquire asset from wholesales then sell asset to retail buyer at higher price
6. Lease - acquire an asset, allow another to use asset for period of time in exchange for a fee
7. Agency - market, sell asset or service don't own for third party, collect percentage of transaction as a fee
8. Audience Aggregation - get attention of group of people, then sell access in form of advertising to another business
9. Loan - lend money, then collect payments over time amounting to principal plus interest
10. Option - offer ability to take action for period of time in exchange for a fee
11. Insurance - take risk of some specific bad thing happening in exchange for pre-defined series of payments plus payout if event happens
12. Capital - purchase ownership stake in business, then collect corresponding portion as one-time payout or ongoing divide
Perceived value: higher perceived value, more you can charge for it
- less attractive the end result and more end-user involvement to obtain benefit, the lower perceived value
Modularity: refers to creating and improving offers (value) in isolation, then mixing and matching on necessary
Unbundling: repurpose value already created to create even more value
- more offers, more perceived value
- unbundling into individual units opens way to sales is otherwise wouldn't take place
Prototype: early representation of offer to get feedback from real customers
Iteration cycle: process to make anything better over time
- Watch; Ideate; Guess, Act, Measure
- measure results of the change and decide whether or not to keep it
Iteration velocity: work way through Iteration Cycle as quickly as possible
Feedback: from potential customers is the core of the Iteration Cycle
Alternatives: examine alternatives (to improve) and consider customer's perspective will result in better choices.
Trade-off: a decision that places higher value on several competing options
- look for patterns - how specific groups of people tend to value some characteristics in certain content - when making decisions about offering
Economic Values: find out what your potential customers value more than their buying power
- common patterns when people evaluate a potential purchase.
9 economic values:
1. Efficacy - how does it work?
2. Speed - how quickly does it work?
3. Reliability - can I depend on it to do what I want?
4. Fare of Use - how much effort does it require?
5. Flexibility - how many things does it do?
6. Status - how does it affect how I'm perceived?
7. Aesthetic Appeal - how attractive or otherwise it is?
8. Emotion - how does it make me feel?
9. Cost - how much do I have to give up to get this?
People never accept Trade-offs unless forced to make a decision
Convenience: quick, reliable, easy to flexible OR
Fidelity: quality, status, aesthetic appeal or emotional impact
Relative Importance Testing: asks people questions to simulate real-life Trade-Offs as way to determine what people actually want
- makes participates decide
Critically Important Assumptions (CIAs): facts/characteristics that must be true in real world for business/offering to be successful.
- Test CIAs by testing offering with real paying customers before fully committing via Shadow Testing
Shadow Test using Minimum Economically Viable Offer (MEVO)
- MEVO is a prototype that provides smallest number of benefits necessary to produce actual sale.
- use to pretest CIAs
Incremental Augmentation: process using Iteration Cycle to add new benefits to an existing offer.
Field Testing: create, use, iterate every product in the field before offering in customers.
Marketing: attract attention of the right people and make interested in what's offered.
- getting noticed c/f closing deal (sales).
Receptivity: how open someone is to your message - people ignore what they don't care about
- what + when
- message created just for receiver
Remarkability: Five Fingers running shoes
- customers market shoes because remarkable
Attract attention of Probable Purchases - type of person perfectly suited to offering. Otherwise, waste of time/money
End Result: marketing to focus on End-Result that connects to a Core Human Drive.
Qualification: determine whether prospect is a good customer before they purchase
- clearly define ideal customer and screen out prospects (qualify) there that don't fit
Point of Market Entry: point when prospects stops filtering messages and starts seeking information/becomes receptive
- become the standard by in competing offers are evaluated
Addressability: how easy it is to get in touch with people who want what you're offering
Desire: marketing must create visceral feeling of Desire
- not convince people to want what you're offering: rather help prospects convince themselves that what you're offering help them get what they really want (Core Human Drives).
Visualisation: emotionally imagine life with the sale, rather than treat potential purchase in detached manner
- stopped comparing of started wanting: encourage prospect to visualise their life once they've accepted your offer.
Framing: emphasizing details that are critical white de-emphasizing things that are not.
