Growth Through Subtraction in Business
Any writer, sculptor, or musician will tell you, subtraction is part of the process. Call it less is more, call it separating the wheat from the chaff, call it what you will. The principle is the same in all disciplines: removing things that aren’t working can be just as important as adding things that do work. This goes for business as much as it does in the arts.
Subtraction as a business tool can be harder to wrap your head around than subtraction as a principle in art because unlike with art, success in business is defined growth. You want the important numbers to go higher indefinitely. Intuitively, you wouldn’t expect removing aspects of your business to be conducive to company growth.
But intuition isn’t always reliable. Let’s break down three ways in which the concept of subtraction can be applied to business: the design of products, your inventory, and the scope of your offerings.
A Simple Tool Is a Useful Tool
When designing the products and services, usually you’re working from the ground up. You start with an idea about how to solve a problem and add features until you’ve got something that people want to buy. This usually isn’t the stage where subtraction and removal play a big role.
The problem comes when features continue to be added over time. In an effort to stay forever relevant, you give the product more capabilities, make things bigger, better, and more complex. In any competitive marketplace, stagnation is not an option. But adding more to a product isn’t the only way to stay competitive. In fact, sometimes addition can gradually cause a product to become less useful.
In the software realm this is commonly called feature-bloat: when your solution becomes bogged down with new abilities, modules, and features that all might have seemed like good ideas at the time, but end up hurting the overall experience in aggregate.
With physical goods, endless addition can develop into a different kind of problem. As products become more complex they get bigger, require more parts, and longer production times. All of this will necessitate higher prices. Higher prices mean slower growth in the market.
That’s why regardless of what you’re selling, be it software or physical products, it’s a good practice to regularly investigate whether subtraction can be used to redesign your products. Doing so can lead to lower production and maintenance costs and happier customers.
Excess Inventory Is a Burden
The purpose of inventory management is to be able to meet customer demand while remaining as cost-effective as possible. A good system for managing inventory will be able to react and (ideally) proactively anticipate changes in customer demand.
In a low competition market, it’s easy enough to keep inventory levels steady without much management. The more competition in a market, the uncertainty there will be in demand and therefore more pressure to optimize production and inventory. By establishing systems and practices that allow you to keep inventory lower, you will be able to free up capital to allocate towards other operations.
When demand starts to get more unpredictable the first solution is to keep more inventory. But in time this can cause all sorts of issues. Old inventory starts to become obsolete, material maintenance adds more overhead costs, storage fees grow larger, waste management becomes a bigger problem, the list goes on.
Inventory management will mean different things for different types of businesses. For B2B businesses that produce good for others, such as print service providers, a solid warehouse management system can do wonders for establishing a system that keeps inventory low while still meeting all customer demand. Any sufficiently modern and sophisticated web to print platform should include a robust warehouse management system. These platforms include features such as demand forecasting based on past order history, order batching, and more. Any business that produces goods should consider keeping inventory low a major part of their cost reduction strategy.
Ace of One Rather Than Jack of All
Our last type of subtraction in business we’ll touch on today is like the first but of a different scope. We talked about how cutting down product features can end up making the product both more useful and likable to the customer and easier/cheaper to produce or maintain. In a similar vein, think about how the concept of subtraction can be applied to your entire list of offerings. In other words: how much does your company try to do? Often times, narrowing your company’s focus, rather than trying to be a jack of all trades, can have impactful results on your growth.
It happens all too often that a company will try to cast a wide net of services and product types in an attempt to catch as many customers as possible. This is another instance where an idea that might make intuitive sense on the surface (sell more things, do more business) actually tends to backfire. You end up with a confused marketing message, mediocre products, and no clear customer base to sell to.
And just like feature-bloat with software, this can happen gradually in a way that might go under the radar. The solution is to swing back the other direction and focus on who your core customers are, what problem they need solving the most, and how you can solve that one thing really well.
That’s the macro understanding of pairing down your offerings. On a micro level, you can use contribution margin analysis to start investigating which products aren’t pulling their weight. Contribution margin is the measurement of how much leftover revenue a product generates after subtracting variable costs. It’s a specific way of analyzing profit that distills a product down to its relative contribution to your overall revenue.
When Less Is More
None of these ideas are new or revolutionary. The premise of subtraction being a useful tool in business is easy enough to understand, whether that means subtracting unnecessary features from products, keeping inventory low, or letting go of low performing products. Nonetheless, because we so often pay attention to growth and adding more; more equipment, more customers, more revenue, it can be good to be reminded of how powerful subtraction can be. As with all things, sometimes less is truly more.
