The Power of Empirical Proof: A Case Study

The Power of Empirical Proof: A Case Study

Empirical proof involves testing numerous scenarios or analyzing entire datasets to extract facts, trends, percentages, and averages. While typically more challenging than other methods, empirical proof yields more convincing results and often uncovers unexpected, valuable insights.

The Story of George Smith and ACME Corp

George Smith worked for ACME Corp (names changed to protect the guilty), a company with a product catalog containing thousands of stock-keeping units (SKUs). Despite having only a few hundred unique products, ACME offered ten to twenty variations of each, differing by size, color, texture, quality, packaging, and combinations of these factors.

ACME sold products through a variety of channels: big-box stores, convenience stores, online retailers, conventions, and wholesalers. Each of the dozen sales executives championed the variants that performed best in their market, designing special packaging for different markets and key retailers.

When George joined the team responsible for maintaining Just In Time (JIT) inventory levels, he developed software to analyze trends and alert buyers when to reorder products. He quickly discovered that ordering small batches from the factory and maintaining many SKUs negatively impacted the company's profitability.

George recommended discontinuing less popular variants if the reorder quantity fell below a certain threshold, suggesting more popular alternatives instead. However, the sales team often sought exceptions from the CEO, turning each product into a separate anecdote and ignoring the broader trend.

The Empirical Approach

George’s boss asked him to prepare a comprehensive report on all SKUs, including sales trends, costs, and other data. The report took several months to complete and spanned hundreds of pages in fine print. A two-hour meeting was scheduled with the sales executives, product designers, and finance team to review the findings.

The sales team challenged the report's details and data collection methods in the first meeting, requesting additional information. The discussion covered only a few pages, leading to the scheduling of a full-day meeting a month later.

The updated report included the requested data and additional proof of the calculations' accuracy. The second meeting covered about ten percent of the report, prompting the scheduling of two more full-day sessions the following month. They agreed to continue meeting monthly until they reviewed the entire report.

The Results

Initially, the sales team argued over every product, explaining anomalies and excusing mistakes. However, as the meetings progressed, they began to recognize the trends and patterns, realizing that exceptions were costing the company millions of dollars.

A year later, they had eliminated more than half of the SKUs and established a system to continue purging. They reduced inventory levels by twenty percent and doubled profitability.

While developing the report seemed like a waste of time, proving the obvious and requiring hundreds of hours, it was the only way to demonstrate to the sales team the magnitude of the problem. The report also revealed trends George hadn't noticed, enabling him to save time and improve products in the future. The product design team also gained new ideas from the meetings.

Conclusion

The empirical method may feel like trudging through an endless swamp of details, but the insights it provides can leverage big change. If you have a big presentation or a tough conversation coming up and want to build the strongest argument possible, contact BizCoachTN today.