Free: quick attention
- give away free value that is likely to attract real paying customers
Ask for Permission to follow up after Providing Free Value
Hook: single phrase/sentence that describes offers primary benefit
- emphasize what's uniquely valuable about your offer
- use it across all materials
Call-to-Action: tell prospects exactly what steps you want them to take
Narrative: a good story will make best offer even better
- common format of compelling narrative: "The Hero's Journey"
- testimonials that tell the story of heroes that have vanquished path and overcome adversity
- vivid, clear and emotionally compelling stories
Controversy: publicly taking position that not everyone will agree with or approve/support
- have opinion or make strong stand
Reputations: improve reputation = enhance brand, build brand equity etc.
-Reputation is what people generally think about a particular offer of company
"no one ever got fired for buying IBM"
- improve reputation over time by making people glad they chose to do business with you
Sales: helping prospect understand what's important and convincing you're capable of delivering promise
Trust: key to Transaction taking place
- trust flows from Reputation
Common Ground: the state of overlapping interests between two or more parties
- align interests to find common ground
- the more aligned interests, the more trust
- Negotiation process of exploring different paths to find Common Ground
Pricing Uncertainty Principle: prices are arbitrary and malleable
Four Pricing Methods:
- Replacement Cost
- Market Comparison
- Discounted cash flow/net present value
- Value comparison -> often optimal way to price offer
Value Based Selling: understanding/reinforcing reasons Why offer valuable
(SPIN selling by Neil Rackham): listen to what customer wants
1. Understand the Situation
2. Define the Problem
3. Clarify short-term, long-term implications of problem
4. Quantifying need pay-off - financial/emotional benefits customer experiences after resolution of the problem
- ask detailed questions to get to root of what prospect really wants
1. make prospect more comfortable
2. help prospect become more knowledgeable
Next Best Alternative: what you'll do if can't find Common Ground
- structure agreement so more attractive than their Next Best Alternative
Three Universal Currencies:
- Resources: tangible items like gold oil etc
Three Dimensions of Negotiation:
Buffer: agent empowered to negotiate on your behalf.
Reciprocation: desire to "pay back" favours, gifts, benefits and resources provided. (not necessarily in proportion to original gift).
Damaging Admission: making these dramatically increases trust
Barriers to purchase: identify and eliminate barriers to purchase
1. It costs too much (Loss Aversion)
- Framing + Value-Based Selling
2. It won't work
- Social Proof + Referrals
3. It won't work for ME
- Social Proof + Referrals
4. I can wait + It's too difficult
- Education-Based Selling: teach prospects what you know about their business, then have the visualise what involvement would look like.
1. convince prospect that objective isn't true
2. convince prospect that objective is irrelevant
Risk Reversal: transfer risk from buyer to seller
"take the puppy home strategy"
Reactivation: convincing past customers to buy from you again
Value Delivery: everything to ensure every paying customer is happy customer
Value Stream: set of all steps and processes from start of Value Creation process all the way through the delivery of end result to the customer
Value Creation + Value Delivery process
- to understand Value Stream need to diagram it
- shorter the stream less chance of error
Distribution Channel: describes how your form of value is actually delivered to the end-users
1. direct-to-user distribution
2. intermediary distribution
Expectation Effect: Quality = Performance - Expectations
- expectation must be high in order for customer to purchase. After purchase, performance of offering must surpass expectations in order for customer to be satisfied.
e.g. Zappos expedited delivery which not advertised to customer
- give customers unexpected bonus in addition to expected value
Predictability: key is for customer to be absolutely certain value delivered absolutely right
Throughput: rate at which system achieves its desired goal
Throughput measured by: rate/time (more results created per unit of time, higher the Throughput).
