The Blind Spot
In the 21st century, you must know the difference between the mathematics of your business and the numbers.
We all know the drill. Or we learn it soon enough.
There is the revenue.
The sales tax adjusted revenue were appropriate.
There is the 'adjusted’ revenue line.
Start subtracting.
Start comparing.
Is above the line labor more than 30% of your costs.
Is COGS more than 30%?
What about Advertising and Consumer dollars?
What about standard SMG&A?
Well, before the truth of your P&L is finalized before you start debating whether you should be discounting your Free cash flow numbers (and with what yield curve), there is something often invisible to everyone from your CFO to your security experts: the mathematics of your business.
The variables that you are solving for daily that you are blind to.
Wayne Rooney has learned that he is blind to variables being solved by him and all around him. Remember Wayne? He scored a goal as a teenager that changed several futures at once:
If you look at what Wayne Rooney does here, can you count how many variables he blindly solves for? The equation, at the very least, solved by a teenager earning less than £100 per week, is quintic (as quadratic is 4, quintic is 5); meaning he solved for (at a minimum) 5 variables all at once. The Equation that cannot be solved by Mario Livio, deals with a quintic equation associated with symmetry. Did Wayne Rooney read this book? Probably not.
Everyday, in your business, you are also solving equations of this magnitude without seeing them at all.
In data, insight, ideation, concept, feasibility, development, hazard and critical control procedures, implementation, product launches…
In data alone, there is the speed at which data comes in and the speed at which you use that data, the speed at which you protect it, and the speed at which it goes out. How long, for example, does a product take, to deliver robust data back?
How long, for example, does Mercadona need before it decides to attack a new product with a clone?
I like to explain in an another unpopular way: Lucent Technologies.
The stock went public c. 36 dollars a share in 1996.
It traded sideways for a short time and then exploded.
Up to 100 dollars a share.
It then split.
From 50 dollars a share it shot back up to 100 dollars a share.
As of this writing Lucent technologies is quoted at $2.62 a share.
Why?
The famous ad campaign?
Or something deeper?
Did they simply not solve for the length of time it took for them to explain what they are doing with all that money they raised?
The P&L is one thing. The mathematics of your business is another. If you believe your business is developing rust, or has a leak, or is simply under-performing, perhaps you have a blind spot.