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Posted: August 27, 2013

Maximize, minimize or optimize?

Bigger isn't always better

Todd Ordal

Which of the below sound like good business advice?

You should:
• Maximize profits.
• Minimize expenses.
• Minimize conflict.
• Maximize customer service.
• Maximize market share.

In some cases and to some degree, these statements are true. However, they can also be extremely problematic.

Maximize profits over what time frame and at the expense of what? Long-term profits? Values? Ethics? A bird in the hand may be worth two in the bush, but what about three, four or five?

Minimize expenses to what end? Short-term profits? A burned-out team? A high return on invested capital over the long haul? I’ve seen many retail establishments minimize payroll only to ruin service levels. A boss once told me to minimize a certain expense. I told him I could take it to zero, but we had to close the doors. What if you could spend more and make more?

Minimize conflict? Sounds nice, doesn’t it? Certainly maximizing conflict isn’t a brilliant idea, but when conflict is avoided or minimized (unfortunately often called “managing conflict”), issues aren’t fully explored and go unresolved.

Does maximizing customer service mean you’ll do whatever they want? Will you adjust your product and services offering for everyone? Will you provide champagne for the price of beer? Many years ago as an executive, I built a system that resulted in substantial customer service gains, but it cost a fortune and wasn’t a good return on investment.

Maximizing market share sometimes means you buy it from your competitors, and that most always means margin degradation. Bigger is sometimes better, but not always. Shooting for market share above all else is a bit like marketing for eyeballs on the web. Many eyeballs don’t carry wallets!

When we only think of our business objectives and challenges in a binary fashion (minimize or maximize), we lose perspective, make rash decisions and damage our long-term growth and profit potential.

Optimize is a much better word than minimize or maximize. If you optimize expenses, you get profits today but invest for tomorrow. If you optimize conflict, you occasionally upset someone but get better decisions and behavior. If you optimize profits, you can reinvest the right amount for greater returns tomorrow.  If you optimize market share, you don’t get into destructive price wars with your competition.

Of course, optimize has a different definition depending on context, but I think if you use the word as a starting point for the conversation, you’ll get much smarter objectives and results.

Todd Ordal is President of Applied Strategy LLC. Todd helps CEOs achieve better financial results, become more effective leaders and sleep easier at night. He speaks, writes, consults and advises on issues of strategy and leadership. Todd is a former CEO and has led teams as large as 7,000. Follow Todd on Twitter here. You can also find Todd at http://www.appliedstrategy.info,  303-527-0417 or todd@appliedstrategy.info

Enjoy this article? Sign up to get ColoradoBiz Exclusives. The opinions expressed in this article are solely that of the author and do not represent ColoradoBiz magazine. Comments on articles will be removed if they include personal attacks.

Readers Respond

Skip--I agree... to a point. I believe that optimizing the utility for all those groups will give you good business results (e.g. profit) if your strategy is correct. In other words, you don't have to rely on philanthropic reasons to treat your employees and vendors well, its just good business! By Todd Ordal on 2013 08 27
Todd, You could also try to optimize stakeholder value; e.g balancing the outcome across the interests of customers, investors, employees and vendors. By skip on 2013 08 27
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