1. Dollar Throughput
2. Satisfaction Throughput
3. Unit Throughput
Duplication: ability to reliably reproduce something of value
- better able to Duplicate offer, more value you can provide
Multiplication: multiplication is Duplication for entire process or system
Scale: ability to reliably Duplicate or Multiply process as volume increases
Accumulation: inputs in system accumulate over time to produce large results
- small changes
Amplification: small changes to a scalable System produces huge results
- Amplification opportunities for things that are constantly Duplicated or Multiplied
Force Multiplier: investments that amplify or multiply system
Systemisation: create process explicit and repeatable
Finance: money flowing in and out of business + deciding how to allocate it
Profit Margin: difference between how much revenue you capture and how much you spend to capture it. - expressed as percentage
Value Capture: capture some % of value created in the form of revenue as profit
- maximisation on minimisation of value capture
Sufficiency: point at which business bringing in enough profit that people running business consider worthwhile to continue
- (Ramen Profitable)
- track using Target Monthly Revenue "TMR"
4 Methods to Increase Revenue:
1. Increase number of customers
2. Increase average size of each Transaction by selling (upselling) more
3. Increase frequency of transactions per customer
4. Raise prices
Pricing Power: ability to raise prices you're charging over time
Lifetime Value: total value of customers business over life time of their relationship with your company
Allowable Acquisition Cost (AAC): marketing component of lifetime value
- calculate formally on p. 162
Overhead: minimum ongoing resources required for business to operate
Costs: Fixed and Variable: Fixed Costs incurred regardless of value created
- Variable Costs directly related to value created - reductions is Fixed Costs Accumulate
- reductions in Variable Costs are Amplified by volume
Incremental Degradation: savings in costs may incrementally degrade offering over time, and accumulated to undermine quality of product
Breakeven: the point where business's total revenue exceeds its total expenses - point where business starts creating wealth instead of consuming it
- take tools at total from start to current point
Amortisation: process of spreading cost of resource investment over estimated useful life of that investment
Purchasing Power: sum total of all liquid assets a business has at its disposal
Cash Flow Cycle: describes how cash flows through a business
Opportunity Cost: the value you're giving up by making a Decision
Time Value of Money: dollar today is worth more than dollar tomorrow
Compounding: Accumulation of gains over time
Leverage: borrowing money to magnify potential gains
- form of financial Amplification
Hierarchy of Funding: give up certain amount of control for funding (lender looking to reduce risk)
1. Personal Cash
2. Personal Credit
3. Personal Loans
4. Unsecured Loans
5. Secured Loans
7. Receivables Funding
8. Angel Capital
9. Venture Capital
Bootstrapping: building and operating business without funding
- checking account
- savings account
- business credit card
Return on Investment (ROI): value created from investment of time or resources
ROI = Investment + Return e.g. $1000 + $1000
--------------------- --------------- = 1.10 or 10%
100% ROI = doubled investment
Sunk Cost: investments of time, energy and money that can't be recovered once they've been made
The Human Mind
Caveman Syndrome: Human biology is optimised for conditions that existed 100,000 years ago
The Gas Tank: eat high-quality food, excercise regularly, get enough sleep, get enough sun, etc
The Onion Brain:
FOREBRAIN (thin layer of tissue)
- cognitive capabilities
- self awareness
- inhibitions (see W.Upower + Inhibition)
- and decision
- sensory data
- memory (radio)
- pattern matching
- automatically predicting what will happen next, informing hindbrain and readies body for action
- keeping you alive: sleep, heartbeat, etc
POINT BETWEEN MIDBRAIN AND HINDBRAIN: Motivation
- usually, midbrain + hindbrain operate. When face something unexpected or unfamiliar, and [[confounds]] midbrain, forebrain kicks in and gathers data and considers options
- dissociate yourself from radio announcer in your head
- it highlights things that fulfill Love Human Drives or danger
- meditate to separate voice in your head
- breathe + watch what "monkey minds" does without associating yourself with it
Perceptual Control: human behavior like a thermostat
- sensor, set point and switch
- action only taken if perception is "out of control" to thermostat
- act to keep perceptions of world within acceptable boundaries
- action controls the perception, and action depends on the Environment
- people act to control their perceptions
Reference Level: a range of perceptions that indicate the Perceptual Control System is "under control"
- set point (eg financial controls)
- range - spread of acceptable values: between two set points (eg glucose levels)
- error - a set point defined a zero. (eg pain receptors in shin or customer service complaints)
- to change behavior, either change system's Reference Level or change the Environment
Conservation of Energy: people are generally lazy
- unless a Reference Level is violated, people will Conserve Energy
Guiding Structure: the structure of your environment is largest determinant of behaviour
- to change behaviour, change structure that influences or supports behaviour
Reorganisation: random action that occurs when Reference Level is violated but don't know what to do to bring the perception under control
- the neurological basis of learning
- nothing wrong with "dark nights of the soul" - signal that life out of control and reorganisation required to gather more data how to fix it
Conflicts: conflicts occur when two control systems try to change the same perception
- "get things done" in conflict with "get enough rest"
- inner conflict
- conflicts always exist between people
- only way to resolve conflict is to change each party's Reference Level, and is best done by changing structure of situation
Pattern Matching: your brain automatically learns and recognises patterns
- humans learn patterns via Experimentation
- patterns are stored in long-term memory
- recall optimised for speed + brain stores information contextually (find keys by walking back where have seen)
- the more accurate patterns you've learned, the more options to solve problems.
Mental Simulation: mind imagining specific action, then simulating the probable result before acting
- relies on patterns
- powerful + versatile
- from End Result in mind, mind automatically starts connecting dots
- needs an End Result or GOAL
- see Counterfactual Simulation
Interpretation and Reinterpretation: brain constatly relies on Prior Patterns and information to make Interpretations in absense of information
(eg. when you meet someone now and make snap judgement)
- Interpretations are also be altered - process called Reinterpretation
- possible to change beliefs and Mental Simulations by consciously recalling and actively Reinterpreting past events
- eg. writers past career at P&G
Motivation: emotional state that links part of brain that feel with parts responsible for action
Two basic desires:
1. moving towards desirable things
2. moving away from non-desirable things
- Core Human Drives fulfilled appear desirable, so experience impulse to move towards them. Dangerous things undesirable, so move away
- Caveman Syndrome means moving away from danger takes priority over moving toward desirable things
- Motivation not logical activity but emotional. Often Mental Simulations, Patterns, Conflicts and Interpretations in midbrain can prevent action
- as long as moving away signals present, you'll have hard time moving towards
- eliminate inner conflicts compelling you to move away from potential threats, and you'll experience Motivation to move toward what you want
Inhibition: ability to temporarily override natural inclinations
- Willpower fuel for Inhibition
- whenever inhibit natural responses to Environment, Willpower at work
- midbrain + hindbrain in autopilot, forebrain in override
- willpower correlates to success (deferring, gratification, for example to save)
- willpower is instinctual override - way to interrupt automatic processing in order to do something else
- Willpower becomes depleted with use
- dependent upon physiological fuel: blood glucose
- limit reserves of Willpower by using Guiding Structure to change structure of Environment
Loss Aversion: people hate to lose things more than they like to gain them
- explains why threats to priority over opportunities in Motivation
Threat Lockdown - fight, flee or freeze in face of threat
- freezing makes your bran go into Threat Lockdown - fixate on threat
- Threat Lockdown will exist until threat taken away
eg. workers worrying about job less - best to call workers swiftly and clearly
- deal within Threat Lockdown by convincing mind that threat no longer exists or never existed in first place
Cognitive Scope Limitation: limit to amount of information a single mind can process, store and response to eg. Dunbar's number
- personalising an issue can hack limitation
Association: mind stores info contextually, including Environment. Because Pattern Matching, mind effortlessly forms Associations - even between things that aren't logically connected. For example: Coke ads associating with happiness
Absence Blindness: cognitive bias that prevents us from identifying what we can't observe
Contrast: perceptual faculties optimised to notice Contrast, not compare what we perceive with things that aren't there eg. the ties seem cheap next to expensive suit
- contrast effective to influence buying decisions
- Framing is a way to control the perception of Contrast
Scarcity: scarcity encourages people to make decisions quickly
(Conservation of Energy encourages no decision)
- if you want something thats scarce, Loss Aversion answers that you act now
Add Scarcity to offer:
- Limited Quantities
- Price Increases
- Price Decreases (for discounts)
Novelty: presence of new sensory data is critical if you want to attract and maintain attention overtime
- continue to offer something new
Working with Yourself
Monoidealism: the state of focusing your energy and attention on only one thing, without conflicts.
- "flow" state
- just do it, without thinking about anything, including what you are doing
- eliminate distractions + interruptions and conflicts
Cognitive Switching Penalty: every time you switch the focus of Attention from one subject to another, you incur Cognitive Switching Penalty.
- time spent by brain loading context
- makers schedule, managers schedule
4 Methods of Completion:
- completion: doing the task - best for important tasks that only you can do
- deletion: eliminating the task - anything unimportant or unnecessary
- delegation: assigning task to someone else - effective for anything another person can do 80% as well as you
- deterrent: put off the task to later: effective for tasks not critical or time dependent
Most Important Task (MIT): complete 3 MITs per day
- create artificial deadline to complete MITs per set time
Goals: should be PICS:
- positive, immediate, concrete, specific
State of Being: is a quality of your present experience
- eg. being happy, successful etc
- think of these as decision criteria
Habits: regular actions that support us
- exercise, brushing teeth, keeping in touch with friends
- use guiding structure to help create environment to make easier
Priming: priming method of consciously programming your brain to dart you when a particular information is present in your environment, eg. speed reading technique
Decision: the affect of committing to a specific plan of action
- cannot ever have complete information to make decision
- acquire 40-70% of available information, and then go with your gut: Colin Powell
Five-Fold Why: technique to discover what you really want
Five-Fold How: way to connect core desires to physical actions
Next Action: focus only on action to take next step towards goal. Next Action is next specific concrete thing can do right away to move project forward
Externalisation: convert internal thought process to external. Gives ability to reinput information into our brains via different channel, eg. writing or speaking
Self-Elicitation: practice of asking yourself questions, then answering them
Counterfactual Simulation: consciously posing of "what if" or "what would happen if" questions of your mind, to directly access brains simulation capability
Parkinson's Law: work expands so as to fill the time available for its completion
Doomsday Scenario: counterfactual simulation in and imagine everything that could go wrong does
Excessive Self Regard Tendency: the natural tendency to overestimate your own abilities, particularly if have little experience
- unconsciously incompetent
Confirmation Bias: general tendency for people to pay attention to information that supports their conclusions and ignore information that doesn't
Hindsight Bias: hindsight bias tendency to pinch yourself for things you "should have known".
- don't feel bad about things should have known
- reinterpret past mistakes in constructive light
Performance Load: above a certain point, the more tasks a person has to do, the more their performance on all tasks decreases
Energy Cycles: every hour of time is not fungible as "time management" suggests.
- throughout day energy naturally cycles up and down
- 90 minute ultradian rhythm
1. Learn Your Patterns: note energy every day
2. Maximise Peak Cycles by doing important work
3. Take a break during down cycle
- go for walk, meditate, 20 min power nap
4. Get enough sleep
Stress and Recovery: pay attention and recovery and recognise breaking point
Testing: test many different approaches, different variables and make habit of what works best
Mystique: mystique - mystery makes things appear attractive
Locus of Control: separate what can control from what you can't
Attachment: when something outside Locus of Control affects plans, can't take it personally. The more Attached to particular idea, the more you limit your flexibility and reduce chances of finding better solution.
Personal Research and Development: set aside monthly Personal R&D budget
- books, courses, equipment, conferences to improve skills and capabilities
Growth Mind-Set: skills and abilities are malleable. If you experience challenge or difficulty, you're not good yet but you're always getting better.
Working with others
Power: all human relationships are based on power - the ability to influence the actions of other people
power = influence or compulsion
Comparative Advantage: better to capitalize on strengths than make up for weaknesses
- applies to people as much as countries
Communicative Overhead: proportion of time spent communicating with members of the team instead of productive work
- 3-8 people teams
Importance: Everyone has fundamental need to feel important
- the more interest you take, the more important they will feel
Safety: effective communication only occurs when both parties feel safe
- Appreciation, Courtesy and Respect
Reasons Why: People are far more likely to comply with and request if you give them a reason why.
Commander's Intent: way to prevent micromanagement whenever assign/delegate a task, tell them why it must be done
- alleviates communication overhead
Bystander Apathy: inverse relationship between number of people who could take action and number of people who actually choose to
- ensure all tasks have single, clear owners and deadlines.
Planning Fallacy: people have tendency to underestimate completion times
Referrals: People always prefer to interact with people they know and like, referrals transfer the quality of being known and liked
Clanning: humans naturally tend to form distinct groups, process call Clanning
- eg. sports fans natural tendency
Convergence and Divergence: convergence is tendency of group members to become more alike
- violationg Norms is Social Signal that don't belong in group
- company culture
- divergence is tendency for groups to become less like other groups over time
Social Signal: tangible indicates of some intangible quality that increases a person's social status or group affiliation
Social Proof: actions of others strong indication that okay to behave in certain way
- testimonials plus eg.
Authority: people have inherent tendency to comply with Authority figures
Commitment and Consistency: commitment bind people, most people will do whatever to act in ways consistent with previous positions or promises
Incentive-Caused Bias: people with vested interest will tend to guide you towards their interest
Modal Bias: automatic assumption that our idea or approach is best
Pygmation Effect: people tend to rise to other peoples expectations of them
Attribution Error: when others screw up, we blame their character, when we screw up we blame circumstances
Option Orientation: instead of focusing on problem (out of Locus of Control), focus on options.
Management: coordinating group of people to achieve specific goal while accounting for Change and Uncertainty
Page 306: Outline of management
Systems: self-perpetuating arrangement of interconnected parts that form a unified whole
Galls Law: all complex systems that work evolved from simpler systems that worked
- best approach is to build a simple system that meets environments current selection tests, and improve over time.
Flow: movement of resources into and out of the system. inflows flow into system, outflows flow out
- start with the flows
Stock: resources stock together or pool (along where flow)
Slack: slack is the amount of resources present in stock
Constraint: limits to availability of critical input
Feedback Laps: output of a system becomes an input in next cycle
Autocatalysis: a reaction whose output produces the raw materials for an identical reaction eg. advertising growth between 1950s - 1990s
Environment: a system imparted by systems around it. Environment is the structure in which an system operates
Selection Test: Environmental constraint that determines which systems self-perpetuate and which one die
Uncertainty: these are unknown unknowns (all known unknowns which are risks)
Change: all systems change. Plans must take change into account
Interdependence: complex systems always rely on other systems
Counterparty Risk: the possibility that other people won't deliver what they promised
Secondary Order Effects: action have consequences and those consequential actions themselves have consequences called Second-Order Effects
Normal Accidents: errors inevitable in complex systems
Deconstruction: process of separating complex systems into smallest possible subsystems in order to understand how things work.
- diagrams and flowcharts
Measurement: measurement is process of collecting data as the system operates
Key Performance Indicator: measurements of the critical parts of the system
- limit 3-5 KPIs per system
Analytical Honesty: measure and analyse your data dispassionately
Context: use of related measurements to provide additional information about the data you're examining
Sampling: taking random small percentage of total output and use as proxy for active system
Confidence Interval: probability particular anaylysis is correct
Ratio: method comparing two measurements against each other
ROI = earned/spent = 1.00 expressed as %
- Return on assets
- Return on capital
- Return on promotion
- Profit per employee
- Closing Ration
- Returns/complaints ratio
Mean, Median, Mode and Midrange: mean = average
median = sorted: order, then take middle
mode = value that occurs most frequency
midrange = value halfway between range
Causation and Correlation: an event caused outcome
- correlation: measurement highly associated with another, does not prove caused
Norms: measurements that use historical data to provide context
Proxy: proxy measures one quantity by measuring another
Segmentation: splitting data sets into well-defined sub-groups to add context
- past performance: segment customers by known past actions
- demographics: personal characteristics
- psychographics: internal psychological characteristics
Humanisation: use data to tell a story about a real persons experience or behaviour.
Optimisation: process of maximising output or minimising specific input required to operate
Refactoring: changing a system to improve efficiency without changing the output of the system
- primary benefit isn't output, its making the system itself faster or more efficient. By rearranging processess system uses to produce result, its possible to make the program rum faster or require fewer resources.
Pareto Principle: minority of inputs produce majority of output 80-20 rule
- less than 20% of customers account for more than 80% of revenue
Diminishing Returns: optimise and refactor until Diminishing Returns, then look elsewhere.
Friction: friction is any force that removes energy from a system over time.
Automation: refers to a system or process that can operate without human intervention
Paradox of Automation: more efficient the system, the more crucial the human operates of that system.
SOP: Standard Operating Procedure is predefined process used to complete a task or resolve a common issue
Checklist: checklist is an externalised, predetermined SOP for completing a specific task
Cessation: intentionally stop doing something that counterproductive
Resilience: ability to adjust strategy and tactics as conditions change
Fail-safe: a backup system designed to prevent or allow recovery from a primary system failure
Stress-Testing: identifying boundaries of a system by simulating specific Environmental conditions
Scenario Planning: systematically constructing series of hypothetical situations, then Mentally Simulating what would do if they occured
"What would I do if...."
Middle Path: ever-changing balance point between too litte and too much - just enough
Experimental Mind-set: constant Experimentation is the only way you can identify what will actually produce the results you desire
Business education a never ending process. Tao = "way" or "path".